QEC: Questerre Energy Release Q1 2026 Report

President's Message 
The turnaround at PX Energy is producing results.

In our first full quarter with management control, lifting costs in Brazil were
reduced by $7.6 million or 30% to $17.5 million from $25.5 million last quarter.
With stronger oil prices in March, this contributed to Questerre generating
adjusted funds flow from operations of $20.8 million - including $6.7 million in
revenue related to minimum sales contracts in Brazil - compared to $4.3 million
in the fourth quarter of 2025. Further cost reductions are planned for the
remainder of the year, and we believe the underlying operation has room to
improve.

In Quebec, the economy and energy situation is evolving. The trade dispute with
the United States, a structural electricity shortage, and rising concern about
energy security have together rekindled consideration of energy options
including local natural gas production. We have been making the case that our
Quebec Utica discovery is part of the answer. On the emissions reduction front,
we met with the Government on Bill 17, their framework for carbon storage, and
on our pending carbon storage pilot application. These steps toward meeting
Quebec's decarbonization commitments demonstrate our commitment to finding a
business and political solution.

Our capital reorganization closed in January, transferring the value of our
Quebec assets to preferred shareholders. We are actively evaluating paths to
list those shares for trading.

Highlights
o	Average daily production of 6,180 boe per day 
o	Additional 540 boe per day was invoiced as deferred revenue related to minimum
sales contracts in Brazil
o	Adjusted funds flow from operations of $20.8 million including $6.7 million
related to minimum sales contracts (net cash from operating activities of $3.1
million) 
o	Cost cutting at PX Energy reduces lifting costs by $7.6 million to $17.5
million from $25.5 million in the fourth quarter of 2025
o	Corporate reorganization conveys interest in Quebec assets to preferred shares
o	Questerre case approved by Quebec Superior Court to advance legal process

Oil Shale
The first quarter results show we are on the right track with our cost cutting.
The support from local management for the restructuring has been strong.

The cost reduction plan included cutting overhead, renegotiating supply
contracts and refinancing government obligations. The target is to deliver $8
million in cost savings this year and reduce operating and overhead by 10% over
last year. We plan to reduce them by a further $8 million in 2027. 
The goal is to reduce operating costs from US$59 per produced boe, the average
cost in 2025 prior to our acquisition, to US$40 per produced boe by 2027. 

One of our most significant cost items is internal fuel consumption. This
accounts for nearly 25% of our operating costs in Brazil. This quarter it
represented approximately 940 boe per day split equally between gas and fuel
oil. We are investing capital to reduce these high-value fuel oil volumes.

In March, we commissioned a biomass boiler fueled by wood waste that cuts fuel
oil consumption by nearly 50%. Other projects include switching our burners off
fuel oil to materially lower costs. 
This summer, we also plan to test the Red Leaf HCCO technology- a trial that
should increase heat mass efficiency, reduce fuel consumption further and
validate a critical element of the technology at scale.

The Red Leaf HCCO is fundamentally different from conventional oil shale
processing, including the process currently used at PX Energy. Conventional
methods - almost universally - move large volumes of rock to a heat source. Red
Leaf inverts that approach. The rock stays stationary inside vessels while a
heat plug moves through in a batch process. This is engineered to materially
lower costs, substantially reduce water usage, and improve thermal efficiency.
The prize is converting billions of barrels of oil shale resource into reserves.
We now have a clearer, faster, and cheaper path to proving the technology at
scale than our original plan.

Quebec
Quebec's electricity shortage is no longer a future problem - it is here. The
provincial utility has stated plainly that surpluses are a thing of the past,
and it is now rationing power for new industrial loads, prioritizing projects
that support decarbonization(1). This February it proposed to the provincial
energy regulator that new large data centers exceeding 5 MW should pay
approximately double what current large-power customers pay(2). Earlier in the
quarter it announced plans to utilize the TC Energy Bécancour power plant as a
peaking facility to be supplied in part by renewable natural gas(3). We have
been making the case directly that our gas is a cheaper alternative with lower
environmental impact. Our tie-in point from drilled but as yet untested wells is
less than ten kilometres from the Bécancour plant.

The political environment is also shifting. Despite the National Assembly's
non-binding vote in March to reaffirm the shale gas ban, the current Premier -
during her recent leadership campaign - expressed openness to local gas
development as part of an energy sovereignty platform. She has acknowledged that
local production would reduce dependence on United States imports and serve as a
transition fuel(4). In April, the head of one of Quebec's largest financial
institutions made a similar point publicly at a shareholder meeting, calling on
the province to develop its own resources(5). 

The judicial process to protect shareholder rights is advancing. During the
first quarter the Quebec Superior Court approved Questerre as a 'test case' to
move forward to expedite the process. The case protocol agreed in April sets out
the schedule for remaining pre-trial steps, including a Government expert
report. We expect a hearing date to be set for next year or early 2028.

Operating and Financial
Production averaged 6,180 boe per day in the quarter. There was an additional
540 boe per day invoiced as deferred revenue related to minimum sales contracts.
Volumes in Brazil were about 10% lower than last quarter as we reduced
production to meet seasonally lower demand.

Our first quarter results reflected stronger commodity prices in March, which
helped maintain revenue at $43 million, in line with the fourth quarter of 2025,
despite lower production volumes. Revenue in the period does not include any
amounts related to deferred revenue for the minimum sales contracts. We also
made meaningful progress on cost cutting at PX Energy and, additionally, saw
some unbudgeted savings in the period. This overall reduced operating costs to
$17.5 million from $25.5 million in the fourth quarter of 2025. We reported a
net loss for the quarter of $17.8 million, which includes several non-cash items
such as depletion, deferred tax expense and most of our finance income and
expense. For instance, our finance expense includes $10.1 million of non-cash
expense related to the embedded derivative associated with the secured bonds.

Adjusting for these non-cash items, our cost cutting contributed to adjusted
funds flow from operations of $20.8 million, including $6.7 million of revenue
related to minimum sales contracts, compared to $4.3 million in the fourth
quarter of 2025. Higher oil prices are creating some demand pressure in Brazil,
with some customers lifting volumes below the minimums in their contracts. This
makes it more challenging for them to meet their minimum sales volumes. Our
customers and contracts are both essential to our business and managing this
dynamic is an important priority for us.

Outlook
We closed the disposition of our Kakwa Central assets in early May, further
improving our working capital position. As a result, production is expected to
be lower for the remainder of this year. A portion of our Canadian production is
now hedged, though based on current strip prices, we expect the improvement in
our working capital to continue.

The restructuring of PX Energy is well underway and the first quarter is an
early proof point that we are on the right track. We have a defined path to
prove the Red Leaf technology at scale - at lower cost and on a shorter timeline
than originally planned. In Quebec, the political and economic environment is
moving in our direction. The assets are unchanged. The opportunity, if anything,
is larger.

Michael Binnion 
President and Chief Executive Officer

Forward Looking Advisory
Please refer to the section Forward Looking Statements in the Management
Discussion and Analysis regarding the forward-looking information provided in
this President's Message.

Footnotes:
(1)	https://www.hydroquebec.com/residential/energy-wise/are-we-running-out-elect
ricity.html
(2)	https://news.hydroquebec.com/news/press-releases/all-quebec/hydro-quebec-pro
posing-regie-energie-new-rate-large-data-centres-adjustment-rate-cryptographic-u
se-applied-blockchains.html
(3)	https://news.hydroquebec.com/news/press-releases/all-quebec/quebec-energy-se
curity-hydro-quebec-confirms-next-steps-use-power-plant-becancour-during-peak-pe
riods.html
(4)
	https://ici.radio-canada.ca/info/videos/1-10620098/christine-frechette-prete-a-
rouvrir-dossier-gaz-schiste?liste=28-23005
(5)	https://www.theglobeandmail.com/business/article-national-bank-quebec-energy
-natural-resources-major-infrastructure/ 
s/1-10620098/christine-frechette-prete-a-\
rouvrir-dossier-gaz-schiste?liste=28-23005\
(5)	https://www.theglobeandmail.com/business/article-national-bank-quebec-energy\
-natural-resources-major-infrastructure/ \