Mr. Joel MacLeod reports

HIGHWOOD ASSET MANAGEMENT LTD. ANNOUNCES SALE OF WILSON CREEK ASSETS

Highwood Asset Management Ltd. has closed its previously announced arm's-length divestiture of its Wilson Creek assets to Obsidian Energy Ltd. Total consideration received from Obsidian Energy was up to $112-million:

• $105-million in cash, which was reduced to $98-million after interim closing adjustments;
• Up to an aggregate of $7-million in contingent consideration, to be paid in quarterly instalments between the third quarter of 2026 and the second quarter of 2027, based on the price of WTI (West Texas Intermediate).

Credit facility and capital resources update

In association with the closing of the transaction, the cash proceeds were used to pay down the company's debt, leaving approximately $15-million drawn on the company's reduced $75-million syndicated credit facility with (Royal Bank of Canada, Business Development Bank of Canada, ATB Financial, Canadian Imperial Bank of Commerce and Macquarie Bank Ltd). In conjunction with the transaction, the company completed its semi-annual borrowing base redetermination, resulting in the maturity date under the credit facility being extended by a year to Aug. 1, 2028.

The company's pro forma capitalization provides Highwood with ample liquidity that can be used to pursue the development of the company's deep inventory of organic opportunities, acquisitions and return of capital to shareholders.

Strategic outlook and capital deployment

With the divestiture complete, Highwood is concentrating capital toward its long-duration, high-margin Brazeau asset and other early-stage opportunities across the portfolio. Continued drilling success in the Basal Belly River at Brazeau, together with the recently commenced waterflood initiative, is expected to lower base declines and extend reserve life. Highwood's high-netback, oil-weighted Brazeau asset delivers compelling single-well economics, with an approximately 2.6 times recycle ratio and a 12-month before-tax payback at $65 (U.S.) WTI, capital efficiencies of approximately $19,000 per boe/d (barrel of oil equivalent per day) and a corporate free cash flow breakeven below $45 (U.S.) WTI.

Based on the independent qualified reserves evaluator's (GLJ Ltd.) evaluation of Highwood's reserves as at Dec. 31, 2025, the company's retained reserves carry a BTNPV10 of approximately $153-million on a proved developed producing (PDP) basis and approximately $306-million on a total proved (1P) basis; net of approximately $15-million of net debt pro forma for closing, implying a net asset value (NAV) of approximately $9 per share (PDP) and approximately $19 per share (1P).

Given recent industry success in close proximity to Highwood's Mannville stack lands in eastern Alberta using horizontal technology, Highwood plans to deploy capital to these assets before the end of the year and continues to add to its position in the area through multiple Crown acquisitions. These lands offer multiple opportunities, including potential steam-assisted gravity drainage (SAGD) projects. The company intends to delineate and commence strategic financing and partnership discussions over the coming months to advance these opportunities.

In addition, the company continues to explore strategic options for its lithium, critical mineral and rare earth element assets, where it has seen interest from potential strategic partners and believes there is strong potential to access government funding support.

Shareholder returns

As part of Highwood's commitment to enhancing shareholder returns, the company intends to implement its inaugural normal course issuer bid (NCIB) in the second half of 2026, subject to approval by the board of directors and acceptance by the TSX Venture Exchange. Highwood's strengthened postclosing balance sheet, together with ample liquidity under the credit facility, provides the flexibility to enhance total shareholder returns alongside continued investment in the company's organic growth opportunities and selective acquisitions.

Corporate update

The company also announces that it has entered into an equity research coverage agreement dated Jan. 22, 2026, with Granite Point Research Inc., an arm's-length party based in Toronto, Ont., and owned by its president and chief executive officer, John Stephenson. Under the research agreement, Granite Point will provide sponsored equity research and investor awareness services in accordance with the policies of the TSX Venture Exchange and applicable securities laws. The research agreement has an initial one-year term, automatically renewing for an additional one-year term unless otherwise agreed. In consideration, the company will pay Granite Point $11,250 (Canadian) per calendar quarter, in arrears ($45,000 (Canadian) annually). No securities of the company are being issued to Granite Point as compensation. The research agreement and Granite Point's engagement remain subject to TSX-V approval.

We seek Safe Harbor.