Osum Moving Forward with Expansion at Orion and Announces Closing of a Royalty Sale

CALGARY, ALBERTA (October 2, 2017) — Osum Oil Sands Corp. (“Osum” or the “Company”), a private oil sands company, is pleased to announce that it has approved the commencement of the Phase 2B expansion at its Orion Thermal Project (“Orion Project” or “Orion”). In conjunction with this, Osum, through its wholly-owned subsidiary, Osum Production Corp., sold a 4 percent gross overriding royalty interest on its Orion Project (the “Royalty Interest”) for cash proceeds of $92.5 million, before transaction costs. The sale has an effective date of September 1, 2017.

The Phase 2B expansion will be funded from a portion of the proceeds of the sale of the Royalty Interest. The Royalty Interest covers current and any future expansions of the Orion Project. TD Securities Inc. acted as Osum’s exclusive financial advisor on the sale.

Orion is currently producing 7,500 – 8,000 barrels per day of bitumen from the Clearwater Formation in the Cold Lake oil sands region, about 200 km north east of Edmonton, Alberta. The just completed Phase 2A expansion is expected to add 1,500 barrels per day of production over the next twelve months. The Phase 2B expansion is projected to be completed in mid-2018 and is expected to increase production progressively through mid-2019 by an additional 3,000 barrels per day. The Orion Project has regulatory approval for production of up to 20,000 barrels per day.

Commenting on the planned expansion and the sale of the Royalty Interest, Steve Spence, President and CEO of Osum said, “We are on a clear path for positive growth over the next two years. The sale of the royalty enables us to accelerate our staged expansion strategy, moving us closer to our goal of producing 20,000 barrels per day from Orion. By taking a measured approach to adding capacity, we are building an oil sands business that is robust, and can grow sustainably in a moderate oil price environment.”

Concurrent with the royalty sale process, Osum engaged GLJ Petroleum Consultants (“GLJ”) as an independent qualified reserve evaluator to conduct a reserves and resource assessment in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“GLJ Report”), taking into account new well data and project performance since GLJ’s last update on December 31, 2016. This has resulted in volume increases of more than 25% in the Company’s gross proved (“1P”) reserves and 5% in gross proved plus probable (“2P”) reserves. The GLJ Report has an effective date of September 1, 2017.

The following table displays gross bitumen reserves and bitumen reserves net of forecast royalties, inclusive of the Royalty Interest, along with the present values of estimated future net revenue using a range of discount rates at September 1, 2017:

Bitumen Reserves
– (Mbbl)
Net Present Value of Future Net Revenue
– Before Taxes ($millions)
Forecast Prices and Costs
Gross
Net
0%
5%
10%
15%
20%
Total proved (1P)
60,138
49,697
1,064
690
471
336
250
Total probable
477,272
391,715
10,011
3,768
1,540
622
198
Total proved plus probable (2P)
537,410
441,412
11,075
4,458
2,011
958
448

About Osum:
Established in Alberta in 2005, Osum Oil Sands Corp. is a private oil sands producer focused on the responsible application of in-situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the company is available at www.osumcorp.com.

Reserves and Resources
The reserve estimates herein were extracted from the GLJ Report, which was prepared in accordance with resources and reserves definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGEH”). Reserves are classified according to the degree of certainty associated with the estimates. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Other criteria that must also be met for the categorization of reserves are provided in the COGEH.

The qualitative certainty levels referred to in the definitions above are applicable to individual reserve entities (which refers to the lowest level at which reserves calculations are performed) and to reported reserves (which refers to the highest level sum of individual entity estimates for which reserve estimates are prepared). Reported reserves should target the following levels of certainty under a specific set of economic conditions: (a) at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves; and (b) at least a 50 percent probability that the quantities actually recovered will equal or exceed the estimated proved plus probable reserves. A qualitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods. Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGEH.

The preparation of an evaluation requires the use of judgement in applying the standards and definitions contained in the COGEH. As the Company’s independent reserve evaluator, GLJ applies those standards and definitions based on its experience and knowledge of industry practice. However, because the application of the standards and definitions contained in the COGEH require the use of judgement there is no assurance that governing securities regulator(s) will not take a different view than GLJ as to some of the determinations in an evaluation.

In determining the valuation estimates contained in the GLJ Report, the following GLJ pricing forecast as at July 1, 2017 was utilized:

Year
Western
Canadian
Select
(C$/bbl)
WTI at
Cushing
(US$/bbl)
Diluent
(Condensate)
(C$/bbl)
AECO Gas
(C$/mmbtu)
Exchange
Rate
(US$/C$)
H2 2017
47.83
49.00
65.63
2.83
0.750
2018
48.68
52.00
67.02
2.93
0.775
2019
53.17
57.00
70.89
3.05
0.800
2020
57.65
62.00
74.52
3.22
0.825
2021
60.54
66.00
77.32
3.39
0.850
2022
64.08
69.00
81.06
3.58
0.850
2023
67.60
72.00
83.60
3.76
0.850
2024
71.17
75.00
87.29
3.95
0.850
2025
74.61
78.00
90.98
4.03
0.850
2026
78.47
81.27
94.04
4.11
0.850
2027+
+2.0%/yr
+2.0%/yr
+2.0%/yr
+2.0%/yr
0.850

Cautionary Information and Forward Looking Statements
Certain statements contained in this press release may contain projections and “forward-looking statements” within the meaning of that phrase under Canadian and U.S. securities laws. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect”, “project” and similar expressions, may be used to identify forward-looking statements. Forward-looking statements in this press release may include, but are not limited to, statements regarding production from the Phase 2A expansion, completion of the Phase 2B expansion, the funding of the Phase 2B expansion and the anticipated production from the Phase 2B expansion. By their nature, those statements reflect management’s current views, beliefs and assumptions and are subject to certain risks, uncertainties, known and unknown, and assumptions, including, without limitation, assumptions about expected cash flows, expected production levels or conditions, and expected economic life of the Orion Project, retaining a high quality, experienced management and operating team, production delays, changing environmental and other regulations, the ability to attract and retain business partners, the ability to exploit hydrocarbon resources with available technology, the need to obtain and maintain proprietary rights over aspects of the technology, competition from other technologies, the ability to access the capital required for project development, research, technology development, operations and marketing, financial position, predictions of future actions or plans or strategies, changes in energy prices and currency levels.

Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the projections or forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, projected or expected. Osum does not intend and does not assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise.

All reserve references in this press release are “Company share reserves”. Company share reserves are the Company’s total working interest reserves before the deduction of any royalties and including any royalty interests of the Company. It should not be assumed that the present worth of estimated future cash flow presented in the tables above represents 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. The recovery and reserve estimates of Osum’s bitumen reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual bitumen reserves may be greater than or less than the estimates provided herein. All future net revenues are estimated using forecast prices, arising from the anticipated development and production of Osum’s reserves, net of the associated royalties, operating costs, development costs, and abandonment and reclamation costs and are stated prior to provision for interest and general and administrative expenses. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein do not represent fair market value.

The Company’s securities are not traded on any stock exchange, and thus Osum is not subject to regulation by any Canadian stock exchange. Osum is not a reporting issuer anywhere in Canada and its securities are not registered under the United States Securities Act of 1933. As a result, the Company is not presently subject to the reporting, certification or other requirements imposed on reporting issuers in Canada or U.S. securities legislation including U.S. registered issuers under, among other things, applicable Canadian securities legislation or the U.S. Sarbanes-Oxley Act of 2002. This release is provided for information purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the common shares in any jurisdiction (including the United States) in which such offer, solicitation or sale would be unlawful.

Media Contact:

Osum Oil Sands Corp.
Christi Clouter
cclouter@osumcorp.com

Osum saddened by death of Chairman, Rick George

Osum Oil Sands Corp. (Osum), its Board of Directors and staff are deeply saddened by the passing of Chairman, Richard L. (Rick) George, OC.

Mr. George had a long and distinguished career in Canada’s oil sands industry and joined the Osum Board of Directors as Chairman on October 29, 2012.

“Rick was a champion of Osum and its people,” said Steve Spence, CEO of Osum.  “His optimism for the future was balanced with a realistic view of the present – a perspective that has helped our company through the recent downturn.  He was a great friend and mentor, I will miss him greatly.”

Osum would like to extend its condolences to the George family during this difficult time.