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2017-11-08

BLACKPEARL ANNOUNCES THIRD QUARTER 2017 FINANCIAL AND OPERATING RESULTS

BlackPearl Resources Inc. Interimsrapport BLACKPEARL ANNOUNCES THIRD
QUARTER 2017 FINANCIAL AND OPERATING RESULTS CALGARY, ALBERTA – BlackPearl
Resources Inc. ("BlackPearl" or the "Company") (TSX: PXX) (NASDAQ
Stockholm: PXXS) is pleased to announce its financial and operating results
for the three and nine months ended September 30, 2017. Q3 Highlights: --

At Onion Lake, excellent progress was made during the quarter on the
construction of the 6,000 barrel per day (bbl/d) phase 2 thermal expansion.
Construction is currently ahead of schedule and costs are in line with our
original estimates of $185 million. Fabrication of the modules for the
central processing facilities and well pads were approximately 85% complete
at the end of the quarter and the modules continue to be shipped out to
site for assembly and tie-in. All 14 horizontal production wells have been
drilled as well as 29 of 39 planned steam injection wells. Drilling should
be complete by the end of November. We now anticipate construction to be
completed and initial steam injection to occur as early as the end of Q1
2018, with first oil expected in Q3 2018. We anticipate reaching peak
production approximately 12 months after initial steam injection, a similar
timeline achieved for phase 1.

--

We successfully completed a planned turnaround on the phase 1 thermal
facilities at Onion Lake in Q3 2017. Thermal production from Onion Lake was
temporarily impacted by the turnaround as well as the temporary shut-in of
phase 1 wells to allow for offset drilling of the phase 2 wells. The
thermal facilities and wells were successfully restarted and current
production is back up to design capacity of 6,000 bbl/d.

--

At Blackrod, we continued to successfully operate and produce the SAGD
pilot. The pilot produced 500 bbl/d in Q3 and cumulatively the well pair
has produced 600,000 barrels of oil. We continue to operate the pilot to
fully understand the well characteristics for an extended period.
Additional core hole drilling is planned this winter at Blackrod to further
define our development plans for the area.

--

Production for the quarter averaged 9,072 bbls/d, 13% lower than Q2 2017
volumes. Lower volumes were mainly attributable to the planned maintenance
work on the Onion Lake thermal facilities; current production is back over
10,000 bbls/d.

--

Total capital investment for the quarter was $58.6 million, almost all of
which related to the Onion Lake thermal expansion project.

--

Oil and gas sales during the first nine months of 2017 increased 46% to
$108 million and adjusted funds flow (a non-GAAP measure) increased 40% to
$41 million. For the nine months ended September 30, 2017, the Company
recognized net income of $11 million.

--

The Company maintained a strong liquidity position with net debt of $81
million, while its $120 million bank credit facilities remained undrawn.

--

Initial 2018 guidance demonstrates the significant impact the Onion Lake
thermal expansion is expected to have on our operations as we expect to
exit 2018 at about 14,000 bbl/d, approximately 40% higher than our current
production.

John Festival, President of BlackPearl commenting on Q3 activities
emphasized that “Construction of the Onion Lake thermal expansion is going
very well. We are ahead of schedule and if we continue to get favourable
weather conditions we should be able to beat our target start-up date of
mid 2018. Additionally, with the financing we put in place in Q2 the
project is fully funded. This is a significant step for us to add 6,000
barrels of oil per day of low cost production to our existing 10,000 barrel
per day base with no dilution to our shareholders. The Onion Lake thermal
assets will have low sustaining capital requirements and will generate
significant free cash flow which will allow for debt repayment and
continued expansion at Onion Lake and other areas. We are going to see the
full effect of phase 2 in 2019 when our production should be in the range
of 15,000 to 16,000 boe/d with 12,000 boe/d coming from Onion thermal. In
addition, we will start working on a further expansion of Onion thermal in
2019. We currently have enough reserves and resource to keep the expanded
project at full design capacity for more than 20 years.” Financial and
Operating Highlights
--------------------------------------------------------------------------------
Three months ended Nine months ended September 30, September 30, 2017 2016
2017 2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Daily sales volumes Oil (bbl/d) 8,486 10,251 9,472 9,236 Bitumen (bbl/d)
(1) 500 565 493 567 ---------------------------------------------------
--------------------------------------------------- 8,986 10,816 9,965
9,803 Natural gas (mcf/d) 516 815 595 836
---------------------------------------------------
--------------------------------------------------- Combined (boe/d) (2)
9,072 10,951 10,064 9,942 Product pricing ($) (before the effects of
hedging transactions) Crude oil - per bbl 42.05 34.15 41.55 28.97 Natural
gas - per mcf 1.31 2.10 2.18 1.72
---------------------------------------------------
--------------------------------------------------- Combined - per boe
41.71 33.87 41.26 28.69 Netback ($/boe) Oil and gas sales 41.71 33.87 41.26
28.69 Realized gain on risk 1.84 2.24 0.67 3.98 management contracts
Royalties (5.69) (4.30) (5.83) (3.61) Transportation (2.33) (2.11) (2.55)
(2.08) Operating costs (16.46) (12.13) (15.43) (12.55)
--------------------------------------------------- Netback (5) 19.07 17.57
18.12 14.43 ---------------------------------------------------
--------------------------------------------------- ($000’s, except per
share amounts) Revenue Oil and gas revenue – 32,894 32,367 107,800 73,706
gross Net income (loss) for the (5,445) 556 10,687 (17,711) period Per
share, basic and (0.02) 0.00 0.03 (0.05) diluted Adjusted funds flow(3)
13,412 14,202 40,515 28,977 Cash flow from operating 10,775 16,441 40,641
27,412 activities (4) Capital expenditures 58,592 1,753 121,961 4,775
Working capital deficiency 8,445 (3,384) 8,445 (3,384) (surplus), end of
period Long term debt 72,738 67,000 72,738 67,000
---------------------------------------------------
--------------------------------------------------- Net debt (6) 81,183
63,616 81,183 63,616 Shares outstanding, end of 336,267,235 335,646,559
336,267,235 335,646,559 period (1) Includes production from the Blackrod
SAGD pilot. All sales and expenses from the Blackrod SAGD pilot are being
recorded as an adjustment to the capitalized costs of the project until the
technical feasibility and commercial viability of the project is
established. (2) Boe amounts are based on a conversion ratio of 6 mcf of
gas to 1 barrel of oil. Boe’s may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 mcf:1 barrel is based on an energy
equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. (3) Adjusted funds
flow is a non-GAAP measure that represents cash flow from operating
activities before changes in non-cash working capital related to operations
and decommissioning costs. Adjusted funds flow does not have a standardized
meaning prescribed by Canadian GAAP and therefore may not be comparable to
similar measures used by other companies. See non-GAAP measures. (4) Cash
flow from operating activities is a GAAP measure and has a standardized
meaning prescribed by Canadian GAAP. (5) Netback is a non-GAAP measure that
does not have a standardized meaning prescribed by Canadian GAAP and
therefore may not be comparable to similar measures used by other
companies. See non-GAAP measures. (6) Net debt is a non-GAAP measure that
does not have a standardized meaning prescribed by Canadian GAAP and
therefore may not be comparable to similar measures used by other
companies. See non-GAAP measures. Production Oil and gas production
averaged 9,072 barrels of oil equivalent per day (boe/day) in the third
quarter of 2017, a 17% decrease compared with the third quarter of 2016.
The decrease reflects the shutdown of the Onion Lake thermal facilities for
three weeks during the quarter for planned maintenance and inspection work
as well as the temporary shut-in of existing producing phase 1 wells to
allow for offset drilling of the phase 2 wells. Average Daily Sales Volume
Three months ended Nine months ended September 30, September 30,
-------------------------------------- (boe/day) 2017 2016 2017 2016
-------------------------------------- Onion Lake - thermal 4,553 6,472
5,511 5,319 Onion Lake - conventional 1,942 2,162 2,058 2,177 Mooney 1,157
665 1,068 807 John Lake 774 885 794 872 Blackrod 500 565 493 567 Other 146
202 140 200 9,072 10,951 10,064 9,942
-------------------------------------- Financial Results Oil and natural
gas sales were $32.9 million in the third quarter of 2017, comparable to
the $32.4 million in the same period in 2016. A 23% increase in our average
realized sale price was offset by a 17% decrease in production volumes (on
a boe basis) in Q3 2017 compared to the same period in 2016. Oil and
natural gas sales for the nine months ended September 30, 2017 increased
46% to $107.8 million compared to the same period in 2016 and was mainly
attributable to a 44% increase in our average realized price. Our realized
oil price (before the effects of risk management activities) in Q3 2017 was
$42.05 per barrel compared to $34.15 per barrel for the same period in
2016. The increase in our realized wellhead price reflects higher WTI
reference oil prices in Q3 2017 compared with Q3 2016 (US$48.21/bbl vs
US$44.94/bbl) and tighter heavy oil differentials (US$9.96/bbl vs
US$13.51/bbl), offset by a stronger Canadian dollar relative to the US
dollar ($0.799 vs $0.766). Operating costs in Q3 2017 were $13 million,
down 4% from Q2 2017 but 12% higher than Q3 2016. The increase from 2016 is
mainly attributable to higher conventional production costs related to the
restart of the ASP flood at Mooney in 2017. Thermal production costs
decreased in Q3 2017 compared to Q2 2017, which is primarily attributable
to lower gas consumption costs due to lower natural gas prices (AECO gas
prices were $1.38/GJ in Q3 2017 vs $2.64/GJ in Q2 2017), partially offset
by turnaround costs related to the Onion Lake thermal facility. Three
months ended Nine months ended September 30, September 30,
-------------------------------------- 2017 2016 2017 2016
-------------------------------------- ---------- Conventional Production
Production costs ($000s) 7,681 6,359 24,480 18,309 Per boe ($) 20.78 17.66
22....

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