Yangarra Resources Ltd. — Interim / Quarterly Report 2023

Jul 27, 2023

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Yangarra Resources Ltd. Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022

Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

		June 30		December 31
		2023		2022
		(unaudited)		(audited)
Assets
Current
Accounts receivable_(note 10)_	$	26,494	$	31,950
Prepaid expenses and inventory		8,843		8,809
Commodity contracts (note 10)		1,324		24
Total current assets		36,661		40,783
Non-current
Property and equipment_(note 2)_		736,129		701,045
Exploration and evaluation assets		26,494		26,230
Total assets	$	799,284	$	768,058
Liabilities
Current
Accounts payable and accrued liabilities	$	22,885	$	35,718
Bank debt_(note 3)_		7,410		139,405
Commodity contracts_(note 10)_		615		–
Current portion of lease obligations_(note 4)_		1,609		2,092
Current portion of decommissioning liability_(note 5)_		488		488
Flow-through share obligation_(note 6)_		529		–
Total current liabilities		33,536		177,703
Non-current
Bank debt_(note 3)_		125,000		–
Lease obligations_(note 4)_		1,229		1,003
Other liabilities		952		1,018
Decommissioning liability_(note 5)_		14,662		13,593
Deferred tax liability		112,780		101,167
Total liabilities		288,159		294,484
Shareholders' equity
Share capital_(note 6)_		192,719		179,688
Contributed surplus		30,599		28,821
Retained earnings		287,807		265,065
Total shareholders’ equity		511,125		473,574
Total liabilities and shareholders’ equity	$	799,284	$	768,058

Contingency (note 14)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

1

Yangarra Resources Ltd.

Condensed Interim Consolidated Statements of Income and Comprehensive Income For the three and six months ended June 30

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

	Three months ended June 30 Six months ended June 30	Three months ended June 30 Six months ended June 30
	2023 2022 2023	2022
Revenue Petroleum and natural gas sales_(note 13)_ Royalties	$ 38,396$ 68,545 $ 87,451 (3,414) (5,605) **(8,642) **	$ 119,973 (8,210)
Commodity price risk contracts_(note 10c iii)_ Gain (loss) on commodity contract settlement Unrealized change in fair value of commodity contracts	34,982 62,940 78,809 510 (2,712) 470 707 472 685	111,763 (2,701) (820)
	36,199 60,700 79,964	108,242
Expenses Production Transportation General and administrative Finance_(note 12) Share-based compensation(note 7) Depletion and depreciation(note 2)_	7,206 5,714 15,028 1,598 1,194 3,110 1,356 1,019 2,935 3,175 2,597 6,219 427 181 885 9,980 9,106 19,871	10,370 2,311 1,921 5,112 338 17,713
	23,742 19,811 48,048	37,765
Income before tax Deferred tax expense	12,457 40,889 31,916 4,624 10,258 9,174	70,477 17,126
Net income and total comprehensive income	$ 7,833$ 30,631$ 22,742	$ 53,351
Earnings per share(note 8) Basic Diluted	$ 0.08$ 0.35 $ 0.25 $ 0.08$ 0.33 $ 0.23	$ 0.61 $ 0.58

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Changes in Equity For the six months ended June 30 (unaudited, in thousands of Canadian dollars)

		2023		2022
Share capital
Balance, beginning of period	$	179,688	$	178,110
Equity financing_(note 6)_		13,013		–
Exercise of stock options		12		1,040
Contributed surplus transferred on exercise of stock options		6		484
Balance, end of period		192,719		179,634
Contributed surplus
Balance, beginning of period		28,821		28,142
Share-based compensation_(note 7)_		1,784		498
Exercise of stock options		(6)		(484)
Balance, end of period		30,599		28,156
Retained earnings
Balance, beginning of period		265,065		158,707
Netincome		22,742		53,351
Balance, end ofperiod		**287,807 **		212,058
Total shareholders’ equity	$	511,125	$	419,848

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Condensed Interim Consolidated Statements of Cash Flows For the three and six months ended June 30 (unaudited, in thousands of Canadian dollars)

	Three months ended June 30 Six months ended June 30
	2023 2022 2023 2022
Operating Net income for the period Add back non-cash items: Unrealized change in fair value of commodity contracts Finance expense_(note 12) Share-based compensation(note 7) Depletion and depreciation(note 2) Deferred tax expense Interest and finance costs paid(note 12) Change in non-cash working capital(note 9)_	$ 7,833$ 30,631 $ 22,742$ 53,351 (707) (472) (685) 820 3,175 2,597 6,219 5,112 427 181 885 338 9,980 9,106 19,871 17,713 4,624 10,258 9,174 17,126 (2,922) (2,273) (5,728) (4,676) (118) (711) 3,762 (8,236)
Net cash flow from operating activities	22,292 49,317 56,240 81,548
Financing Issue of common shares_(note 6) Share issue costs(note 6) Exercise of stock options Bank debt repayment(note 3) Lease obligation repayment(note 4) Lease interest paid(note 12)_ Realized interest rate contract settlement Other liabilities advance (repayment)	– – 17,250 – – – (1,269) – 12 919 12 1,040 3,362 (26,539) (7,183) (31,115) (514) (544) (744) (1,053) (70) (84) (124) (173) – – – 393 6 216 (66) 277
Net cash flow from (used in) financing activities	2,796 (26,032) 7,876 (30,631)
Investing Additions to property and equipment_(note 2) Additions to exploration and evaluation assets Changein non-cashworking capital(note 9)_	(20,189) (26,961) (52,679) (48,226) – (308) (264) (382) (8,400) 3,984 (11,173) (2,309)
Net cash flow used in investing activities	(28,589) (23,285) (64,116) (50,917)
Change in cash Cash, beginning of period	(3,501) – – – 3,501 – – –
Cash, end of period	$ – $ –$ – $ –

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

1. Basis of preparation and statement of compliance and authorization

Yangarra Resources Ltd. ("Yangarra" or the “Company”) is a publicly-traded company involved in the production, exploration and development of resource properties in Western Canada. The address of the registered office is 1530, 715 – 5 Avenue SW, Calgary Alberta, T2P 2X6. These condensed interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yangarra Resources Corp., Yangarra Production Partnership and Yangarra Holding Corp., after the elimination of intercompany transactions and balances.

The condensed interim consolidated financial statements were authorized for issue by the Company’s Board of Directors on July 26, 2023.

Statement of compliance and authorization:

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting on a basis consistent with the accounting, estimation and judgement policies described in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2022 (the “Annual Financial Statements”). These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments and stock options which are recognized at fair value. All financial information is reported in Canadian dollars, unless otherwise noted. Certain information and disclosures normally included in the notes to the Annual Financial Statements prepared in accordance with International Financial Reported Standards have been condensed or omitted. These condensed interim consolidated financial statements should be read in conjunction with the Annual Financial Statements.

Material accounting policies:

The new accounting policies set out below were applied during the six months ended June 30, 2023 by the Company and its subsidiaries in the condensed interim consolidated financial statements. These policies are considered material to the Company as they provide information to facilitate the understanding of other material information reported and disclosed in these condensed interim consolidated financial statements.

Flow-through shares

Expenditure deductions for income tax purposes related to development activities funded by flow-through equity instruments are renounced to investors in accordance with income tax legislation. The proceeds from issuance are allocated between the offering of shares and the sale of tax benefits. The allocation is made based on the difference between the quoted price of the existing shares and the amount the investor pays for the shares. A flow-through share premium liability is recognized for this difference. The liability is reversed when eligible capital expenditures are incurred, and a deferred tax liability is recognized at that time. Income tax expense is the difference between the amount of the deferred tax liability and the liability recognized on issuance.

Restricted Share Units (“RSUs”)

The Company uses the fair value method for valuing RSUs. Under the fair value method, compensation costs attributable to stock-based compensation awards are measured at fair value at the date of grant and expensed over the vesting period with a corresponding increase to contributed surplus. A forfeiture rate is estimated on the date of grant and is adjusted to reflect the actual number of awards that vest. The fair value of each RSU award is determined with reference to the trading price of the Company’s common shares on the date of grant.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

2. Property and equipment

	Oil and Natural Gas Interests Well and Plant Equipment Other Assets	Total
Cost Balance, December 31, 2022 Cash additions Share-based compensation_(note 7) Decommissioning liability(note 5) ROU asset addition(note 4)_ Balance, June 30, 2023 Depletion and depreciation Balance, December 31, 2022 Depletion and depreciation ROU asset depreciation Balance, June 30, 2023 At December 31, 2022 At June 30, 2023	$ 810,233 $ 152,491 $ 16,765 40,877 10,903 899 899 – – 834 – – – – 543	$ 979,489 52,679 899 834 543
	$ 852,843 $ 163,394 $ 18,207	$ 1,034,444
	$ 247,472 $ 20,975 $ 9,997 17,767 1,568 101 – – 435	$ 278,444 19,436 435
	$ 265,239 $ 22,543 $ 10,533	$ 298,315
	$ 562,761 $ 131,516 $ 6,768 $ 587,604 $ 140,851 $ 7,674	$ 701,045 $ 736,129

At June 30, 2023, all of the Company’s properties are pledged as security for the bank debt (note 3). The calculation of depletion for the six months ended June 30, 2023 included estimated future development costs of $555,786 (2022 – $609,806) associated with the development of the Company’s proved plus probable reserves.

Cash additions for the six months ended June 30, 2023 include $665 (2022 - $701) of recoveries related to the Company's working interest in operated capital expenditure programs on which overhead has been charged in accordance with standard industry operating agreements and $138 (2022 – $221) of capitalized salaries and consulting expenses directly related to geological, drilling and completions.

Included in property and equipment at June 30, 2023 is $3,744 (December 31, 2022 – $3,636) of right-of-use (“ROU”) assets associated with the Company’s lease obligations.

3. Bank debt

As at June 30, 2023, the maximum amount available under the syndicated credit facility was $145,000 (December 31, 2022 – $180,000) comprised of a $120,000 (December 31, 2022 – $155,000) extendable revolving term credit facility and a $25,000 (December 31, 2022 – $25,000) operating facility. The credit facility will reduce by $5 million per quarter starting September 30, 2023, through to September 30, 2024, at which point the facility will remain at $120 million. The amount available under these facilities is re-determined at least twice a year and is primarily based on the Company’s oil and gas reserves, the syndicate of lending institutions’ forecast commodity prices, the current economic environment and other factors as determined by the syndicate (the “Borrowing Base”). If the total advances made under the credit facilities are greater than the re-determined Borrowing Base, the Company has 60 days to repay any shortfall. The facilities last for a 364-day period and will be subject to the next 364-day extension by May 31, 2024. If not extended by May 31, 2024, the facilities will cease to revolve, and all outstanding balances will become repayable on May 31, 2025.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

3. Bank debt (continued)
Balance, December 31, 2022	$	139,405
Repayment		(7,183)
Accretion of debt transaction costs		188
Balance, June 30, 2023	$	132,410

As at June 30, 2023, the $132,410 (December 31, 2022 – $139,405) reported amount of bank debt was comprised of $14,737 (December 31, 2022 – $593) drawn on the operating facility and $119,128 (December 31, 2022 – $139,130) drawn on the revolving facility and net of unamortized transaction costs of $1,455 (December 31, 2022 – $318).

The Company is subject to a financial covenant requiring an adjusted working capital ratio above 1:1 (current assets plus the undrawn availability under the revolving facility, divided by the current liabilities less the drawn portion of the revolving facility and excluding unrealized commodity contracts). The Company was in compliance with this covenant as at June 30, 2023 and December 31, 2022. The facilities are secured by a general security agreement over all assets of the Company. Beginning July 3, 2023, the Company is required to ensure that not less than 50% of the forecasted daily production for the July 2023 – June 2024 twelve-month period is hedged. Thereafter, the Company is required to ensure that not less than 20% of the forecasted daily production for the July 2024 – December 2024 six-month period is hedged.

The total standby fees on the revolving facility range, depending on the debt to EBITDA ratio, between 200 bps to 400 bps on bank prime borrowings and between 300 bps and 500 bps on bankers’ acceptances. The undrawn portion of the revolving facility is subject to a standby fee in the range of 75 bps to 125 bps.

During the six months ended June 30, 2023, the weighted average effective interest rate for the bank debt was approximately 8.31% (six months ended June 30, 2022 – 5.35%).

4. Lease obligations

The Company incurs lease payments related to the oil hauling fleet, operator/crew trucks and the head office. Leases are entered into and exited in coordination with specific business requirements which includes the assessment of the appropriate durations for the related leased asset.

appropriate durations for the related leased asset.
Balance, December 31, 2022 Additions Cancellations Lease payments Accretion Balance, June 30, 2023 Current Non-current	$ 3,095 884 (341) (744) (56)
	$ 2,838
	$ 1,609 $ 1,229
Maturity analysis – contractual undiscounted cash flows Less than one year One to six years Total undiscounted lease obligations Unrecognized imputed interest Total lease obligation	$ 1,609 1,910
	3,519 (681)
	$ 2,838

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

5. Decommissioning liability

The following table presents the reconciliation of the carrying amount of the liability associated with the decommissioning of the Company’s property and equipment:

Balance, December 31, 2022 Liabilities incurred Effect of change in estimates Accretion Balance, June 30, 2023 Current Non-current	$ 14,081 762 72 235
	$ 15,150
	$ 488 $ 14,662

The current portion of decommissioning liability relates to wells the Company plans to abandon and reclaim in 2023 as part of the Alberta Energy Regulator’s mandatory spend target.

The following significant assumptions were used to estimate the decommissioning liability:

Undiscounted cash flows	$	19,506
Discount rate		2.86% - 3.74%
Inflation rate		2%
Weighted average expected timing of cash flows		6.3 years

6. Share capital

Common shares issued

Common shares issued
	Number of shares	_Amount _
Balance, December 31, 2022	87,985 $	179,688
Exercise of stock options	25	12
Contributed surplus transferred on exercise of stock options	–	6
CDE flow-through financing	6,791	17,250
CDE flow-through premium liability	–	(3,260)
Share issue costs (net of $292 in tax)	–	(977)
Balance, June 30, 2023	94,801$	192,719

On March 27, 2023, the Company, closed a "bought deal" financing, completed by way of a short form prospectus. 6,791common shares were issued on a flow-through basis in respect of Canadian development expenses ("CDE Flow-Through Shares") at a price of $2.54 per CDE Flow-Through Share for gross proceeds of $17,250.

7. Share-based compensation

On January 2, 2023, the Company implemented a Restricted Share Unit (“RSU”) program. In the RSU program’s initial grant, the Company issued 1,590 RSUs that vest equally over 3 years with the last tranche vesting on January 2, 2026. The RSUs are exercisable in either cash or shares at the option of the Company. As it is the Company’s intention to settle in shares, the RSUs are treated as share-based compensation with a value on the date of issue of $2.67 per RSU.

With the commencement of the RSU program, the Company will no longer issue any new options under the Stock Option plan. All previously issued stock options will continue to vest and expire as per the agreements in place when they were originally issued.

During the six months ended June 30, 2023, the Company recognized $885 (2022 – $338) of share-based compensation in the condensed interim consolidated statements of income and comprehensive income. During the six months ended June 30, 2023, the Company capitalized $899 (2022 - $160) of share-based compensation to property and equipment (note 2).

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

7. Share-based compensation (continued)

The following table provides a continuity of stock options outstanding as at June 30, 2023:

	Number of stock Weighted – average options exercise price
Balance, December 31, 2022 Exercised Cancelled Balance, June 30, 2023	7,779 $ 1.09 (25) 0.50 (27) (1.19)
	7,727 $ 1.09

The following provides a summary of the stock options outstanding as at June 30, 2023:

Range of exercise price	Number outstanding Weighted-average remaining contractual life (years) Weighted- average exercise price	Number exercisable Weighted- average exercise price
$ 0.45 – $ 0.49 $ 0.50 – $ 1.00 $ 1.01 – $ 1.50 $ 1.51 – $ 2.00 $ 2.00 – $ 2.50 $ 2.51 – $ 3.00 $ 3.01 – $ 3.50	55 2.25 $ 0.45 4,797 2.20 0.57 1,146 2.91 1.36 428 3.38 1.66 743 3.84 2.45 303 4.09 2.59 255 3.89 3.05	55 $ 0.45 4,796 0.57 1,146 1.36 421 1.66 288 2.45 11 2.90 128 3.05
	7,727 2.91 $ 1.09	6,845 $ 0.90

8. Earnings per common share

Basic earnings per share was calculated as follows:

		Three	months ended	months ended		Six months ended	Six months ended
				June 30			June 30
		2023		2022		2023	2022
Net income for the period	$	7,833	$	30,631	$	22,742$	53,351
Weighted average number of shares (basic)
Issued common shares at beginning of period		94,776		86,874		87,984	86,649
Effect of common shares issued in the period		–		221		3,565	236
Weighted average number of common shares-basic		94,776		87,095		91,549	86,885
Net income per share-basic		0.08		0.35		0.25	0.61

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

8. Earnings per common share (continued)

Diluted earnings per share was calculated as follows:

Diluted earnings per share was calculated as follows:
	Three months ended June 30 Six months ended June 30
	2023 2022 2023 2022
Weighted average number of shares (diluted) Weighted average number of shares (basic) Effect of outstanding options Effect ofoutstandingRSUs	94,776 87,095 91,549 86,885 3,551 4,992 3,922 4,603 1,590 – 1,590 –
Weighted average number of common shares-diluted	99,917 92,087 97,061 91,488
Netincome pershare-diluted	0.08 0.33 0.23 0.58

The average market value of the Company’s shares for purpose of calculating the dilutive effect of share options was based on quoted market prices for the period that the options were outstanding. For the three months ended June 30, 2023, 1,314 (2022 – nil) options were excluded based on an average share price of $1.74 (2022 – $3.14) for the period. For the six months ended June 30, 2023, 1,301 (2022 – 298) options were excluded as they were out of the money based on an average share price of $2.00 (2022 – $2.61) for the period.

9. Change in non-cash working capital

	Three months ended June 30 Six months ended June 30
	2023 2022 2023 2022
Accounts receivable Prepaid expenses and inventory Accounts payable and accrued liabilities	$ 5,414 $ (4,448) $ 5,456$ (9,600) (918) (2,123) (34) (1,907) (13,014) 9,844 (12,833) 962
	$ (8,518)$ 3,273 $ (7,411)$ (10,545)

The change in non-cash working capital has been allocated to the following activities:

Operating Investing	$ (118) $ (711) $ 3,762 $ (8,236) (8,400) 3,984 (11,173) (2,309)
	$ (8,518) $ 3,273 $ (7,411)$ (10,545)

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management

a. Accounts receivable and credit risk

Purchasers of the Company’s natural gas and liquids are subject to credit review to minimize the risk of non-payment. As at June 30, 2023, the maximum credit exposure is the carrying amount of the accounts receivable of $26,494 (December 31, 2022 – $31,950).

The maximum exposure to credit risk for accounts receivable by type of customer was:

As at	June 30, 2023 December 31, 2022
Natural gas and liquids marketers Partners on joint operations Other	$ 13,816$ 19,985 9,381 9,677 3,297 2,288
	$ 26,494$ 31,950

The Company historically has not experienced any significant collection issues with its natural gas and liquids marketers. The majority of the revenue accruals and receivables from natural gas and liquids marketers were received in July 2023.

The Company’s receivables are aged as follows:

As at	June 30, 2023 December 31, 2022
Under 30 days 30 to 60 days 60 to 90 days Over 90 days	$ 15,632$ 21,273 94 486 2,199 1,942 8,569 8,249
	$ 26,494$ 31,950

As at June 30, 2023, 94% (December 31, 2022 – 97%) of the over 90-day receivables are made up of three (December 31, 2022 – three) industry partners, for which a significant portion of the balances are in dispute (note 14). The Company has performed an analysis of each partner’s financial situation and has determined that the industry partners have the ability to pay.

b. Liquidity risk

As at June 30, 2023, the contractual maturities of the Company’s obligations are as follows:

		Carrying Amount	Contractual Cash Flows	Less than 1 year	1-2 Years	2-5 Years
Accounts payable and accrued liabilities		$ 22,885	$ 22,885	$ 22,885	$ –	$ –
Bank debt		132,410	133,767	133,767	–	–
Lease obligations		2,838	3,519	1,069	1,229	1,221
Other liabilities		952	952	–	–	952
Commoditycontracts		615	615	615	–	–
		$ 159,700	$ 161,738	$ 158,336	$1,229	$ 2,173

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

c. Market risk

The Company has exposure to the following market risks:

i. Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate fluctuations on its bank debt which bears interest at a floating rate and to mitigate this risk, the Company may enter into interest rate contracts. For the six months ended June 30, 2023, if interest rates had been 1% lower with all other variables held constant, net income would have been $628 (2022 - $292) higher, due to lower interest expense. An equal and opposite impact would have occurred had interest rates been higher by the same amount. The Company had no interest rate contracts in place as at June 30, 2023.

ii. Currency risk

Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. All of the Company’s petroleum and natural gas sales are denominated in Canadian dollars, however, the underlying market prices in Canada for petroleum and natural gas are impacted by changes in the exchange rate between the Canadian and United States dollar. The sensitivity of the fair value of a 10% change in foreign exchange rates would have a nominal impact the consolidated statements of income and comprehensive income.

iii. Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in commodity prices.

As at June 30, 2023, the Company was committed to the following commodity price risk contracts:

	As at June 30, 2023, the Company was committed to the following commodity price risk contracts:
	Year Volume Term Reference Type Strike Price Fair Value
	Natural Gas
	2023 500 GJ/d Jan - Dec AECO Collar CAD $2.50 - $7.25/GJ $ 38
	2023 7,000 GJ/d Mar - Aug AECO Collar CAD $1.50 - $2.41/GJ (23)
	2023 4,500 GJ/d Mar - Aug AECO Collar CAD $1.50 - $2.60/GJ (10)
	2023 7,000 GJ/d Sep AECO Collar CAD $1.75 - $2.55/GJ (19)
	2023 4,500 GJ/d Sep AECO Collar CAD $1.75 - $2.60/GJ (12)
	2023 7,000 GJ/d Oct AECO Collar CAD $1.25 - $2.50/GJ (67)
	2023 4,500 GJ/d Oct AECO Collar CAD $1.40 - $2.26/GJ (63)
	2023 5,700 GJ/d Jul - Oct AECO Put CAD $1.50 (43)
	2023 2,700 GJ/d Jul - Oct AECO Put CAD $1.50 (28)
	2023 6,500 GJ/d Nov23 - Dec23 AECO Put CAD $1.50 (34)
	2023/2024 6,000 GJ/d Nov23 - Jun24 AECO Put CAD $1.50 (158)
	2023/2024 7,000 GJ/d Nov23 - Jun24 AECO Put CAD $1.50 (98)

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

c. Market risk

iii. Commodity price risk

	iii. Commodity price risk
	Oil
	2023 200 bbl/d Mar - Aug WTI - CDN Collar CAD $80.00 - 129.00 /bbl 3
	2023 500 bbl/d Mar - Aug WTI - CDN Collar CAD $75.00 - 126.00 /bbl 3
	2023 200 bbl/d Mar - Aug WTI - CDN Collar CAD $70.00 - 137.00 /bbl 1
	2023 250 bbl/d Mar - Aug WTI - CDN Collar CAD $70.00 - 130.75 /bbl 1
	2023 700 bbl/d Sep WTI - CDN Collar CAD $80.00 - 112.20 /bbl 14
	2023 450 bbl/d Sep WTI - CDN Collar CAD $70.00 - 121.15 /bbl 2
	2023 700 bbl/d Oct WTI - CDN Collar CAD $70.00 - 115.00 /bbl (2)
	2023 450 bbl/d Oct WTI - CDN Collar CAD $70.00 - 113.45 /bbl (2)
	2023 500 bbl/d Jul -Oct WTI - USD Put USD - $50.00 (20)
	2023 200 bbl/d Jul -Oct WTI - CDN Collar CAD $70.00 - 108.10 /bbl (9)
	2023 1,100 bbl/d Nov - Dec WTI - USD Put USD - $50.00 (18)
	2023 500 bbl/d Nov - Dec WTI - USD Put USD - $50.00 (10)
	Butane
	2023 100 bbl/d Mar - Aug Mnt Belvieu Swap CAD 1.3930/gal 207
	2023 100 bbl/d Mar - Aug Mnt Belvieu Swap USD 1.055/gal 209
	2023 100 bbl/d Sep Mnt Belvieu Swap CAD 1.24/gal 42
	2023 100 bbl/d Sep Mnt Belvieu Swap CAD 1.241/gal 42
	2023 100 bbl/d Oct Mnt Belvieu Swap USD 0.80/gal 16
	2023 100 bbl/d Oct Mnt Belvieu Swap CAD 1.08/gal 18
	Propane
	2023 100 bbl/d Mar - Aug Mnt Belvieu Swap USD 0.80/gal 130
	2023 250 bbl/d Mar - Aug Mnt Belvieu Swap CAD 1.11/gal 375
	2023 100 bbl/d Sep Mnt Belvieu Swap CAD 1.09/gal 42
	2023 250 bbl/d Sep Mnt Belvieu Swap CAD 1.10/gal 110
	2023 100 bbl/d Oct Mnt Belvieu Swap USD 0.70/gal 18
	2023 250 bbl/d Oct Mnt Belvieu Swap CAD 0.956/gal 54
	Total $ 709

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

10. Financial instruments and financial risk management (continued)

d. Fair value of financial instruments

As the Company had a limited value of derivatives in place as at June 30, 2023, the sensitivity of the fair value of a 10% volatility in commodity prices would have a nominal impact on unrealized gains (losses) reported in the condensed interim consolidated statements of income and comprehensive income.

The following table summarizes the carrying value and fair value of the Company’s risk management assets and liabilities.

Financial Assets Financial assets at fair value through profit or loss: Commodity contracts Financial Liabilities Financial liabilities at fair value through profit or loss: Commodity contracts	Measurement Level	June 30, 2023 December 31, 2022
		Carrying Amount Fair Value Carrying Amount Fair Value
	2 2	$ 1,324 $ 1,324 $ 24 $24 $ 615 $ 615 $– $–

The fair values of financial instruments have been determined by various valuation methods as defined below:

• Level 1: fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: fair value is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and,

• Level 3: fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between levels in the fair value hierarchy for the three and six months ended June 30, 2023.

11. Capital disclosures

The Company considers its capital structure to include shareholders’ equity and debt:

		June 30, 2023		December 31, 2022
Shareholders’ equity	$	511,125	$	473,574
Bank debt	$	132,410	$	139,405

The Company monitors capital based on annual cash flow from operating activities before changes in non-cash working capital and capital expenditure budgets, which are updated as necessary and are periodically reviewed and approved by the Board of Directors.

At June 30, 2023 and December 31, 2022, the Company’s capital structure was subject to the banking covenant disclosed in note 3. No changes were made to the capital policy in 2023.

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Yangarra Resources Ltd. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023 and 2022 (unaudited, in thousands of Canadian dollars, except per share and per unit amounts)

12. Finance expense

2. Finance expense
	Three months ended June 30 Six months ended June 30
	2023 2022 2023 2022
Cash interest and finance costs Interest on lease obligations Realized gain on interest rate contracts Change in fair value of interest rate contracts Accretion of decommissioning liability_(note 5) Accretion of debt transaction costs(note 3) Accretion of lease obligations(note 4)_	$ 2,922 $ 2,273 $ 5,728 $ 4,676 70 84 124 173 – – – (393) – – – 364 115 81 235 132 84 117 188 255 (16) 42 (56) (95)
	$ 3,175 $ 2,597 $ 6,219 $ 5,112

13. Revenue

The Company derives its revenue from contracts with customers primarily through the sale of commodities at a point in time representing the following major product types:

	Three months ended June 30 Six months ended June 30
	2023 2022 2023 2022
Crude Oil Natural Gas Natural Gas Liquids	$ 19,943 $ 28,665 $ 44,327$ 54,164 10,488 26,129 23,883 40,693 7,965 13,751 19,241 25,116
	$ 38,396 $ 68,545 $ 87,451$ 119,973

At June 30, 2023, receivables from contracts with customers, which are included in trade accounts receivable, were $17,567 (December 31, 2022 - $24,005).

14. Contingency

In the normal conduct of operations, there are other pending claims by and against the Company. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. In the opinion of management, based on the advice and information provided by its legal counsel, the final determination of these other litigations will not materially affect the Company’s financial position or results of operations.

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