Prairie Provident Resources Inc. Consolidated Financial

PrairieProvidentResourcesInc.

ConsolidatedFinancialStatements

AsatandfortheYearEndedDecember31,2020

Dated:March25,2021

INDEPENDENTAUDITOR’SREPORT

TotheShareholdersofPrairieProvidentResourcesInc.

Opinion

WehaveauditedtheconsolidatedfinancialstatementsofPrairieProvidentResourcesInc.anditssubsidiaries(the”Company”),which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidatedstatementsoflossandcomprehensiveloss,consolidatedstatementsofchangesinequity(deficit)andconsolidatedstatementsofcashflowsfortheyearsthenended,andnotestotheconsolidatedfinancialstatements,includingasummaryofsignificantaccountingpolicies.

In our opinion, the accompanying consolidated financial statements present fairly, in allmaterial respects, the consolidatedfinancial position of the Company as at December 31, 2020 and 2019, and its consolidated financial performance and itsconsolidatedcashflowsfortheyearsthenendedinaccordancewithInternationalFinancialReportingStandards(“IFRS”).

BasisforOpinion

Weconductedouraudit inaccordancewithCanadiangenerallyacceptedauditingstandards.OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sResponsibilitiesfortheAuditoftheConsolidatedFinancialStatementssectionofourreport.WeareindependentoftheCompanyinaccordancewiththeethicalrequirementsthatarerelevanttoourauditoftheconsolidatedfinancialstatementsinCanada,andwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirements.Webelieve that the audit evidencewehaveobtained is sufficient and appropriate to provide a basis for ouropinion.

KeyAuditMatters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. This matter was addressed in the context of our audit of theconsolidatedfinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthismatter.Forthematterbelow,ourdescriptionofhowourauditaddressedthematterisprovidedinthatcontext.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financialstatements section of our report, including in relation to this matter. Accordingly, our audit included the performance ofprocedures designed to respond to our assessment of the risks of material misstatement of the consolidated financialstatements.Theresultsofourauditprocedures,includingtheproceduresperformedtoaddressthematterbelow,providethebasisforourauditopinionontheaccompanyingconsolidatedfinancialstatements.

Keyauditmatter Howourauditaddressedthekeyauditmatter

Impairmentofpropertyandequipment.

AsatDecember31,2020,thecarryingamountofpropertyandequipmentwas$189.1million.FortheyearendedDecember31,2020,animpairmentlossof$78.3millionwasrecordedwithrespecttopropertyandequipment.TheCompany’sdisclosuresrelatedtopropertyandequipmentandrelatedimpairmentareincludedinNote2(d)UseofEstimatesandJudgments,Note3SignificantAccountingPoliciesandChangesinAccountingPoliciesandNote7PropertyandEquipment.Propertyandequipmentistestedforimpairmentonlywhencircumstancesindicatethatthecarryingamountofacashgeneratingunit(‘CGU’)mayexceeditsrecoverableamount.TherecoverableamountsofallCGUsweredeterminedatMarch31,2020usingthefairvaluelesscostofdisposalmethod.

AuditingtheCompany’sestimatedrecoverableamountsforallCGUswascomplexduetothesubjectivenatureoftheunderlyinginputsandassumptions.Theprimaryinputsnotedinthefairvaluelesscostofdisposalmodelwere

TotesttheCompany'sestimatedrecoverableamount,weperformedthefollowingprocedures,amongothers:

• EvaluatedtheCompany’sindependentreserveevaluator’scompetence,capabilityandobjectivityaswellasobtainedanunderstandingoftheworktheyperformed.Theappropriatenessoftheirworkasauditevidencewasevaluatedbyconsideringtherelevanceandreasonablenessofthemethodsandassumptionsutilized.

• Involvedourinternalvaluationspecialiststoassessthemethodologyapplied,andthevariousinputsutilizedindeterminingtheafter-taxdiscountratebyreferencingcurrentindustry,economic,andcomparablecompanyinformation,aswellascompanyandcash-flowspecificriskpremiums.

• Comparedforecastedbenchmarkcommoditypricingagainsthistoricalrealizedpricesandtootherthird-partypriceforecasts.

forecastedproduction,pricing,royalties,operatingcosts,futuredevelopmentcostsandanafter-taxdiscountrate.

• Assessed forecasted production, royalties, operatingcosts,andfuturedevelopmentcostsbycomparingthemtohistoricalresults.

• Evaluated the adequacy of the impairment notedisclosure included in Note 7 of the accompanyingconsolidated financial statements in relation to thismatter.

OtherInformation

Managementisresponsiblefortheotherinformation.TheotherinformationcomprisesManagement’sDiscussionandAnalysis.

Ouropinionontheconsolidatedfinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanyformofassuranceconclusionthereon.

Inconnectionwithourauditoftheconsolidatedfinancialstatements,ourresponsibilityistoreadtheotherinformation,andindoingso,considerwhethertheother information ismaterially inconsistentwiththeconsolidatedfinancialstatementsorourknowledgeobtainedintheauditorotherwiseappearstobemateriallymisstated.

WeobtainedManagement’sDiscussionandAnalysispriortothedateofthisauditor’sreport. If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

ResponsibilitiesofManagementandThoseChargedwithGovernancefortheConsolidatedFinancialStatements

Management is responsible for thepreparationand fairpresentationof the consolidated financial statements in accordancewith IFRS, and for such internal control asmanagement determines is necessary to enable the preparation of consolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingtheconsolidatedfinancialstatements,managementisresponsibleforassessingtheCompany’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessmanagementeitherintendstoliquidatetheCompanyortoceaseoperations,orhasnorealisticalternativebuttodoso.

ThosechargedwithgovernanceareresponsibleforoverseeingtheCompany’sfinancialreportingprocess.

Auditor’sResponsibilitiesfortheAuditoftheConsolidatedFinancialStatements

Ourobjectives are toobtain reasonable assurance aboutwhether the consolidated financial statements as awhole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithCanadiangenerallyacceptedauditingstandardswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterial if, individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedfinancialstatements.

AspartofanauditinaccordancewithCanadiangenerallyacceptedauditingstandards,weexerciseprofessionaljudgmentandmaintainprofessionalskepticismthroughouttheaudit.Wealso:

• Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations,ortheoverrideofinternalcontrol.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’sinternalcontrol.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebymanagement.

• Concludeon theappropriatenessofmanagement’suseof thegoing concernbasisof accountingand,basedon theauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificant

doubtontheCompany’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedfinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’sreport.However,futureeventsorconditionsmaycausetheCompanytoceasetocontinueasagoingconcern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures,andwhethertheconsolidatedfinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

Wecommunicatewiththosechargedwithgovernanceregarding,amongothermatters, theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

Wealsoprovidethosechargedwithgovernancewithastatementthatwehavecompliedwithrelevantethical requirementsregardingindependence,andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonourindependence,andwhereapplicable,relatedsafeguards.

From the matters communicated with those charged with governance, we determine those matters that were of mostsignificanceintheauditoftheconsolidatedfinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters.We describe thesematters in our auditor’s report unless law or regulation precludes public disclosure about thematter orwhen, inextremely rarecircumstances,wedetermine thatamatter shouldnotbecommunicated inour reportbecause theadverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Theengagementpartnerontheauditresultinginthisindependentauditor’sreportisKimWiggins.

Calgary,Alberta March25,2021

CONSOLIDATEDSTATEMENTSOFFINANCIALPOSITIONAsat($000s) Note

December31,2020

December31,2019

ASSETS

Cash 4,544 2,873

Restrictedcash 9 4,332 4,917

Accountsreceivable 21 7,875 8,667

Inventory 604 958

Prepaidexpensesandotherassets 2,654 3,282

Derivativeinstruments–current 21 798 11

Totalcurrentassets 20,807 20,708

Explorationandevaluation 6 5,785 10,183

Propertyandequipment 7 189,142 293,549

Right-of-useassets 8 3,948 6,119

Derivativeinstruments 21 — 332

Otherassets 634 634

Totalassets 220,316 331,525

LIABILITIES

Accountspayableandaccruedliabilities 14,683 18,479

Leaseliabilities–currentportion 11 2,548 2,520

Derivativeinstruments–current 21 — 4,325

Currentportionofdecommissioningliability 12 3,500 4,000

Warrantliability 10 686 84

Totalcurrentliabilities 21,417 29,408

Long-termdebt 9 103,071 113,595

Leaseliabilities–non-currentportion 11 2,606 5,121

Decommissioningliabilities 12 162,726 163,805

Otherliabilities 7,406 6,018

Totalliabilities 297,226 317,947

Commitmentsandcontingencies 23

SHAREHOLDERS’EQUITY

Sharecapital 13 136,534 135,958

Warrants 13 — 1,103

Contributedsurplus 3,662 2,919

Accumulateddeficit (217,645) (126,872)

Accumulatedothercomprehensiveincome(“AOCI”) 539 470

Totalequity (76,910) 13,578

Totalliabilitiesandshareholders’equity 220,316 331,525

Seeaccompanyingnotestotheconsolidatedfinancialstatements.

ApprovedbytheBoardofDirectors,

(signed)(signed)PatrickMcDonaldAjaySabherwalChairoftheBoardofDirectorsandDirectorChairoftheAuditCommitteeandDirector

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CONSOLIDATEDSTATEMENTSOFLOSSANDCOMPREHENSIVELOSSFortheyearsended

($000s) Note December31,2020 December31,2019

REVENUE

Oilandnaturalgasrevenue 17 51,720 97,891

Royalties (5,027) (10,086)

Oilandnaturalgasrevenue,netofroyalties 46,693 87,805

Unrealizedgain(loss)onderivativeinstruments 21 4,780 (10,618)

Realizedgain(loss)onderivativeinstruments 21 15,241 (2,169)

66,714 75,018

Otherincome 327 —

EXPENSES

Operating 18 37,271 46,626

Generalandadministrative 19 5,742 8,277

Depletionanddepreciation 7 27,887 39,826

Explorationandevaluation 6 4,183 996

Depreciationonright-of-useassets 8 2,170 2,743

Gainonpropertydispositions 5 (375) (263)

Loss(gain)onwarrantliability 10 260 (726)

Gainonmodificationoffinancialliabilities 9 (15,874) —

Impairmentloss(recovery) 6,7 78,459 (436)

Gainonforeignexchange (1,425) (3,826)

Changeinotherliabilities 1,361 (3,283)

Financecosts 20 17,995 17,588

Transaction,restructuringandothercosts 238 888

Totalexpenses–net 157,892 108,410

Netlossbeforetaxes (90,851) (33,392)

Currenttax(recovery)expense (78) 19

Deferredtaxrecovery — (332)

Nettaxrecovery 15 (78) (313)

Netloss (90,773) (33,079)

Othercomprehensiveincome(loss)

Itemsthatmaybereclassifiedtonetloss:

Foreigncurrencytranslationadjustment 160 —

Itemsthatwillnotbereclassifiedtonetloss:

Actuarial(loss)gainonemployeepost-retirementbenefitplan (91) 2

Totalothercomprehensiveincome(loss) 69 2

Comprehensiveloss (90,704) (33,077)

Netlosspershare

Basic&Diluted 13 (0.53) (0.19)


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CONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY(DEFICIT)

($000s) Note

ShareCapitalAmount Warrants

ContributedSurplus

AccumulatedDeficit AOCI

TotalEquity

BalanceatDecember31,2019 135,958 1,103 2,919 (126,872) 470 13,578

Shareissuancecosts 13 4 — — — — 4

Share-basedcompensation 14 — — 240 — — 240

Settlementofrestrictedshareunits(“RSU”),netofwithholdingtax 13 572 — (600) — — (28)

Actuariallossonpost-retirementbenefitplan — — — — (91) (91)

Warrantexpiries 13 — (1,103) 1,103 — — —

Exchangedifferencesontranslationofforeignoperations — — — — 160 160

Netloss — — — (90,773) — (90,773)

BalanceatDecember31,2020 136,534 — 3,662 (217,645) — 539 (76,910)

($000s) Note

ShareCapitalAmount Warrants

ContributedSurplus

AccumulatedDeficit AOCI

TotalEquity


ImpactontransitiontoIFRS16 — — — (853) — (853)

BalanceatJanuary1,2019 136,145 1,440 1,859 (93,714) 468 46,198

Shareissuancecosts (57) — — — — (57)

Normalcourseissuerbid(“NCIB”) (509) — 377 — (132)

Share-basedcompensation — — 825 — — 825

Settlementofrestrictedshareunits(“RSU”)andperformanceshareunits("PSU"),netofwithholdingtax 405 — (479) — — (74)PurchaseofcommonsharesforRSUsettlement (26) — — — — (26)Actuarialgainonpost-retirmentbenefitplan — — — — 2 2

Warrantexpiries — (337) 337 — — —

IFRS16impact — — — (79) — (79)

Netloss — — — (33,079) — (33,079)



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CONSOLIDATEDSTATEMENTSOFCASHFLOWSFortheyearsended($000s) Note December31,2020 December31,2019OPERATINGACTIVITIESNetloss (90,773) (33,079)Adjustmentsfornon-cashitems:Impairmentloss(recovery) 6,7 78,459 (436)Gainonmodificationoffinancialliabilities-net 9 (15,874) —Unrealized(gain)lossonderivativeinstruments 21 (4,780) 10,618Depletionanddepreciation 7 27,887 39,826Depreciationonright-of-useasset 8 2,170 2,743Explorationandevaluationexpense 6 4,183 996Accretionandnon-cashfinancecosts 20 5,520 6,244Unrealizedforeignexchangegain (1,512) (3,624)Changeinotherliabilities (480) (3,283)Gainonsaleofproperties 5 (375) (263)Loss(gain)onwarrantliability 10 260 (726)Deferredtaxrecovery 15 — (332)Share-basedcompensation 14 225 679

Settlementsofdecommissioningliabilities 12 (1,869) (3,801)DeferredinterestonSeniorNotes&RevolvingFacility 9,20 7,193 1,999Other,net 1,727 (528)Changeinnon-cashworkingcapital 16 (1,779) (12,653)Netcashfromoperatingactivities 10,182 4,380FINANCINGACTIVITIESDebtissuancecosts (980) (408)Shareissuancecosts 4 (57)PurchaseofcommonshareunderNCIB — (133)PurchaseofcommonshareforRSUsettlement — (26)Withholdingtaxesonsettlementofshare-basedcompensations 13 (28) (60)Repaymentofprincipalrelatedtoleaseobligations 11 (3,144) (3,803)ChangeinSeniorNoteborrowings 14,632 —ChangeinRevolvingFacilityborrowings 9 (15,619) 12,456Changeinnon-cashworkingcapital 16 1,021 —

Netcashfromfinancingactivities (4,114) 7,969INVESTINGACTIVITIESExplorationandevaluationexpenditures 6 (271) (2,678)Propertyandequipmentexpenditures 7 (3,758) (9,317)Proceedsfromdispositions(netofacquisitions) 249 285Changeinnon-cashworkingcapital 16 (1,202) (1,799)

Netcashusedininvestingactivities (4,982) (13,509)Changeincashandrestrictedcash 1,086 (1,160)Cashandrestrictedcashbeginningofperiod 7,790 8,950Cashandrestrictedcashendofperiod 8,876 7,790

Seeaccompanyingnotestoconsolidatedfinancialstatements.

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NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS

FortheyearsendedDecember31,2020and2019

1. REPORTINGENTITY

PrairieProvidentResourcesInc.(“PPR”orthe“Company”)wasincorporatedunderthelawsoftheprovinceofAlbertaonJuly29,2016.Itsprincipalofficeislocatedat640–5thAvenueS.W.,Calgary,Alberta.TheCompany’scommonsharesarelistedontheTorontoStockExchangeunderthesymbol“PPR”.

PPR is an independent oil and natural gas exploration, development and production company. PPR’s reserves, producingproperties and exploration prospects are located primarily in the province of Alberta. The Company conducts certain of itsoperatingactivitiesjointlywithothersthroughunincorporatedjointarrangementsandtheseconsolidatedfinancialstatementsreflectonlytheCompany’sshareofassets,liabilities,revenuesandexpensesunderthesearrangements.TheCompanyconductsallofitsprincipalbusinessinonereportablesegment.

2. BASISOFPRESENTATION

(a) StatementofCompliance

These annual financial statements have been prepared in accordance with IFRS as issued by the International AccountingStandards Board (“IASB”). The Company’s significant accounting policies under IFRS are presented in Note 3. The annualfinancialstatementswereapprovedandauthorizedforissuebytheBoardofDirectorsofPPRonMarch25,2021(the“FinancialStatements”).

Certaincomparativefigureshavebeenreclassifiedtoconfirmwiththepresentationadoptedinthecurrentperiod.

(b) Basisofmeasurement

TheFinancialStatementshavebeenpreparedonthehistoricalcostbasisexceptforthosepresentedatfairvalueasdetailedintheaccountingpoliciesdisclosedinNote3-SignificantAccountingPoliciesandChangesinAccountingPolicies.

(c) FunctionalandPresentationCurrency

The Financial Statements are presented in Canadian dollars (CAN), which is also the Company’s functional currency. AllreferencestoUS$orUSDaretoUnitedStatesdollars.

(d) UseofEstimatesandJudgments

The preparation of financial statements in conformity with IFRS requires management tomake judgements, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues andexpenses.Actualresultsmaydifferfromtheseestimates.

Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognized intheperiodinwhichtheestimatesarerevisedandinanyfutureperiodsaffected.

On January 30, 2020, theWorld HealthOrganization declared the Coronavirus disease (COVID-19) outbreak a Public HealthEmergencyofInternationalConcernand,onMarch10,2020,declaredittobeapandemic.ActionstakenaroundtheworldtohelpmitigatethespreadofCOVID-19includerestrictionsontravel,quarantinesincertainareas,andforcedclosuresforcertaintypesofpublicplacesandbusinesses.Thesemeasureshavecaused,andwillcontinuetocausesignificantdisruptiontobusinessoperationsandasignificantincreaseineconomicuncertainty,withreduceddemandforcommoditiesleadingtovolatilepricesandcurrencyexchangerates,andadeclineinlong-terminterestrates.TheCompany'soperationsareparticularlysensitivetoareductioninthedemandfor,andpricesof,crudeoil,naturalgasandnaturalgasliquids.InadditiontotheimpactoncommoditypricesCOVID-19hascreatedmanyuncertaintiesinthecrudeoilandnaturalgasindustrywithrespecttoincreasedcounterpartycreditriskandvaluationoflong-livedpetroleumandnaturalgasassets.

The COVID-19 pandemic is an evolving situation that will continue to have widespread implications for our businessenvironment, operations and financial condition. Management cannot reasonably estimate the length or severity of thispandemic,ortheextenttowhichthedisruptionmaymateriallyimpactourfinancialresultsinfutureperiods.

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InformationaboutsignificantareasofestimationuncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognizedintheFinancialStatementsareasfollows:

• PPR’soilandgasassetsaregroupedintocashgeneratingunits(“CGUs”).ACGUisthelowestlevelofintegratedassetsthatgenerate identifiablecash inflows thatare largely independentof thecash inflowsofotherassetsorgroupsofassets. The allocation of assets into CGUs requires significant judgement and interpretations with respect to theintegrationbetweenassets, geological formation,geographicalproximity, theexistenceof commonsalespointsandsharedinfrastructuresandthewayinwhichmanagementmonitorsitsoperations.TherecoverabilityofPPR’soilandgasassetsisassessedattheCGUlevel,andtherefore,thedeterminationofacostscouldhaveasignificantimpactonimpairmentlossesorimpairmentreversals;

• Reserves engineering is an inherently complex and subjective process of estimating underground accumulations ofpetroleum and natural gas. The process relies on interpretations of available geological, geophysical, engineering,economicandproductiondata.Theaccuracyofareservesestimateisafunctionofthequalityandquantityofavailabledata, the interpretation of that data, the accuracy of various economic assumptions and the judgement of thosepreparing theestimate.Because theseestimatesdependonmanyassumptions, all ofwhichmaydiffer fromactualresults, reservesestimates andestimatesof futurenet revenuemaybedifferent from the sales volumesultimatelyrecovered and net revenues actually realized. Changes inmarket conditions, regulatorymatters and the results ofsubsequent drilling, testing and production may require revisions to the original estimates. Estimates of reservesimpact: (i) theassessmentofwhetherornotanewwellhas foundeconomically recoverable reserves; (ii)depletionrates; (iii) the determination of net recoverable amount of oil and gas properties for impairment assessment andmeasurement, (iv) purchase price allocation for business combinations, and (v) the determination of reserve liveswhich affect the timing of decommissioning activities, all of which could have a material impact on earnings andfinancialpositions;

• Recoverableamountscalculatedforimpairmenttestingarebasedonestimatesoffuturecommodityprices,expectedvolumes,quantityofreservesanddiscountratesaswellasfuturedevelopmentcosts,royalties,andoperatingcosts.Thesecalculationsrequiretheuseofestimatesandassumptions,whichbytheirnature,aresubjecttomeasurementuncertainty. In addition, judgement is exercised by management as to whether there have been indicators ofimpairment or of impairment reversal. Indicators of impairment or impairment reversal may include, but are notlimited to a change in: market value of assets, asset performance, estimate of future prices, royalties and costs,estimatedquantityofreservesandappropriatediscountrates;

• Amountsrecordedfordecommissioningliabilitiesandtherelatedaccretionexpenserequiretheuseofestimateswithrespecttotheamountandtimingofdecommissioningexpenditures,inflationratesanddiscountrates.Actualcostsandcash outflows can differ from estimates because of changes in law and regulations, public expectations, marketconditions, discovery and analysis of site conditions and changes in technology. Decommissioning liabilities arerecognizedintheperiodwhenitbecomesprobablethattherewillbeafuturecashoutflow;

• Compensationcostsrecordedpursuanttoshare-basedcompensationplansaresubjecttotheestimatedfairvaluesoftheawardsonthegrantdateandtheestimatednumberofunitsthatwillultimatelyvest.TheCompanyusestheBlack-Scholesoptionvaluationmodel toestimate the fairvalueofoptions,which requires theCompany todetermine themost appropriate inputs including the expected life of the options, volatility, forfeiture rates and future dividends,whichbynaturearesubjecttomeasurementuncertainty;

• Derivativeriskmanagementcontractsarevaluedusingvaluationtechniqueswithmarketobservableinputs.Themostfrequently appliedvaluation techniques includeBlack-Scholesoptionvaluationmodel and forwardpricingand swapmodels. Themodels incorporate various inputs including the credit quality of counterparties, foreignexchange spotandforwardrates,volatilitiesofcommoditypricesandforwardratecurvesoftheunderlyingcommodity.Changesinanyoftheseassumptionswouldimpactfairvalueoftheriskmanagementcontractsandasaresult,futurenetincomeandothercomprehensiveincome;

• Taxinterpretations,regulationsandlegislationinthevariousjurisdictionsinwhichtheCompanyoperatesaresubjecttochange.TheCompany isalso subject to incometaxauditsand reassessmentswhichmaychange itsprovision forincome taxes. Therefore, the determination of income taxes is by nature complex, and requires making certainestimatesandassumptions.PPRrecognizesnetdeferredtaxbenefitrelatedtodeferredtaxassetstotheextentthatitis probable that the deductible temporary differences will reverse in the foreseeable future. Assessing therecoverability of deferred tax assets requires the Company tomake significant estimates related to expectations offuturetaxableincome.Estimatesoffuturetaxableincomearebasedonforecastcashflowsfromoperationsandthe

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application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differsignificantlyfromestimates,theabilityoftheCompanytorealizethenetdeferredtaxassetsrecordedatthereportingdatecouldbeimpacted;

• The determination of fair value requires judgement and is based on market information, where available andappropriate.Fairvalueisbestevidencedbyanindependentquotedmarketpriceforthesameassetor liability inanactivemarket.However,quotedmarketpricesandactivemarketsdonotalwaysexist.Inthoseinstances,fairvaluationtechniquesareused.TheCompanyappliesjudgementindeterminingthemostappropriateinputsandtheweightingascribedtoeachsuchinputaswellasitsselectionofvaluationmethodologies.Thecalculationoffairvalueisbasedonmarketconditionsasateachreportingdate,andmaynotbereflectiveofultimaterealizablevalue;

• Contingencies will only be resolved when one or more future events occur or fail to occur. The assessment ofcontingenciesinherentlyinvolvestheexerciseofsignificantjudgmentandestimatesoftheoutcomeoffutureevents;and

• Amounts recorded for capitalized general and administrative cost that is related to directly attributed supportingfunctions and activity to post-license exploration and evaluation assets and to development and producing CGUpropertiesrequirestheuseofestimatesandjudgmentsandisbyitsnaturesubjecttomeasurementuncertainty;

• Management applies judgment in reviewing each of its contractual arrangements to determine whether thearrangement contains a lease within the scope of IFRS 16. Leases that are recognized are subject to furthermanagement judgment and estimation in various areas specific to the arrangement. The Company determines thelease termas thenon-cancellable termof the lease, togetherwithanyperiods coveredbyanoption toextend thelease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it isreasonablycertainnottobeexercised.TheCompanyappliesjudgmentinevaluatingwhetheritisreasonablycertaintoexercisetheoptiontorenewbyconsideringallrelevantfactorsthatcreateaneconomicincentiveforittoexercisetherenewal. After the commencement date, the Company reassesses the lease term if there is a significant event orchange incircumstances that iswithin itscontrolandaffects itsability toexercise (ornot toexercise) theoption torenew(e.g.,achangeinbusinessstrategy).Wheretherateimplicitinaleaseisnotreadilydeterminable,thediscountrateofleaseobligationsareestimatedusingadiscountratesimilartoPPR'scompany-specificincrementalborrowingrate.ThisraterepresentstheratethatPPRwouldincurtoobtainthefundsnecessarytopurchaseanassetofasimilarvalue,withsimilarpaymenttermsandsecurityinasimilareconomicenvironment;and

• Managementappliesjudgementinreviewingmodificationsoffinancialliabilitiestodetermineifthemodificationsareconsidered substantial under the requirementsof IFRS9, including the considerationofqualitative andquantitativefactors.Theclassificationofamodificationasnon-substantialorsubstantialimpactstheaccountingtreatmentforthefinancialliabilityastotheimplementationofmodificationaccountingorextinguishmentaccountingandassuch,mayhavematerialimplicationsonthefinancialstatements.

3. SIGNIFICANTACCOUNTINGPOLICIESANDCHANGESINACCOUNTINGPOLICIES

(a) BasisofConsolidation

At December 31, 2020, the Financial Statements included the accounts of PPR and its wholly owned subsidiaries, includingPrairie Provident Resources Canada Ltd. (“PPR Canada”), Lone Pine Resources, Lone Pine Resources (Holdings) Inc., ArsenalEnergyUSAInc.,andArsenalEnergyHoldingsLtd.SubsidiariesareconsolidatedfromthedatetheCompanyobtainscontrolandcontinues to be consolidated until the date such control ceases. Control is achievedwhen PPR is exposed, or has rights, tovariablereturnsfromits involvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, usingconsistent accounting policies. All inter-entity transactions have been eliminated upon consolidation between PPR and itssubsidiariesintheseconsolidatedfinancialstatements.PPR'soperationsareviewedasasingleoperatingsegmentbythechiefoperatingdecisionmakeroftheCompanyforthepurposeofresourceallocationandassessingperformance.

(b) JointArrangements

PPR conducts someof its oil and gas activities through joint operations. Joint operation is a typeof joint arrangement overwhich two or more parties have joint control and rights to the assets and obligations for the liabilities, relating to thearrangement.Jointcontrol isthecontractuallyagreedsharingofcontrolofanarrangement,whichexistsonlywhendecisionsabouttherelevantactivities(beingthosethatsignificantlyaffectthereturnsofthearrangement)requireunanimousconsentof

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thepartiessharingcontrol.PPRdoesnothaveanyjointarrangementsthatarematerialtotheCompany,orthatarestructuredusingseparatevehicles. In relationto its interests in jointoperations,PPRrecognizes in theFinancialStatements its shareofassets,liabilities,revenuesandexpensesofthearrangements.

(c) BusinessCombinations

Businesscombinationsareaccountedforusingtheacquisitionmethodofaccounting.Thefairvalueoftheassetsacquired,theliabilitiesassumedandtheconsiderationtransferredismeasuredattheacquisitiondate.Transactioncostsrelatedtobusinesscombinationsareexpensedwhenincurred.

Ifthefairvalueoftheconsiderationexceedsthenetidentifiableassetsacquired,itisrecordedasgoodwill.Iftheconsiderationis less than the fair value of the net identifiable assets acquired, the difference is recognized as a gain in the consolidatedstatementoflossandcomprehensiveloss.

(d) Revenue

Revenuefromthesaleofcrudeoil,naturalgasandnaturalgasliquidsismeasuredpertheconsiderationspecifiedincontractswithcustomers. Revenueisrecognizedwhenthecustomerobtainscontrolofthegoods.TheCompanysatisfiesperformanceobligations and the customer obtains control upon the delivery of crude oil, natural gas and natural gas liquids, which isgenerallyatapointintime.Whilethetransactionpriceisvariableunderthetermsofthecontract,atthetimeofdelivery,thereisonlyaminimalriskofachangeinthetransactionpricetobeallocatedtothevolumesold.Accordingly,atthepointofsalethere is not a significant risk of revenue reversal relative to the cumulative revenue recognized, and there is no need toconstrain any variable consideration. The amount of revenue recognized is based on the agreed upon transaction price,wherebyanyvariabilityinrevenueisrelatedspecificallytotheCompany’seffortstodeliverproduction.Therefore,theresultingrevenueisallocatedtotheproductiondeliveredintheperiodduringwhichthevariabilityoccurs.

TheCompanydoesnothavecontractswithcustomerswheretheperiodbetweenthetransferofthepromisedgoodsorservicestothecustomerandpaymentbythecustomerexceedsoneyear.Asaconsequence,theCompanydoesnotadjustanyofthetransactionpricesforthetimevalueofmoney.

(e) ExplorationandEvaluationAssetsandPropertyandEquipment

(i) RecognitionandMeasurement

ExplorationandEvaluation(“E&E”)Assets

Pre-licensecostsarerecognizedintheconsolidatedstatementsoflossandcomprehensivelossasincurred.

E&E costs, including the costs of acquiring licenses, obtaining geological and geophysical data, drilling andcompletingE&Ewells, andbuildingassociated facilities are initially capitalizedasE&Eassets according to thenature of the expenditure. E&E assets may include estimated decommissioning costs associated with E&Edecommissioning obligations. The costs are accumulated by well, field or exploration area pendingdeterminationoftechnicalfeasibilityandcommercialviability.E&Eassetsarenotamortized.

The technical feasibility and commercial viability of extracting a hydrocarbon resource are considered to bedeterminable when proved and/or probable reserves are determined to exist. A review of each explorationlicenseorfieldiscarriedout,atleastannually,toascertainwhetherprovedand/orprobablereserveshavebeendiscovered.Upondeterminationofprovedand/orprobablereserves,E&Eassetsattributabletothosereservesare tested for impairment and if estimated recoverable amounts exceed carrying values the E&E assets, aretransferred to petroleum and natural gas properties, within property and equipment assets. The cost ofundeveloped land that expires and E&E expenditures determined to be unsuccessful are derecognized byrecordingexplorationandevaluationexpense.

ProductionandDevelopment(“P&D”)Assets

P&Dassetsgenerallyrepresentcostsincurredinacquiringanddevelopingprovedand/orprobablereserves,andbringing inor enhancingproduction from such reserves.Development costs include the initial purchasepriceand directly attributable costs relating to land and mineral leases, geological and seismic studies, propertyacquisitions, development drilling, construction of gathering systems and infrastructure facilities,decommissioning costs, transfers fromE&Eassets, and forqualifyingassets,borrowing costs. These costsare

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accumulatedonafieldoranareabasis(majorcomponents).Thecostsoftheday-to-dayservicingofpropertyandequipmentarerecognizedinoperatingexpensesasincurred.

The production and development items of property and equipment, which includes oil and natural gasdevelopment, properties and production assets, are measured at cost less accumulated depletion anddepreciation and accumulated impairment losses, net of impairment reversals. Development assets includecertainstockequipmentthatisexpectedtobeusedinthenormalcourseofP&Dfielddevelopment.

Gains and losses on disposal of an item of property and equipment, including petroleum and natural gasproperties,aredeterminedbycomparingthenetproceedsfromdisposalwiththecarryingamountofpropertyandequipmentandare recognizedonanetbasison theconsolidatedstatementsof lossandcomprehensiveloss.

(ii) DepletionandDepreciation

ThenetcarryingvalueofP&Dassetsisdepletedusingtheunit-of-productionmethodbyreferencetotheratioofproduction in the year to the related proved plus probable reserves, taking into account estimated futuredevelopment costs necessary to convert those reserves into production. Future development costs areestimatedtakingintoaccountthelevelofdevelopmentrequiredtoproducethereserves.Theseestimatesarepreparedbyindependentreserveengineersatleastannually.

Proved plus probable reserves are estimated annually by independent and qualified reserve evaluators andrepresenttheestimatedquantitiesofpetroleumandnaturalgaswhichgeological,geophysicalandengineeringdatademonstratewithaspecifieddegreeofcertaintytoberecoverableinfutureyearsfromknownreservoirsandwhichareconsideredcommerciallyproducible.

Reservesaretheremainingquantitiesof,petroleumandnaturalgasfromknownaccumulationsestimatedtoberecoverable from a given date forward. The estimates of reserves are determined from drilling, geological,geophysical and engineering data based on established technology and specified economic conditions. Fordepletionpurposes,relativevolumesofpetroleumandnaturalgasproductionandreservesareconvertedattheenergyequivalentconversionrateofsixthousandcubicfeetofnaturalgastoonebarrelofcrudeoil.

Forotherassets,depreciationisrecognizedinprofitorlossonastraight-lineordeclining-balancebasisovertheestimated useful life of each part of an item of property and equipment. Leasehold improvements aredepreciatedover thetermof the lease.Leasedassetsaredepreciatedover theshorterof the leasetermandtheirusefullivesunlessitisreasonablycertainthattheCompanywillobtainownershipbytheendoftheleaseterm.

Computerequipment isdepreciatedusing thedeclining-balancebasis at a rateof30percentper year.Officefurnitureisdepreciatedonastraightlinebasisoverfiveyears.

Depreciationmethods,usefullivesandresidualvaluesarereviewedateachreportingdate.

(iii) Impairment

E&EAssets

E&E assets are assessed for impairment if: (i) sufficient data exists to determine technical feasibility andcommercialviability;and(ii)atsuchtimethatfactsandcircumstancesindicatethatthecarryingamountexceedsthe recoverable amount. If the recoverable amount does not exceed the carrying amount, an impairmentadjustmentisrecognizedinnetlossandcomprehensiveloss.

Forthepurposesofimpairmenttesting,E&EassetsareallocatedtoCGUsbasedongeographicalproximity.E&Eassets that are not related to established CGUs with reserves, such as undeveloped land holdings, seismic,equipment,andexplorationdrillinginQuebec,theNorthwestTerritoriesandotherexploratoryproperties,aresubject to impairment testing basedon the nature and estimated recoverable amount of the respective costcomponents.

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P&DAssets

PPR assesses, at each reporting date, whether there is an indication that an asset may be impaired. If anyindicationexists,theCompanyestimatestheasset’srecoverableamount.Anasset’srecoverableamountisthehigher of an asset’s fair value less cost of disposal (“FVLCD”) and its value-in-use (“VIU”). The recoverableamount isdeterminedforan individualasset,unlesstheassetdoesnotgeneratecash inflowsthatare largelyindependentofthosefromotherassetsorgroupsofassets.Insuchcase,animpairmenttestisperformedattheCGUlevel.ACGUisagroupofassetsthatPPRaggregatesbasedontheirabilitytogeneratelargelyindependentcashflows.AsatDecember31,2020,theCompanyhasfiveprincipaloperatingCGUs–Evi,Michichi(previouslyknownasWheatland),Princess,ProvostandOther.

WherethecarryingamountofanassetorCGUexceedsitsrecoverableamount,theassetisconsideredimpairedandiswrittendowntoitsrecoverableamount.TodetermineVIU,theCompanyestimatesthepresentvalueofthe futurenetcash flowsexpectedtoderive fromthecontinueduseof theassetorCGU.Discountrates thatreflectthemarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetorCGUareused.IndeterminingFVLCD,discountedcashflowsandrecentmarkettransactionsaretaken intoaccount, ifavailable.These calculationsare corroboratedbyvaluationmultiplesorotheravailable fair value indicators. Forassetsexcluding goodwill, an assessment ismade at each reporting date as towhether there is any indication thatpreviously recognized impairment lossesmayno longerexistormayhavedecreased. If such indicationexists,thepreviouslyrecognizedimpairmentlossisreversed.Thereversalislimitedsuchthatthecarryingamountoftheassetdoesnotexceeditsrecoverableamount,nordoesitexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciation,hadnoimpairmentlossbeenrecognizedfortheassetinpriorperiods.

(f) FinancialInstruments

(i) RecognitionandMeasurement

PPRrecognizesfinancialassetsandfinancial liabilities, includingderivatives,ontheconsolidatedstatementsoffinancial position when the Company becomes a party to the contract. The Company initially measures allfinancial instruments at fair value. Subsequent measurement of the financial instrument is based on itsclassification.Financialassetsandfinancialliabilitiesareclassifiedintothefollowingcategories:amortizedcost,fairvaluethroughothercomprehensiveincome(“FVOCI”)andfairvaluethroughprofitandloss(“FVPL”).

Financial assets and financial liabilities classifiedas FVPLaremeasuredat fair valuewith subsequent changesrecognizedthroughnetincome(loss).Financialassetsandliabilitiesclassifiedasamortizedcostaremeasuredatamortizedcostusing theeffective interestmethodofamortization.Under theeffective interest ratemethod,anytransactionfees,costs,discountsandpremiumsdirectlyrelatedtothefinancialinstrumentsarerecognizedincomprehensivelossovertheexpectedlifeoftheinstrument.FinancialassetsclassifiedasFVOCIaremeasuredatfairvalueswithchangesinthosefairvaluesrecognizedinothercomprehensiveloss.

(ii) LiabilitiesandEquity

Financial instruments are classified as a liability or equity based on the substance of the contractualarrangement.An instrument isclassifiedasa liability if it isacontractualobligationtodelivercashoranotherfinancialasset,ortoexchangefinancialassetsorfinancialliabilitiesonpotentiallyunfavorableterms.Acontractisalsoclassifiedasaliabilityifitisanon-derivativeandcouldobligatetheCompanytodeliveravariablenumberofitsownsharesoritisaderivativeotherthanonethatcanbesettledbythedeliveryofafixedamountofcashor another financial asset for a fixed number of the Company’s own equity instruments. An instrument isclassifiedasequityifitevidencesaresidualinterestintheCompany’sassetsafterdeductingallliabilities.

(iii) DerivativeFinancialInstruments

Derivative financial instruments areusedby theCompany tomanage its exposure tomarket risks relating tocommodityprices.TheCompany’spolicyisnottousederivativefinancialinstrumentsforspeculativepurposes.Theestimateof fairvalueofallderivative instruments isbasedonquotedmarketprices,or in theirabsence,thirdpartymarketindicationsandforecastsandincludesanestimateofthecreditqualityofcounterpartiestothederivativeinstruments.Theestimatedfairvalueoffinancialassetsandliabilitiesissubjecttomeasurementuncertainty.

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TheCompanyhasnotdesignateditsfinancialderivativecontractsaseffectiveaccountinghedges,andthereforehasnotappliedhedgeaccounting,eventhoughtheCompanyconsidersallcommoditycontractstobeeconomichedges. As a result, all financial derivative contracts are measured at fair value, with any gains and lossesrecordedintheconsolidatedstatementofloss.

(iv) DerecognitionofFinancialInstruments

Afinancialliabilityisderecognizedwhentheobligationundertheliabilityisdischarged,cancelledorexpires.Thedifferencebetween thecarryingvalueof the liabilityand theultimateconsiderationpaid is recognized in theconsolidatedstatementoflossandcomprehensiveloss.Ifequityinstrumentsareissuedtoextinguishafinancialliability,theequityinstrumentsaretreatedasconsiderationpaidandmeasuredattheirfairvalueatthedateofextinguishment.Whenanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasthederecognitionoftheoriginalliabilityandtherecognitionofanewliability.Thedifferenceintherespectivecarryingamountsisrecognizedinthestatementofprofitorlossandothercomprehensiveincome.

(v) Impairment

TheCompanyrecognizesallowancesforlossesonitsfinancialassetsmeasuredatamortizedcostsbasedonthelifetimeexpectedcreditlossesanticipatedtooccurfromallexpecteddefaultsoverthelifeoffinancialasset.Tocalculate the expected credit loss, PPR applies the simplified approach applying a provision matrix wherebyfinancial assets are grouped into categories based on counterparty characteristics and aging categories. TheCompany considers past experience and forward-looking information if such information is reasonable andsupportable,availablewithoutunduecostsandeffort,andcanhaveasignificantimpactonthelossestimate.

Lossallowancesforfinancialassetsmeasuredatamortizedcostaredeductedfromthegrosscarryingamountoftheassetsand impairment lossesare recognized inprofitand loss.OncetheCompanyhaspursuedcollectionactivitiesand ithasbeendetermined that the incrementalcostofpursuingcollectionoutweighs thebenefits,PPR derecognizes the gross carrying amount of the financial asset and the associated allowance from theconsolidatedstatementoffinancialposition.

(vi) Offsetting

Financialassetsandliabilitiesareoffsetandthenetamountreportedinthestatementoffinancialpositionwhenthereisalegallyenforceablerighttooffsettherecognizedamountsandthereisanintentiontosettleonanetbasisorrealizetheassetandsettletheliabilitysimultaneously.

(g) FairValueMeasurement

PPRmeasuresderivativesatfairvalueateachbalancesheetdateand,forthepurposesofimpairmenttesting,usesFVLCDtodetermine the recoverableamountof someof itsnon-financial assets.Also, fair valuesof financial instrumentsmeasuredatamortized cost aredisclosed inNote21. Fair value is theprice thatwouldbe received to sell an assetor paid to transfer aliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.ThefairvaluemeasurementisbasedonthepresumptionthatthetransactiontoselltheassetortransfertheliabilitytakesplaceeitherinthefollowingmarketsthatareaccessiblebytheCompany:

• theprincipalmarketfortheassetorliability,or

• intheabsenceofaprincipalmarket,themostadvantageousmarketfortheassetorliability.

Thefairvalueofanassetoraliabilityismeasuredusingtheassumptionsthatmarketparticipantswouldusewhenpricingtheasset or liability, assuming thatmarket participants act in their economic best interest. A fair valuemeasurement of a non-financialassettakesintoaccountamarketparticipant'sabilitytogenerateeconomicbenefitsbyusingtheassetinitshighestand best use or by selling it to anothermarket participant that would use the asset in its highest and best use. PPR usesvaluationtechniquesthatareappropriateinthecircumstancesandforwhichsufficientdataareavailabletomeasurefairvalue,maximizingtheuseofrelevantobservable inputsandminimizingtheuseofunobservable inputs. AllassetsandliabilitiesforwhichfairvalueismeasuredordisclosedintheFinancialStatementsarecategorizedwithinthefairvaluehierarchy;describedasfollows,basedonthelowest-levelinputthatissignificanttothefairvaluemeasurementasawhole:

• Level1—Quoted(unadjusted)marketpricesinactivemarketsforidenticalassetsorliabilities;

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• Level 2—Valuation techniques forwhich the lowest-level input that is significant to the fair valuemeasurement isdirectlyorindirectlyobservable;and

• Level 3—Valuation techniques forwhich the lowest-level input that is significant to the fair valuemeasurement isunobservable.

Forassetsandliabilitiesthatarerecognizedinthefinancialstatementsonarecurringbasis,PPRdetermineswhethertransfershaveoccurredbetweenlevelsinthehierarchybyreassessingcategorization(basedonthelowest-levelinputthatissignificanttothefairvaluemeasurementasawhole)attheendofeachreportingperiod.

(h) Provisions

(i) ProvisionsandContingencies

ProvisionsarerecognizedwhentheCompanyhasapresentobligation(legalorconstructive)asaresultofapastevent, it isprobable thatanoutflowof resourcesembodyingeconomicbenefitswillbe required tosettle theobligationandareliableestimatecanbemadeof theamountof theobligation.WheretheCompanyexpectssomeorallof aprovision tobe reimbursed, forexample,underan insurancecontract, the reimbursement isrecognizedasaseparateassetbutonlywhenthereimbursement isvirtuallycertain.Theexpensesrelatingtoprovisionsaregenerallypresentedintheconsolidatedstatementsoflossnetofanyreimbursementexceptfordecommissioningliabilities.Iftheeffectofthetimevalueofmoneyismaterial,provisionsarediscountedusingacurrent discount rate that reflects,where appropriate, the risks specific to the liability.Where discounting isused,theincreaseintheprovisionduetothepassageoftimeisrecognizedasafinancecost.

Acontingencyisdisclosedwheretheexistenceofanobligationwillonlybeconfirmedbyfutureevents,orwheretheamountofapresentobligationcannotbemeasuredreliablyorwilllikelynotresultinaneconomicoutflow.Contingentassetsareonlydisclosedwhentheinflowofeconomicbenefitsisprobable.

(ii) DecommissioningLiabilities

PPRrecognizesdecommissioning liabilitiesrelatedto itsobligationstodismantle,retireandreclaimitsoilandgasproperties.Decommissioningobligationsaremeasuredatthepresentvalueofmanagement’sbestestimateof expenditures required to settle thepresentobligationat thebalance sheetdate. Thepresent valueof theestimatedobligationisrecordedasaliabilitywithacorrespondingincreaseinthecarryingamountoftherelatedasset.Theobligationissubsequentlyadjustedattheendperiodtoreflectthepassageoftimeandchangesintheestimatedfuturecashflowsunderlyingtheobligation.Theincreaseintheprovisionduetothepassageoftimeisrecognizedasaccretioncostswhereasincreasesordecreasesduetochangesintheestimatedfuturecashflowsorchangesinthediscountratearecapitalized.Actualcostsincurreduponsettlementortowardsthesettlementof the decommissioning obligations are charged against the provision to the extent the provision wasestablished.

(i) Share-BasedCompensation

PPRhasnotofferedanyawardsthatareclassifiedascash-settledawards. Forequitysettledshare-basedawardsgrantedtoofficers,directorsandemployees,thegrantdatefairvalueofsuchawardsisrecognizedascompensationcostswithinoperatingand general and administrative expenses,with a corresponding increase in contributed surplus over the vesting period. TheCompany also capitalizes a portion of the share-based compensation that is directly attributable to capital projects, with acorrespondingdecreasetocompensationexpense.

Thefairvalueofoption-basedawardsismeasuredusingBlack-Scholesoptionvaluationmodel.Non-optionbasedawardsarevaluedbasedonthefairvalueofPPR'sunderlyingsharesatgrantdate.Aforfeiturerateisestimatedonthegrantdateandisadjustedtoreflecttheactualnumberofawardsthatvest.Upontheexerciseoftheshare-basedawards,anyconsiderationpaidtogetherwiththeamountpreviouslyrecognizedincontributedsurplusisrecordedasanincreaseinsharecapital.Intheeventthat vestedawardsexpire,previously recognized compensationexpenseassociatedwith suchawards isnot reversed. In theevent that awards are forfeited, previously recognized compensation expense associatedwith the unvested portion of suchawardsisreversed.

(j) Post-RetirementObligation

TheCompanysponsorsanunfundedpost-retirementbenefitsplantocertainretirees,whichisclosedtonewentrants.Expenseforthepost-retirementbenefitsplanincludestheinterestcostonpost-retirementbenefitsobligations.

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Theliabilityofthepost-retirementbenefitsplanisactuariallydeterminedusingtheprojectedunitcreditactuarialcostmethodproratedon service and reflects theCompany’sbest estimateof futurehealth care costs and retiree longevity. Theaccruedbenefit obligation is discounted using the market interest rate on high-quality corporate debt instruments as at themeasurementdate.TheCompanyaccountsforitspost-retirementbenefitsplanbyrecognizingtheunderfundedstatusoftheplanasaliabilityinitsconsolidatedstatementsoffinancialposition.InterestcostsontheunfundedobligationarerecordedinFinanceCosts.Anyactuarialgainsorlossesarerecognizedintheyearinwhichthechangesoccurthroughothercomprehensiveincome.

(k) Flow-throughShares

Pursuant to the termsof the flow-through share agreements, the resourceexpendituredeductions for income taxpurposesrelatedtoexploratoryanddevelopmentactivitiesfundedbyflow-throughsharesarerenouncedtoinvestorsinaccordancewithtaxlegislation.Sharecapitalisstatedatthemarketvalueofshareswithouttheflow-throughfeatureatthetimeofissue,withaliability recognizedrepresentingthedifferencebetweencashreceivedandmarketvalue.Thepremiumpaid for flow-throughshares inexcessof thatmarket valueof the shares isdrawndownanddeferred tax is recognizedat the time thequalifyingexplorationanddevelopmentexpendituresarerenouncedandincurred.

(l) IncomeTax

Incometaxexpensecomprisescurrentanddeferredtax.Incometaxexpenseisrecognizedinprofitorlossexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequity,inwhichcaseitisrecognizedinequity.

Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.

Deferred tax is recognized on the temporary differences between the carrying amounts of assets and liabilities for financialreportingpurposes and the amountsused for taxationpurposes.Deferred tax is not recognizedon the initial recognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombination.

Deferred tax ismeasuredat the tax rates thatareexpected tobeapplied to temporarydifferenceswhentheyare reversed,basedonthelawsthathavebeenenactedorsubstantivelyenactedbythereportingdate.Deferredtaxassetsandliabilitiesareoffset ifthere isa legallyenforceablerighttodoso,andtheyrelateto incometaxes leviedbythesametaxauthorityonthesametaxableentity,orondifferenttaxableentities,buttheyintendtosettlecurrenttaxliabilitiesandassetsonanetbasisortheirtaxassetsandliabilitieswillberealizedsimultaneously.

Adeferredtaxassetisrecognizedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthetemporarydifferencecanbeutilized.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealized.

(m) Inventory

Inventoriesarestatedatthelowerofcostandnetrealizablevalue.Thecostofmaterialsisthepurchasecost,determinedonfirst-in, first-outbasis.Thenetrealizablevalue isbasedontheestimatedsellingprice intheordinarycourseofbusiness, lessestimatedcostsnecessarytosell.

(n) ForeignCurrency

TransactionsinforeigncurrenciesaretranslatedtoCanadiandollarsatexchangeratesineffecttothedatesofthetransactions.MonetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedtoCanadiandollarsattheperiodendexchangerate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are notsubsequentlyre-translated.Foreigncurrencydifferencesarisingontranslationarerecognizedintheconsolidatedstatementofloss.

(o) GovernmentGrants

Governmentgrantsare recognizedwhen there is reasonableassurance thatPPRwill complywith theconditionsattached tothemandthegrantswillbereceived.Ifagrantisreceivedbeforeit iscertainwhethercompliancewithallconditionswillbeachieved,thegrantisrecognizedasadeferredliabilityuntilsuchconditionsaremet.Whentheconditionsofagrantrelatetoincomeorexpense,itisrecognizedintheconsolidatedstatementofloss.Whenconditionsofagrantrelatetoanunderlyingasset,itisrecognizedasareductiontothecarryingamountoftherelatedasset.

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(p) Leases

WhenPPRispartytoa leasearrangementasthe lessee, itrecognizesaright-of-useasset("ROUasset")andacorrespondingleaseobligationontheconsolidatedstatementsoffinancialpositiononthedatethataleasedassetbecomesavailableforuse.

ROU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for anyremeasurementofleaseliabilities.ThecostofROUassetsincludestheamountofleaseliabilitiesrecognized,initialdirectcostsincurred,andleasepaymentsmadeatorbeforethecommencementdatelessanyleaseincentivesreceived.TheROUassetisdepreciatedover the leasetermonastraight-linebasisover theshorterof itsestimateduseful lifeandthe leaseterm.ROUassetsaresubjecttoimpairment.

Lease liabilities include the net present value of fixed payments (including in-substance fixed payments), less any leaseincentives receivable,variable leasepayments thatarebasedonan indexora rate,amountsexpected tobepayableby thelesseeunderresidualvalueguarantees,theexercisepriceofapurchaseoptionifthelesseeisreasonablycertaintoexercisethatoption,andpaymentsofpenaltiesforterminatingthelease,iftheleasetermreflectsthelesseeexercisingthatoption.Theselease payments are discounted using the Company’s incremental borrowing ratewhere the rate implicit in the lease is notreadilydeterminable.TheCompanyusesasinglediscountrateforaportfolioofleaseswithreasonablysimilarcharacteristics.Thevariable leasepaymentsthatdonotdependonan indexoraratearerecognizedasexpense intheperiodonwhichtheeventorconditionthattriggersthepaymentoccurs.Afterthecommencementdate,theamountofleaseliabilitiesisincreasedtoreflecttheaccretionofinterestandreducedfortheleasepaymentsmade.Inaddition,thecarryingamountofleaseliabilitiesis remeasured if there is amodification, a change in the lease term,a change in the in-substance fixed leasepaymentsorachangeintheassessmenttopurchasetheunderlyingasset.

Leasepaymentsonshort-termleasesor leaseson low-valueassetsareexpensed intheconsolidatedstatementsof lossonastraight-linebasisovertheleaseterm.

4. ADOPTIONOFNEWACCOUNTINGSTANDARDSANDNEWACCOUNTINGPRONOUNCEMENTS

NewAccountingPronouncements

IBORReformanditsEffectsonFinancialReporting-Phase2

InAugust2020, the IASB issued InterestRateBenchmarkReform -Phase2whichamended requirements in IFRS9FinancialInstruments,IAS39FinancialInstruments:RecognitionandMeasurement,IFRS7FinancialInstruments:Disclosures,andIFRS16Leases,relatingtochangesinthebasisfordeterminingcontractualcashflowsoffinancialassets,financialliabilities,andleaseliabilities. This will be effective January 1, 2021. The Company is currently evaluating the impact of the standard on itsconsolidatedfinancialstatements.

5. ASSETACQUISITIONSANDDISPOSITIONS

During2020,PPRdisposedofcertainnon-corepropertiesandundevelopedlandforthetotalproceedsof$0.2million(2019—$0.3million).Theassociatedpropertyandequipment,explorationandevaluationassetanddecommissioning liabilitieswerederecognized,resultinginanetgainof$0.4million(2019—$0.3million)ondisposition.

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6. EXPLORATIONANDEVALUATIONASSETS

($000s) December31,2020 December31,2019

CostBalance–beginningofyear 66,799 65,642

Additions 271 2,678

Acquisitions — (59)

Transferstooilandgaspropertyandequipment — (1,122)

Adjustmentsduetochangeinestimatesindecommissioningliabilities(Note12) (343) 656

Explorationandevaluationexpense (4,183) (996)

CostBalance–endofyear 62,544 66,799

Provisionforimpairment–beginningofyear (56,616) (55,960)

Impairmentloss (143) (656)

Provisionforimpairment–endofyear (56,759) (56,616)

Netbookvalue–beginningofyear 10,183 9,682

Netbookvalue–endofyear 5,785 10,183

Explorationandevaluation(“E&E”)assetsconsistoftheCompany’sundevelopedlandandexplorationandpilotprojectswhicharependingthedeterminationofprovenorprobablereserves.

AsatDecember31,2020,theCompanyrecognizedanimpairmentlossof$0.5millionagainstundevelopedlandleasesinthePrincess area thatwere due to expire in the first quarter of 2021. The FVLCDwas determined to be zero, using amarketapproachbasedontheestimatedsellingpriceoflandintherelatedareawithsimilartermstoexpiry.Keyassumptionsincludedestimated selling prices of assets with similar geographic location, remaining term and related risk profile. The fair valuemeasurementwasnon-recurringandwasclassifiedaslevel3inthefairvaluehierarchy(seeNote3(g)forinformationonthefairvaluehierarchy).Theimpairmentlosswaspartiallyoffsetby$0.3millionofimpairmentrecoveryforchangesinestimatesofdecommissioningliabilitiesrelatedtoE&Epropertieswithzerocarryingvalue.

During2019,PPRrecognized$0.7millionofnon-cashE&Eimpairmentrelatedtochangesinestimatesusedindecommissioningliabilities.

FortheyearendedDecember31,2020,PPRrecognized$4.2million(2019-$1.0million)ofE&Eexpenserelatedtoexpiredandsurrenderedleasesinvariousareas.

DuringtheyearendedDecember31,2020,PPRdidnotcapitalizeanydirectlyattributablegeneralandadministrativeexpensesorshare-basedcompensationtoE&Eassets(December31,2019-nil).

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7. PROPERTYANDEQUIPMENT

($000s)

Productionand

DevelopmentOffice

Equipment

YearEndedDecember31,

2020

Cost:

Balance–beginningofyear 675,931 4,654 680,585

Additions 3,863 7 3,870

Disposition,netofacquisitions(Note5) (320) (11) (331)

Adjustmentsduetochangeinestimatesindecommissioningliabilities(Note12)

(1,785) — (1,785)

Balance–endofyear 677,689 4,650 682,339

Accumulatedimpairment,depletionanddepreciation:

Balance–beginningofyear (383,210) (3,826) (387,036)

Depletionanddepreciation (27,578) (267) (27,845)

Impairmentloss (78,316) — (78,316)

Balance–endofyear (489,104) (4,093) (493,197)

Netbookvalue–beginningofyear 292,721 828 293,549

Netbookvalue–endofyear 188,585 557 189,142

($000s)

Productionand

DevelopmentOffice

Equipment

YearEndedDecember31,

2019

Cost:

Balance–beginningofyear 645,891 4,618 650,509

Additions 9,654 36 9,690

Disposals (7) — (7)

Adjustmentsduetochangeinestimatesindecommissioningliabilities

19,271 — 19,271

Transfersfromexplorationandevaluationassets 1,122 — 1,122

Balance–endofyear 675,931 4,654 680,585

Accumulatedimpairment,depletionanddepreciation:

Balance–beginningofyear (344,830) (3,518) (348,348)

Depletionanddepreciation (39,472) (308) (39,780)

Impairmentrecovery 1,092 — 1,092

Balance–endofyear (383,210) (3,826) (387,036)

Netbookvalue–beginningofyear 301,061 1,100 302,161

Netbookvalue–endofyear 292,721 828 293,549

As at December 31, 2020, an estimated $222.4 million in future development costs associated with proved plus probableundevelopedreserveswereincludedinthecalculationofdepletion(December31,2019-$304.0million).

(a) CapitalizationofGeneralandAdministrativeandShare-BasedCompensationExpenses

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DuringtheyearendedDecember31,2020,$0.2million(2019–$1.6million)ofdirectlyattributablegeneralandadministrativeexpenses,includingnominalamount(2019–$0.1million)ofshare-basedcompensationexpenses,werecapitalizedtopropertyandequipment.

(b)Impairment

At December 31, 2020, the Company assessed its production and development assets for indicators of impairment orimpairmentreversalandnonewerenoted.InadditiontotheimpairmentlossrecognizedasatMarch31,2020(seediscussionbelow),duringtheyearendedDecember31,2020,PPRrecognizedanon-cashP&D impairment lossof$1.7million (2019—$1.1million)relatedtochangesindecommissioningliabilitiesofcertainpropertiesthathadzerocarryingvalue.

AtMarch 31, 2020, the decreases in crude oil and natural gas benchmark prices as compared to December 31, 2019wereconsideredindicatorsofimpairmentforthepropertyandequipment.Asaresult,theCompanycompletedimpairmenttestsonallofitscashgeneratingunits("CGU's")anddeterminedthatthecarryingamountsofcertaintheCGUsexceededtheirfairvalueless costs of disposal ("FVLCD"). The FVLCD values used to determine the recoverable amounts of the Company’s CGUs areclassified as Level 3 in the fair value hierarchy (see Note 3(g) for information on the fair value hierarchy) as certain keyassumptionsarenotbasedonobservablemarketdatabutrathertheCompany'sbestestimate.TheFVLCDwasestimatedusinganafter-taxdiscountrateof12.5%.

AsaresultoftheimpairmenttestatMarch31,2020,PPRrecognizedatotalof$76.6million(2019-$nil)non-cashimpairmentloss.UnderIFRS,impairmentlossesrelatedtoPP&EmaybereversedinfutureperiodsiftherecoverablevalueoftheimpairedCGUincreases.AtMarch31,2020,aonepercentchangeinthediscountratewouldhaveresultedina$3.3millionchangeinthe impairmentexpenseanda fivepercentchange in the forecastedcash flowswould resulted ina$2.8million impairmentexpense.

ImpairmentlossbyCGUwasasfollows:

Yearsended($000s) December31,2020 December31,2019

EVICGU 51,719 —

PrincessCGU 5,790 —

ProvostCGU 12,982 —

OtherCGU 6,096 —

Totalimpairmentloss 76,587 —

The following tableoutlinesbenchmarkpricesandassumptions,basedon the forecastprovidedbyour independent reserveevaluatorSprouleAssociatesLimited,usedincompletingtheimpairmenttestsasatMarch31,2020.

WTI($US/bbl)

EdmontonLight

($CAD/bbl)

AECO($CAD/MMBtu)

Exchangerate

($USequals,$1CAD) Inflationrate

2020 25.00 24.29 1.43 0.70 —%

2021 37.00 43.15 2.05 0.73 1%

2022 48.00 58.67 2.33 0.75 2%

2023 48.96 59.84 2.41 0.75 2%

2024 49.94 61.04 2.48 0.75 2%

2025 50.94 62.26 2.56 0.75 2%

Thereafter(inflationpercentage) 2% 2% 3% 0.75 2%

During the year ended December 31, 2019, the decreases in crude oil and natural gas benchmark prices as compared toDecember31,2018wereconsideredpotentialindicatorsofimpairment.Asaresult,theCompanycompletedimpairmenttestsonallofitsCGUsinaccordancewithIAS36anddeterminedthatthecarryingamountsoftheCGUsdidnotexceedtheirFVLCD.

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8. RIGHT-OF-USEASSETS

($000s) OfficeLeases FacilityLease OtherLeases Total

Cost:

Balance–January1,2019 3,056 6,687 313 10,056

Additionsandadjustments (1,115) — — (1,115)

Disposition/Derecognition (79) — — (79)

Balance–December31,2019 1,862 6,687 313 8,862

Additionsandadjustments — — 20 20

Disposition/derecognition — — (21) (21)

Balance–December31,2020 1,862 6,687 312 8,861

Accumulateddepreciation:

Balance–January1,2019 — — — —

Depreciation (990) (1,605) (148) (2,743)

Balance–December31,2019 (990) (1,605) (148) (2,743)

Depreciation (459) (1,605) (106) (2,170)

Balance–December31,2020 (1,449) (3,210) (254) (4,913)

Netbookvalue–December31,2019 872 5,082 165 6,119

Netbookvalue–December31,2020 413 3,477 58 3,948

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9. LONG-TERMDEBT


RevolvingFacility

USDAdvances(US$16.0million(December31,2019-US$27.6million))1 20,371 35,847

CADAdvances(US$30.0million(December31,2019-US$30.0million))2 40,530 40,530

CADDeferredInterest(US$0.5million(December31,2019-US$nil))1 590 —

Totalprincipal-RevolvingFacility 61,491 76,377

SeniorNotesIssuedOctober31,2017

Principal(US$16.0million)1 20,371 20,780

Deferredinterest(US$4.4million(December31,2019-US$1.8million))1 5,611 2,363

TotalPrincipalandDeferredInterest-October31,2017SeniorNotes 25,982 23,143

SeniorNotesIssuedNovember21,2018

Principal(US$12.5million)1 15,915 16,235

Deferredinterest(US$2.6million(December31,2019-US$0.7million))1 3,338 922

TotalPrincipalandDeferredInterest-November21,2018SeniorNotes 19,253 17,157

SeniorNotesIssuedDecember21,2020

Principal(US$11.4million(December31,2019-US$nil))1 14,500 —

Deferredinterest(US$0.04million(December31,2019-US$nil))1 48 —

TotalPrincipalandDeferredInterest-December21,2020SeniorNotes 14,548 —

TotalPrincipalandDeferredInterest-SeniorNotes 59,783 40,300

Unamortizeddeferredfinancingfees (691) (2,154)

UnamortizedvalueallocatedtoWarrantLiability (343) (928)

Unamortizedvalueallocatedtofairvalueadjustment (17,169) —

Long-termdebt 103,071 113,595

1Converted using themonth end exchange rate of $1.00USD to$1.27CAD as atDecember 31, 2020 and $1.00USD to $1.30CAD as atDecember31,2019.2Convertedusingtheexchangerateatthetimeofborrowingof$1.00USDto$1.35CAD.

(a) RevolvingFacility

On December 21, 2020, PPR renewed and amended its senior secured revolving note facility (“Revolving Facility”) with aborrowingbaseofUS$57.7million (December31,2020—US$60.0million)andextendedthematuritydateof theRevolvingFacility from April 30, 2021 to December 31, 2022. The borrowing base is subject to a reduction to US$53.8 million onDecember 31, 2021 and to semi-annual redeterminations thereafter, without limiting the lenders' right to require aredeterminationatanytime.Thenextborrowingbasere-determinationdatewillbearoundApril2022basedonyear-end2021reserveevaluations.

BorrowingsundertheRevolvingFacilityarerepayableattheCompany’selectionatparplusaccruedinterestandanyapplicablebreakage costs. Repayments generally will not affect the aggregate commitment or borrowing base under the RevolvingFacility, except in certain extraordinary circumstances where a repayment will reduce the borrowing base. The RevolvingFacilityisdenominatedinUSD,butaccommodatesCADadvancesuptothelesserofCAN$54millionorUS$30million.AllnoteswereissuedatparbyPPRCanadaandareguaranteedbyPrairieProvidentResourcesInc.andcertainofitsothersubsidiariesand securedbyaUS$200milliondebenture.AsatDecember31,2020, theCompanyhadUS$11.2million (CAN$14.3millionequivalent)borrowingcapacityundertheRevolvingFacility.

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Thedeterminationoftheborrowingbaseismadebythelenders,intheirsolediscretion,takingintoconsiderationtheestimatedvalue of PPR’s oil and natural gas properties in accordancewith the lenders’ customary practices for oil and gas loans. If aborrowingbasedeficiencyexistsbecauseofare-determination,thelenderisrequiredtonotifytheCompanyofsuchshortfall.TheCompanymayrepaytheshortfallamountbyeithermakingoneinstallmentwithin90daysorsixequalconsecutivemonthlyinstallmentsbeginningwithin30daysaftertheCompany'sreceiptoftheborrowingbasedeficiencynotice.

AmountsborrowedundertheRevolvingFacilitycanbedrawnintheformofUSDorCADprimeadvancesbearinginterestbasedon reference bankUSD and CADprime lending rates announced from time to time, or LIBOR advances (in the case ofUSDamounts)orCDORadvances(inthecaseofCADamounts)bearinginterestbasedonLIBORandCDORratesineffectfromtimetotime,plusanapplicablemargin.ApplicableMarginsperannumforCDOR,CADprime,LIBORandUSDprimeadvancesare650basispointsandstandbyfeesonanyundrawnborrowingcapacityare87.5basispointsperannum.

AsatDecember31,2020,PPRhadoutstandinglettersofcreditof$4.2million(December31,2019–$4.9million).ThelettersofcreditareissuedbyafinancialinstitutionatwhichPPRhaspostedcashdepositscollateral.Therelateddepositsareclassifiedasrestrictedcashonthestatementoffinancialpositionandthebalanceisinvestedinshort-termmarketdepositswithmaturitydatesofoneyearorlesswhenpurchased.

AsatDecember31,2020,$0.7millionofdeferredcostsrelatedtotheRevolvingFacilitywasnettedagainst itscarryingvalue(December31,2019–$1.3million).

(b) SubordinatedSeniorNotes

OnDecember21,2020,PPRamendeditsagreementsforseniornotesoriginallyissuedonOctober31,2017andNovember21,2018withtotalprincipaloutstandingofUS$28.5million(the"SeniorNotesdue2023").Undertheamendments,thematuritydate was extended fromOctober 21, 2021 to June 30, 2023. The annual interest rate on the Senior Notes due 2023wasreducedfrom15%perannumtoniluntilJune30,2021,andwillthereafterriseto4%attheearlierof15monthsafterclosing(March2022)andthelastdayofthefiscalquarterforwhichtheCompany'strailing12-monthseniorleverageratiois2.5orless,andto8%attheearlierof20monthsafterclosing(August2022)andthelastdayofthefiscalquarterforwhichtheCompany'strailing12-monthseniorleverageratiois2.0orless.

Additionally, on December 21, 2020 PPR purchased additional US$11.4 million senior notes ("Senior Notes due 2026",collectively with the Senior Notes due 2023, "Senior Notes") (CAN$14.5 million using the December 31, 2020 month-endexchangerateof$1.00USDto$1.27CAD)bearinginterestat12%perannum.NetproceedsfromtheissuanceofSeniorNotesdue2026wereappliedagainstborrowingsundertheRevolvingFacilityuponissuance.

InterestonSeniorNotesispayablequarterly.TheSeniorNoteagreementsprovidethat,untilcertaincriteriaaremet,includingcompliancewithoriginalfinancialcovenantratiosontheRevolvingFacilityasatOctober31,2017(whenthefacilitywasfirstimplemented), the absence of any borrowing base deficiency, and a projected ability to meet any scheduled paymentobligationsunder theRevolvingFacility for thenext12-monthperiod,PPRmayelect todeferall interestsdueon theSeniorNotes.ThetermsoftheRevolvingFacilityrequirethattheCompanymakethiselectionandnotpaycashinterestontheSeniorNotesuntilthesecriteriaaresatisfied.PPRwillthereafterbepermittedtoelecttodeferupto4.00%perannumofinterestontheSeniorNotes.

Inconjunctionwith the issuancesof theSeniorNotesdue2026, theCompany issueda totalof34,292,360warrantswithanexercisepriceof$0.0192pershareforaneight-yeartermexpiringonDecember21,2028(seeNote10).

InaccordancewithIFRS9,PPRaccountedforthechangestotermsoftheSeniorNotesdue2023asanextinguishmentandassuch,thepreviouslyrecordedliabilitieswerederecognizedandnewliabilitiesfortheSeniorNoteswererecordedattheirfairvalueasatDecember21,2020.Inaddition,theSeniorNotesdue2026wereinitiallyrecognizedatfairvaluewhichwaslowerthanthefacevalueofthenotes.Thefairvaluewascalculatedusingthepresentvalueofexpectedfuturecashflows,discountedat17.5%.Thefairvaluemeasurementwasnon-recurringandwasclassifiedaslevel3inthefairvaluehierarchy(seeNote3(g)forinformationonthefairvaluehierarchy).Collectively,themodificationofSeniorNotesdue2023andtheinitialrecognitionofSeniorNotesdue2026resultedintherecognitionofagainof$15.9millioninthefourthquarterof2020.Thegainisnetof$1.4millionoffinancingcosts.Aone-percentagepointincreaseinthediscountratewouldresultinaincreaseof$1.4milliontothegainonthemodificationoffinancialliabilities.

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AsatDecember31,2020,$nildeferredcostsrelatedtoPPR’sSeniorNoteswasnettedagainstitscarryingvalue(December31,2019–$0.9million).

(c) Covenants

The note purchase agreement for the Revolving Facility, the Senior Note agreement and related parent and subsidiaryguaranteescontainvariouscovenantsonthepartoftheCompanyanditssubsidiariesincludingcovenantsthatplacelimitationsoncertain typesofactivities, including restrictionsor requirementswith respect toadditionaldebt, liens,asset sales, capitalexpenditures, hedging activities, investments, dividends andmergers andacquisitions. In addition, capital expenditures andacquisitionsaregenerallylimitedtoconsistencywiththeCompany'sannualdevelopmentplan,ascreatedandupdatedbytheCompanyfromtimetotimeandapprovedbythelenders.

The note purchase agreement for the Revolving Facility and the subordinated Senior Note purchase agreement include thesamefinancialcovenants,with15%lessrestrictivethresholdsundertheSeniorNoteagreements.FinancialcovenantsarenotapplicableforthequarterendedDecember31,2020.FuturethresholdsforfinancialcovenantsundertheRevolvingFacilityforthequartersendedfromMarch31,2021toSeptember30,2022varybyquarterandareasfollows:

a. seniorleverage,pursuanttowhichtheratioofsenioradjustedindebtedness1toEBITDAX2forthefourquartersmostrecentlyendedcannotexceedbetween3.61to1.00and6.36to1.00;

b. assetcoverage,pursuanttowhichtheratioofadjustednetpresentvalueofestimatedfuturenetrevenuefromprovedreserves(discountedat10%perannum)toadjustedindebtedness3asofthedateofanyreservesreportcannotbelessthanfrom0.34to1.00to0.47to1.00;and

c. current ratio, pursuant to which the ratio of consolidated current assets, plus any undrawn capacity under theRevolvingFacility,toconsolidatedcurrentliabilitiesattheendofanyfiscalquartercannotbelessthanfrom0.9to1.0to 1.0 to 1.0. Under the agreements, current assets exclude derivative assetswhile current liabilities excludes thecurrent portion of long-term debt, lease liabilities, decommissioning obligations, derivative liabilities and non-cashliabilities.

1Underthedebtagreements,senioradjustedindebtednessisdefinedasAdjustedIndebtedness(asdefinedbelow)lesssubordinatedborrowings.2Under thedebt agreements, EBITDAX is definedasnet earnings (loss) before financing charges, foreignexchangegain (loss), E&Eexpense, income taxes,

depreciation, depletion, amortization, other non-cash items of expense and non-recurring items, adjusted formajor acquisitions andmaterial dispositionsassumingthatsuchtransactionshadoccurredonthefirstdayoftheapplicablecalculationperiod(“pro-formaadjustments”).3Underthedebtagreements,AdjustedIndebtednessisdefinedasborrowingslessoutstandinglettersofcreditforwhichPPRhasissuedcashcollateral.

TheCompanywasincompliancewithallapplicablecovenantsasatDecember31,2020.

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10. WARRANTLIABILITY

WarrantExpiringOctober31,2022

WarrantExpiringOctober31,2023

WarrantExpiringDecember21,2028

NumberofWarrants Amount



PPRWarrantLiability,December31,2019 2,318 24 6,000 60 — —

Cancelled (2,318) — (6,000) — — — —

Issued — — — — 34,292 342

Fairvalueadjustment — (24) — (60) — 344

PPRWarrantLiability,December31,2020 — — — — 34,292 686

Inconjunctionwith themodificationofSeniorNotesdue2023andthe issuanceofSeniorNotesdue2026 (seeNote9),PPRissuedatotalof34,292,360warrantswithanexercisepriceof$0.0192pershareforaneight-yeartermexpiringonDecember21,2028.WarrantsissuedconcurrentwiththeissuanceofSeniorNotesonOctober31,2017andNovember21,2018totaling2,318,000,withanexercisepriceof$0.549and6,000,000,withanexercisepriceof$0.282,respectively,werecancelledinfull.

Thewarrants issuedwereclassifiedas financial liabilitiesdue toacashlessexerciseprovisionandaremeasuredat fairvalueuponissuanceandateachsubsequentreportingperiod,withthechangesinfairvaluerecordedintheconsolidatedstatementoflossandcomprehensiveloss.ThefairvalueofthesewarrantsisdeterminedusingtheBlack-Scholesoptionvaluationmodel.Thesewarrantsareexercisableanytimeandthusthevalueofthesewarrantsispresentedascurrentliabilityintheconsolidatedstatementoffinancialposition.ThevalueofthewarrantliabilityasatDecember31,2020was$0.7million(December31,2019-$0.1million).Fortheyearof2020,PPRrecordedalossinfairvalueof$0.3million(2019—$0.7milliongain)againstwarrantliabilities.

ThefairvalueofthewarrantsasatDecember31,2020of$0.02perwarrantwasestimatedusingthefollowingassumptions:

December31,2020

WarrantsExpiringDecember21,

2028

Riskfreeinterestrate 0.46%

Expectedlifeofoptions(years) 7.92

Expectedvolatility 151%

Stockprice $0.02

Dividendspershare —

11. LEASELIABILITIES


Openingbalance 7,641 11,531

Additionsandadjustments 27 (1,115)

Financeexpense 658 1,028

Leasepayments (3,172) (3,803)

Endingbalance 5,154 7,641

Less:currentportion 2,548 2,520

Endingbalance–long-termportion 2,606 5,121

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($000s) December31,2020

Variableleasepayments 1,029

Subleaseincome (829)

Balancerecognizedingeneralandadministrativeexpense 200

TheCompanyincursleasepaymentsrelatedtovehicles,headofficefacilitiesandgasprocessingfacility.Leasesareenteredintoandexitedincoordinationwithspecificbusinessrequirementswhichincludestheassessmentoftheappropriatedurationsforthe related leasedassets.TheCompanyhas recognized lease liabilities in relation toall leasearrangementsmeasuredat thepresentvalueoftheremainingleasepaymentsatanincrementalborrowingrateof10.0%.

Short-term leases are leases with a lease term of twelve months or less while low-value assets comprised of informationtechnology and miscellaneous equipment. Such items are charged to operating expenses and general and administrativeexpensesinthecondensedconsolidatedstatementsofoperationsandareimmaterial.

ThefollowingtabledetailstheundiscountedcashflowsofPPR’sleaseobligations,asatDecember31,2020:

($000s)Under1

Year 1-3Years 4-5yearsBeyond5

yearsTotalContractual

CashFlowsCarryingAmount

Leaseobligations 2,950 2,733 12 63 5,758 5,154

12. DECOMMISSIONINGLIABILITIES


TotalBalance–beginningofyear 167,805 148,460

Liabilitiesincurred 88 883

Liabilitiesacquired(disposed)-Net (446) (292)

Settlements (1,869) (3,801)

Changeinestimates (2,128) 19,271

Accretionofdecommissioningliabilities 2,776 3,284

TotalBalance–endofyear 166,226 167,805

Currentportion–endofyear 3,500 4,000

Long-termportion–endofyear 162,726 163,805

TheCompanyestimatedtheundiscountedandinflatedtotalfutureliabilitiestobeapproximately$221.2million(December31,2019 – $266.4million). Liability payments are estimated over the next 55 years with themajority of costs expected to beincurredoverthenext26years,ofwhich$18.0millionisestimatedtobeincurredoverthenextfiveyears.

DecommissioningliabilitiesatDecember31,2020weredeterminedusingrisk-freeratesof0.52%-1.19%(December31,2019–1.5%-1.7%)andaninflationrateof1.1%(December31,2019–1.7%).

In2020,thechangeinestimatesof$2.1millioncomprisedofa$22.6milliondecreaseresultedfromlowerinflationratewhichwasoffsetbya$20.5millionincreaseresultedfromlowerrisk-freeratesappliedasatDecember31,2020.In2019,changeinestimateswascomprisedofa$22.6millionincreaseresultedfromlowerrisk-freeratesappliedasatDecember31,2019anda$3.4milliondecreaseincostestimates.

13. SHARECAPITAL

(a) Authorized

TheCompanyisauthorizedtoissueanunlimitednumberofcommonshares.

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(b) UnitsOutstanding

NumberofShares(000s)

Amount($000s)

Commonshares:

PPRShares,December31,2018 171,860 136,145

Shareissuancecosts — (57)

IssuedforRSUsettlement 217 231

IssuedforPSUsettlement 114 234

WithholdingtaxesonRSUsettlement — (54)

WithholdingtaxesonPSUsettlement — (6)

SharerepurchaseforRSUsettlement (121) (26)Sharerepurchaseundernormalcourseissuerbid (643) (509)


Shareissuancecosts — 4

IssuedforRSUsettlement 897 600

WithholdingtaxesonRSUsettlement — (28)


NumberofWarrants(000s)

Amount($000s)

Warrants:

Warrants,December31,2018 7,950 1,440

ExpiredMarch16,2019 (3,155) (337)

Warrants,December31,2019 4,795 1,103

ExpiredOctober11,2020 (4,795) (1,103)

Warrants,December31,2020 — —

OnNovember29,2018,theTorontoStockExchange(“TSX”)acceptedtheCompany’snoticetomakeanormalcourseissuerbid(“NCIB”) to purchase its outstanding common shares on the openmarket. TheNCIB effectively renewed the previousNCIB,whichwasscheduledtoendonNovember30,2018.Undertherenewedbid,theTSXauthorizedtheCompanytopurchaseupto 5,000,000 common shares during the period fromDecember 4, 2018 to December 3, 2019. During 2019, the Companypurchased and cancelled 643,130 of common shares under the NCIB at a weighted average cost of $0.21 per share. TheCompanyhasnotrenewedtheNCIBsinceitsexpiryinDecember2019.

SubsequenttoDecember31,2020,PPRcancelled44,711,330commonsharesthatweresurrenderedbyashareholdertotheCompanyfornominalconsideration.AsatMarch25,2021,therewere128,014,081commonsharesoutstanding.

(c) LossperShare

YearsEnded

(000s) December31,2020 December31,2019

Netlossfortheyear (90,773) (33,079)

Weightedaveragenumberofcommonshares

Basic&diluted 172,013 171,356

Basic&dilutednetlosspershare (0.53) (0.19)

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Incalculatingtheweighted-averagenumberofdilutedcommonsharesoutstandingfortheyearendedDecember31,2020,allequity-settleable share-based instruments (see Notes 10 and 14) are excluded from the diluted weighted average sharescalculationastheywereanti-dilutive(December31,2019–allanti-dilutiveinstrumentsexcluded).

14. SHARE-BASEDCOMPENSATION

(a) StockOptions

UndertheCompany’sstockoptionplan,optionsgrantedvestevenlyoverathree-yearperiodandexpire5yearsafterthegrantdate.Eachoptionentitlestheholdertopurchaseonecommonshareatthespecifiedexerciseprice.

Thefollowingtablessummarizethestockoptionsoutstandingandexercisableundertheplan:

NumberofOptionsWeightedAverage

ExercisePrice

Balance,January1,2019 2,156,839 0.81

Granted 2,373,633 0.21

Forfeitedorexpired (598,153) 0.61

Balance,December31,2019 3,932,319 0.48

Granted 2,633,673 0.05

Forfeitedorexpired (1,051,115) 0.11

Balance,December31,2020 5,514,877 0.34

ExercisableatDecember31,2020 2,481,999 0.63

OptionsOutstanding OptionsExercisable

YearofGrantNumber

Outstanding

WeightedAverageExercise

Price

WeightedAverageRemaining

ContractualLife(years)

NumberExercisable

WeightedAverageExercise

Price

2016 462,709 $0.96 0.8 462,709 $0.96

2017 1,294,130 $0.75 1.1 1,294,130 $0.75

2019 1,807,912 $0.21 3.1 725,160 $0.21

2020 1,950,126 $0.05 4.1 — $0.05

Total 5,514,877 $0.34 2.7 2,481,999 $0.63

TheweightedaverageremainingcontractuallifeofoptionsoutstandingasatDecember31,2020was2.7years(December31,2019–3.2years).Thefairvalueofoptionsgrantedin2020of$0.02peroptionwasestimatedonthedateofgrantusingtheBlack-Scholesoptionvaluationmodelwiththefollowingassumptionsandresultingfairvalue:

Exercisepriceofoption $0.05

Riskfreeinterestrate 1.4%

Expectedlifeofoptions(years) 3.6

Expectedvolatility 89.9%

Estimatedforfeiturerate 1.5%

Dividendpershare —

(b) DeferredRestrictedShareUnits

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Deferredrestrictedshareunits(“DSUs”)aregrantedundertheCompany’sincentivesecurityplantonon-managementdirectorsoftheCompany.DSUsvestintheirentiretyonthegrantdateandwillbesettledwhenadirectorceasestobeamemberoftheboard of directors. DSUsmay be settled in common shares or cash at the discretion of the Company; however, it is PPR’sintentiontosettletheDSUsincommonsharesandtheplanhasbeenaccountedforasequitysettled.

ThefollowingtablesummarizestheDSUsoutstandingundertheplan:

DSUs

Balance,January1,2019 635,712

Granted 1,701,369

Settled —

Balance,December31,2019andDecember31,2020 2,337,081

NounitsweregrantedduringtheyearendedDecember31,2020.

(c) RestrictedShareUnits

Restricted share units (“RSUs”) are granted under the Company’s incentive security plan to the Company’s employees andmanagement.RSUsvestevenlyoverathree-yearperiodandwillbesettledincommonsharesorcashatthediscretionoftheCompany;however, it isPPR’s intentiontosettletheRSUs incommonsharesandtheplanhasbeenaccountedforasequitysettled.

RSUs

Balance,January1,2019 1,635,807

Granted 2,373,633

Settled (545,264)

Forfeitedorexpired (273,073)

Balance–December31,2019 3,191,103

Granted 975,435

Settled (1,734,181)

Forfeitedorexpired (627,336)

Balance–December31,2020 1,805,021

ThefairvalueatgrantdatefortheRSUsawardedduringtheyearendedDecember31,2020was$0.04perunit.

(d) Share-basedcompensationexpense

YearsEnded


Sharedbasedcompensationexpense:

IncludedinG&A 240 825

Share-basedcompensationexpensebeforecapitalization 240 825

Capitalizedduringtheperiod (15) (146)

Share-basedcompensationexpenseaftercapitalization 225 679

15. INCOMETAX

The tax provision differs from the amount computed by applying the combined Canadian federal and provincial statutoryincometaxratestonetlossbeforeincometaxexpenseasfollows:

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Yearsended($000s) December31,2020 December31,2019

Netlossbeforetaxes (90,851) (33,392)

Statutoryincometaxrate1 24.02% 26.50%

Expectedincometaxrecovery (21,822) (8,849)

Add(deduct):

Changeinunrecognizeddeferredtaxasset 20,513 (20,536)

Foreigncurrencytranslationgains (171) (442)

AlbertaIncomeTaxRateAdjustment 845 30,486

Non-deductibleshare-basedcompensation 54 219

Flow-throughsharerenouncements — 457

Flow-throughsharepremiumadjustments — (332)

Other 503 (1,316)

Taxexpenses (78) (313)

1. ThetaxrateconsistsofthecombinedfederalandprovincialstatutorytaxratesfortheCompanyfortheyearsendedDecember31,2020and2019.Thecombinedfederalandprovincialratedecreaseto24.0percentin2020from26.5percentin2019reflectstheAlbertacorporateincometaxratedecreasefrom11percentto10percenteffectiveJanuary1,2020andto8percenteffectiveJuly1,2020.

ThemovementsindeferredtaxbalancesduringtheyearendedDecember31,2020areasfollows:

($000s)BalanceDecember31,

2019 RecognizedinNetLossBalanceDecember31,

2020

Deferredtaxliabilities:

Financingfee (34) (142) (176)

Debtvaluationadjustment — (3,949) (3,949)

Unrealizedgainsonfinancialinstruments — (183) (183)

Totaldeferredtaxliabilities (34) (4,274) (4,308)

Deferredtaxassets:

Petroleumandnaturalgasassets 40,306 26,965 67,271

Decommissioningliabilities 38,662 (430) 38,232

Netoperatinglosscarryforwards 1,310 (18) 1,292

Unrealizedlosses/gainsonfinancialinstrument 916 (916) —

Financingandrestructuringfees 1,240 219 1,459

Non-capitallosses 88,889 (710) 88,179

Accrualsandotheritems,net 988 (323) 665

Totaldeferredtaxassets 172,311 24,787 197,098

Netdeferredtaxasset 172,277 20,513 192,790

Less:Unrecognizeddeferredtaxasset (172,277) (20,513) (192,790)

Deferredtaxes — — —

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ThemovementsindeferredtaxbalancesduringtheyearendedDecember31,2019areasfollows:

($000s)BalanceDecember

31,2018RecognizedinNet

LossRecognizedin

EquityRecognizedin

OtherBalanceDecember

31,2019

Deferredtaxliabilities:

Financingfee — (34) — — — — (34)

Unrealizedgainsonfinancialinstruments (1,792) 1,792 — — —

Totaldeferredtaxliabilities (1,792) 1,758 — — (34)

Deferredtaxassets:

Petroleumandnaturalgasassets 53,777 (13,471) — — — 40,306

Decommissioningliabilities 40,084 (1,422) — — — 38,662

Netoperatinglosscarryforwards 1,367 (57) — — — 1,310

Unrealizedlosses/gainsonfinancialinstrument — 916 — — — 916

Unrealizedtranslationgains 411 (411) — — — —

Flow-throughsharepremium — (332) — — 332 —

Financingandrestructuringfees 1,458 (218) — — — 1,240

Non-capitallosses 96,145 (7,256) — — — 88,889

Accrualsandotheritems,net 1,368 (395) 15 — — 988

Totaldeferredtaxassets 194,610 (22,646) 15 332 172,311

Netdeferredtaxasset 192,818 (20,888) 15 332 172,277

Less:Unrecognizeddeferredtaxasset (192,818) 20,556 (15) — (172,277)

Deferredtaxes — (332) — 332 —

AtDecember31,2020,theCompanyhad$474.8million(December31,2019–$467.6million)offederaltaxpools inCanadarelatedtotheexploration,developmentandproductionofoilandgasavailablefordeductionagainstfutureCanadiantaxableincome.Inaddition,theCompanyhadCanadiantaxlosscarry-forwardsintheamountof$383.1million(December31,2019–$382.8million),scheduledtoexpireintheyears2021to2040.

As ofDecember 31, 2020 and2019, theCompanydid not recognize anydeferred tax assets in excess of taxable temporarydifferencesas therewas insufficientevidence to indicate that itwasprobable that future taxableprofits inexcessofprofitsarisingfromthereversalofexistingtemporarydifferencewouldbegeneratedtoutilizetheexistingdeferredtaxassets.

16. SUPPLEMENTALINFORMATION

(a) CashFlowPresentation

Changesinnon-cashworkingcapitalandinterestpaidaresummarized:

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YearsEnded($000s) December31,2020 December31,2019

Source(use)ofcash:

Accountsreceivable 792 (2,900)

Prepaidexpensesandothercurrentassets 982 109

Accountspayableandaccruedliabilities (3,796) (16,726)

Less:Foreignexchangeontranslation 62 —

Non-cashworkingcapitalacquired — (247)

Less:reclassificationtolong-termliabilities — 5,312

(1,960) (14,452)

Relatedtooperatingactivities (1,779) (12,653)

Relatedtofinancingactivities 1,021 —

Relatedtoinvestingactivities (1,202) (1,799)

(1,960) (14,452)

Other:

Interestpaidduringtheyear 5,578 9,150

(b) FinancialLiabilitiesReconciliation

Changesinliabilitiesarisingfromfinancingactivities:

RevolvingFacility SeniorNotes

BalanceasofDecember31,2018 63,363 37,781

Changesincashflows 12,456 —

Deferredinterest — 1,999

Debtissuancecosts (408) —

Non-cashchanges

Unrealizedforeignexchangegain (1,479) (1,973)

Amortizationofdebtissuancecosts 1,162 694


Changesincashflows (15,619) 14,632

Deferredinterest 1,097 6,096

Debtissuancecosts (511) (811)

Non-cashchanges

Unrealizedforeignexchangegain (362) (1,248)

Amortizationofdebtissuancecosts 1,099 823

Derecognitionofissuancecostsondebtmodification — 1,449

Fairvaluationofdebt — (17,322)

Amortizationoffairvalueadjustment — 153


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17. REVENUE


Light&mediumcrudeoil 40,119 83,853

Heavycrudeoil 2,710 4,879

Conventionalnaturalgas 7,667 7,312

Naturalgasliquid 1,224 1,847

Oilandnaturalgasrevenue 51,720 97,891

IncludedinaccountsreceivableatDecember31,2020was$4.3million(December31,2019–$6.5millionrelatedtoDecember2019production)ofaccruedoilandnaturalgasrevenuerelatedtoDecember2020production.

18. OPERATINGEXPENSES


Leaseoperatingexpense 29,458 35,716

Transportationandprocessing 2,474 4,735

Productionandpropertytaxes 5,339 6,175

Operatingexpense 37,271 46,626

19. GENERALANDADMINISTRATIVECOSTS


Salariesandbenefits 3,640 5,694

Share-basedcompensation(Note14) 240 825

Officerentsandleases 975 609

Professionalfees 1,250 1,525

Other–office (178) 1,246

Grossgeneralandadministrativeexpense 5,927 9,899

AmountscapitalizedtoP&E,E&Eassetsandother (185) (1,622)

Generalandadministrativeexpense 5,742 8,277

During the year endedDecember 31, 2020, PPRqualified for $0.9million (December 31, 2019 – $nil) of government grantsunder the Canada Emergency Wage Subsidy program, which were recognized as reductions in general and administrativeexpensesinthe"Other-office"category.

20. FINANCECOSTS


Cashinterestexpense 5,282 9,345

Deferredinterestexpense 7,193 1,999

Non-cashinterestondebtmodification 153 —

Amortizationoffinancingcosts 1,499 1,499

Non-cashinterestonleaseobligations(Note11) 658 1,028

Non-cashinterestonwarrantliabilities 424 357

Accretion–decommissioningliabilities(Note12) 2,776 3,284

Accretion–otherliabilities 10 76

Financecost 17,995 17,588

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21. FINANCIALINSTRUMENTS,FAIRVALUESANDRISKMANAGEMENT

(a) FairValuesoffinancialinstruments

ThefairvalueoftheborrowingsunderPPR’sRevolvingFacilityandSeniorNotesapproximatestheircarryingvalues(excludingdeferred financing charges and the value assigned to the warrant liability) due to their recent issuance. Additionally, theRevolvingFacilitybearsfloatingmarketrates.

Cash,derivativeinstrumentsandwarrantyliabilityaremeasuredandrecordedonPPR’sstatementoffinancialpositionatFVPL.Cash,restrictedcash,derivativecontractsandthewarrantliabilityhavebeenassessedonthefairvaluehierarchydescribedinNote3(g).CashisclassifiedasLevel1,whilerestrictedcash,derivativecontractsandwarrantliabilityareclassifiedasLevel2.DuringtheyearsendedDecember31,2020and2019,therewerenotransfersamongLevels1,2and3.

Derivative contracts are valued using valuation techniques with observable market inputs. The most frequently appliedvaluationtechniquesincludeforwardpricingandswapmodelsusingpresentvaluecalculationsandthird-partyoptionvaluationmodels.Themodelsincorporatevariousinputsincludingthecreditqualityofcounterparties,foreignexchangespotandforwardrates,andforwardratecurvesandvolatilitiesoftheunderlyingcommodity.ThefairvaluesofthederivativecontractsarenetofacreditvaluationadjustmentattributabletoderivativecounterpartydefaultriskortheCompany’sowndefaultrisk.

(b) RiskManagement

TheCompany’sactivitiesexposeittoavarietyoffinancialrisksthatariseasresultofitsexploration,developmentproductionandfinancingactivitiessuchas:

• Creditrisk;• Liquidityrisk;and• Marketrisk

ThisnotepresentsinformationabouttheCompany’sexposuretoeachoftheaboverisks,theCompany’sobjectives,policiesandprocesses for measuring and managing risk and the Company’s management of capital. The Board of Directors overseesmanagement’sestablishmentandexecutionof theCompany’s riskmanagement framework.Managementhas implemented,andmonitorscompliancewith,riskmanagementpolicies.TheCompany’sriskmanagementpoliciesareestablishedtoidentifyandanalyzetherisksfacedbytheCompany,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetomarketconditionsandtheCompany’sactivities.

(i) CreditRisk

Creditrisk istheriskof financial losstotheCompany ifacustomerorcounterpartytoafinancial instrumentfailstomeet its contractualobligations,andarisesprincipally fromtheCompany’saccounts receivable from jointoperatorsandoilandnaturalgasmarketers.

CashandRestrictedCash

The Company limits its exposure to credit risk related to cash by depositing its excess cash only with financialinstitutionsthathaveinvestmentgradecreditratings.AsofDecember31,2020,restrictedcashincluded$4.3millionofguaranteedinvestmentcertificateswithmaturitydatesofoneyearorless(December31,2019–$4.9million).

AccountsReceivable

AlloftheCompany’soperationsareconductedinCanada.TheCompany’sexposuretocreditriskisinfluencedmainlyby the individual characteristics of each customer. All of the Company’s petroleum and natural gas production ismarketed under standard industry terms. Accounts receivable from oil and natural gas marketers are normallycollectedonthe25thdayofthemonthfollowingproduction.TheCompany’spolicytomitigatecreditriskassociatedwiththesebalancesistoestablishmarketingrelationshipswithanumberoflargepurchasersandbyenteringintosalescontracts with only established, credit-worthy counterparties. The Company historically has not experienced anycollectionissueswithitsoilandnaturalgasmarketers.

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PPRexecutesitsderivativecontractswithcredit-worthycounterpartiesbelievedtohavelowcreditrisk.TheCompanyhistoricallyhasnotexperiencedanycollectionissueswithitsderivativeinstrumentscounterparties.

Receivablefromjointoperatorsaretypicallycollectedwithinonetothreemonthsofthejointventurebillbeingissued.TheCompanyattemptstomitigatetheriskfromjointventurereceivablesbyobtainingthepartners’pre-approvalofsignificantcapitalexpenditures.However,thereceivablesarefromparticipants intheoilandnaturalgassector,andcollectionofthebalancesisdependentonindustryfactorssuchascommoditypricefluctuations,escalatingcostsandtheriskofunsuccessfuldrilling.Inaddition,furtherrisksexistwithjointoperatorsasdisagreementsoccasionallyarisethat may increase the potential for non-collection. The Company does not typically obtain collateral from oil andnaturalgasmarketersorjointoperators;however,theCompanycanwithholdproductionfromjointoperatorsintheeventofnon-paymentormaybeabletoregistersecurityontheassetsofjointoperators.

DuringtheyearendedDecember31,2020,globaleventshavehad,andareexpectedtocontinuetohaveasignificantimpactoncompaniesandtheircreditrisk,refertoNote2(d).PPRhasincorporatedthesefactorsintoitsassessmentofexpectedcreditlossatDecember31,2020.

FortheyearendedDecember31,2020,PPRhadfiveexternalcustomerthatconstitutedmorethan10percentofoiland natural gas revenuewith combined revenues of $46.3million. At December 31, 2019, PPR had three externalcustomerthatconstitutedmorethan10percentofcommoditysalesfromproduction,withsalesof$63.5million.

AsatDecember31, themaximumexposure tocredit risk for loansand receivablesat the reportingdateby typeofcustomerwas:


Oilandnaturalgasmarketingcompanies 4,412 6,601

Jointoperators 1,486 1,091

Governmentagencies 534 484

Counterparties–derivativeinstruments 363 33

Other 1,080 458

Totalaccountsreceivable 7,875 8,667

AsatDecember31,theCompany’saccountsreceivableareagedasfollows:


Current(lessthan90days) 7,115 6,574

Pastdue(morethan90days) 760 2,093

Total 7,875 8,667

PPR’sallowancefordoubtfulaccountswas$0.07millionasatDecember31,2020(December31,2019–$0.05million).Basedonindustryexperience,theCompanyconsidersitsjointinterestaccountsreceivabletobeindefaultwhenthereceivable is more than 90 days past due. When determining whether amounts that are past due are collectible,managementassessesthecreditworthinessandpastpaymenthistoryofthecounterparty,aswellasthenatureofthepastdueamount.

Derivatives

PPRexecuteswitheachofitsderivativecounterpartiesanInternationalSwapandDerivativesAssociation,Inc.("ISDA")MasterAgreement,whichisastandardindustryformcontractcontaininggeneraltermsandconditionsapplicabletomanytypesofderivativetransactions.AsofDecember31,2020,allofthederivativecounterpartieshaveenteredinter-creditoragreementswiththeCompany’slendertoeliminatetheneedtopostanycollateral.PPRdoesnotrequirethepostingofcollateralforitsbenefitunderitsderivativeagreements.However,PPR'sISDAMasterAgreementsgenerallycontainnettingprovisionswhereby ifonanydateamountswouldotherwisebepayablebyeachparty to theother,thenonsuchdatethepartythatowesthelargeramountwillpaytheexcessofthatamountoverthesmalleramountowed by the other party, thus satisfying each party's obligations. These provisions generally apply to all derivative

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transactions,orallderivative transactionsof thesametype (e.g., commodity, interest rate,etc.),with theparticularcounterparty.

FinancialassetsandfinancialliabilitiesareonlyoffsetifPPRhasthecurrentlegalrighttooffsetandintendstosettleonanetbasis. PPR’sderivative instrumentsaresubjecttomasternettingagreementsthatcreatea legallyenforceablerighttooffsetbycounterparty.ThefollowingisasummaryofPPR’sfinancialassetsandfinancial liabilitiesthatweresubjecttooffsettingasatDecember31,2020andDecember31,2019.Thenetassetamountsrepresentthemaximumexposuretocreditriskforderivativeinstrumentsateachreportingdate.

December31,2020($000s)

GrossAssets(Liabilities)

AmountOffsetGrossAssets(Liabilities)

NetAmountPresented

Current:

Derivativeinstrumentsassets 1,930 (1,132) 798

December31,2019($000s)

GrossAssets(Liabilities)

AmountOffsetGross

Assets(Liabilities)

NetAmountPresented

Current:

Derivativeinstrumentsassets 11 — 11

Derivativeinstrumentsliabilities (4,793) 468 (4,325)

Long-term:

Derivativeinstrumentsassets–long-term 1,368 (1,036) 332

(ii) LiquidityRisk

Liquidity risk is the risk that the Company will encounter difficulty inmeeting obligations associated with financialliabilities. The Company addresses its liquidity risk through its capital management of cash, working capital, creditfacility capacity, equity issuance along with its planned capital expenditure program. As outlined in Note 9, atDecember31,2020,theCompanyhadUS$11.2millionborrowingcapacityundertheRevolvingFacility.

During the fourth quarter of 2020, PPR renewed its credit facilitieswith its lender. The renewal included terms toreducecashinterestcostandextendthematuritydatesofborrowings. Overall,theamendments increasedliquidityandthefinancialflexibilityoftheCompany.

PPR anticipates its future development to be fundedprimarilywith cash flows fromoperations. The Company hasdeterminedthatitscurrentfinancialobligations,includingcurrentcommitments(Note23),willbeadequatelyfundedfrom the available borrowing capacity, cash flows from operating activities and working capital derived fromoperations.Exceptforthelong-termportionofderivativefinancial instruments,long-termleaseliabilities, long-termotherliabilitiesandlong-termdebt,alloftheCompany’sfinancialliabilitiesareduewithinoneyear.

(iii) MarketRisk

Market risk is the risk thatchanges inmarketprices, suchascommodityprices, foreignexchange ratesand interestrates will affect the Company’s income or the value of the financial instruments. The objective of market riskmanagementistomanageandcontrolmarketriskexposurewithinacceptableparameters,whileoptimizingthereturn.

TheCompanymayusefinancialderivativecontractstomanagemarketrisksasdisclosedbelow.AllsuchtransactionsareconductedwithinriskmanagementtolerancesthatarereviewedbytheBoardofDirectors.

(iv) CurrencyRisk

Currencyriskistheriskthatthefairvalueoffuturecashflowswillfluctuateasaresultofchangesinforeignexchangerates. Substantially all of the Company’s petroleum and natural gas sales are conducted in Canada and aredenominatedinCanadiandollars.Canadiancommoditypricesare influencedbyfluctuations intheCanadatoUnitedStatesdollarexchangerate.PricesforoilaredeterminedinglobalmarketsandgenerallydenominatedinUnitedStatesdollars.TheCompanyisexposedtocurrencyriskinrelationtoitsUSdollardenominatedlong-termdebt.Fortheyear

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endedDecember31,2020,a10%strengtheningorweakeningoftheUSdollarwouldhaveresultedina$8.0millionincreaseordecreasetotheCompany’snetlossbeforetax(2019–$7.6million).TheexposuretofluctuationsoftheUSdollarandCanadiandollarexchangerate,servesasnaturalhedgestotheUSdollardenominateddebt.Therefore,theCompanyhasenteredintocommodityhedgesinUSdollarstomaintainsuchnaturaleconomichedges.

(v) InterestRateRisk

Interest rate risk is the risk that future cash flowswill fluctuateas a resultof changes inmarket interest rates. Theinterest charged on the Revolving Facility fluctuateswith the interest rates posted by the lenders. The Company isexposedtointerestrateriskrelatedtoborrowingsaredrawnundertheRevolvingFacility.

Achangeinprimeinterestratesby1%wouldhavechangednetlossbyapproximately$0.6millionin2020(2019–$0.7million)assumingallothervariablesremainconstant.

(vi) CommodityPriceRisk

Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes incommodityprices.Commodityprices foroil andnatural gasare impactednotonlyby the relationshipbetween theCanadianandUnitedStatesdollarsbutalsoworldwideeconomiceventsthatinfluencesupplyanddemand.

PPR enters into derivative instruments to manage its exposure to commodity price risk caused by fluctuations incommodityprices,whichhaveservedtoprotectandprovidecertaintyonaportionoftheCompany’scashflows.

Thefollowingliststhefairvalueofallderivativecontractsbycommoditytypeinplaceatthefollowingbalancesheetdates:

December31,2020 CrudeOil NaturalGas Total

($000s)

Derivativeinstruments–currentasset 779 19 798

December31,2019 CrudeOil NaturalGas Total

($000s)

Derivativeinstruments–currentasset — 11 11

Derivativeinstruments–currentliabilities (4,325) — (4,325)

Derivativeinstruments–long-termassets 332 — 332

Totalassets(liabilities) (3,993) 11 (3,982)

ThefollowingtablesummarizescommodityderivativetransactionsasatDecember31,2020:

RemainingTerm Reference TotalDailyVolume(bbl)

WeightedAveragePrice/bbl

CrudeOilSwaps

January01,2021-June30,2021 US$WTI 500 $47.60

CrudeOilThree-wayCollars

January01,2021-December31,2021 US$WTI 650 $40.00/50.00/64.25

January01,2021-March31,2021 US$WTI 200 $42.50/52.50/65.00

July01,2021-December31,2021 US$WTI 300 $30.00/40.00/55.00

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RemainingTerm Reference TotalDailyVolume(MMBtu)

WeightedAveragePrice/MMBtu

NaturalGasSwaps

January01,2021-June30,2021 US$AECO 2000 $1.95

SubsequenttoDecember31,2020,theCompanyenteredintothefollowingcommodityderivativecontracts:

RemainingTerm Reference TotalDailyVolume(bbl)

WeightedAveragePrice/bbl

CrudeOilThree-wayCollarsJuly01,2021-December31,2021 US$WTI 725 $35.00/42.50/60.10

January01,2022-June30,2022 US$WTI 300 $30.00/40.00/58.50

January01,2022-June30,2022 US$WTI 1,150 $35.00/45.00/64.00

July01,2022-December31,2022 US$WTI 1,250 $32.00/42.00/64.00

CrudeOilSwapsFebruary01,2021-June30,2021 US$WTI 575 $52.25

RemainingTerm Reference TotalDailyVolume(MMBtu)

WeightedAveragePrice/MMBtu

NaturalGasThree-wayCollarsApril01,2022-December31,2022 US$NYMEX 3,600 $1.75/2.00/3.32

NaturalGasCollarsJuly01,2021-September30,2021 US$NYMEX 1,500 $2.50/3.42October01,2021-December31,2021 US$NYMEX 2,100 $2.25/3.90January01,2022-March31,2022 US$NYMEX 2,350 $2.75/3.90November01,2021-March31,2022 US$NYMEX 2,200 $2.50/3.99

NaturalGasSwapsMarch01,2021-October31,2021 US$AECO 3,500 $2.15

NaturalGasBasisSwapsNovember01,2021-March31,2022 US$NYMEX/AECO 2,200 ($0.67)

ThefollowingshowsthebreakdownofrealizedandunrealizedgainsandlossesrecognizedbycommoditytypefortheyearendedDecember31,2020and2019:

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YearendedDecember31,2020 CrudeOil NaturalGas Total

($000s)

Realizedgain(loss)onderivativeinstruments 15,400 (159) 15,241

Unrealizedgainonderivativeinstruments 4,772 8 4,780

Totalgain(loss) 20,172 (151) 20,021

YearendedDecember31,2019 CrudeOil NaturalGas Total

($000s)

Realized(loss)gainonderivativeinstruments (3,249) 1,080 (2,169)

Unrealizedlossonderivativeinstruments (9,789) (829) (10,618)

Total(loss)gain (13,038) 251 (12,787)

TheCompany’soperationalresultsandfinancialconditionarelargelydependentonthecommoditypricereceivedforitsoilandnaturalgasproduction.Commoditypriceshavefluctuatedwidelyinrecentyearsduetoglobalandregionalfactorsincludingsupplyanddemandfundamentals,inventorylevels,weather,economicandgeopoliticalfactors.

PPRmanages the risks associatedwith changes in commodity prices by entering into a variety of riskmanagementcontracts.TheCompanyassessestheeffectsofmovementincommoditypricesonincomebeforetax.Whenassessingthepotentialimpactofthesecommoditypricechanges,theCompanybelievesatenpercentvolatilityisareasonablemeasure. A ten percent increase or decrease in commodity prices would have resulted in the following impact tounrealized gains (losses) on risk management contracts and net income before tax, assuming all other variables,includingtheCanadian/UnitedStatesdollarexchangerate,remainconstant:

December31,2020

($000s) Increase10% Decrease10%

Crudeoil (1,435) 1,472

Naturalgas (88) 88

(c) CapitalManagement

PPR’s objectivewhenmanaging capital is tomaintain a flexible capital structure and sufficient liquidity tomeet its financialobligations and to execute its business plans. The Company considers its capital structure to include shareholders’ equity,borrowingunderitscreditfacilitiesandworkingcapital.

TheCompanymonitorsitscurrentandforecastedcapitalstructureinresponsetochangesineconomicconditionsandtheriskcharacteristicsofitsoilandgasproperties.Adjustmentsaremadeonanongoingbasisinordertomeetitscapitalmanagementobjectives.ModificationstoPPR’scapitalstructurecanbeaccomplishedthroughissuingcommonshares,issuingnewdebtorreplacingexistingdebt,adjustingcapitalspendingandacquiringordisposingofassets,thoughthereisnocertaintythatanyoftheseadditionalsourcesofcapitalwouldbeavailableifrequired.

Inlightofcontinueduncertaintyinthemacroeconomicenvironment,PPR’sshort-termcapitalmanagementobjectiveistofunditscapitalexpendituresnecessaryforthereplacementofproductiondeclinesusingprimarilycashflowfromoperatingactivities.Value-creatingactivitiesmaybefinancedwithacombinationofcashflowfromoperatingactivitiesandothersourcesofcapital.TheCompanyhasdeterminedthatitscurrentfinancialobligations,includingcurrentcommitmentsareadequatelyfundedfromtheavailableborrowingcapacity,cashflowsfromoperatingactivitiesandworkingcapitalderivedfromoperations.

PPRmonitorsitscapitalstructureusingtheratioofseniordebttotrailingtwelvemonths’BankAdjustedEBITDAX(asdefinedinNote9).SeniordebttoBankAdjustedEBITDAXprovidesameasureoftheCompany’sabilitytomanage itsdebt levelsundercurrentoperatingconditions.TheCompany’sgoalistomanagethisratiowithinthefinancialcovenantsimposedonitunderitsoutstandingdebtagreements.

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22. KEYMANAGEMENTCOMPENSATION

Theaggregatecompensationofdirectorsandexecutivemanagementissummarizedasfollows:


Salary,bonusandfees 1,701 2,332

Sharebasedcompensation 137 502

Totalremuneration 1,838 2,834

Sharebasedcompensationincludedinkeymanagementcompensationisnon-cashcompensation.

23. COMMITMENTSANDCONTINGENCIES

TheCompanyhasnon-cancellablecontractualobligationssummarizedasfollows:

2021 2022 2023 2024 2025 Thereafter Total

Debt(interestandprincipal) 4,714 66,205 49,232 — — 29,486 149,637

Leases-variable 822 69 — — — — 891

Firmtransportationagreements 360 202 113 41 36 — 752

Otheragreements 100 48 47 32 28 269 524

Total 5,996 66,524 49,392 73 64 29,755 151,804

ThetableaboveexcludescontractualobligationsforleasepaymentswhicharerecordedasleaseliabilitiesontheconsolidatedstatementoffinancialpositioninaccordancewithIFRS16(seeNote11).

Contingencies

PPR is involved in litigation and claims arising in the normal course of operations. Such claims are not expected to have amaterialimpactontheCompany’sresultsofoperationsorcashflows.

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Documents

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