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Kaybob Montney Oil Pool Development

Based on encouraging completion results from the first quarter 2016 Montney horizontal oil wells, the Company increased its 2016 Montney drilling activity from the 2 wells that were initially planned to a total of 12 wells for the year. Nine of these wells were completed prior to the end of 2016; the remaining 3 were completed in January 2017 and producing through the Montney oil battery in late February 2017.

Continued improvements to Trilogy’s Montney oil well drilling and completion program resulted in year-over-year well costs declining by approximately 30 percent while productivity generally increased. Cost savings were achieved in the drilling operations through the utilization of multi-well pads and high performance drilling systems. The shift from hydrocarbon-based fracture to water-based fracture stimulations significantly reduced completion costs and allowed the Company to economically increase proppant volume and decrease stage spacing, thereby better distributing proppant along the length of the lateral wellbore.

Trilogy varied sand volumes from 10 tonnes per stage in the Company’s original horizontal Montney oil wells to as much as 20 tonnes per stage in recent wells. At the same time, stage spacing was reduced from 75 meters per stage in the original wells to 50 to 65 meters in the fourth quarter wells. In addition, substantially higher completion pump rates have increased the size and complexity of Trilogy’s fracture stimulations. All of these factors combined have contributed to higher initial well productivity as compared to the Company’s first generation Montney oil wells.

Incorporating the efficiencies and learnings from its 2016 Montney drilling and completion program, Trilogy plans to drill 15 horizontal Montney oil wells and complete 18 wells in 2017. The capital investment Trilogy has made into the Montney oil gathering and processing infrastructure has resulted in Trilogy reducing its operating cost structure in this area to $6.60/Boe for 2016. For the month of January 2017, Trilogy realized a $33.89/Boe operating netback for its Montney oil operations, when WTI averaged USD $52.61/Bbl and natural gas averaged $3.32/GJ. Assuming $2.9 million capital costs to drill, complete and equip a Montney oil well, wells are expected to reach a capital payout after 85 MBoe of production (60 MBbl of crude oil and 150 MMcf of natural gas). Trilogy’s 10 tonne type curve for the west side of the pool forecasts 60 MBbl of cumulative oil production after approximately 6 producing months, while new wells with higher fracture intensity and sand concentration may reach 60 MBbl in as little as 2 to 3 months of production.

The following table updates production results to February 28, 2017 for the 9 horizontal Montney oil wells that were drilled, completed and brought on production in 2016. The variable results reflect the evolution of completion techniques described above.