Rubellite Energy : Q1 2024 Interim Report

During the first quarter of 2024, progress was made to advance Perpetual's strategic priorities for 2024 which include:

1. Maximize Funds Flow and Value of Edson;
2. Re-igniteExploration and Grow Land Base and Prospect Inventory for Chosen Play Strategies;
3. Advance Technology-Driven Diversifying New Ventures; and
4. Strengthen Balance Sheet, Reduce Corporate Costs and Manage Risk.

FIRST QUARTER 2024 HIGHLIGHTS

• First quarter average sales production of 4,597 boe/d(1), was down 20% from the fourth quarter of 2023 (Q4 2023 - 5,749 boe/d) and down 31% from the first quarter of 2023 (Q1 2023 - 6,655 boe/d) as a result of the Mannville Disposition(2) in the fourth quarter of 2023 and natural declines at East Edson. First quarter sales production results were at the high end of the first quarter guidance of 4,300 boe/d to 4,600 boe/d.
• Exploration and development capital expenditures(3) in the first quarter of 2024 were nominal as there were no wells drilled at East Edson. In addition, $0.1 million was spent on land purchases at East Edson and $1.2 million was spent on asset retirement obligations ("ARO") to abandon wells that had reached their end of life and execute surface lease reclamation activities.
• Adjusted funds flow(3) in the first quarter of 2024 was $2.4 million ($0.03/share) a decrease from $8.9 million ($0.13/share) in the first quarter of 2023. Adjusted funds flow on a unit-of-production basis was $5.62/boe, a 62% decrease from the $14.82/boe inthe first quarter of 2023, driven by lower commodity prices and lower production volumes, partially offset by lower costs in all areas.
• Cash costs(3) were $6.4 million or $15.32/boe in the first quarter of 2024 (Q1 2023 - $10.0 million or $16.65/boe).
• Net loss was $31.9 million in the first quarter of 2024 (Q1 2023 - $0.2 million net loss) driven by the $28.0 million provision expense related to the Sequoia Ligation and also included unrealized losses on commodity risk management contracts.
• As previously announced on March 22, 2024, after several years of litigation, Perpetual entered into an agreement to resolve the Sequoia Litigation without any party involved admitting liability, wrongdoing or violation of law, regulations, public policy or fiduciary duties (the "Settlement Agreement"). Pursuant to the Settlement Agreement, and subject to Court approval, the Company will make an aggregate payment of $30.0 million (the "Settlement Principal") spread out over several years, consisting of an initial payment of $10.0 million which was paid into escrow on March 22, 2024 and annual installments of $3.75 million until the total amount of the Settlement Principal is paid.
• Concurrent with entering into the Settlement Agreement, as of March 22, 2024, Perpetual repaid and cancelled its $2.7 million second lien term loan and provided notice for the early redemption of its $33.2 million 8.75% senior secured third lien notes maturing January 23, 2025. Senior Notes with a face value of $7.0 million were redeemed for payment of principal and interest of $7.2 million, while Senior Notes with a face value of $26.2 million remain outstanding, are subject to the new supplemental indenture and have a maturity date of January 23, 2025.
• As at March 31, 2024, net debt(3) was $19.9 million, inclusive of $3.0 million of cash on hand and the $10.0 million Settlement Agreement deposit held in escrow, a decrease of $1.7 million from $21.6 million at December 31, 2023.
• Perpetual had available liquidity at March 31, 2024 of $31.7 million, comprised of the $30.0 million borrowing limit of Perpetual's first lien credit facility ("Credit Facility Borrowing Limit") and cash on hand of $3.0 million less letters of credit of $1.3 million.

1. See "Financial and Operating Highlights" for breakdown by product type.
2. On November 22, 2023, the Company closed the disposition of certain assets at Mannville in Eastern Alberta ("the Mannville Disposition"), which comprised substantially all of the production attributed to the Eastern Alberta cash-generating unit ("CGU"s).
3. Non-GAAPfinancial measure, non-GAAP ratio or supplementary financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. See "Non-GAAP and Other Financial Measures" in this first quarter 2024 interim report.

PERPETUAL ENERGY INC.

Q1 2024

Page 1

2024 OUTLOOK

Perpetual's Board of Directors have approved annual exploration and development capital spending(1) of $7.0 to $8.0 million for 2024, excluding land purchases and acquisitions, if any. Exploration and development capital spending will be focused almost exclusively at East Edson.

During the second half of 2024, Perpetual plans to participate at its 50% working interest in an East Edson drilling program to drill, complete, equip and tie-in an additional two (1.0 net) horizontal Wilrich wells, to partially offset production declines through the West Wolf gas plant in order to optimize production and operating costs and meet transportation commitments.

2024 guidance is as outlined in the table below:

	2024 Guidance
Exploration and development expenditures ($ millions)(1)(2)	$7.0 - $8.0
# of wells (gross/net)	2 / 1.0
Cash costs ($/boe)(1)	$13 - $14
Royalties (% of revenue)(1)	16 - 17%
Average daily production (boe/d)	4,200 - 4,350
Production mix (%)	10% NGL

1. Non-GAAPmeasure or ratio. See "Non-GAAP and Other Financial Measures".
2. Excludes abandonment and reclamation spending and acquisitions or land expenditures.

Perpetual continues to address end of life ARO, with total abandonment and reclamation spending of $1.3 to $1.5 million planned for 2024, $1.2 million of which was spent in the first quarter. The Company's area-based mandatory spending requirement for 2024 is $1.3 million, as calculated by the Alberta Energy Regulator ("AER").

1. Non-GAAPfinancial measure, non-GAAP ratio or supplementary financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. See "Non-GAAP and Other Financial Measures" contained within this first quarter 2024 interim report.
2. Excludes abandonment and reclamation spending and acquisitions or land expenditures.

Susan Riddell Rose

President and Chief Executive Officer

May 7, 2024

ADVISORIES

This letter to shareholders and first quarter 2024 interim report refer to certain non-GAAP measures and metrics commonly used in the oil and natural gas industry and provides forward-looking information and statements. Further detailed information regarding these measures is provided in this report in "Management's Discussion and Analysis - NON-GAAPAND OTHER FINANCIAL MEASURES " on pages 13 to 15, "Management's Discussion and Analysis - FORWARD-LOOKINGINFORMATION AND STATEMENTS " on page 16.

In addition to the disclosure set out in the Company's Management's Discussion and Analysis for the period ended March 31, 2024, we provide certain supplementary disclosure throughout this report in respect of certain specified financial measures (as such term is defined in National Instrument 51-112 - Non-GAAPand Other Financial Measures ) and in respect of certain oil and gas metrics.

PERPETUAL ENERGY INC.

Q1 2024

Page 2

FINANCIAL AND OPERATING HIGHLIGHTS

		Three months ended March 31,
(CAD$ thousands, except volume and per share amounts)	2024	2023	Change
Financial
Oil and natural gas revenue	8,890	17,811	(50)%
Net (loss) and comprehensive (loss)	(24,564)	(265)	9169 %
Per share - basic(2)	(0.36)	0.00	100 %
Per share - diluted(2)	(0.36)	0.00	100 %
Cash flow from (used in) operating activities	(5,268)	7,436	(171)%
Adjusted funds flow(1)	2,351	8,876	(74)%
Per share(1)(3)	0.03	0.13	(77)%
Total assets	192,076	216,206	(11)%
Revolving bank debt	-	10,846	(100)%
Term loan, principal amount	-	2,671	(100)%
Other liability	2,788	3,288	(15)%
Senior Notes, principal amount	33,229	35,647	(7)%
Adjusted working capital (surplus) deficiency(1)	(16,156)	2,977	(643)%
Net debt(1)	19,861	55,429	(64)%
Capital expenditures
Net capital expenditures, after dispositions(1)	441	9,111	(95)%
Common shares outstanding (thousands)(4)
End of period	67,457	66,032	2 %
Weighted average - basic	67,457	65,978	2 %
Weighted average - diluted	67,457	65,978	2 %
Operating
Daily average production	24.8
Conventional natural gas (MMcf/d)	30.8	(19)%
Heavy crude oil (bbl/d)	-	1,022	(100)%
NGL (bbl/d)	471	495	(5)%
Total (boe/d)(5)	4,597	6,655	(31)%
Average realized prices(6)	2.72
Realized natural gas price ($/Mcf)(1)	3.13	(13)%
Realized oil price ($/bbl)(1)	-	63.39	(100)%
Realized NGL price ($/bbl)(1)	64.35	73.81	(13)%
Wells drilled - gross (net)
Conventional natural gas	-/-	2/1.0
Heavy crude oil	-/-	-/-
Total	-/-	2/1.0

1. Non-GAAPfinancial measure, non-GAAP ratio or supplementary financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. See "Non-GAAP and Other Financial Measures" contained within this first quarter 2024 interim report.
2. Based on weighted average basic common shares outstanding for the period.
3. Adjusted funds flows divided by the Company's shares outstanding.
4. Shares outstanding are net of shares held in trust (2024 - 1.1 million; 2023 - 1.1 million).
5. See "Advisories - Volume Conversions" in this first quarter 2024 interim report.
6. Average realized prices exclude the impact of the Company's risk management contracts.

PERPETUAL ENERGY INC.

Q1 2024

Page 3

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is management's discussion and analysis ("MD&A") of Perpetual Energy Inc.'s ("Perpetual", the "Company" or the "Corporation") operating and financial results for the three months ended March 31, 2024, as well as information and estimates concerning the Corporation's future outlook based on currently available information. This discussion should be read in conjunction with the Corporation's unaudited condensed interim consolidated financial statements and accompanying notes for the three months ended March 31, 2024 as well as the audited consolidated financial statements and accompanying notes for the year ended December 31, 2023. Disclosure which is unchanged from the December 31, 2023 MD&A has not been duplicated herein. The Corporation's unaudited condensed interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("GAAP") which require publicly accountable enterprises to prepare their financial statements using IFRS Accounting Standards. The date of this MD&A is May 7, 2024.

This MD&A contains certain specified financial measures that are not recognized by GAAP and used by management to evaluate the performance of the Corporation and its business. Since certain specified financial measures may not have a standardized meaning, securities regulations require that specified financial measures are clearly defined, qualified and, where required, reconciled with their nearest GAAP measure. See "Non-GAAP and Other Financial Measures" for further information on the definition, calculation and reconciliation of these measures. This MD&A also contains forward-looking information. See "Forward-Looking Information and Statements". See also the other advisory sections in this MD&A for additional information.

Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alberta. Additional information on Perpetual, including the most recently filed Annual Information Form, can be accessed at SEDAR+ at www.sedarplus.caor from the Corporation's website at www.perpetualenergyinc.com.

Q1 2024 OPERATIONAL AND FINANCIAL HIGHLIGHTS

1. • First quarter average sales production of 4,597 boe/d(1), was down 20% from the fourth quarter of 2023 (Q4 2023 - 5,749 boe/d) and down 31% from the first quarter of 2023 (Q1 2023 - 6,655 boe/d) as a result of the Mannville Disposition(2) in the fourth quarter of 2023 and natural declines at East Edson. First quarter average sales production results were at the high end of the first quarter guidance of 4,300 boe/d to 4,600 boe/d.
   • Exploration and development capital expenditures(3) in the first quarter of 2024 were nominal as there were no wells drilled at East Edson. In addition, $0.1 million was spent on land purchases at East Edson and $1.2 million was spent on asset retirement obligations ("ARO") to abandon wells that had reached their end of life and execute surface lease reclamation activities.
   • Adjusted funds flow(3) in the first quarter of 2024 was $2.4 million ($0.03/share) a decrease from $8.9 million ($0.13/share) in the first quarter of 2023. Adjusted funds flow on a unit-of-production basis was $5.62/boe, a 62% decrease from the $14.82/boe in the first quarter of 2023, driven by lower commodity prices and lower production volumes, partially offset by lower costs in all areas.
   • Cash costs(3) were $6.4 million or $15.32/boe in the first quarter of 2024 (Q1 2023 - $10.0 million or $16.65/boe).
   • Net loss was $31.9 million in the first quarter of 2024 (Q1 2023 - $0.2 million net loss) driven by the $28.0 million provision expense related to the Sequoia litigation and also included $2.7 million of unrealized losses on risk management contracts.
   • As previously announced on March 22, 2024, after several years of litigation, Perpetual entered into an agreement to resolve the Sequoia litigation without any party involved admitting liability, wrongdoing or violation of law, regulations, public policy or fiduciary duties (the "Settlement Agreement"). Pursuant to the Settlement Agreement, and subject to Court approval, the Company will make an aggregate payment of $30.0 million (the "Settlement Principal") spread out over several years, consisting of an initial payment of $10.0 million which was paid into escrow on March 22, 2024 and annual installments of $3.75 million until the total amount of the Settlement Principal is paid.
   • Concurrent with entering into the Settlement Agreement, as of March 22, 2024, Perpetual repaid the $2.7 million second lien term loan and provided notice for the early redemption of its $33.2 million 8.75% senior secured third lien notes maturing January 23, 2025. Senior Notes with a face value of $7.0 million were redeemed for payment of principal and interest of $7.2 million, while Senior Notes with a face value of $26.2 million remain outstanding, are subject to amended terms and have a maturity date of January 23, 2025.
   • As at March 31, 2024, net debt(3) was $19.9 million, inclusive of $3.0 million of cash on hand and the $10.0 million Settlement Agreement deposit held in escrow, a decrease of $1.7 million from $21.6 million at December 31, 2023.
   • Perpetual had available liquidity (see "Liquidity and Capital Resources - Capital Management") at March 31, 2024 of $31.7 million, comprised of the $30.0 million borrowing limit of Perpetual's first lien credit facility ("Credit Facility Borrowing Limit") and cash on hand of $3.0 million less letters of credit of $1.3 million.
2. See "First Quarter Financial and Operating Results - Production" for details of product components that comprise Perpetual's boe production.
3. On November 22, 2023, the Company closed the disposition of certain assets at Mannville in Eastern Alberta ("the Mannville Disposition"), which comprised substantially all of the production attributed to the Eastern Alberta cash-generating unit ("CGU").
4. Non-GAAPfinancial measure and ratio. See "Non-GAAP and Other Financial Measures".

2024 OUTLOOK

Perpetual's Board of Directors have approved annual exploration and development capital spending(1) of $7.0 to $8.0 million for 2024, excluding land purchases and acquisitions, if any. Exploration and development capital spending will be focused almost exclusively at East Edson.

During the second half of 2024, Perpetual plans to participate at its 50% working interest in an East Edson drilling program to drill, complete, equip and tie-in an additional two (1.0 net) horizontal Wilrich wells, to partially offset production declines through the West Wolf gas plant in order to optimize production and operating costs and meet transportation commitments.

PERPETUAL ENERGY INC.

Q1 2024

Page 4

2024 guidance is as outlined in the table below:
	2024 Guidance
Exploration and development expenditures(1)(2)($ millions)	$7.0 - $8.0
# of wells (gross/net)	2 / 1.0
Cash costs(1) ($/boe)	$13 - $14
Royalties (% of revenue)(1)	16 - 17%
Average daily production (boe/d)	4,200 - 4,350
Production mix (%)	10% NGL

1. Non-GAAPmeasure or ratio. See "Non-GAAP and Other Financial Measures".
2. Excludes abandonment and reclamation spending and acquisitions or land expenditures.

Perpetual continues to address end of life ARO, with total abandonment and reclamation of $1.3 to $1.5 million planned for 2024, $1.2 million of which was spent in the first quarter. The Company's area-based mandatory spending requirement for 2024 is $1.3 million, as calculated by the Alberta Energy Regulator ("AER").

1. Non-GAAPmeasure or ratio. See "Non-GAAP and Other Financial Measures".

FIRST QUARTER FINANCIAL AND OPERATING RESULTS

Cash Flow used in Investing Activities, Capital Expenditures, Acquisitions and Dispositions

Cash flow used in investing activities for the three months ended March 31, 2024 was $7.2 million (2023 - $3.2 million cash flow used in investing activities). In addition to cash flow used in investing activities, Perpetual uses capital expenditures to measure its capital investments compared to the Company's annual budgeted expenditures, which excludes acquisition and disposition activities.

The following table summarizes capital expenditures:

	Three months ended March 31,
($ thousands)	2024	2023
Exploration and development	(265)	9,066
Corporate assets	571	45
Capital Expenditures	306	9,111
Land and other	135	-
Capital expenditures, including land and other(1)	441	9,111
Net proceeds from dispositions	-	-
Capital expenditures, after dispositions	441	9,111

1. Non-GAAPmeasure. See "Non-GAAP and Other Financial Measures".

Exploration and development spending by area

	Three months ended March 31,
($ thousands)	2024	2023
West Central	(265)	8,939
Eastern Alberta(1)	-	127
Total	(265)	9,066

1. On November 22, 2023, the Company closed the Mannville Disposition, which comprised substantially all of the production attributed to the Eastern Alberta CGU.

Wells drilled by area

	Three months ended March 31,
(gross/net)	2024	2023
West Central	- / -	2 / 1.0
Eastern Alberta(1)	- / -	- / -
Total	- / -	2 / 1.0

1. On November 22, 2023, the Company closed on the Mannville Disposition, which comprised substantially all of the production attributed to the Eastern Alberta CGU.

Perpetual's exploration and development spending in the first quarter of 2024 was a nominal amount and offset by accrual reversals in the period (Q1 2023 - nominal amount). There were no new wells drilled at the East Edson property during the quarter and the Mannville Disposition occurred in the fourth quarter of 2023.

Land expenditures of $0.1 million in the first quarter of 2024 related to crown land purchases at East Edson. Expenditures on decommissioning obligations

During the first quarter of 2024, Perpetual spent $1.2 million (Q1 2023 - $0.3 million) on abandonment and reclamation projects and received one reclamation certificate from the AER (2023 - four reclamation certificates).

PERPETUAL ENERGY INC.

Q1 2024

Page 5

Production
	Three months ended March 31,
	2024	2023
Production
Conventional natural gas (Mcf/d)(1)	24,755	30,828
Conventional heavy crude oil (bbl/d)(2)	-	1,022
NGL (bbl/d)(3)	471	495
Total production (boe/d)	4,597	6,655

1. Conventional natural gas production yielded a heat content of 1.17 GJ/Mcf for the three months ended March 31, 2024 (three months ended March 31, 2023 - 1.17 GJ/Mcf), resulting in higher realized natural gas prices on a $/Mcf basis.
2. On November 22, 2023, the Company closed on the Mannville Disposition, which comprised substantially all of the heavy oil production attributed to the Eastern Alberta CGU.
3. Primarily from West Central which produces liquids-rich conventional natural gas.

	Three months ended March 31,
	2024	2023
Production by core area
West Central	4,597	5,122
Eastern Alberta(1)	-	1,533
Total production (boe/d)	4,597	6,655

1. On November 22, 2023, the Company closed on the Mannville Disposition, which comprised substantially all of the heavy oil production attributed to the Eastern Alberta CGU.

First quarter production averaged 4,597 boe/d, down 31% from 6,655 boe/d in the first quarter of 2023 driven by the Mannville Disposition. During the first quarter of 2024, there were no new wells brought on production at East Edson. As a result of the disposition, the production mix was comprised of 90% conventional natural gas and 10% NGL, as compared to 77% of conventional natural gas and 23% heavy crude oil and NGL in the first quarter of 2023. First quarter sales production results were at the high end of the first quarter guidance of 4,300 boe/d to 4,600 boe/d.

First quarter conventional natural gas production averaged 24.8 MMcf/d, a decrease of 20% from 30.8 MMcf/d in the first quarter of 2023 primarily as a result of natural declines and the Mannville Disposition. The East Edson drilling program resumed in first quarter of 2023 with two (1.0 net) wells drilled and placed on production early in the second quarter of 2023, two (1.0 net) wells drilled during the third quarter of 2023 and placed on production in late August, and two (1.0 net) wells drilled during the fourth quarter of 2023 and placed on production in late November. There were no new wells brought on production at East Edson in the first quarter of 2024.

First quarter NGL production was 471 bbl/d, 5% lower than the first quarter of 2023. The decrease in NGL production is largely tied to lower natural gas production, partially offset by higher NGL yields of 18.8 bbl per MMcf achieved in the first quarter of 2024 (Q1 2023 - 17.0 bbl per MMcf).

Oil and Natural Gas Revenue

	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Oil and natural gas revenue
Natural gas	6,129	8,691
Oil(1)	-	5,833
NGL	2,761	3,287
Oil and natural gas revenue	8,890	17,811

1. On November 22, 2023, the Company closed on the Mannville Disposition, which comprised substantially all of the heavy oil production.

	Three months ended March 31,
	2024	2023
Average Benchmark Prices
AECO 5A Daily Index ($/GJ)	2.36	3.05
AECO 5A Daily Index ($/Mcf)(1)	2.49	3.22
West Texas Intermediate ("WTI") (US$/bbl)	76.96	76.13
Exchange rate (CAD$/US$)	1.35	1.35
West Texas Intermediate ("WTI") (CAD$/bbl)	103.90	102.78
Perpetual Average Realized Prices(2)
Natural gas ($/Mcf)	2.72	3.13
Oil ($/bbl)	-	63.39
NGL ($/bbl)	64.35	73.81
Average realized price ($/boe)	21.25	29.74

1. Converted from $/GJ using a standard energy conversion rate of 1.06 GJ:1 Mcf.
2. Non-GAAPratio. See "Non-GAAP and Other Financial Measures".

PERPETUAL ENERGY INC.

Q1 2024

Page 6

Perpetual's oil and natural gas revenue for the three months ended March 31, 2024 of $8.9 million was a 50% decrease from $17.8 million in the comparative period in 2023 due to lower reference prices for all products and the Mannville Disposition which contributed to a 31% decrease in production volumes.

Natural gas revenue of $6.1 million in the first quarter of 2024 comprised 69% (Q1 2023 - 49%) of total revenue and natural gas production was 90% (Q1 2023 - 77%) of total production. Natural gas revenue was 29% lower than the first quarter of 2023, reflecting the impact of lower AECO Daily Index prices and a 20% decrease in production volumes. Compared to the first quarter of 2023, the AECO 5A Daily index average price decreased 23% to $2.49/Mcf (Q1 2023 - $3.22/Mcf), compared with the 13% decrease in Perpetual's realized natural gas price.

NGL revenue for the first quarter of 2024 of $2.8 million represented 31% (Q1 2023 -18%) of total revenue while NGL production was 10% (Q1 2023 -7%) of total production. NGL revenue decreased 16% from the first quarter of 2023, reflecting lower prices and a 5% decrease in NGL production.

Risk Management Contracts

The Company uses financial derivatives, physical delivery contracts and market diversification strategies to manage commodity price risk. Derivative contracts are put in place to manage fluctuations in commodity prices, protecting Perpetual's funds flows from potential volatility. The Company's market diversification strategies balance pricing exposure over multiple markets and are put in place to mitigate market and delivery point risks and dislocations. As a result, Perpetual's realized prices deviate from the index prices. The Company uses "average realized prices after risk management contracts" which is not a standardized measure, and therefore may not be comparable with the calculation of similar measures by other entities. The measure is used by management to calculate the Company's net realized commodity prices, taking into account the monthly settlements of physical and financial crude oil and natural gas forward sales, collars, basis differentials and forward foreign exchange contracts.

	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Unrealized gain (loss) on risk management contracts
Unrealized gain (loss) on foreign exchange contracts	(278)	59
Unrealized loss on natural gas contracts	(2,386)	(3,006)
Unrealized loss on oil contracts	-	(454)
Unrealized loss on risk management contracts	(2,664)	(3,401)
Realized gain on risk management contracts
Realized gain on foreign exchange contracts	114	31
Realized gain on natural gas contracts	1,111	4,289
Realized gain on oil contracts	-	303
Realized gain on risk management contracts	1,225	4,623
Change in fair value of risk management contracts	(1,439)	1,222

The following table calculates average realized prices after risk management contracts, which is not a standardized measure:

	Three months ended March 31,
	2024	2023
Realized gain on risk management contracts (1)
Realized gain on natural gas contracts ($/Mcf)	0.49	1.55
Realized gain on oil contracts ($/bbl)	-	3.63
Realized gain on risk management contracts ($/boe)	2.93	7.72
Average realized prices after risk management contracts(1)
Natural gas ($/Mcf)	3.21	4.68
Oil ($/bbl)	-	67.02
NGL ($/bbl)	64.35	73.81
Average realized price ($/boe)	24.18	37.46

1. See "Non-GAAP and Other Financial Measures".

The realized gain on risk management contracts totaled $1.2 million for the first quarter of 2024, compared to a realized gain of $4.6 million for the first quarter of 2023. Realized gains or losses on risk management contracts are attributable to reference price fluctuations relative to pricing on commodity contracts driven by changes in AECO, WTI and WCS differential prices as well as fluctuations in foreign exchange rates and the production volumes hedged at any given time.

The unrealized loss on risk management contracts totaled $2.7 million in the first quarter of 2024 (Q1 2023 - unrealized loss of $3.4 million). Unrealized gains and losses represent the change in mark-to-market value of risk management contracts as forward commodity prices and foreign exchange rates change. Unrealized gains and losses on risk management contracts are excluded from the Company's calculation of cash flow from (used in) operating activities as non-cash items. Gains and losses vary depending on the nature and extent of risk management contracts in place, which in turn, vary with the Company's assessment of commodity price risk, committed capital spending and other factors.

PERPETUAL ENERGY INC.

Q1 2024

Page 7

Royalties
	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Crown royalties
Natural gas	131	865
Oil	-	156
NGL	295	607
Total Crown royalties	426	1,628
Freehold and overriding royalties
Natural gas	614	968
Oil	-	591
NGL	308	389
Total freehold and overriding royalties	922	1,948
Total royalties	1,348	3,576
$/boe	3.22	5.97
Royalties as a percentage of revenue(1)
Crown	4.8	9.1
Freehold and overriding	10.4	10.9
Total (% of oil and natural gas revenue)	15.2	20.0
Natural gas royalties (% of natural gas revenue)	12.2	20.9
Oil royalties (% of oil revenue)	-	12.8
NGL royalties (% of NGL revenue)	21.8	30.3

1. See "Non-GAAP and Other Financial Measures".

Total royalties for the first quarter of 2024 were $1.3 million, 62% lower than the first quarter of 2023 primarily due to lower commodity prices and lower production volumes. Freehold and overriding royalties decreased due to the impact of lower AECO Daily Index and NGL prices and the annual 10% step down in the GORR payable at East Edson effective January 1 of each year, reducing the East Edson GORR from 2.5 to 2.3 MMcf/d of natural gas plus associated NGL for 2024. On a unit-of-production basis, royalties were down 46% to $3.22/boe (Q1 2023 - $5.97/boe).

Perpetual's royalties consists of Crown royalties payable to the Alberta provincial government and other freehold and gross overriding ("GORR") royalties. The mix between Crown and freehold production as a percentage of total production can change the composition of royalties from one period to the next. Under the Alberta Modernized Royalty Framework ("MRF"), the Company pays a flat Crown royalty of 5% on wells in their early production period. As Perpetual's wells mature and begin to pay higher royalty rates, the amounts owing to the Crown may fluctuate to a greater degree.

Net operating costs (1)

	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Net operating costs (1)	1,730	4,117
$/boe (1)	4.14	6.88

1. See "Non-GAAP and Other Financial Measures".

Total net operating costs were $1.7 million, 58% lower than the first quarter of 2023 (Q1 2023 - $4.1 million) as a result of lower production volumes and the Mannville Disposition which had significantly higher operating costs per boe than Perpetual's West Central Alberta assets. On a unit-of-production basis, net operating costs decreased by 40% to $4.14/boe in the first quarter of 2024 (Q1 2023 - $6.88/boe). The Mannville asset contributed higher heavy crude oil production as a percentage of total volumes and the heavy oil production had higher operating costs than the Company's conventional natural gas and NGL production at East Edson.

Transportation costs

	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Transportation costs	674	1,092
$/boe	1.61	1.82

Transportation costs include clean oil trucking and NGL transportation, as well as costs to transport natural gas from the plant gate to commercial sales points. Transportation costs in the first quarter of 2024 were $0.7 million, a 38% decrease from the first quarter of 2023 (Q1 2023 - $1.1 million) due to no longer requiring trucking of heavy oil volumes as a result of the Mannville Disposition.

On a unit-of-production basis, transportation costs decreased by 12% to $1.61/boe in the first quarter of 2024 on lower costs which more than offset lower production volumes (Q1 2023 - $1.82/boe).

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Operating netbacks
The following table highlights Perpetual's operating netbacks for the three months ended March 31, 2024 and 2023:
		Three months ended March 31,
($/boe) ($ thousands)		2024		2023
Production (boe/d)		4,597		6,655
Oil and natural gas revenue	21.25	8,890	29.74	17,811
Royalties	(3.22)	(1,348)	(5.97)	(3,576)
Net operating costs (1)	(4.14)	(1,730)	(6.88)	(4,117)
Transportation costs	(1.61)	(674)	(1.82)	(1,092)
Operating netback(1)	12.28	5,138	15.07	9,026
Realized gain on risk management contracts	2.93	1,225	7.72	4,623
Total operating netback, including risk management contracts(1)	15.21	6,363	22.79	13,649

1. Non-GAAPmeasure. See "Non-GAAP and Other Financial Measures".

Perpetual's operating netback in the first quarter of 2024 decreased to $5.1 million, or $12.28/boe (Q1 2023 - $9.0 million or $15.07/boe) as a result of the significant decrease in revenue on lower sales volumes and prices, partially offset by lower royalties and lower costs in all areas as a result of the Mannville Disposition. After the realized gain on risk management contracts of $1.2 million, or $2.93/boe (Q1 2023 - gain of $4.6 million or $7.72/boe), operating netbacks after risk management contracts were $6.4 million ($15.21/boe), down 53% (33% on a unit of production basis) from $13.6 million ($22.79/boe) in the first quarter of 2023.

General and administrative ("G&A") expenses
	Three months ended March 31,
($ thousands, except as noted)	2024	2023
G&A before overhead recoveries	5,227	5,255
MSA recoveries(1)	(1,349)	(779)
Overhead recoveries	(642)	(922)
Total G&A expense	3,236	3,554
$/boe	7.74	5.93

1. Concurrent with the sale of the Clearwater Assets to Rubellite Energy Inc. ("Rubellite") on September 3, 2021, Perpetual entered into a Management and Operating Services Agreement (the "MSA") with Rubellite whereby Perpetual receives payment for certain technical and administrative services provided to Rubellite split on a relative production basis.

Total G&A expenses were $3.2 million in the first quarter of 2024, 9% lower than the first quarter of 2023 as a result of higher MSA recoveries, partially offset by lower overhead recoveries. Overhead recoveries will fluctuate from one period to the next based on the amount of capital spent by Perpetual and Rubellite under the MSA.

For the three months ended March 31, 2024, the costs billed under the MSA to Rubellite were $1.3 million (Q1 2023 - $0.8 million). MSA recoveries in 2024 increased over the comparative period as a result of Rubellite's increased production relative to Perpetual's production (Q1 2024 - 50%; Q1 2023 - 31%).

Share-based payments

	Three months ended March 31,
($ thousands, except as noted)	2024	2023
Share-based payments	568	679
Total share-based payments	568	679

Share-based payments expense for the three months ended March 31, 2024 decreased to $0.6 million (Q1 2023 - $0.7 million). The decrease is due to a reduction in the performance share right multiplier in 2024 and a reduction in the number of equity grants.

During the first quarter of 2024, a nominal amount of deferred shares were granted to Officers, Directors and employees of the Company.

Depletion and depreciation

		Three months ended March 31,
($/boe) ($ thousands)		2024		2023
Depletion	8.43	3,525	8.85	5,300
Depreciation and other	1.02	428	0.11	66
Total depletion and depreciation	9.45	3,953	8.96	5,366

The Company calculates depletion using the net book value of the asset, future development costs associated with proved and probable reserves, salvage values on associated production equipment, as well as proved and probable reserves. As at March 31, 2024, depletion was calculated on a $122.3 million depletable balance and $97.6 million in future development costs (December 31, 2023 - $174.2 million depletable balance and $97.6 million in future development costs). The depletable base excluded an estimated $1.1 million (December 31, 2023 - $3.8 million) of salvage value.

Depletion expense for the first quarter of 2024 decreased to $3.5 million or $8.43/boe (Q1 2023 - $5.3 million or $8.85/boe) as a result of the Mannville disposition. On a unit-of-production basis, depletion expense increased from the comparable period of 2023 due to a higher

PERPETUAL ENERGY INC.

Q1 2024

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depletable base from increased future development costs, partially offset by a reduction in the depletion rate as a result of the Mannville Disposition. Depletion and depreciation expense will fluctuate from one period to the next depending on the amount of capital spent, the amount of reserves added and volumes produced.

Depreciation expense for the first quarter of 2024 increased to $0.4 million or $1.02/boe (Q1 2023 - $0.1 million or $0.11/boe) as a result of corporate asset additions.

Impairment

There were no indicators of impairment as of March 31, 2024; therefore, an impairment test was not performed. E&E assets are tested for impairment both at the time of any triggering facts and circumstances as well as upon their reclassification to oil and gas properties in PP&E. There were no transfers during 2024 and as such an impairment test was not performed.

Finance expense

	Three months ended March 31,
($ thousands)	2024	2023
Cash finance expense
Interest (income) on revolving bank debt	(65)	359
Interest on term loan	48	54
Interest on Senior Notes	716	772
Interest on lease liabilities	69	23
Total cash finance expense	768	1,208
Non-cash finance expense
Amortization of debt issue costs	109	358
Accretion on decommissioning obligations	110	222
Change in fair value of other liability	-	24
Total non-cash finance expense	219	604
Finance expense recognized in net loss	987	1,812

Total cash finance expense was $0.8 million in the first quarter of 2024, 36% lower than the first quarter of 2023 as the Credit Facility was undrawn during the quarter as a result of proceeds from the fourth quarter Mannville Disposition.

Total non-cash finance expense was $0.2 million in the first quarter of 2024, a decrease from the first quarter of 2023 due to lower amortization of debt issues costs and lower accretion on decommissioning obligations as a result of the Mannville Disposition.

SEQUOIA LITIGATION

On August 3, 2018, Perpetual received a Statement of Claim that was filed by PricewaterhouseCoopers Inc., LIT in its capacity as trustee in bankruptcy (the "Trustee") of Sequoia Resources Corp. ("Sequoia"), with the Alberta Court of King's Bench (the "Court"), against Perpetual (the "Sequoia Litigation"). The Claim related to a transaction when, on October 1, 2016, Perpetual closed the disposition of shallow conventional natural gas assets in Eastern Alberta (the "Sequoia Disposition").

After several years of litigation, Perpetual entered into the Settlement Agreement on March 22, 2024 with the Trustee to resolve the Sequoia Litigation without any party admitting liability, wrongdoing or violation of law, regulations, public policy or fiduciary duties.

Pursuant to the Settlement Agreement, and subject to Court approval, the Company will make payments of the Settlement Principal of $30.0 million over several years, consisting of an initial payment of $10.0 million, and annual installments of $3.75 million until the total amount of the Settlement Principal is paid. Amounts owing pursuant to the Settlement Agreement have second lien security behind the Company's Credit Facility. The initial payment of $10.0 million has been recognized as deposit held in escrow until Court approval has been received.

Subject to the payment of all amounts under the Settlement Agreement, interest prior to March 27, 2026 will accrue and be forgiven. As of March 28, 2026, interest will accrue and be payable on the outstanding Settlement Principal at an interest rate equal to the applicable Bank of Canada prime rate on the date of payment. The Company is able to pre-pay all, or any portion, of the outstanding balance of the Settlement Principal at any time without bonus or penalty.

		March 31, 2024
Other provisions - current	$	13,624
Other provisions - non-current		14,335
Total other provisions	$	27,959
The following assumptions were used to estimate the Company's $28.0 million provision:
		March 31, 2024
Undiscounted obligations	$	30,000
Discount rate		3.5%
Expected timing of settling obligations		6 years

LIQUIDITY AND CAPITAL RESOURCES

Perpetual's strategy targets the maintenance of a strong capital base to retain investor, creditor and market confidence to support the execution of its business plans. The Company manages its capital structure and adjusts its capital spending in light of changes in economic conditions such as depressed commodity prices, available liquidity, and the risk characteristics of its underlying oil and natural gas assets. The

PERPETUAL ENERGY INC.

Q1 2024

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