OBSIDIAN ENERGY LTD. (TSX: OBE) (OTCQB: OBEL) ("Obsidian Energy", the "Company", "we", "us" or "our") is pleased to announce our second quarter 2020 financial and operational results. All figures are in Canadian dollars unless otherwise stated. Obsidian Energy's unaudited interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") as at and for the three and six months ended June 30, 2020 can be found on our website at  obsidianenergy.com. The documents will also be filed on SEDAR and EDGAR in due course.

FINANCIAL AND OPERATING HIGHLIGHTS

MESSAGE TO SHAREHOLDERS

The second quarter of 2020 brought significant volatility to the global oil markets which resulted in extremely low prices. Obsidian Energy reacted quickly and was able to effectively leverage the flexibility in our asset base to temporarily suspend production in areas that were not economic to produce. Given the improvement in oil prices over the last few months, we have currently restored over 88% of previously shut-in production, with 425 boe/d remaining temporarily shut-in in certain higher cost areas, primarily in our heavy oil Peace River property.

In conjunction with managing our underlying asset base, we implemented a series of decisions to help preserve liquidity in the business. Significant cost control measures allowed us to achieve substantial reductions in operating costs ("Opex") and general and administrative ("G&A") costs, which, on a combined basis, were $31 million lower than the first half of 2019. In addition, the results of the 10 wells drilled in the first quarter continued their strong performance, with some of the highest rate wells we have drilled to date in our Cardium program.

As a result of the proactive and timely actions to reduce costs during the quarter and the outstanding performance and contribution of our first half development program, Obsidian Energy was able to exceed all guidance targets in a very challenging macro environment. Our FFO performance of $25 million for the quarter was strong given the low oil price environment and included $4 million in advisory fees in connection with our lender extensions and office lease renegotiation. Our results demonstrate the underlying strength of the business and the ability of our management team to quickly react to a complex and challenging environment.

As we continue to monitor the recovery in oil demand and should oil prices sustainably return above WTI US$45/bbl, we will evaluate initiating a development drilling plan to take advantage of our deep inventory of locations across our Cardium base, with a continued focus in our Willesden Green area. In addition, recent technical work has allowed us to increase our inventory to over 900 identified well locations in our Cardium asset base.

Our senior management and the Board of Directors continue to focus their attention on the evaluation of the Company's strategic options and alternatives and actively pursue the objective of consolidation within the Cardium play to add scale, efficiency and financial strength.

SECOND QUARTER RESULTS

• FFO in the second quarter of 2020 totaled $25 million ($0.34 per share) compared to $37 million ($0.51 per share) for the first quarter of 2020 and $41 million ($0.56 per share) for the second quarter of 2019. The decline from the first quarter of 2020 is mainly due to lower crude oil prices as a result of the COVID-19 pandemic and associated demand implications. This was partially offset by a lower cost structure as the Company implemented several measures to further reduce Opex, transportation and G&A costs.
• Average production was 25,872 boe/d compared to 27,092 boe/d in the first quarter of 2020 and 27,835 boe/d in the second quarter of 2019. As a result of the lower crude oil pricing environment, the Company shut-in production deemed temporarily uneconomic which impacted average production by approximately 2,100 boe/d in the second quarter of 2020.
• Capital and decommissioning expenditures were negligible in the second quarter of 2020 as the Company restricted spending in response to the COVID-19 pandemic and lower crude oil prices. For the first half of 2020, capital and decommissioning expenditures totaled $49 million compared to recent guidance of $51 million.
• Opex was $8.51 per boe in the second quarter of 2020 compared to $12.86 per boe in the second quarter of 2019. The Company continued progress on several cost saving initiatives, deferred discretionary spending and implemented additional temporary measures due to the low crude oil price environment which included a 10% reduction in field staff salaries. For the first half of 2020, Opex totaled $10.32 per boe, significantly improved over our guidance range of $11.50 - $11.90 per boe.
• G&A costs were $1.36 per boe in the second quarter of 2020 compared to $2.20 per boe in the second quarter of 2019. The Company implemented a number of cost reduction initiatives throughout 2019 which are being realized in 2020. Additionally, in response to the COVID-19 pandemic and resultant impact on crude oil prices, the Company implemented a number of temporary cost saving measures in the second quarter including a 20% reduction to head office staff salaries, the suspension of the Company's matching component under the employee saving plan, and a 10% reduction to the Board of Directors retainer fees.
• The Company applied for and received the first three payments from the Federal Governments Canadian Emergency Wage Subsidy program (CEWS). In July we received the fourth payment. These payments benefited Opex by $0.32 per boe and G&A costs by $0.09 per boe for the first six months of 2020.
• Net loss was $22 million ($0.30 per share) during the second quarter of 2020 which can be attributed to lower revenues primarily due to lower crude oil prices from the COVID-19 pandemic. This was partially offset by a lower cost structure as the Company implemented a number of cost reduction measures.
• Net debt totaled $496 million, including $420 million drawn on our syndicated credit facility and $65 million of senior notes. Net debt decreased compared to $517 million at March 31, 2020, primarily due to negligible capital expenditures and positive FFO of $25 million.
• Through proactive management of production and costs, the Company was able to exceed our production, capital expenditure, Opex and G&A cost guidance targets for the first half of 2020.

FIRST HALF 2020 PRODUCTION AND COST GUIDANCE

2020 DEVELOPMENT PROGRAM AND OPERATIONS UPDATE

Our staff worked diligently in response to the exceptional pricing volatility over the past several months. This focus on decisive, efficient action ensured our strong Opex and netback performance. Contributing to our results was the decision to temporarily shut-in production that was uneconomic in the lower price environment. The shut-in production was mostly comprised of heavy oil in the Peace River area.

The second quarter shut-in production impact of 2,100 boe/d was partially offset by higher light oil production as the Company's results from its 2020 Cardium development program continued to perform above expectations with five wells demonstrating among the best production rates from Cardium wells drilled by Obsidian Energy. These strong Cardium rates also led to us outperforming our first half 2020 guidance with production averaging 26,482 boe/d for the period compared to guidance of 25,500 to 26,000 boe/d. In addition to these strong well results, the Company successfully completed our first half optimization program, investing $5 million for related activities to maximize production from our existing assets. Production rates for the 10 wells drilled and brought on in 2020 are outlined in the table below.

Our first half decommissioning program of $8 million was completed efficiently and Obsidian Energy continues to be an active participant of the Alberta Energy Regulator's ("AER") Area Based Closure program ("ABC"). In May, the AER suspended ABC spending requirements for the balance of 2020 and accordingly our second half decommissioning estimate reflects this change. The Company's spending on ABC-eligible projects prior to May 11, 2020 will be creditable against our 2021 spending requirement once this target amount is determined by the AER.  We also continue to work to secure support for future asset retirement projects via the Alberta Site Rehabilitation Program.  

Second Half Development Program

In light of the current commodity price environment, Obsidian Energy has planned for a reduced second half 2020 capital expenditure program of approximately $13 million. The Company has deferred development spending and will focus activities on optimization and minor infrastructure projects. With our operational flexibility we can react quickly to fluctuations in oil pricing, protecting liquidity in low price scenarios whilst also having the ability to add new incremental production should oil prices continue to improve.

Second Half 2020 Production and Cost Guidance 

ANNUAL AND SPECIAL MEETING

The Company's Annual and Special Meeting (the "Meeting") for shareholders is scheduled for later today, Thursday, July 30, 2020 at 9:00 am (Mountain Time).  The Meeting will take place at the Company's head office located at 200 – 207 9th Avenue S.W., Calgary, Alberta.

Due to restrictions on gatherings implemented by the Government of Alberta in response to the COVID-19 (Coronavirus) outbreak, guidelines issued with respect to social distancing and out of concern for the wellbeing of all participants, we strongly recommend that registered shareholders not attend the meeting in-person. Any person attending the Meeting in person will be required to follow the Company's health and safety measures, which will include physical distancing, use of personal protective equipment (including facemasks) and completion of a health-assessment. The precautionary measures being taken by the Company are intended to reduce the potential risks associated with the COVID-19 pandemic, and they may be further updated as necessary to take into account evolving recommendations and directives of public health authorities.

Following the conclusion of the Meeting, our Interim President and CEO, Mr. Stephen Loukas will host a webcast presentation online on Thursday, July 30, 2020 at 10:30 am Mountain Time (12:30 pm Eastern Time).

This webcast presentation will also be broadcast live on the Internet and may be accessed directly at the following URL:https://produceredition.webcasts.com/starthere.jsp?ei=1345300&tp_key=e31cae696f

Alternatively, to listen to the conference call, please call 416-764-8659 or 1-888-664-6392 (toll-free).

A question and answer session will be held following the presentation. If you wish to submit a question to the Company, participants can do so through the webcast portal, or by emailing questions ahead time to [email protected].

A recording will be available for replay two hours after the call completion and will remain available until August 6, 2020. To listen to the replay, please dial 416-764-8677 or 1-888-390-0541 (toll-free) and enter replay code 047571, followed by the pound (#) key.