Cenovus Energy (CVE) 40-F2021 FY Annual report (Canada)

Annual Information Form

For the Year Ended December 31, 2021

February 7, 2022

In this Annual Information Form (“AIF”), unless otherwise specified or the context otherwise requires, references to “the Company”, “the Corporation”, “Cenovus”, “we”, “us”, or “our” mean Cenovus Energy Inc., the subsidiaries of, and partnership interests held by, Cenovus Energy Inc., and its subsidiaries, as at December 31, 2021.

This AIF contains forward-looking statements and other information (collectively “forward-looking information”) about the Company’s current expectations, estimates and projections, made in light of the Company’s experience and perception of historical trends. Although we believe that the expectations represented by such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. This forward-looking information is identified by words such as “anticipate”, “believe”, “capacity”, “commit”, “continue”, “could”, “estimate”, “expect”, “focus”, “forecast”, “future”, “may”, “opportunities”, “option”, “plan”, “potential”, “project”, “progress”, “schedule”, “seek”, “strive”, “target”, “view”, and “will”, or similar expressions and includes suggestions of future outcomes, including, but not limited to, statements about: the closing of transactions; corporate sustainability targets; development of the Narrows Lake resource and achieving first steam from the field; the anticipated benefits and opportunities created by the Arrangement (defined below); the Company’s ability to fund future development costs; the receipt of insurance proceeds; the effect of Conventional segment production on hedging in relation to the Company’s oil sands and refining operations; realizing the best margins and netbacks for the Company’s products and maximizing value; optimizing product mix, delivery points, transportation commitments and customer diversification; unlocking resource potential; the effect of capital investments in the Conventional segment; drilling exploration wells and purchasing working interests; investment decisions; resuming production of curtailed or suspended projects; capturing global prices for crude oil production; capturing value; restarting the Superior Refinery; the focus of, and timelines for, the development and completion of projects; forecast operating and financial results, including forecast production, sales prices, costs and cash flows; forecast capital expenditures; techniques expected to be used to recover reserves and forecasts of the timing thereof; future abandonment and reclamation costs; expected payment of taxes, royalties and other payments; potential impacts of various identified risk factors, including those related to commodity prices and climate change; reserves and related information, including reserves life index, future net revenue and future development costs; expected capacities, including for projects, processing, transportation and refining; improving cost structures, forecast cost savings and the sustainability thereof; anticipated timelines for future regulatory, partner or internal approvals; future impact of regulatory measures; forecast commodity prices and trends and expected impacts to the Company; and future use and development of technology, including expected effects on land footprint, steam to oil ratios and environmental performance and sustainability. Readers are cautioned not to place undue reliance on forward-looking information as the Corporation’s actual results may differ materially from those expressed or implied.

Statements relating to “reserves” are deemed to be forward looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and can be profitably produced in the future. Readers are cautioned that the term reserves life index may be misleading, particularly if used in isolation. This measure is used for consistency with other oil and gas companies and does not reflect the actual life of the reserves.

Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to the Company and others that apply to the industry generally. The factors or assumptions on which the forward-looking information is based include, but are not limited to: forecast oil and natural gas, natural gas liquids, condensate and refined products prices, light-heavy crude oil price differentials; the Company’s ability to realize the benefits and anticipated cost synergies associated with the combination of Cenovus and Husky; the Company’s ability to successfully integrate the business of Husky, including new business activities, assets, operating areas, regulatory jurisdictions, personnel and business partners for Cenovus; the accuracy of any assessments undertaken in connection with the Arrangement; forecast production volumes are subject to potential further ramp down of production based on business and market conditions; projected capital investment levels, the flexibility of capital spending plans and associated sources of funding; the absence of significant adverse changes to legislation and regulations, Indigenous relations, interest rates, foreign exchange rates, competitive conditions and the supply and demand for crude oil and natural gas, NGLs, condensate and refined products; the political, economic and social stability of jurisdictions in which the Company operates; the absence of significant disruption of operations, including as a result of harsh weather, natural disaster, accident, civil unrest or other similar events; the prevailing climatic conditions in the Company’s operating locations; achievement of further cost reductions and sustainability thereof; applicable royalty regimes, including expected royalty rates; future improvements in availability of product transportation capacity; increase to the Company’s share price and market capitalization over the long term; opportunities to repurchase shares for cancellation at prices acceptable to the Company; cash flows, cash balances on hand and access to credit and demand facilities being sufficient to fund capital investments; foreign exchange rate risk, including with respect to our US$ debt and refining capital and operating expenses; the Company’s ability to manage our 2022 oil sands production, including without negative impacts to our assets; realization of expected capacity to store within the Company’s oil sands reservoirs barrels not yet produced, including that the Company will be able to time production and sales of our inventory at later dates when demand has increased, pipeline and/or storage capacity has improved and crude oil differentials have narrowed; the WTI-WCS differential in Alberta remains largely tied to the extent to which voluntary economically driven supply

cuts are made, the potential start-up of the Enbridge Inc.’s Line 3 Replacement Program, the completion of Trans Mountain Expansion project, and the level of crude-by-rail activity; the ability of the Company’s refining capacity, dynamic storage, existing pipeline commitments and financial hedge transactions to partially mitigate a portion of the Company’s WCS crude oil volumes against wider differentials estimates of quantities of heavy crude oil, bitumen, natural gas and NGLs from properties and other sources not currently classified as proved; the accuracy of accounting estimates and judgments; future use and development of technology and associated expected future results; the Company’s ability to obtain necessary regulatory and partner approvals; the successful, timely and cost effective implementation of capital projects or stages thereof; the Company’s ability to generate sufficient cash flow to meet current and future obligations; the sufficiency of existing cash balances, internally generated cash flows, existing credit facilities, management of the Company’s asset portfolio and access to capital markets to fund future development costs and dividends, including any increase thereto; estimated abandonment and reclamation costs, including associated levies and regulations applicable thereto; the Company’s ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner; the Company’s ability to access sufficient capital to pursue its development plans; the Company’s ability to complete asset sales, including with desired transaction metrics and within the timelines it expects; the stability of general domestic and global economic, market and business conditions; forecast inflation and other assumptions inherent in the Company’s 2022 guidance available on cenovus.com and as set out below; expected impacts of the contingent payment to ConocoPhillips; alignment of realized WCS and WCS prices used to calculate the contingent payment to ConocoPhillips; the Company’s ability to access and implement all technology and equipment necessary to achieve expected future results and that such results are realized; the Company’s ability to implement capital projects or stages thereof in a successful and timely manner; and other risks and uncertainties described from time to time in the filings we make with securities regulatory authorities.

2022 guidance, as updated December 7, 2021 and available on cenovus.com, assumes: Brent prices of US$74.00/bbl, WTI prices of US$71.00/bbl; WCS of US$55.00/bbl; Differential WTI-WCS of US$16.00/bbl; AECO natural gas prices of $3.70/Mcf; Chicago 3-2-1 crack spread of US$18.00/bbl; and an exchange rate of $0.79 US$/C$.

The risk factors and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking information, include, but are not limited to: the effect of the novel corona virus pandemic on the Company’s business, including any related restrictions, containment, and treatment measures taken by varying levels of government in the jurisdictions in which the Company operates; the success of the Company’s new novel corona virus workplace policies and the return of people to the Company’s workplace; the Company’s ability to achieve the benefits and anticipated cost synergies anticipated with the Arrangement in a timely manner or at all; the Company’s ability to successfully integrate Husky’s business with its own in a timely and cost effective manner; the effects of entering new business activities; unforeseen or undisclosed liabilities associated with the Arrangement; the inaccuracy of any assessments undertaken in connection with the Arrangement and any resulting pro forma information; the inaccuracy of any information provided by Husky; the Company’s ability to access or implement some or all of the technology necessary to efficiently and effectively operate its assets and achieve expected future results; the effect of the Company’s increased indebtedness; the effect of new significant shareholders; volatility of and other assumptions regarding commodity prices; the duration of any market downturn; foreign exchange risk, including related to agreements denominated in foreign currencies; the Company’s continued liquidity is sufficient to sustain operations through a prolonged market downturn; WTI-WCS differential in Alberta does not remain largely tied to the extent to which voluntary economically driven supply cuts are made, the potential start-up of Enbridge Inc.’s Line 3 Replacement Program, the completion of the Trans Mountain Expansion project, and the level of crude-by-rail activity; the Company’s ability to achieve lower transportation costs as a result of temporarily suspending the crude-by-rail program; the Company’s ability to realize the expected impacts of its capacity to store within its oil sands reservoirs barrels not yet produced, including possible inability to time production and sales at later dates when pipeline and/or storage capacity and crude oil differentials have improved; the effectiveness of the Company’s risk management program, including the impact of derivative financial instruments, the success of the Company’s hedging strategies and the sufficiency of its liquidity positions; the accuracy of cost estimates regarding commodity prices, currency and interest rates; lack of alignment of realized WCS prices and WCS prices used to calculate the contingent payment to ConocoPhillips; product supply and demand; the accuracy of the Company’s share price and market capitalization assumptions; market competition, including from alternative energy sources; risks inherent in the Company’s marketing operations, including credit risks, exposure to counterparties and partners, including the ability and willingness of such parties to satisfy contractual obligations in a timely manner; risks inherent in the operation of the Company’s crude-by-rail terminal, including health, safety and environmental risks; the Company’s ability to maintain desirable ratios of Net Debt to Adjusted EBITDA as well as Net Debt to Capitalization; the Company’s ability to access various sources of debt and equity capital, generally, and on acceptable terms; the Company’s ability to finance growth and sustaining capital expenditures; changes in credit ratings applicable to the Company or any of its securities; changes to the Company’s dividend plans; the Company’s ability to utilize tax losses in the future; the accuracy of the Company’s reserves, future production and future net revenue estimates; the accuracy of the Company’s accounting estimates and judgements; the Company’s ability to replace and expand oil and gas reserves; the costs to acquire exploration rights, undertake geological studies, appraisal drilling and project developments; potential requirements under applicable accounting standards for impairment or reversal of estimated recoverable amounts of some or all of the Company’s assets or goodwill from time to time; the Company’s ability to maintain its relationships with its partners and to successfully manage and operate its integrated operations and business; reliability of the Company’s assets including in order to meet production targets; potential disruption or unexpected technical difficulties in

developing new products and manufacturing processes; the occurrence of unexpected events resulting in operational interruptions, including blowouts, fires, explosions, railcar incidents or derailments, aviation incidents, gaseous leaks, migration of harmful substances, loss of containment, releases or spills, including releases or spills from offshore facilities and shipping vessels at terminals or hubs and as a result of pipeline or other leaks, corrosion, epidemics or pandemics, and catastrophic events, including, but not limited to, war, extreme weather events, natural disasters, iceberg incidents, acts of vandalism and terrorism, and other accidents or hazards that may occur at or during transport to or from commercial or industrial sites and other accidents or similar events; refining and marketing margins; cost escalations, including inflationary pressures on operating costs, such as labour, materials, natural gas and other energy sources used in oil sands processes and increased insurance deductibles or premiums; the cost and availability of equipment necessary to the Company’s operations; potential failure of products to achieve or maintain acceptance in the market; risks associated with the energy industry’s and the Company’s reputation, social license to operate and litigation related thereto; unexpected cost increases or technical difficulties in operating, constructing or modifying manufacturing or refining facilities; unexpected difficulties in producing, transporting or refining bitumen and/or crude oil into petroleum and chemical products; risks associated with technology and equipment and its application to the Company’s business, including potential cyberattacks; geo-political and other risks associated with the Company’s international operations; risks associated with climate change and the Company’s assumptions relating thereto; the timing and the costs of well and pipeline construction; the Company’s ability to access markets and to secure adequate and cost effective product transportation including sufficient pipeline, crude-by-rail, marine or alternate transportation, including to address any gaps caused by constraints in the pipeline system or storage capacity; availability of, and the Company’s ability to attract and retain, critical talent; possible failure to obtain and retain qualified leadership and personnel, and equipment in a timely and cost efficient manner; changes in labour demographics and relationships, including with any unionized workforces; unexpected abandonment and reclamation costs; changes in the regulatory frameworks, permits and approvals in any of the locations in which the Company operates or to any of the infrastructure upon which it relies; government actions or regulatory initiatives to curtail energy operations or pursue broader climate change agendas; changes to regulatory approval processes and land use designations, royalty, tax, environmental, greenhouse gas, carbon, climate change and other laws or regulations, or changes to the interpretation of such laws and regulations, as adopted or proposed, the impact thereof and the costs associated with compliance; the expected impact and timing of various accounting pronouncements, rule changes and standards on the Company’s business, its financial results and consolidated financial statements; changes in general economic, market and business conditions; the impact of production agreements among OPEC and non-OPEC members; the political, social and economic conditions in the jurisdictions in which the Company operates or supplies; the status of the Company’s relationships with the communities in which it operates, including with Indigenous communicates; the occurrence of unexpected events such as protests, pandemics, war, terrorist threats and the instability resulting therefrom; and risks associated with existing and potential future lawsuits, shareholder proposals and regulatory actions against the Company.

Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. Events or circumstances could cause our actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information. For a full discussion of the Company’s material risk factors, see Risk Management and Risk Factors in its most recently filed annual Management’s Discussion and Analysis (“MD&A”), and to the risk factors described in other documents the Company files from time to time with securities regulatory authorities in Canada, available on SEDAR at sedar.com, and with the U.S. Securities and Exchange Commission on EDGAR at sec.gov, and on the Company’s website at cenovus.com.

Information on or connected to the Company’s website at cenovus.com does not form part of this AIF unless expressly incorporated by reference herein.

Cenovus’s material subsidiaries and partnerships as at December 31, 2021 are as follows:

Cenovus is a Canadian-based integrated energy company headquartered in Calgary, Alberta. We are the second largest Canadian-based crude oil and natural gas producer and the second largest Canadian-based refiner and upgrader, with operations in Canada, the United States (“U.S.”) and the Asia Pacific region.

Our upstream operations include oil sands projects in northern Alberta, thermal and conventional crude oil, natural gas and NGLs projects across Western Canada, crude oil production offshore Newfoundland and Labrador and natural gas and NGLs production offshore China and Indonesia. Our downstream business includes upgrading and refining operations in Canada and the U.S., and retail operations across Canada. Our common shares and common share purchase warrants ("Cenovus Warrants") are listed on the Toronto Stock Exchange (“TSX”) and New York Stock Exchange (“NYSE”). Our cumulative redeemable preferred shares series 1, 2, 3, 5 and 7 are listed on the TSX.

Our operations involve activities across the full value chain to develop, produce, transport and market crude oil and natural gas in Canada and internationally. Our physically integrated upstream and downstream operations help us mitigate the impact of volatility in light-heavy crude oil differentials and contribute to our bottom line by capturing value from crude oil and natural gas production through to the sale of finished products such as transportation fuels.

Cenovus and Husky Arrangement

On January 1, 2021, Cenovus and Husky closed a transaction to combine the two companies through a plan of arrangement (the “Arrangement”) pursuant to which Cenovus acquired all the issued and outstanding common shares of Husky in exchange for common shares and Cenovus Warrants. In addition, all of the issued and outstanding Husky preferred shares were exchanged for Cenovus preferred shares with substantially identical terms.

The Arrangement combined high quality oil sands and heavy oil assets with extensive trading, storage and logistics infrastructure, and downstream assets, which creates opportunities to optimize the margin captured across the heavy oil value chain. With the combination of processing capacity and market access outside Alberta for the majority of the Company’s oil sands and heavy oil production, exposure to Alberta heavy oil price differentials is reduced while maintaining exposure to global commodity prices.

Comparative figures in this AIF include Cenovus results prior to the closing of the Arrangement on January 1, 2021, and does not reflect any historical data from Husky.

As at December 31, 2021, the Company’s reportable segments were as follows:

Upstream Segments

Oil Sands

Conventional

The Conventional segment includes assets rich in NGLs and natural gas within the Elmworth-Wapiti, Kaybob‑Edson, Clearwater and Rainbow Lake operating areas in Alberta and British Columbia and interests in numerous natural gas processing facilities. Cenovus’s NGLs and natural gas production is marketed and transported with additional third-party commodity trading volumes through access to capacity on third-party pipelines, export terminals and storage facilities, which provides flexibility for market access to optimize product mix, delivery points, transportation commitments and customer diversification.

Offshore

The Offshore segment includes offshore operations, exploration and development activities in China and the east coast of Canada, as well as the equity-accounted investment in the Husky-CNOOC Madura Ltd. (“HCML”) joint venture in Indonesia.

Downstream Segments

Canadian Manufacturing

The Canadian Manufacturing segment includes the owned and operated Lloydminster upgrading and asphalt refining complex which upgrades heavy oil and bitumen into synthetic crude oil, diesel fuel, asphalt and other ancillary products. Cenovus seeks to maximize the value per barrel from its heavy oil and bitumen production through its integrated network of assets. In addition, Cenovus owns and operates the Bruderheim crude-by-rail terminal and two ethanol plants. Cenovus also markets its production and third-party commodity trading volumes of synthetic crude oil, asphalt and ancillary products.

U.S. Manufacturing

Retail

The Retail segment includes the marketing of our own and third-party volumes of refined petroleum products, including gasoline and diesel, through retail, commercial and bulk petroleum outlets, as well as wholesale channels in Canada.

Corporate and Eliminations

The following describes significant events and conditions that have influenced the development of Cenovus’s business during the last three financial years:

2019

2020

2021

Cenovus’s Oil Sands segment includes the development and production of bitumen and heavy oil in northern Alberta and Saskatchewan. Cenovus’s oil sands assets include Foster Creek, Christina Lake, Sunrise (jointly owned with BP Canada and operated by Cenovus) and Tucker oil sands projects, as well as Lloydminster thermal and Lloydminster conventional heavy oil assets. Cenovus jointly owns and operates pipeline gathering systems and terminals through the equity-accounted investment in HMLP.

The sale and transportation of Cenovus’s production and third-party commodity trading volumes are managed and marketed through access to capacity on third-party pipelines and storage facilities in both Canada and the U.S. to optimize product mix, delivery points, transportation commitments and customer diversification.

As of December 31, 2021, Cenovus held bitumen and heavy oil rights of approximately 4.2 million gross acres (3.8 million net acres) within the Athabasca and Cold Lake regions of northern Alberta and Saskatchewan, as well as the exclusive rights to lease an additional 603 thousand gross acres on the Cold Lake Air Weapons Range, an active military base.

Development Approach

Cenovus uses steam-assisted gravity drainage (“SAGD”) technology to recover bitumen. The Company does not employ mining techniques for extraction and none of its reserves are suitable for extraction using mining techniques. SAGD involves injecting steam into the reservoir to enable bitumen to be pumped to the surface. Cenovus applies a manufacturing-like, phased approach to developing its oil sands assets. This approach incorporates learnings from previous phases into future growth plans, helping the Company to minimize costs.

At Cenovus’s Lloydminster conventional heavy oil assets, the Company employs a combination of production technologies including cold heavy oil production with sand (“CHOPS”) and horizontal wells and enhanced oil recovery (“EOR”), defined as the increased recovery from a crude oil pool achieved by artificial means or by the application of energy extrinsic to the pool.

Technology

Cenovus’ innovations are focused on carbon, cost and revenue while also ensuring the impact to land, water use, air quality, and wildlife habitat are minimized.

Foster Creek

Cenovus has a 100 percent working interest in Foster Creek, located on the Cold Lake Air Weapons Range, which is 72 kilometres from Cold Lake, Alberta. Foster Creek produces from the McMurray formation, with a reservoir depth up to 500 meters, using SAGD technology.

The Company holds surface access rights from the governments of Canada and Alberta and bitumen rights from the Government of Alberta for exploration, development and transportation from areas within the Cold Lake Air Weapons Range. In addition, Cenovus holds exclusive rights to lease several hundred thousand acres of bitumen rights in other areas on the Cold Lake Air Weapons Range on the Company’s and/or its assignee’s behalf.

Bitumen production from phases A through G at Foster Creek averaged 179.9 thousand barrels per day in 2021 (163.2 thousand barrels per day in 2020).

Cenovus operates a 98-megawatt natural gas-fired cogeneration facility in conjunction with Foster Creek. The steam and power generated by the facility is presently being used within the SAGD operation and any excess power generated is being sold into the Alberta power pool.

Christina Lake

Cenovus has a 100 percent working interest in Christina Lake, which is located approximately 120 kilometres south of Fort McMurray, Alberta. Christina Lake produces from the McMurray formation, with a reservoir depth up to 375 meters, using SAGD technology.

Bitumen production from phases A through G at Christina Lake averaged 236.8 thousand barrels per day in 2021 (218.5 thousand barrels per day in 2020). Cenovus operates a 100-megawatt natural gas-fired cogeneration facility in conjunction with Christina Lake. The steam and power generated by the facility is presently being used within the SAGD operation and any excess power generated is being sold into the Alberta power pool.

Cenovus has a 100 percent working interest in Narrows Lake, which is located adjacent to Christina Lake. Narrows Lake has a reservoir depth up to 375 meters and the Company has regulatory approval for 130 thousand gross barrels per day of production capacity. In 2021, the Narrows Lake field commenced tieback into the Christina Lake plant. First steam from Narrows Lake is expected in 2025.

Sunrise

Acquired as part of the Arrangement, Sunrise is an oil sands project located in the Athabasca region of northern Alberta. Sunrise produces from the McMurray formation, at a reservoir depth up to 200 meters, using SAGD technology. Sunrise is a Cenovus operated project in a 50 percent partnership with BP Canada. Cenovus's 50 percent share of bitumen production at Sunrise averaged approximately 25.9 thousand barrels per day in 2021.

Acquired as part of the Arrangement, Tucker is an oil sands project located 30 kilometres northwest of Cold Lake, Alberta. Tucker produces primarily from the Clearwater formation, at a reservoir depth up to 450 meters, using SAGD technology.

Bitumen production averaged 21.0 thousand barrels per day in 2021. On December 16, 2021 Cenovus announced an agreement to sell its Tucker asset for gross cash proceeds of $800 million. The sale closed on January 31, 2022.

Lloydminster Thermal

Acquired as part of the Arrangement, Lloydminster thermal consists of 11 producing thermal plants, which are 100 percent owned by Cenovus and produce bitumen. The plants are located in the Lloydminster region of Saskatchewan. In addition, a plant located in the same region, Spruce Lake North, is expected to be completed in late 2022. Each plant has a number of production pads and uses SAGD technology. Bitumen production from Lloydminster thermal in 2021 averaged 97.7 thousand barrels per day.

Lloydminster Conventional Heavy Oil

Acquired as part of the Arrangement, Lloydminster conventional heavy oil utilizes a combination of production technologies including CHOPS and horizontal wells and EOR projects in the Lloydminster region of Alberta and Saskatchewan. Production for 2021 averaged 20.2 thousand barrels per day of heavy crude oil and 10.6 MMcf per day of conventional natural gas.

Husky Midstream Limited Partnership

HMLP owns crude oil pipeline gathering systems in Alberta and Saskatchewan as well as the Lloydminster and Hardisty crude oil terminals. As a result of the Arrangement, Cenovus acquired 35 percent of HMLP and became the operator. The other partners in HMLP are CK Infrastructure Holdings Limited (16.25 percent) and Power Assets Holdings Limited (48.75 percent). HMLP has approximately 2,200 kilometres of pipeline in the Lloydminster region, 5.9 million barrels of storage capacity at Hardisty and Lloydminster, and other ancillary assets.

The Lloydminster terminal, with a total storage capacity of 1.0 million barrels, serves as a hub for the gathering systems. The pipeline systems transport blended heavy crude oil to Lloydminster for delivery to the Lloydminster Upgrader and Lloydminster Refinery. Blended heavy crude oil from the field and synthetic crude oil from the upgrading operations are transported south to Hardisty, Alberta to a connection with the major export trunk pipelines. The Hardisty terminal, with a total storage capacity of 4.9 million barrels, acts as the exclusive blending hub for WCS, the largest heavy oil benchmark pricing point in North America. In addition, HMLP owns the Ansell Corser gas processing plant in west-central Alberta, which Cenovus operates, with 120 MMcf per day of processing capacity.

HMLP has a separate board of directors and independent financing that supports both growth projects under construction and planned future expansions.

The assets play an integral role in the transportation of heavy oil production to end markets by providing connections to the Lloydminster Upgrader and the Lloydminster Refinery, third-party terminals and pipelines through the Hardisty terminal.

Capital Investment

Cenovus’s Conventional segment includes assets rich in NGLs and natural gas within the Elmworth-Wapiti, Kaybob‑Edson, Clearwater and Rainbow Lake operating areas in Alberta and British Columbia and interests in numerous natural gas processing facilities.

Cenovus’s Conventional assets include approximately 4.5 million net acres with an average 67.5 percent working interest. In addition, the Conventional assets include interests in numerous natural gas processing facilities with an estimated net processing capacity of 1.2 Bcf per day.

The Conventional assets are expected to provide short-cycle development opportunities with high return potential that complement Cenovus’s long-term oil sands development. Conventional production is expected to provide an economic hedge for the natural gas required as a fuel source at both the Company’s oil sands and refining operations.

Elmworth-Wapiti

Cenovus is one of the largest operators and producers in the Elmworth-Wapiti area, located in northwest Alberta and northeast British Columbia. As of December 31, 2021, Cenovus held leasehold rights of 1.2 million net acres in this area. Cenovus increased its interest in the area as part of the Arrangement.

The Elmworth-Wapiti area provides production potential from more than 10 formations, with the most prospective being the Falher and Dunvegan formations. It is a mature area that was historically developed with conventional vertical well technology. Cenovus has shifted to horizontal drilling in its development programs with a view to unlock the vast resource potential in the tight sand plays.

The primary processing facility in the area is the Cenovus-operated Elmworth plant. The Company holds significant working interests in four other major natural gas processing facilities in the region.

Kaybob-Edson

Clearwater

The Clearwater area is situated in west-central Alberta, south of Kaybob-Edson. As of December 31, 2021, Cenovus held leasehold rights of approximately 0.2 million net acres. Cenovus’s assets in the Clearwater area are characterized by multi-horizon, Cretaceous and Jurassic reservoirs at depths ranging from 1,900 meters to 3,000 meters, all with high NGLs content in a predominantly gas prone area. This is a mature area historically developed with conventional vertical well technology, providing Cenovus with a series of lower risk horizontal drilling development programs. Cenovus operates natural gas processing facilities in the area, including the Sand Creek and Alder plants.

Rainbow Lake

Acquired as part of the Arrangement, Rainbow Lake is located approximately 900 kilometres northwest of Edmonton, Alberta. As of December 31, 2021, Cenovus held leasehold rights of approximately 0.3 million net acres. Rainbow Lake consists of two distinct areas, Rainbow Lake and Bivouac, with assets including two gas plants and multiple field facilities, including satellites and compressor stations with over 1,100 kilometres of pipelines for gathering, injection, and disposal operations. Rainbow Lake makes up the majority of the asset production, primarily from the deeper Devonian formations, such as Keg River and Muskeg. Bivouac produces mainly sweet gas from the Jean Marie formation.

The Company holds a 50 percent interest in a 90-megawatt natural gas-fired cogeneration facility adjacent to its Rainbow Lake processing plant. The cogeneration facility produces electricity and thermal energy, or steam, for the Rainbow Lake processing plant, and any excess power generated is being sold into the Alberta power pool.

Capital Investment

In 2021, capital investment of $222 million in the Conventional segment focused on short cycle, high return development wells which are expected to improve underlying cost structures through volume enhancement and offset natural declines.

The Offshore segment, acquired as part of the Arrangement, includes operations, exploration and development activities in offshore China and the east coast of Canada, as well as the equity-accounted investment in the HCML joint venture in Indonesia.

Asia Pacific

China

The Liwan Gas Project is located approximately 300 kilometres southeast of the Hong Kong Special Administrative Region and was the first deepwater gas project offshore China. The Liwan Gas Project includes the natural gas discoveries at the Liwan 3-1, Liuhua 34-2 and Liuhua 29-1 fields within the Contract Area Block 29/26 exploration block located in the Pearl River Mouth Basin of the South China Sea. Cenovus has a 49 percent working interest in the Liwan 3-1 and Liuhua 34-2 fields as well as a 75 percent working interest in the Liuhua 29-1 field. The remaining working interest is owned by China National Offshore Oil Corporation Limited (“CNOOC”), directly or through subsidiaries.

An amendment to the natural gas sales agreement for the Liwan 3-1 field is effective until April 30, 2022. The amendment has increased the volume of natural gas the buyer must offtake or pay. After April 30, 2022, the original natural gas sales agreement terms will take effect.

In 2021, the Company’s working interest share of production from the Liwan Gas Project was 244.1 MMcf per day of conventional natural gas and 10.0 thousand barrels per day of NGLs.

The Company holds a production sharing contract (“PSC”) for Block 15/33 exploration block located in the Pearl River Mouth Basin in the South China Sea, east of the Leizhou Peninsula, approximately 140 kilometres southeast of the Hong Kong Special Administrative Region. During the exploration phase, Cenovus is the operator of the block and has a working interest of 100 percent. In the event of a commercial discovery, CNOOC may assume a working interest of up to 51 percent during the development and production phase by paying its proportionate share of all development costs. Block 15/33 contains an existing discovery that was drilled in 2018.

In 2021, Cenovus drilled an exploration well in Block 15/33 that encountered and tested hydrocarbons. The drilling results, including the implications to future development plans, are currently under evaluation.

The Company holds a PSC for the 16/25 exploration block, located in the Pearl River Mouth Basin in the South China Sea, east of the Leizhou Peninsula, about 150 kilometres southeast of the Hong Kong Special Administrative Region and approximately 72 kilometres northeast of Block 15/33. The Company is the operator of the block with a 100 percent working interest during the exploration phase.

During 2021, an amendment agreement was signed between the Company and CNOOC under which the first phase of the exploration period was extended to December 31, 2022, with the remaining obligatory exploration well to be completed in an area to be agreed upon by the parties.

Cenovus holds a PSC for the 23/07 exploration block in the Beibu Gulf area of the South China Sea, west of the Leizhou Peninsula. The Company is the operator of the block with a 100 percent working interest during the exploration phase. In the event of a commercial discovery, CNOOC may assume a participating partnership interest of up to 51 percent in the block for the development and production phases. The Company entered into a two-year exploration, phase II, of the PSC and committed to drill one exploration well before April 30, 2022.

The Company and CPC Corporation, through a joint agreement, have rights to an exploration block covering approximately 7,700 square kilometres located southwest of the Taiwan Area offshore. The Company holds a 75 percent working interest during exploration. CPC Corporation has the right to participate in any future development programs up to a 50 percent interest. The three-dimensional seismic exploration period expires on December 17, 2022.

Indonesia

The Company has a 40 percent interest in the HCML joint venture, which holds the Madura Strait PSC. The Madura Strait PSC encompasses approximately 2,500 square kilometres in the Madura Strait area, located off the coast of East Java, Indonesia.

The Madura Strait includes the operating BD field and the shallow water MDA, MBH, MDK and MAC fields, which are being developed. The MDA and MBH fields are expected to start producing in mid-2022, and the MAC and MDK fields are expected to start producing in 2023. In 2021, the Company’s working interest share of production was 41.2 MMcf per day of conventional natural gas and 2.7 thousand barrels per day of condensate.

Atlantic

Capital Investment

In 2021, combined capital investment in the Offshore segment was $175 million, which was primarily preservation capital for the West White Rose project in the Atlantic region. Major construction on the West White Rose project was suspended in March of 2020 and the project remains under review while we evaluate options with our partners.

Cenovus also markets its production and third-party commodity trading volumes of synthetic crude oil, asphalt and ancillary products.

The following table summarizes the key operational results for the assets in the periods indicated:

Lloydminster Upgrader

Acquired as part of the Arrangement, the Company owns and operates the Lloydminster Upgrader, located outside Lloydminster, Saskatchewan. The Lloydminster Upgrader is designed to process blended heavy crude oil feedstock (including bitumen), creating high quality, low sulphur synthetic crude oil and ultra-low sulphur diesel and recovers diluent from the feedstock for reuse in the heavy oil production facilities. Synthetic crude oil is used as refinery feedstock for the production of transportation fuels in Canada and the U.S.

The Lloydminster Upgrader’s current rated production capacity is 81.5 thousand barrels per day of synthetic crude oil, diluent and ultra-low sulphur diesel.

Production at the Lloydminster Upgrader averaged 54.9 thousand barrels per day of synthetic crude oil, 15.3 thousand barrels per day of diluent and 10.0 thousand barrels day of ultra-low sulphur diesel in 2021. In addition, as by-products of its upgrading operations, the Lloydminster Upgrader produced approximately 376 long ton per day of sulphur and 1,069 long ton per day of petroleum coke during 2021. These products are sold in Canadian and international markets.

Lloydminster Refinery

Acquired as part of the Arrangement, the Lloydminster Refinery, located in Lloydminster, Alberta, processes blended heavy crude oil into asphalt products used in road construction and maintenance. Throughput capacity is 29.0 thousand barrels per day of blended heavy crude oil. The Lloydminster Refinery also produces condensate, bulk distillates and industrial products. The condensate stream is removed and re-circulated into HMLP’s pipeline network as diluent. The distillate streams are transferred to the Lloydminster Upgrader and blended into the Husky Synthetic Blend (“HSB”) stream or sold as industrial products. Industrial products are a blend of medium and light distillate and gas oil streams, which are typically sold directly to customers as refinery feedstock, drilling and well-fracturing fluids, or used in asphalt cutbacks and emulsions.

The Lloydminster Refinery throughput averaged 27.5 thousand barrels per day of blended heavy crude oil feedstock during 2021. Due to the seasonal demand for asphalt products, many asphalt refineries typically operate at full capacity only during the paving season in Canada and the northern U.S. The Company has implemented various strategies to increase refinery throughput outside of the paving season, such as increasing storage capacity and developing U.S. markets for asphalt products. This allows the Lloydminster Refinery to run at or near full capacity throughout the year.

Asphalt Distribution Network

In addition to sales directly from the Lloydminster Refinery, and acquired as part of the Arrangement, the Company owns an asphalt distribution network composed of four asphalt terminals located at: Kamloops, British Columbia; Edmonton, Alberta; Yorkton, Saskatchewan; and Winnipeg, Manitoba, and an emulsion plant located at Saskatoon, Saskatchewan.

Bruderheim Crude-by-Rail Terminal

The Company owns a crude-by-rail loading facility near Edmonton, Alberta. The Bruderheim crude-by-rail terminal is part of our strategy to create additional transportation options for our products and is designed to help us capture global prices for our crude oil production. The Company has hired a third-party service provider to assist in operating the rail terminal. In 2021, volumes loaded at the Bruderheim crude-by-rail terminal averaged 12.1 thousand barrels per day compared with an average of 30.4 thousand barrels per day in 2020.

The Company leases a fleet of coiled and insulated rail cars to safely transport our products to market.

Ethanol Plants

Acquired as part of the Arrangement, the Company owns and operates two ethanol plants, located in Lloydminster, Saskatchewan and Minnedosa, Manitoba. At the Minnedosa ethanol plant, the Company is progressing the Carbon Capture and Sequestration project. Fuel grade ethanol is produced from grain-based feedstock. Each ethanol plant has an annual nameplate capacity of 130 million litres. In 2021, combined ethanol production averaged 661.0 thousand litres per day.

The Lloydminster ethanol plant captures carbon dioxide for use in the Company’s Lloydminster conventional heavy oil assets and ethanol produced at the plant has a low carbon intensity designation.

Capital Investment

In 2021, Canadian Manufacturing capital investment was $37 million, focused on maintenance projects at the Lloydminster Upgrader and Lloydminster Refinery.

The U.S. Manufacturing segment includes the refining of crude oil to produce gasoline, diesel and jet fuel, asphalt and other products at the wholly-owned Lima Refinery and Superior Refinery, the jointly owned Wood River and Borger refineries (jointly owned with operator Phillips 66) (collectively “WRB”) and the jointly owned Toledo Refinery (jointly owned with operator BP). WRB has a Management Committee, which is composed of three Cenovus representatives and three Phillips 66 representatives, with each company holding equal voting rights. The Toledo Refinery has a Governance Committee, which is comprised of four Cenovus representatives and four BP representatives, with each company holding equal voting rights.

The refining interests allow Cenovus to capture the value from crude oil production through to refined products, such as gasoline, diesel and jet fuel, to partially mitigate volatility associated with regional North American light/heavy crude oil price differential fluctuations.

Cenovus looks to extend the value chain by marketing fuels generated by the Lima and Toledo Refineries, and Superior Refinery once it is rebuilt and restarted in the first quarter of 2023, into the Midwestern and Northeastern United States.

Cenovus also markets some of its own and third-party volumes of refined petroleum products including gasoline, diesel and jet fuel.

The following table summarizes the key operational results for the refineries in the periods indicated:

Lima Refinery

Acquired as part of the Arrangement, the Lima Refinery is located in Lima, Ohio, approximately 150 kilometres northwest of Columbus, Ohio. The Lima Refinery’s stated crude oil processing capacity for 2021 was 175.0 thousand barrels per day. The Lima Refinery processes both light sweet crude oil and heavy crude oil feedstock sourced from the U.S. and Canada, which includes Canadian synthetic crude oil, including HSB produced by the Lloydminster Upgrader. The Lima Refinery produces low-sulphur gasoline, gasoline blend stocks, ultra-low sulphur diesel, jet fuel, petrochemical feedstock and other by-products. The feedstocks are received via the Mid-Valley and Marathon Pipelines, and the refined products are transported via the Buckeye, Inland and Energy Transfer Partners pipeline systems and by railcar to primary markets in Ohio, Illinois, Indiana, Pennsylvania and southern Michigan.

Production at the Lima Refinery averaged 62.2 thousand barrels per day of gasoline, 50.7 thousand barrels per day of distillates and 18.3 thousand barrels day of other products in 2021. Approximately eight percent of the crude oil processed at the Lima refinery consisted of Canadian heavy crude oil in 2021.

Toledo Refinery

Acquired as part of the Arrangement, the Toledo Refinery is located near Toledo, Ohio, with total stated crude oil processing capacity for 2021 of 160.0 thousand barrels per day. Products from the refinery include gasoline, diesel, jet fuel and other products. A portion of the Toledo Refinery’s capacity is used to process high total acid number crude oil to support production from Sunrise. The feedstocks are received via the Mid-Valley, Marathon and Enbridge Mainline Pipelines, and the refined products are transported via the Buckeye, Inland and Energy Transfer Partners pipeline systems and by barge and railcar to primary markets in Ohio, Illinois, Indiana, Pennsylvania and southern Michigan.

Cenovus’s share of production at the Toledo Refinery averaged 42.5 thousand barrels per day of gasoline, 22.6 thousand barrels per day of distillates and 9.7 thousand barrels day of other products in 2021. Of the crude oil processed at the Toledo Refinery in 2021, approximately 38 percent consisted of Canadian heavy crude oil and approximately 11 percent consisted of U.S. heavy crude oil.

The Wood River Refinery ranks in the top 10 percent of approximately 130 refineries in the U.S. based on total crude oil capacity. It is located in Roxana, Illinois, approximately 25 kilometres northeast of St. Louis, Missouri. The Wood River Refinery processes light low-sulphur and heavy high-sulphur crude oil that it receives via the Keystone, Capline, Ozark and Capwood Pipelines to produce gasoline, diesel and jet fuel, petrochemical feedstock as well as petroleum coke and asphalt. The gasoline, diesel and jet fuel are transported via the Explorer, Buckeye, and Marathon Pipelines to markets in the upper U.S. Midwest. Other products are transported via pipeline, truck, barge and railcar to various markets.

The Wood River Refinery’s total stated crude oil processing capacity for 2021 was 346.0 thousand barrels per day. Cenovus’s share of production at the Wood River Refinery averaged 65.9 thousand barrels per day of gasoline, 47.1 thousand barrels per day of distillates and 33.2 thousand barrels per day of other products in 2021.

Borger Refinery

The Borger Refinery is located in Borger, Texas, approximately 80 kilometres north of Amarillo, Texas. The Borger Refinery processes mainly medium and heavy high-sulphur crude oil that it receives via the WA/80 and O-Line pipelines to produce gasoline, diesel and jet fuel, along with solvents and other products. The refined products are transported via the Denver, Powder River, Amarillo and Gold Line Pipelines and by truck and railcar to markets in Texas, New Mexico, Colorado and the U.S. mid-continent.

The Borger Refinery’s total stated crude oil processing capacity for 2021 was 149.0 thousand barrels per day. Cenovus’s share of production at the Borger Refinery averaged 34.7 thousand barrels per day of gasoline, 25.0 thousand barrels per day of distillates and 6.8 thousand barrels per day of other products in 2021

Acquired as part of the Arrangement, the Superior Refinery is located in Superior, Wisconsin, approximately 250 kilometres northeast of Minneapolis, Minnesota. On April 26, 2018, the Superior Refinery experienced an incident while preparing for a major turnaround and was taken out of operation. The rebuild work commenced in March 2019 with demolition, site preparation work and permitting preceding construction. The rebuild is ongoing and the Company anticipates a substantial portion of the investment will be recovered from property damage insurance. The refinery has associated infrastructure including five storage and distribution terminals that are strategically located throughout the northern U.S. These terminals include: the Superior Products Terminal; the Duluth Terminal in Duluth/Esko, Minnesota, which has a storage capacity of 180.0 thousand barrels; the Duluth Marine Terminal in Duluth, Minnesota, which has a storage capacity of 14.0 thousand barrels; the Rhinelander Asphalt Terminal in Rhinelander, Wisconsin, which has a storage capacity of 157.0 thousand barrels; and the Crookston Asphalt Terminal in Crookston, Minnesota, which has a storage capacity of 136.0 thousand barrels. In addition, the Superior Refinery has a working tank capacity of 2.6 million barrels.

The refinery is expected to restart around the first quarter of 2023, with a stated crude oil processing capacity of 49.0 thousand barrels per day, including capability to process up to 34.0 thousand barrels per day of heavy oil while producing asphalt, gasoline and diesel.

Asphalt Distribution Network

Acquired as part of the Arrangement, the Company has a U.S. asphalt distribution network composed of the two terminals described under “Superior Refinery” above, located at Rhinelander, Wisconsin and Crookston, Minnesota. The Company also markets asphalt from independently operated terminals located in the states of Minnesota, Wisconsin and Ohio.

Capital Investment

In 2021, U.S. Manufacturing capital investment of $995 million focused primarily on the Superior Refinery rebuild, combined with refining reliability, maintenance and yield optimization projects at the Wood River and Borger refineries, and maintenance projects at the Toledo Refinery.

The Retail segment includes the marketing of its own and third-party volumes of refined petroleum products, including gasoline and diesel, through retail, commercial and bulk petroleum outlets, as well as wholesale channels in Canada.

Retail and Commercial Network

Cenovus’s retail and commercial operating model is balanced by corporate owned/dealer operated and branded dealer-owned-and-operated sites. The network consists of a variety of full- and self-serve retail stations, travel centres and cardlocks serving urban and rural markets across Canada, while our bulk distributors offer direct sales to commercial and agricultural markets in the prairie provinces.

Retail outlets offer a variety of services including convenience stores, service bays, 24-hour accessibility, car washes, Husky House Restaurants, and proprietary and co-branded quick-serve restaurants. In addition to ethanol-blended gasoline, Cenovus sells diesel, propane and Mobil-branded lubricants to customers. Cenovus supplies refined petroleum products to its branded independent retailers on an exclusive basis and provides financial and other assistance for location improvements, marketing support and related services.

The following table shows the number of Husky-branded and Esso-branded petroleum outlets by province as at December 31, 2021:

During 2021, the Company purchased approximately 31.1 thousand barrels per day of refined petroleum products of which 26.6 thousand barrels per day were pursuant to agreements with Imperial Oil. The Company also acquired approximately 7.0 thousand barrels per day of refined petroleum products pursuant to exchange agreements with third-party refiners.

The Company also markets refined petroleum products directly to various commercial markets, including independent dealers, national rail companies, and major industrial and commercial customers in Canada.

The following table shows average daily sales volumes of light refined petroleum products for the year ended December 31, 2021:

All aspects of the energy industry are highly competitive, including skilled and knowledgeable personnel. For further information on the competitive conditions affecting Cenovus, refer to the sections entitled “Risk Management and Risk Factors – Operational Risk – Competition“ and “Risk Management and Risk Factors – Operational Risk – Leadership and Talent“ in the Company’s annual 2021 MD&A, which sections are incorporated by reference into this AIF and is available on the Company's SEDAR profile at sedar.com.

All phases of crude oil, natural gas and refining operations are subject to environmental regulation pursuant to a variety of federal, provincial, territorial, state, municipal, regional and local laws and regulations in the jurisdictions in which Cenovus operates, as well as international conventions. For further information on the environmental regulations affecting Cenovus, refer to the section entitled “Risk Management and Risk Factors – Environmental Regulation Risks” in the Company’s annual 2021 MD&A, which section is incorporated by reference into this AIF and is available on the Company's SEDAR profile at sedar.com.

The Code addresses the identification and management of ethical situations and provides guidance in making ethical business decisions and reporting violations of the Code. The Code provides a message from the President & Chief Executive Officer and addresses a number of matters including: Cenovus’s values and reputation, acting with integrity and compliance with laws and regulations.

Sustainability Policy

With respect to social aspects, the Sustainability Policy provides that Cenovus recognizes the importance of prioritizing the health and safety of all workers involved in its operations, as well as the residents of the communities where Cenovus works. In addition, it discusses the importance of treating workers with dignity, fairness and respect in order to support an inclusive and diverse workplace and evidences Cenovus’s support for the principles of the Universal Declaration of Human Rights. The Sustainability Policy also addresses the importance of Cenovus fostering positive relationships with Indigenous communities and other stakeholders through communication based on honesty, trust and respect with the objective of building and maintaining long-term, mutually beneficial relationships. In furtherance of this, and in an effort to create a positive impact for both Cenovus and the communities in which it operates, the Sustainability Policy also acknowledges the importance of investments by Cenovus in organizations and initiatives that improve people’s quality of life.

Additional Policy Information

The aforementioned policies are accessible on the Company’s website at cenovus.com, as is Cenovus’s ESG report. The ESG report is published annually to detail management’s efforts and performance across environment, social and governance topics that are important to its stakeholders.

The following table summarizes Cenovus’s full-time equivalent (“FTE”) employees as at December 31, 2021:

As at December 31, 2021, the Company’s reserves were located in Canada (in Alberta, British Columbia, Saskatchewan and Newfoundland and Labrador), China and Indonesia. Cenovus retained two independent qualified reserves evaluators (“IQREs”), McDaniel & Associates Consultants Ltd. (“McDaniel”) and GLJ Ltd. (“GLJ”), to evaluate and prepare reports on 100 percent of its bitumen, heavy crude oil, light crude oil and medium crude oil combined (“light and medium oil”), NGLs, conventional natural gas and shale gas proved and probable reserves. McDaniel evaluated approximately 94 percent of Cenovus’s total proved reserves, located in Canada (in Alberta, Saskatchewan and Newfoundland and Labrador) and China and Indonesia, and GLJ evaluated approximately six percent of the Company’s total proved reserves, located in Alberta and British Columbia, Canada.

The Safety, Sustainability and Reserves Committee (“SSR Committee”), composed entirely of independent directors, reviews, among other things, the qualifications and appointment of the IQREs, the procedures relating to the disclosure of information with respect to oil and gas activities and the procedures for providing information to the IQREs. The SSR Committee meets independently with the management of Cenovus and each IQRE to determine whether any restrictions affected the ability of the IQREs to report on the reserves data without reservation. In addition, the SSR Committee reviews the reserves data and the report of the IQREs and provides a recommendation regarding approval of the reserves disclosure to the Board of Directors (the “Board”) of Cenovus.

Classifications of reserves as proved or probable are only attempts to define the degree of certainty associated with the estimates. There are numerous uncertainties inherent in estimating quantities of petroleum reserves. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. Readers should review the definitions and information contained in “Additional Notes to Reserves Data Tables”, “Definitions” and “Pricing Assumptions” in conjunction with the reserves disclosure. The reserves estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates disclosed. See the section entitled “Risk Management and Risk Factors” in the Company’s annual 2021 MD&A, which section of the MD&A is incorporated by reference into this AIF and is available on the Company's SEDAR profile at sedar.com, for additional information.

Cenovus’s reserves data and other oil and gas information contained in this AIF is dated February 7, 2022, with an effective date of December 31, 2021. McDaniel’s preparation date of the information is January 18, 2022 and GLJ’s preparation date is January 6, 2022.

The reserves data presented summarizes the Company’s bitumen, heavy crude oil, light and medium oil, NGLs, conventional natural gas, shale gas and total reserves and the net present values (“NPV”) and future net revenue (“FNR”) for these reserves. The reserves data uses forecast prices and costs prior to provision for interest, general and administrative expenses or the impact of any hedging activities. Estimates of FNR have been presented on a before and after income tax basis.

Summary of Company Interest Oil and Gas Reserves as at December 31, 2021

Summary of Net Present Value of Future Net Revenue as at December 31, 2021

Total Future Net Revenue (Undiscounted) as at December 31, 2021

Future Net Revenue by Product Type as at December 31, 2021

Additional Notes to Reserves Data Tables

Definitions

Reserves are classified according to the degree of certainty associated with the estimates:

Each of the reserves categories may be divided into developed and undeveloped categories:

Pricing Assumptions

Except as noted below, the forecast of prices, inflation and exchange rate provided in the table below is computed using the average of forecasts (“IQRE Average Forecast”) by McDaniel, GLJ and Sproule Associates Limited and is used to estimate FNR associated with the reserves disclosed herein. The IQRE Average Forecast is dated January 1, 2022. The inflation forecast was applied uniformly to prices beyond the forecast interval, and to all future costs. China and Indonesia gas prices are derived from the natural gas sales agreements specific to each set of projects. For historical prices realized during 2021, see “Production History and Per-Unit Results” in this AIF.

Future Development Costs

The following table outlines undiscounted future development costs deducted in the estimation of FNR, by reserves category: