Storm Resources Ltd. — Interim / Quarterly Report 2020

May 13, 2020

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Condensed Interim Consolidated Statements of Financial Position

(Canadian$000s) (unaudited)	Notes	March 31,2020	December 31,2019
ASSETS
Current
Accounts receivable	12	$ 20,494	$ 21,961
Prepaids and deposits		561	764
Risk management contracts	12	11,805	1,113
		32,860	23,838
Exploration and evaluation	3	99,360	99,737
Property and equipment	4	503,442	490,264
Right-of-use asset	7	2,548	2,657
		$638,210	$616,496
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities		$ 34,863	$ 30,018
Current portion of decommissioning liability	8	736	448
Current portion of lease liability	7	508	507
Risk management contracts	12	799	2,042
		36,906	33,015
Bank indebtedness	5	124,824	121,608
Risk management contracts	12	2,362	904
Lease liability	7	2,140	2,234
Decommissioning liability	8	26,064	27,667
Deferred income taxes		13,218	9,360
		205,514	194,788
Shareholders' equity
Share capital	9	391,444	391,444
Contributed surplus	10	18,081	17,605
Retained earnings		23,171	12,659
		432,696	421,708
Commitments	14
		$638,210	$616,496

See accompanying notes to the condensed interim consolidated financial statements.

On behalf of the Board:

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Director

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Director

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Condensed Interim Consolidated Statements of Income and Comprehensive Income

		Three Months Ended	Three Months Ended
(Canadian$000s exceptper-share amounts) (unaudited)	Notes	March 31,2020	March 31,2019
Revenue
Revenue from product sales	6	$ 41,923	$ 55,766
Royalties		(2,107)	(4,657)
		39,816	$ 51,109
Realizedgain(loss)on risk management contracts	12	2,737	(9,593)
		$ 42,553	$ 41,516
Expenses
Production		11,259	10,862
Transportation		10,834	10,206
General and administrative		1,867	2,851
Share-based compensation	10	476	596
Depletion and depreciation	4, 7	12,005	9,746
Exploration and evaluation costs expensed	3	450	-
Accretion	8	105	129
Interest and finance costs		1,646	1,118
Unrealized (gain) loss on risk management contracts	12	(10,477)	4,808
Unrealized revaluation loss on investment		18	13
		28,183	40,329
Net income and comprehensive income		14,370	1,187
Deferred income tax expense		3,858	580
Net income and comprehensive income		$ 10,512	$ 607
Net income per share	11
- Basic and diluted		$ 0.09	$ 0.00

See accompanying notes to the condensed interim consolidated financial statements.

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Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Canadian$000s) (unaudited)			Three	MonthsEndedMarch31,2020	MonthsEndedMarch31,2020
			Contributed	Retained
	Notes	Share Capital	Surplus	Earnings	Total Equity
Balance, beginning of period		$ 391,444	$ 17,605	$ 12,659	$ 421,708
Net income for the period		-	-	10,512	10,512
Share-based compensation	10	-	476	-	476
Balance, end of period		$ 391,444	$ 18,081	$ 23,171	$ 432,696

(Canadian$000s) (unaudited)			Three	Months Ended	March 31,2019
			Contributed	Retained
	Notes	Share Capital	Surplus	Earnings	Total Equity
Balance, beginning of period		$ 391,444	$ 15,141	$ 1,346	$ 407,931
Net income for the period		-	-	607	607
Share-based compensation	10	-	596	-	596
Balance, end of period		$ 391,444	$ 15,737	$ 1,953	$ 409,134

See accompanying notes to the condensed interim consolidated financial statements.

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Condensed Interim Consolidated Statements of Cash Flows

		Three Months Ended	Three Months Ended
(Canadian$000s) (unaudited)	Notes	March 31,2020	March 31,2019
Operating activities
Net income for the period		$ 10,512	$ 607
Non-cash items:
Unrealized (gain) loss on risk management	12	(10,477)	4,808
Depletion, depreciation and accretion	4, 7, 8	12,110	9,875
Share-based compensation	10	476	596
Lease interest	7	34	38
Exploration and evaluation costs expensed	3	450	-
Unrealized revaluation loss on investment		18	13
Deferred income tax expense		3,858	580
Decommissioning expenditures	8	(92)	-
Funds flow		16,889	16,517
Net change in non-cash working capital items	13	(472)	5,943
		16,417	22,460
Financing activities
Payment of lease liability	7	(127)	(125)
Increase in bank indebtedness		3,216	2,830
		3,089	2,705
Investing activities
Additions to property and equipment	4	(26,242)	(16,361)
Additions to exploration and evaluation assets	3	(233)	(583)
Net change in non-cash working capital items	13	6,969	(8,221)
		(19,506)	(25,165)
Change in cash during the period		-	-
Cash, beginning of period		-	-
Cash, end of period		$ -	$ -

See accompanying notes to the condensed interim consolidated financial statements.

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NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019

Tabular amounts in thousands of Canadian dollars, except per-share amounts (unaudited)

1. REPORTING ENTITY

Storm Resources Ltd. (the “Company” or "Storm"), is a crude oil and natural gas exploration and development company incorporated in the province of Alberta, Canada on June 8, 2010 and is listed on the TSX under the symbol “SRX”. The Company operates primarily in the province of British Columbia and its head office is located at Suite 600, 215 – 2[nd] Street S.W., Calgary, Alberta T2P 1M4. The Company became a reporting issuer in August 2010.

These unaudited condensed interim consolidated financial statements (the “financial statements”) include the accounts of Storm and its wholly owned subsidiary, Storm Gas Resource Corp. All inter-entity transactions have been eliminated upon consolidation. Storm’s operations are viewed as a single operating segment by the chief decision maker of the Company for the purpose of resource allocation and assessing asset performance.

2. BASIS OF PRESENTATION

Statement of Compliance

The financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Certain information and disclosures normally included in the notes to the consolidated financial statements have been condensed or have been disclosed on an annual basis only. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as at and for the year ended December 31, 2019. All financial information is reported in thousands of Canadian dollars, which is the functional currency of the Company.

These financial statements were authorized for issue by the Board of Directors on May 12, 2020.

Basis of Measurement

The Company’s financial statements have been prepared on a going concern basis consistent with prior years, and follow the historical cost convention, except for certain financial assets and financial liabilities, which are measured at fair value, as explained in Note 12.

Significant Accounting Judgments, Estimates and Assumptions

The preparation of the financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, shareholders' equity, revenue and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are continuously reviewed with the financial statement effect being recognized in the reporting period that the changes to estimates are made.

Critical judgments applied by management to accounting policies that have the most significant effect on the amounts in the financial statements are described in Note 5 to the Company’s audited consolidated financial statements for the year ended December 31, 2019.

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The rapid outbreak and subsequent measures intended to limit the spread of COVID-19 have contributed to a significant increase in economic uncertainty, with more volatile commodity prices, currency exchange rates and interest rates. The duration and severity of the business disruptions and reduction in consumer activity internationally and the resulting financial effect is difficult to reliably estimate. The results of the economic downturn and any potential resulting direct or indirect

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effect on the Company has been considered in management’s estimates at period end. However, there could be further prospective material effects in future periods.

3. EXPLORATION AND EVALUATION

3. EXPLORATION AND EVALUATION
	Three Months Ended	Year ended
	March 31,2020	December 31,2019
Balance, beginning of period	$ 99,737	$ 102,277
Additions	233	2,169
Dispositions	-	(1,083)
Expiries - exploration and evaluation costs expensed	(450)	(1,140)
Future decommissioning costs	(160)	178
Transfer topropertyand equipment	-	(2,664)
Balance, end ofperiod	$ 99,360	$ 99,737

As at March 31, 2020, the Company reviewed the carrying amounts of exploration and evaluation assets for indicators of potential impairment. As a result of this assessment, no indicators of impairment were identified.

4. PROPERTY AND EQUIPMENT

4. PROPERTY AND EQUIPMENT
	Three Months Ended	Year ended
	March31,2020	December31,2019
Cost
Balance, beginning of period	$ 746,515	$ 646,983
Additions	26,242	95,757
Future decommissioning costs	(1,168)	1,111
Transfer from exploration and evaluation assets	-	2,664
Balance, end ofperiod	$ 771,589	$ 746,515
Accumulated depletion and depreciation
Balance, beginning of period	$ (256,251)	$ (216,182)
Depletion and depreciation	(11,896)	(40,069)
Balance, end ofperiod	$(268,147)	$(256,251)
Net book value, beginning of period	$ 490,264	$ 430,801
Net book value, end ofperiod	$ 503,442	$ 490,264

As at March 31, 2020, the Company evaluated property and equipment for indicators of potential impairment. As a result of this assessment, no indicators were identified and no impairment was recorded on property and equipment.

As at December 31, 2019, the balance of assets under construction not subject to depreciation or depletion was $65.0 million and related to the construction of a gas plant at Nig, located in northeast British Columbia. During the first quarter of 2020, construction of the Nig Gas Plant was completed and the gas plant became operational on February 22, 2020 and will be depreciated on a straight-line basis over its estimated useful life of 35 years.

5. BANK INDEBTEDNESS

As at March 31, 2020, the Company had an extendible revolving credit facility in the amount of $205 million (December 31, 2019 – $205 million) based on a bank determined borrowing base related to the Company’s producing reserves. The credit facility is available to the Company until May 29, 2020 and the annual review process is currently underway with completion expected on or before the aforementioned date. In the ordinary course of business the Company will have the option to extend the facility for an additional year. If the credit facility is not extended, the facility moves into a term phase whereby the outstanding loan amount is to be repaid in full one year later. In the event that the lenders reduce the borrowing base below the amount drawn, the Company would have 90 days to eliminate any borrowing base shortfall by repaying the amount drawn in excess of the re-determined borrowing base or by providing additional security or other consideration satisfactory to the lenders. Repayments of principal are not required provided that the borrowings under the credit facility do not exceed the authorized borrowing amount. Interest is paid on the utilized portion of the credit facility at bankers’ acceptance rates, plus a stamping fee. Collateral comprises a floating charge demand debenture on the assets of the Company.

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At March 31, 2020, debt including outstanding letters of credit amounted to $135.1 million, representing approximately 66% of the available credit facility.

As at March 31, 2020, the Company had issued letters of credit in the amount of $10.3 million (December 31, 2019 - $10.0 million) in support of future natural gas transportation and processing obligations.

6. REVENUE FROM PRODUCT SALES

The following table presents the Company’s revenue from product sales disaggregated by revenue source:

	Three Months Ended	Three Months Ended
	March 31,2020	March 31,2019
Natural gas	$ 26,850	$ 39,005
Condensate	14,478	12,422
NGL	595	4,339
Total	$ 41,923	$ 55,766

Storm’s revenue was generated mostly in British Columbia where production was sold primarily to three major energy customers with investment grade credit ratings which accounted for 98% of the Company’s total revenue from product sales for the three months ended March 31, 2020 (March 31, 2019 – 81% from two major customers). The majority of revenue is derived from variable price contracts based on index prices at each sales point. Of total natural gas revenue for the three months ended March 31, 2020, 50% received Chicago pricing, 25% received Station 2 pricing, 10% received Sumas pricing, 7% received AECO pricing and the remaining 8% received ATP pricing.

7. RIGHT-OF-USE ASSET AND LEASE LIABILITY

Right-of-Use Asset

The following table provides a reconciliation of the carrying amount of the right-of-use asset pertaining to the Company’s corporate office lease in Calgary:

corporate office lease in Calgary:
	Three Months Ended	Year ended
	March31,2020	December31,2019
Cost
Balance, beginning of period	$ 3,094	$ 3,094
Additions	-	-
Balance, end ofperiod	$ 3,094	$ 3,094
Accumulated depreciation
Balance, beginning of period	$ (437)	$ -
Depreciation	(109)	(437)
Balance, end ofperiod	$(546)	$(437)
Net book value, beginning of period	$ 2,657	$ 3,094
Net book value, end ofperiod	$ 2,548	$ 2,657

As at March 31, 2020, the net book value of the right-of-use asset for the Company’s corporate office lease in Calgary is $2.5 million (December 31, 2019 - $2.7 million) with a remaining lease term to the year 2026.

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Lease Liability

The following table provides a reconciliation of the carrying amount of the liability pertaining to the Company’s corporate office lease in Calgary:

office lease in Calgary:
	Three Months Ended	Year Ended
	March31,2020	December31,2019
Balance, beginning of period	$ 2,741	$ 3,094
Lease payments	(127)	(500)
Lease interest	34	147
Balance, end of period	$ 2,648	$ 2,741
Less currentportion	508	507
Long-termportion	$ 2,140	$ 2,234

As at March 31, 2020, the total undiscounted amount of the estimated future cash flows to settle the Company’s lease liability over the remaining lease term is $3.1 million.

Short-term leases are leases with a lease term of twelve months or less. During the three months ended March 31, 2020, short-term lease costs of approximately $0.5 million (March 31, 2019 - $1.7 million) were incurred primarily relating to the lease of drilling equipment which was captured within property and equipment costs.

8 . DECOMMISSIONING LIABILITY

The Company provides for the future cost of decommissioning crude oil and natural gas production assets, including well sites, gathering systems and facilities. The total decommissioning liability is estimated based on the Company’s net ownership interest in wells and facilities, the estimated costs to abandon and reclaim the wells, gathering systems and facilities and the estimated timing of future costs. The total estimated inflated and undiscounted liability required to settle the Company’s decommissioning obligation is approximately $33.3 million (December 31, 2019 - $38.3 million), with the majority of payments being made in the years 2034 to 2054. A risk-free discount rate of 1.4% (December 31, 2019 – 1.7%) and an inflation rate of 0.8% (December 31, 2019 – 1.4%) was used to calculate the present value of the decommissioning obligation, amounting to $26.8 million at March 31, 2020.

The following table provides a reconciliation of the carrying amount of the obligation:

	Three Months Ended	Year Ended
	March 31,2020	December 31,2019
Balance, beginning of period	$ 28,115	$ 26,334
Obligations incurred	127	2,706
Obligations settled	(92)	(246)
Change in estimates(1)	(1,455)	(1,171)
Accretion expense	105	492
Balance, end of period	$ 26,800	$ 28,115
Less currentportion	736	448
Long-termportion	$ 26,064	$ 27,667

(1) Relates to changes in risk-free discount rates, inflation rates and estimated settlement dates.

9. SHARE CAPITAL

Authorized

An unlimited number of voting common shares without nominal or par value An unlimited number of first preferred shares without nominal or par value

Issued

Issued
						Number of Common Shares	Consideration
Balance as at December	31,	2019	and March	31,	2020	121,557	$ 391,444

For the period from January 1, 2020 to May 12, 2020 there were no common shares issued upon the exercise of stock options.

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10. SHARE-BASED COMPENSATION

The Company has a stock option plan under which it may grant, at the Company’s discretion, options to purchase common shares to directors, officers and employees. Options are granted at the volume weighted average price of the shares on the TSX for the five trading days immediately preceding the date of grant, have a four-year term and vest in one-third tranches over three years. Under the stock option plan, at March 31, 2020, a total of 12,155,681 common shares were available for issuance, options in respect of 10,212,100 common shares were issued and outstanding and options in respect of 1,943,581 common shares were available for future issue.

At May 12, 2020, the date of this quarterly report, options in respect of 10,235,100 common shares were issued and outstanding and options in respect of 1,920,581 common shares are available for future issue.

Details of the options outstanding at March 31, 2020 are as follows:

		Weighted Average
	Number of Options(000s)	Exercise Price
Outstanding at December 31, 2019	10,188	$ 2.74
Granted duringtheperiod	24	$ 1.57
Outstandingat March 31, 2020	10,212	$ 2.74
Number exercisable at March 31, 2020	4,666	$ 3.82

Range of Exercise Price		OutstandingOptions		Exercisable	Options
	Number of	Weighted	Weighted	Number of	Weighted
	Options	Average	Average	Options	Average
	Outstanding	Remaining	Exercise	Outstanding	Exercise
	(000s)	Life(years)	Price	(000s)	Price
$1.36 - $2.85	5,502	3.2	$ 1.65	851	$ 1.83
$2.86 - $4.50	2,696	1.7	$ 3.00	1,801	$ 3.02
$4.51 - $5.50	2,014	0.7	$ 5.39	2,014	$ 5.39
Total	10,212	2.3	$ 2.74	4,666	$ 3.82

The fair value of employee stock options is measured using the Black-Scholes option pricing model. Measurement inputs include the share price on measurement date, exercise price of the instrument, expected volatility, forfeiture rate, weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends and the risk-free interest rate (based on government bonds).

The weighted average inputs used in the Black-Scholes pricing model to determine the fair value of the options granted during the three months ended March 31, 2020 of $0.58 per share include the following:

	2020
Share price	$1.57
Exercise price	$1.57
Volatility	48%
Forfeiture rate	2%
Expected option life (years)	3.7
Risk-free interest rate	1.4%

Share-based compensation expense of $0.5 million was charged to the consolidated statement of income during the three months ended March 31, 2020 (March 31, 2019 - $0.6 million) with an equivalent offset to contributed surplus.

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11. NET INCOME PER SHARE

Basic and diluted net income per share were calculated as follows:

Basic and diluted net income per share were calculated as follows:
	Three Months Ended	Three Months Ended
	March 31,2020	March 31,2019
Net income for theperiod	$ 10,512	$ 607
Weighted average number of common shares outstanding - basic
Common shares outstanding at beginning of period	121,557	121,557
Effect of shares issued	-	-
Weighted average number of common shares outstanding - basic	121,557	121,557
Dilutive effect of outstandingoptions(1)	-	296
Weighted average number of common shares outstanding- diluted	121,557	121,853
Net income per share
Basic and diluted	$ 0.09	$ 0.00

• (1) Excludes effect of 10.2 million weighted average common shares related to stock options that were anti-dilutive for the three months ended March 31, 2020 (6.6 million weighted average common shares related to stock options for the three months ended March 31, 2019).

12. FINANCIAL INSTRUMENTS

The Company’s financial instruments include accounts receivable, prepaids and deposits, accounts payable and accrued liabilities, bank indebtedness and risk management contracts.

Storm classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument.

• Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide continual and verifiable pricing information.

• Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities and interest rates, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

• Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

The carrying value of bank indebtedness approximates its fair value as it bears interest at market rates. The fair value of the Company’s risk management contracts described below is based on forward prices of commodities and interest rates available in the marketplace and they are therefore classified as Level 2 financial instruments. The Company does not have any financial instruments classified as Level 3 and there were no transfers between levels within the fair value hierarchy for the three months ended March 31, 2020.

The Company’s risk management contracts are subject to master netting agreements that create a legally enforceable right to offset by counterparty the related financial assets and financial liabilities on the Company’s consolidated statements of financial position. The following is a summary of the Company’s financial assets and financial liabilities that are subject to offset as at March 31, 2020:

	Gross Amounts	Gross Amounts	Net Amounts
	Recognized as Financial	of Financial Assets	Recognized as Financial
	Assets(Liabilities)	(Liabilities)Offset	Assets(Liabilities)
Risk management contracts
Current asset	$ 15,951	$ (4,146)	$ 11,805
Long-term asset	-	-	-
Current liability	(4,945)	4,146	(799)
Long-term liability	(2,362)	-	(2,362)
Netposition	$ 8,644	$ -	$ 8,644

The following is a summary of the Company’s financial assets and financial liabilities that were subject to offset as at December 31, 2019:

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	Gross Amounts	Gross Amounts	Net Amounts
	Recognized as Financial	of Financial Assets	Recognized as Financial
	Assets(Liabilities)	(Liabilities)Offset	Assets(Liabilities)
Risk management contracts
Current asset	$ 1,805	$ (692)	$ 1,113
Long-term asset	-	-	-
Current liability	(2,734)	692	(2,042)
Long-term liability	(904)	-	(904)
Netposition	$(1,833)	$ -	$(1,833)

Accounts Receivable

The Company’s accounts receivable tend to be concentrated with a limited number of marketers of the Company’s production as well as joint venture partners and are subject to normal industry credit risk. Receivables from crude oil and natural gas marketers are typically collected on or about the 25[th] of the following month. The Company's production is sold to organizations whose credit worthiness is in part assessable from publicly available information. As at March 31, 2020, the Company’s three major energy customers with investment grade credit ratings, accounted for $10.4 million (March 31, 2019 - $19.0 million) of total receivables and 98% of total revenues (March 31, 2019 – 81% from two major customers). Where operations involve partners in a joint venture, the Company attempts to mitigate the risk from joint venture receivables by obtaining pre-approval and cash call deposits from its partners in advance of significant capital expenditures. Receivables from joint ventures are typically collected within one to three months of the joint venture bill being issued. As at March 31, 2020, there were no receivables outstanding for more than 60 days. No material default on outstanding receivables is anticipated as none of the Company’s outstanding receivables are considered past due at March 31, 2020.

The maximum exposure to credit risk at March 31, 2020 was the carrying amount of accounts receivable of $20.5 million and risk management contract assets of $11.8 million. No receivables were impaired at March 31, 2020.

Commodity Price Risk

The Company uses risk management contracts to manage its exposure to fluctuations in commodity prices, by fixing prices of future deliveries of crude oil and natural gas and thus providing stability of funds flow. Although the Company had no crude oil production at March 31, 2020, part of its condensate and NGL stream is sold at a price based on crude oil. Accordingly, a financial investment based on crude oil is used as a proxy for the Company’s condensate and NGL stream. At the date of this report, the Company had entered into the following outstanding financial risk management contracts in place to manage commodity price risk:

As at May 12, 2020	Daily Volume	Period Hedged	Average Price(Cdn$)
Natural Gas Swaps
NYMEX (US$)	2,000 Mmbtu	Apr 1, 2020 – Oct 31, 2020	US$2.42/Mmbtu
NYMEX (US$)	4,500 Mmbtu	Nov 1, 2020 – Dec 31, 2020	US$2.49/Mmbtu
NYMEX (US$)	2,500 Mmbtu	Jan 1, 2021 – Oct 31, 2021	US$2.32/Mmbtu
NYMEX	2,500 Mmbtu	Jul 1, 2020 – Oct 31, 2020	$2.86/Mmbtu
NYMEX	2,500 Mmbtu	Jan 1, 2021 – Mar 31, 2021	$3.69/Mmbtu
NYMEX	10,000 Mmbtu	Apr 1, 2021 – Oct 31, 2021	$3.32/Mmbtu
Chicago	20,000 Mmbtu	Apr 1, 2020 – Jun 30, 2020	$3.29/Mmbtu
Chicago	1,500 Mmbtu	Jul 1, 2020 – Oct 31, 2020	$3.29/Mmbtu
Chicago	6,000 Mmbtu	Nov 1, 2020 – Dec 31, 2020	$3.55/Mmbtu
Chicago	13,500 Mmbtu	Jan 1, 2021 – Mar 31, 2021	$3.65/Mmbtu
Chicago	22,000 Mmbtu	Apr 1, 2021 – Oct 31, 2021	$3.04/Mmbtu
Chicago	3,000 Mmbtu	Oct 1, 2021 – Dec 31, 2021	$3.45/Mmbtu
Chicago	4,500 Mmbtu	Nov 1, 2021 – Mar 31, 2022	$3.65/Mmbtu
Sumas	4,500 Mmbtu	Jul 1, 2020 – Oct 31, 2020	$3.08/Mmbtu
AECO	12,000 GJ	Apr 1, 2020 – Oct 31, 2020	$1.72/GJ
AECO	5,000 GJ	Nov 1, 2020 – Mar 31, 2021	$2.25/GJ
AECO	11,000 GJ	Apr 1, 2021 – Oct 31, 2021	$2.14/GJ
Station 2	5,000 GJ	Apr 1, 2020 – Oct 31, 2020	$1.57/GJ
Station 2	3,000 GJ	May 1, 2020 – Aug 31, 2020	$1.65/GJ
Station 2	18,000 GJ	Nov 1, 2020 – Mar 31, 2021	$2.05/GJ
Station 2	25,000 GJ	Apr 1, 2021 – Oct 31, 2021	$1.87/GJ
Station 2	15,500 GJ	Nov 1, 2021 – Mar 31, 2022	$2.31/GJ
Station 2	3,000 GJ	Apr 1,2022 – Oct 31,2022	$1.90/GJ

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As at May 12, 2020	Daily Volume	Period Hedged	Average Price(Cdn$)
Natural Gas Collars
NYMEX (US$)	3,000 Mmbtu	Apr 1, 2020 – Jun 30, 2020	US$1.90 - $2.45/Mmbtu
NYMEX (US$)	13,000 Mmbtu	Jul 1, 2020 – Oct 31, 2020	US$1.92 - $2.41/Mmbtu
NYMEX (US$)	8,000 Mmbtu	Nov 1, 2020 – Dec 31, 2020	US$1.96 - $2.49/Mmbtu
NYMEX (US$)	3,000 Mmbtu	Jan 1, 2021 – Mar 31, 2021	US$2.40 - $2.75/Mmbtu
NYMEX	12,500 Mmbtu	Apr 1, 2020 – Jun 30, 2020	$2.74 - $3.22/Mmbtu
NYMEX	22,500 Mmbtu	Jul 1, 2020 – Sep 30, 2020	$2.78 - $3.30/Mmbtu
NYMEX	17,500 Mmbtu	Oct 1, 2020 – Oct 31, 2020	$2.74 - $3.31/Mmbtu
NYMEX	19,500 Mmbtu	Nov 1, 2020 – Dec 31, 2020	$2.81 - $3.36/Mmbtu
NYMEX	5,000 Mmbtu	Jan 1, 2021 – Mar 31, 2021	$3.45 - $4.10/Mmbtu
NYMEX	10,500 Mmbtu	Jan 1, 2021 – Mar 31, 2021	$3.46 - $3.96/Mmbtu
NYMEX	6,000 Mmbtu	Nov 1, 2021 – Mar 31, 2022	$3.53 - $4.13/Mmbtu
AECO	9,000 GJ	Nov 1, 2020 – Mar 31, 2021	$2.02 - $2.49/GJ
AECO	7,000 GJ	Nov 1,2020 – Mar 31,2021	$1.90 -$2.58/GJ
Natural Gas Differential Swaps
NYMEX:Chicago (US$)	12,500 Mmbtu	Apr 1, 2020 – Dec 31, 2020	NYMEX minus US$0.274/Mmbtu
NYMEX:Chicago (US$)	5,000 Mmbtu	Jul 1, 2020 – Oct 31, 2020	NYMEX minus US$0.315/Mmbtu
NYMEX:Chicago (US$)	12,500 Mmbtu	Jan 1, 2021 – Dec 31, 2021	NYMEX minus US$0.256/Mmbtu
NYMEX:Chicago	5,000 Mmbtu	Apr 1, 2020 – Jun 30, 2020	NYMEX minus $0.29/Mmbtu
NYMEX:Chicago	22,500 Mmbtu	Jul 1, 2020 – Sep 30, 2020	NYMEX minus $0.30/Mmbtu
NYMEX:Chicago	17,500 Mmbtu	Oct 1, 2020 – Oct 31, 2020	NYMEX minus $0.31/Mmbtu
NYMEX:Chicago	19,500 Mmbtu	Nov 1, 2020 – Dec 31, 2020	NYMEX minus $0.28/Mmbtu
NYMEX:Chicago	10,500 Mmbtu	Jan 1, 2021 – Mar 31, 2021	NYMEX plus $0.048/Mmbtu
NYMEX:Chicago	6,000 Mmbtu	Nov 1, 2021 – Mar 31, 2022	NYMEX plus $0.073/Mmbtu
AECO:Station 2	7,000 GJ	Nov 1,2020 – Mar 31,2021	AECO minus$0.10/GJ
Crude Oil Swaps
WTI	200 Bbls	Apr 2020	$31.90/Bbl
WTI	750 Bbls	May 2020	$33.80/Bbl
WTI	750 Bbls	Apr 1, 2020 – Jun 30, 2020	$71.92/Bbl
WTI	700 Bbls	Jul 1,2020 – Dec 31,2020	$61.72/Bbl
Crude Oil Collars
WTI	900 Bbls	Apr 1, 2020 – Jun 30, 2020	$70.89 - $80.89/Bbl
WTI	500 Bbls	Jul 1,2020 – Dec 31,2020	$63.10 -$73.66/Bbl
Crude Oil Differential Swaps
WTI:C5	400 Bbls	Apr 1, 2020 – Jun 30, 2020	WTI minus $4.25/Bbl
WTI:C5	600 Bbls	Apr 1,2020 – Dec 31,2020	WTI minus $7.90/Bbl

Physical Delivery Sales Contracts

The Company also enters into physical delivery sales contracts from time to time to manage commodity price risk. These contracts are considered normal executory contracts and are not recognized in the consolidated statement of income and comprehensive income until volumes are delivered.

	DailyVolume	Contract Price
Natural Gas
Apr 2020 – Oct 2020	14,028 Mmbtu at Station 2	Sumas less US$0.69/Mmbtu
Apr 2020 – Oct 2020	6,000 GJ at Station 2	AECO 7A less Cdn$0.295/GJ
Nov 2020 – Oct 2021	5,000 GJ at Station 2	AECO 7A less Cdn$0.125/GJ
Apr 2020 – Mar 2021	6,000 GJ at ATP	AECO 5Aplus Cdn$0.09/GJ

Interest Rate Risk

The Company may enter into interest rate swap contracts to manage the uncertainty of variable interest rates by fixing the variable component of a portion of the interest paid on the Company’s revolving bank facility. As at March 31, 2020, the Company had the following outstanding financial risk management contracts in place to manage interest rate risk:

			Notional		Fixed
Index	Effective	Date	Principal	RemainingTerm	Contract Rate
One-month bankers’ acceptance - CDOR(1)	May	2019	$25 million	Apr 2020 – May 2022	1.949%
One-month bankers’ acceptance - CDOR(1)	Jan	2020	$10 million	Apr 2020 – Jan 2023	1.943%
One-month bankers’ acceptance - CDOR(1)	Jan	2020	$15 million	Apr 2020 – Jan 2021	1.985%

(1) Canadian Dollar Offered Rate.

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Risk Management

Risk management contracts may be used by the Company to manage exposure to market risks related to commodity prices, exchange rates and interest rates. The use of financial risk management contracts is governed by Storm’s Board of Directors and follows guidelines and limits approved by the Board. Storm does not use derivative contracts for speculative purposes. All derivative contracts are classified at fair value through profit and loss and measured at fair value, with gains and losses on re-measurement included as a component of unrealized risk management contracts in the period in which they arise.

The fair market value of these risk management contracts at March 31, 2020 was a net asset position of $8.6 million (December 31, 2019 – net liability position of $1.8 million) and is included on the balance sheet as either a risk management asset or liability and is classified as current or non-current based on the contractual terms specific to the instruments. For the three months ended March 31, 2020, this resulted in an unrealized mark-to-market gain of $10.5 million (March 31, 2019 - unrealized mark-to-market loss of $4.8 million) when measured against the fair market value at the end of the preceding reporting period. These amounts are recognized in the consolidated statement of income and comprehensive income.

The Company realized a gain from risk management price contracts in place in the amount of $2.7 million for the three months ended March 31, 2020 (March 31, 2019 – realized loss of $9.6 million).

Sensitivities

The following table summarizes the effects of movement in commodity prices and interest rates on net income due to changes in the fair value of risk management contracts in place at March 31, 2020. Changes in the fair value generally cannot be extrapolated because the relationship of a change in an assumption to the change in fair value may not be linear.

linear.
	ThreeMonthsEndedMarch31,2020
Factor	Gain/(Loss)
Increase of US$10.00/Bbl in the price of WTI(1)	$ (7,045)
Decrease of US$10.00/Bbl in the price of WTI(1)	$ 7,045
Increase of US$0.10/Mmbtu in the price of NYMEX natural gas	$ (5,845)
Decrease of US$0.10/Mmbtu in the price of NYMEX natural gas	$ 5,845
Increase of 100 basis points (1%) in interest rates	$ 951
Decrease of 100 basispoints(1%)in interest rates	$(951)

(1) A portion of the Company’s condensate and NGL production is sold at a price based on WTI.

13. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital

Changes in non-cash working capital
	Three Months Ended	Three Months Ended
	March 31,2020	March 31,2019
Accounts receivable	$ 1,449	$ 6,028
Prepaids and deposits	203	265
Accountspayable and accrued liabilities	4,845	(8,571)
Change in non-cash workingcapital	$ 6,497	$(2,278)
Relating to:
Operating activities	$ (472)	$ 5,943
Investingactivities	6,969	(8,221)
Change in non-cash workingcapital	$ 6,497	$(2,278)
Interestpaid duringtheperiod	$ 1,569	$ 1,037
Income taxespaid duringtheperiod	$ -	$ -

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14. COMMITMENTS

At March 31, 2020, the Company has the following long-term commitments over the next five years and thereafter:

	2020	2021	2022	2023	2024	Thereafter	Total
Transportation and processing commitments	$ 47,980	$ 63,499	$ 51,012	$ 27,677	$ 27,812	$ 209,074	$ 427,054
Office lease(1)	267	356	356	356	356	385	2,076
Total	$ 48,247	$ 63,855	$ 51,368	$ 28,033	$ 28,168	$ 209,459	$ 429,130

(1) Office lease commitment includes the operating cost component of the office lease costs.

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CORPORATE INFORMATION

Officers

Brian Lavergne President & Chief Executive Officer

Robert S. Tiberio Chief Operating Officer

Michael J. Hearn Chief Financial Officer

Jamie P. Conboy Vice President, Geology

H. Darren Evans Vice President, Exploitation

Bret A. Kimpton Vice President, Production

Emily Wignes Vice President, Finance

Directors

Matthew J. Brister[(2)(3)]

John A. Brussa

Mark A. Butler[(1)(3)]

Stuart G. Clark[(1)] Chairman

Sheila A. Leggett[(2)]

Gregory G. Turnbull[(2)] P. Grant Wierzba[(2)(3)]

James K. Wilson[(1) ]

Brian Lavergne President & Chief Executive Officer

(1) Member, Audit Committee (2) Member, Reserves, Environment, Health and Safety Committee (3) Member, Compensation, Governance and Nomination Committee

Stock Exchange Listing

Toronto Stock Exchange Trading Symbol “SRX”

Solicitors

Stikeman Elliott LLP Burnet Duckworth & Palmer LLP Calgary, Alberta

Auditors

Ernst & Young LLP Calgary, Alberta

Registrar & Transfer Agent

Alliance Trust Company Calgary, Alberta

Bankers

ATB Financial Canadian Imperial Bank of Commerce Royal Bank of Canada Canadian Western Bank Calgary, Alberta

Executive Offices

Suite 600, 215 – 2[nd] Street S.W. Calgary, Alberta, T2P 1M4 Canada Tel: (403) 817-6145 Fax: (403) 817-6146 www.stormresourcesltd.com

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Abbreviations

ATP	Alliance Transfer Point
Bbls	Barrels of oil or natural gas liquids
Bbls/d	Barrels per day
Bcf	Billions of cubic feet
Boe	Barrels of oil equivalent
Boe/d	Barrels of oil equivalent per day
Bopd	Barrels of oil per day
Btu	British thermal unit
Cdn$	Canadian dollar
CGU DPIIP	Cash generating unit Discovered Petroleum Initially in Place
GJ	Gigajoules
GJ/d	Gigajoules per day
kPa	Kilopascal

Mbbl	Thousands of barrels
Mboe	Thousands of barrels of oil equivalent
Mcf	Thousands of cubic feet
Mcf/d	Thousands of cubic feet per day
Mmbtu	Millions of British Thermal Units
Mmbtu/d	Millions of British Thermal Units per day
Mmcf	Millions of cubic feet
Mmcf/d	Millions of cubic feet per day
NGL	Natural gas liquids
OPEC	Organization of Petroleum Exporting Countries
TSX	Toronto Stock Exchange
US	United States
US$	United States dollar
WTI	West Texas Intermediate

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Storm Resources Ltd.

Suite 600, 215 – 2nd Street S.W., Calgary, Alberta T2P 1M4 Phone: (403)817-6145 Fax: (403)817-6146

www.stormresourcesltd.com