Mr. Leonard Van Betuw reports

AVILA ENERGY CORPORATION IS PLEASED TO ANNOUNCE THE RESULTS OF ITS INDEPENDENT RESERVES EVALUATION AND THE ACQUISITION COMPLETED NOVEMBER 1, 2022, IN EAST CENTRAL ALBERTA

Avila Energy Corp. has released the results of its independent reserves evaluation and the acquisition completed Nov. 1, 2022, in east-central Alberta.

The company's independent reserves evaluation, which was completed by Deloitte LLP, the company's qualified reserve evaluator of Calgary, Alta., which was conducted in accordance with the definitions, standards and procedures contained in the Canadian oil and gas evaluation handbook (COGEH) and National Instrument 51-101 (Standards for Disclosure of Oil and Gas Activities). The reserve volumes are inclusive of 100 per cent of the company's recent acquisitions and represents the corporate reserve volumes as of Jan. 1, 2023.

Reserve highlights

Avila's reserves on a proven plus probable basis (2P) for the company are 5,256,100 barrels of oil equivalent valued at $30,734,000 future cash flows based on a net present value discounted 10 per cent before income taxes. The $30,734,000 is an estimate of future cash flows, does not necessarily represent fair market value, and is supported by a sustainable capital program of $10,432,000 for proven reserves and $17,517,000 for proven plus probable reserves.

The company's reserves year over year, before income tax, increased.

The company's reserve evaluation before income tax by regions** is attached.

Upon the delivery of the evaluation and taking into consideration the condition of the assets and the facilities at the time, the acquisition was recorded as follows.

On Nov. 1, 2022, the company acquired a 100-per-cent interest in oil and gas properties in east-central Alberta in the Donalda area. The transaction was accounted for as a business combination under international financial reporting standard 3 (Business Combinations) as the assets met the definition of a business. The total purchase is composed of $1.8-million in the form of a promissory note.

The following purchase price allocation is based on management's best estimate of the fair value assigned to the assets acquired and the liabilities assumed. Management determined the fair value of the oil and gas properties to be $11,007,129, which was based on the net present value of 10-per-cent discounted cash flows created by an independent qualified reserve evaluator. The assumption of $981,744 in discounted decommissioning liabilities and asset retirement obligation was based on the future value of $3,772,618, an inflation rate of 2.0 per cent, credit adjusted risk free rate of 5.39 per cent and life of the asset of nine to 50 years.

Best estimates were determined based on available information at the time of preparation of these financial statements. The company continued its review to determine the identification of intangible assets, assumption of liabilities, identification of contingent liabilities and working capital adjustments during the allowable measurement period, which shall not exceed one year from the closing.

Acquisition cost

The company did not incur any acquisition cost.

Revenue and operating income

The acquisition contributed $874,852 in revenue, royalty expense of $84,916 and $560,070 in direct operating expenses in the two months from Nov. 1 to Dec. 31, 2022, resulting in $229,866 of net operating income.

About Avila Energy Corp.

The company is an emerging Canadian Securities Exchange-listed corporation trading under the symbol (VIK), and, in combination with an expanding portfolio of 100-per-cent-owned-and-operated oil and natural gas production, pipelines and facilities, is a licensed producer, explorer and developer of energy in Canada. The company, through the implementation of a closed system of carbon capture and sequestration anticipated to be approved for construction in 2024 and an established path under way toward the material reduction of Tier 1, Tier 2 and Tier 3 emissions, continues to work toward becoming a vertically integrated low-cost carbon-neutral energy producer. The company continues to grow and achieve its results by focusing on the application of a combination of proven geological, geophysical, engineering and production techniques.

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