Equibles

6-K

OBSIDIAN ENERGY LTD. (OBE)

6-K 2023-08-02 For: 2023-08-02
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Added on April 10, 2026
UNITED STATES<br><br>SECURITIES AND EXCHANGE COMMISSION<br><br>Washington, D.C. 20549<br><br><br><br>___________________<br><br>Form 6-K<br><br><br><br>REPORT OF FOREIGN PRIVATE ISSUER<br><br>PURSUANT TO RULE 13a-16 OR 15d-16<br><br>OF THE SECURITIES EXCHANGE ACT OF 1934<br><br><br><br>For the month of August 2023<br><br>Commission File Number 1-32895<br><br>___________________<br><br><br><br>Obsidian Energy Ltd.<br><br>(Translation of registrant's name into English)<br><br><br><br>Suite 200, 207 – 9th Avenue SW<br>Calgary, Alberta T2P 1K3<br><br>Canada<br><br>(Address of principal executive offices)<br><br>___________________<br><br><br><br><br><br>Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.<br><br>Form 20-F  Form 40-F ☑<br><br><br><br>Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) <br><br><br><br>Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) <br><br><br><br>.

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K

See the Exhibit Index hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 2, 2023.

OBSIDIAN ENERGY LTD.
By: /s/ Stephen Loukas
Name: Stephen Loukas
Title: President and Chief Executive Officer

EXHIBIT INDEX

Exhibit Description
99.1 News Release, dated August 2, 2023
99.2 Management’s Discussion and Analysis for the three and six months ended June 30, 2023
99.3<br><br>99.4<br><br>99.5 Financial Statements for the three and six months ended June 30, 2023<br><br>Quarterly Certification of the Chief Executive Officer under Canadian law<br><br>Quarterly Certification of the Chief Financial Officer under Canadian law

EX-99.1

Exhibit 99.1

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Obsidian Energy Announces Second Quarter 2023 Results

• Generated funds flow from operations of $87.4 million during the quarter, resulting in free cash flow of $43.0 million

• Achieved robust production results from 11 new wells drilled on the western side of our Viking play, reaching an average daily peak rate per well of 293 boe/d for the program

• Enhanced liquidity with a $40.0 million increase to our syndicated credit facility, providing us additional financial flexibility

• Commenced return of capital to shareholders via the repurchase of 2.2 million shares through our buyback program to date

CALGARY, August 2, 2023 - OBSIDIAN ENERGY LTD. (TSX / NYSE American – OBE) (“Obsidian Energy”, the “Company”, “we”, “us” or “our”) is pleased to report solid operating and financial results for the second quarter of 2023.

Six months ended<br><br>June 30
2022 2023 2022
FINANCIAL1 (millions, except per share amounts)
Cash flow from operating activities 67.1 125.0 139.7 208.9
Basic per share (/share)2 0.82 1.52 1.71 2.55
Diluted per share (/share)2 0.79 1.48 1.65 2.48
Funds flow from operations3 87.4 157.0 181.7 235.6
Basic per share (/share)4 1.07 1.91 2.22 2.89
Diluted per share (/share)4 1.03 1.86 2.14 2.80
Net income 18.4 113.9 48.9 137.7
Basic per share (/share) 0.22 1.39 0.60 1.69
Diluted per share (/share) 0.22 1.35 0.58 1.64
Capital expenditures 39.5 40.3 146.6 143.7
Decommissioning expenditures 4.9 3.8 13.6 12.3
Long-term debt 275.2 334.6 275.2 334.6
Net debt3 324.3 343.0 324.3 343.0
OPERATIONS
Daily Production
Light oil (bbl/d) 12,512 12,261 12,660 11,689
Heavy oil (bbl/d) 5,356 6,174 5,797 5,982
NGL (bbl/d) 2,432 2,406 2,554 2,419
Natural gas (mmcf/d) 64 64 66 62
Total production5 (boe/d) 31,042 31,575 32,092 30,497
Average sales price2,6
Light oil (/bbl) 96.92 139.88 99.23 129.49
Heavy oil (/bbl) 61.63 106.18 52.71 95.88
NGL (/bbl) 50.45 82.93 55.10 75.51
Natural gas (/mcf) 2.56 7.38 3.33 6.21

All values are in US Dollars.

Netback (/boe)
Sales price 96.44 59.95 87.15
Risk management gain (loss) (4.66) 1.40 (5.58)
Net sales price 91.78 61.35 81.57
Royalties (15.53) (7.87) (13.53)
Net operating costs4 (14.02) (14.81) (13.98)
Transportation (3.29) (3.27) (3.04)
Netback4 (/boe) 58.94 35.40 51.02

All values are in US Dollars.

(1) We adhere to generally accepted accounting principles (“GAAP”); however, we also employ certain non-GAAP measures to analyze financial performance, financial position, and cash flow, including funds flow from operations (“FFO”), net debt, netback and net operating costs. Additionally, other financial measures are also used to analyze performance. These non-GAAP and other financial measures do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures provided by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income and cash flow from operating activities, as indicators of our performance.

(2) Supplementary financial measure. See "Non-GAAP and Other Financial Measures".

(3) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

(4) Non-GAAP financial ratio. See "Non-GAAP and Other Financial Measures".

(5) Please refer to the "Oil and Gas Information Advisory" section below for information regarding the term "boe".

(6) Before realized risk management gains/(losses).

Detailed information can be found in Obsidian Energy's unaudited interim consolidated financial statements and management's discussion and analysis ("MD&A") as at and for the three and six-month periods ended June 30, 2023 on our website at www.obsidianenergy.com, which will also be filed on SEDAR and EDGAR in due course.

KEY SECOND quarter 2023 RESULTS

Our first half 2023 drilling program was completed across our Peace River, Willesden Green, Pembina and Viking areas with all development wells on production by the end of the second quarter. Second quarter 2023 production averaged 31,042 boe/d and was impacted by approximately 2,100 boe/d of temporary production shut-ins in Peace River and Pembina because of the Alberta wildfires. Combined with significantly lower commodity prices, cash flow, FFO and net income decreased compared to the second quarter of 2022.

2023 Second Quarter Financial Highlights

• Solid Funds Flow – FFO was $87.4 million ($1.07 per basic share) for the second quarter of 2023 compared to $157.0 million ($1.91 per basic share) for the same period in 2022. Lower WTI prices of approximately US$35/bbl primarily drove the decrease, partially offset by realized hedging gains and improvements in heavy oil differentials in 2023. In addition, Alberta wildfires temporarily impacted our Peace River and Pembina operations in the second quarter, resulting in a production decrease of 2,100 boe per day and a corresponding FFO reduction of approximately $6.0 million for the period.

• Enhanced Liquidity – We successfully completed our objective of enhancing our liquidity through a $40.0 million increase to our syndicated credit facility, providing us more flexibility for our return of capital strategy. The amount available under our syndicated credit facility increased to $240.0 million from $200.0 million, with the revolving period and maturity dates remaining at May 31, 2024, and May 31, 2025, respectively. At the same time, our net debt decreased to $324.3 million at June 30, 2023, from $343.0 million at June 30, 2022.

• Commenced Share Buyback Program – In the second quarter of 2023, a total of 1,321,136 shares were repurchased and cancelled under the Company’s normal course issuer bid (“NCIB”) for proceeds of $10.5 million ($7.97 per share). Subsequent to June 30, 2023, we continued to execute our share buyback program, resulting in a total of 2,206,135 shares repurchased and cancelled for proceeds of approximately $18.2 million ($8.27 per share) to date.

• Repurchased Senior Unsecured Notes – During the second quarter of 2023, the Company repurchased $3.6 million principal amount of our senior unsecured notes for cancellation on the open market at an average price of $985.00 per $1,000.00 principal amount (initially issued at a price of $980.00 per $1,000.00 principal amount). Subsequent to June 30, 2023, an additional $0.5 million principal amount of senior unsecured notes were repurchased for cancellation at an average price of $990.00 per $1,000.00 principal amount, resulting in a total of $123.5 million of senior unsecured notes currently outstanding.

• Managed Net Operating Costs – Net operating costs were higher at $15.06 per boe in the second quarter of 2023 compared to $14.02 per boe in the second quarter of 2022. The increase was mainly due to higher power costs, lower production levels compared to the second quarter of 2022 due to the Alberta wildfires, and general inflationary pressures experienced across the industry.

• Higher G&A Costs – General and administrative (“G&A”) costs were $1.85 per boe in the second quarter of 2023 compared to $1.64 per boe in the second quarter of 2022. The continued build-out of our Peace River development team combined with the production impact of the Alberta wildfires increased G&A costs on a per boe basis; we expect G&A costs to decrease to more normalized levels for the remainder of 2023.

• Positive Net Income – Despite the impact of lower commodity prices, solid netbacks contributed to $18.4 million ($0.22 per basic share) of net income for the second quarter of 2023 compared to $113.9 million in the same period in 2022 ($1.39 per basic share).

2023 Second Quarter Operational Highlights

• Completed First Half Program – Second quarter capital expenditures focused on the completion and tie-in of new wells and were $39.5 million (2022 – $40.3 million) with decommissioning expenditures of $4.9 million (2022 – $3.8 million). In the first half of 2023, 29 (28.8 net) operated wells were drilled (including four oilsands exploration wells) and 33 (32.6 net) wells were brought on production.

• Assessed Peace River Potential – Completed analysis of the well cores gathered from our four (4.0 net) oilsands exploration (“OSE”) wells along with the results of the wells drilled at Walrus in the first quarter. This data provided valuable information that was used in the development of our second half Peace River capital program.

• Achieved Robust Viking Well Results – All 11 (11.0 net) wells were completed and placed on production on the western side of our Viking play, resulting strong initial production (“IP”) rates and an average daily peak rate per well of 293 boe/d for the program.

• Solid Cardium Returns – Completed the first half Cardium development program in Willesden Green and Pembina with strong results, while beginning a major facility debottlenecking project to increase production.

• Safely Managed Response to Alberta Wildfires – Responded to threats from Alberta wildfires in central and northern Alberta, managing operations and protecting the health and safety of our employees and their families in and around our impacted operational areas.

UPDATed 2023 GUIDANCE

Our 2023 guidance is being revised in response to the impact of Alberta wildfires on our production (~525 boe/d annualized) and expenses in the second quarter, the timing of onstream production with deferral of our Willesden Green debottlenecking project from late July to early November to take advantage of higher, hedged winter gas pricing (~200 boe/d annualized), and the shut-in of a third-party facility affecting nine of our Pembina wells (~120 boe/d annualized). We are evaluating options to bring the Pembina wells back on production. With commodity prices expected to continue at lower levels than originally anticipated in early 2023, we have updated our commodity price assumptions for the year to account for realized price to date and our August 1 to December 31 pricing assumptions of WTI US$75.00/bbl and AECO $2.50/GJ.

Our first half program provided useful information for our Peace River area, which was used to optimize our second half 2023 program and will form the basis of our multi-year Peace River development plan. Our 2023 capital expenditures have been reduced slightly with total well count of 46 (45.5 net) wells under the revised 2023 guidance compared to the previous guidance of 49 (48.2 net) wells, including the four OSE wells. Our lower commodity price forecast combined with lower production (primarily due to the wildfire impact) reduces our funds flow from operations projection.

We expect to continue to generate strong free cash flow in the remainder of 2023 (including after cash used for our share buyback program) and will remain flexible to commodity prices, adjusting our plans accordingly to continue to create value for our stakeholders. Our revised full year 2023 guidance is presented below.

2023E Guidance (Original) 2023E Guidance (Revised)
Production1 boe/d 32,000 – 33,500 31,500 – 32,500
% Oil and NGLs % 67% 66%
Capital expenditures2 $ millions 260 – 270 255 – 265
Decommissioning expenditures $ millions 26 – 28 26 – 28
Net operating costs $/boe 13.50 – 14.40 14.25 – 14.75
General & administrative $/boe 1.60 – 1.70 1.60 – 1.70
Based on midpoint of above guidance
WTI (Aug 1 – Dec 31)3 US$/bbl 80.00 75.00
WCS differential (Aug 1 – Dec 31) US$/bbl 22.50 15.00
AECO (Aug 1 – Dec 31)3 $/GJ 3.00 2.50
FFO4 $ millions ~395 ~350
FFO4 per basic share $/share 4.79 4.36
Free Cash Flow4 $ millions ~105 ~65
Net debt5 $ millions ~215 ~290
Net debt to FFO5 Times 0.5 0.8

(1) Approximate mid-point of revised guidance range: 12,400 bbl/d light oil, 6,100 bbl/d heavy oil, 2,500 bbl/d NGLs and 65.3 mmcf/d natural gas. Average production volumes include a minimal amount of forecasted production associated with exploratory capital expenditures.

(2) Capital expenditures include approximately $25 million for exploration/appraisal well activity with minimal impact on forecasted production volumes.

(3) Pricing assumptions outlined in table are forecasted for August 1, 2023, to December 31, 2023. Full year pricing assumptions, including actuals realized thus far, result in WTI US$74.90/bbl, AECO $2.91/mcf and WCS differentials of US$17.15/bbl.

(4) Guidance FFO and free cash flow (“FCF“) include risk management (hedging) adjustments up to August 1, 2023, and includes approximately $6 million of estimated charges for full year 2023 related to the deferred share units, performance share units and non-treasury incentive plan cash compensation amounts which are based on a share price of $9.00 per share. FFO per share is based on 80.3 million shares outstanding as of August 1, 2023, for revised 2023E guidance, and 82.4 million shares outstanding as of January 27, 2023, for 2023E original guidance.

(5) Net debt figures estimated as at December 31, 2023, and includes the impact of approximately $18.2 million of share purchases under the NCIB to August 1, 2023.Due to changes in the timing of our capital program, our expected working capital deficiency at December 31, 2023, increased by $15.0 million in our 2023E revised guidance.

Guidance Sensitivity Table1
Variable Range Change in 2023 FFO ($ millions)
WTI (US$/bbl) +/- $1.00/bbl 3.5
MSW light oil differential (US$/bbl) +/- $1.00/bbl 2.3
WCS heavy oil differential (US$/bbl) +/- $1.00/bbl 1.2
Change in AECO ($/GJ) +/- $0.25/GJ 0.5

(1) Includes risk management (hedging) adjustments up to July 31, 2023.

2023 update and second half development program

With most of our drilling activity for the first half development program completed in the first quarter, the second quarter focused on the completion and tie-in of new wells, planned facility turnaround maintenance, assessing data from exploratory/appraisal wells and managing operations safely in and around our operating areas and local communities due to the Alberta wildfires.

In May, a state of emergency was declared for areas in central and northern Alberta due to uncontrolled wildfires with numerous mandatory evacuation orders impacting parts of the Grande Prairie, Kaybob and Peace River regions. Some of Obsidian Energy’s operated and non-operated production was temporarily shut-in during the quarter due to wildfires, evacuation orders and third-party constraints in Peace River and Pembina. There was no significant damage to our assets due to the wildfires and all production was restored in the quarter as access to well pads permitted and power was regained to certain sites. In total, the impact of the wildfires resulted in a production decrease of approximately 2,100 boe per day with a corresponding FFO reduction of approximately $6.0 million for the period.

We are pleased with the results of our first half development and exploration/appraisal program which added production across our Peace River, Willesden Green and Viking areas. During the second quarter,

12 (12.0 net) wells were placed on production from wells drilled earlier in the year. The table below provides our wells drilled and on production by area for the first half of 2023:

H1
Operated Wells Wells Rig Released1 Wells On Production
Development:
Willesden Green (Cardium) 5 (5.0) 8 (8.0)
Pembina (Cardium / Devonian) 2 (1.8) 4 (3.6)
Peace River (Bluesky) 4 (4.0) 7 (7.0)
Viking 11 (11.0) 11 (11.0)
Total Development 22 (21.8) 30 (29.6)
Exploration/Appraisal:
Peace River (Bluesky) 2 (2.0) 2 (2.0)
Peace River (Clearwater) 1 (1.0) 1 (1.0)
OSE (Peace River) 4 (4.0) N/A
Total Exploration/Appraisal 7 (7.0) 3 (3.0)
TOTAL 29 (28.8) 33 (32.6)

(1) Rig released well totals do not include 11 wells (10.7 net) rig released in 2022 and put on production in 2023, or the eight (2.4 net) non-operated development wells participated in during the first half, one of which was a water injection well.

Our updated 2023 development and exploration/appraisal program is outlined below for wells rig released during the year:

Development<br>gross (net) wells Exploration/Appraisal<br>gross (net) wells Total<br>2023
H1 H2 Total H1 H2 Total Program
Willesden Green (Cardium) 5 (5.0) 7 (6.7) 12 (11.7) - - - 12 (11.7)
Pembina (Cardium / Devonian) 2 (1.8) 2 (2.0) 4 (3.8) - - - 4 (3.8)
Peace River (Bluesky) 4 (4.0) 5 (5.0) 9 (9.0) 2 (2.0) - 2 (2.0) 11 (11.0)
Peace River (Clearwater) - - - 1 (1.0) 3 (3.0) 4 (4.0) 4 (4.0)
Viking 11 (11.0) - 11 (11.0) - - - 11 (11.0)
TOTAL 22 (21.8) 14 (13.7) 36 (35.5) 3 (3.0) 3 (3.0) 6 (6.0) 42 (41.5)
OSE Wells - - - 4 (4.0) - 4 (4.0) 4 (4.0)
22 (21.8) 14 (13.7) 36 (35.5) 7 (7.0) 3 (3.0) 10 (10.0) 46 (45.5)
(2)<br>Three (2.9 net) wells were spud in 2022 and rig released in 2023; they are included in these totals.<br><br>(3)<br>34 (33.5 net) wells rig released in 2023 are expected to be brought on production by the end of 2023 with eight (8.0 net) wells expected in early 2024.
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Peace River

We are pleased with the results of our first half program at Peace River, which provided the first step in unlocking the additional substantial potential across our acreage and established a new development area at Walrus. During the quarter, our Peace River team analyzed the encouraging results from our first half exploration/appraisal drilling program, including the four vertical OSE wells, the Dawson 12-33 Pad well (1.0 net) and data from two other vertical peer wells drilled in the area. Placed strategically across our Peace River acreage, these wells further assessed the development potential of our extensive land base in multiple formations and was used to optimize our second half 2023 program. The data is also key to the development of our multi-year Peace River development plan and to improve future well design. We expect

to rollout a multi-year development and appraisal plan for the Bluesky and Clearwater formations in Peace River in September of 2023.

Peace River operations and production were impacted during the second quarter due to uncontrollable Alberta wildfires. To address this threat, Obsidian Energy temporarily shut-in the Peace River area fields at Harmon-Valley South (“HVS”), Seal, Walrus and Nampa periodically during the second quarter. Production was later restored but resulted in a production decrease of approximately 900 boe/d for the period.

Bluesky Development

With the completion of the first half 2023 Bluesky development program, we had seven (7.0 net) wells on production by the end of June after adding a second well to the 4-32 Pad, which offset the strong results from the three wells drilled at the HVS 6-31 Pad. Additional 30-day IP rates for the first half 2023 wells were as follows:

• 4-32 Pad - Two (2.0 net) wells were completed and are producing to permanent facilities with an average 30-day IP rate of 195 boe/d (100 percent oil) per well.

• 14-05 Pad - One (1.0 net) well is on production at an average 30-day IP rate of 60 boe/d (100 percent oil) per well, and peak rate of 172 boe/d (98 percent oil).

During the first half of 2023, the potential of our Walrus acreage was effectively delineated for future large-scale development by the drilling of two (2.0 net) exploration/appraisal wells. Located to the east of our successful HVS development field, the wells exceeded production expectations and provided key data on the Bluesky formation.

During the second quarter, Obsidian Energy focused on planned facility turnaround maintenance and prebuilt infrastructure, primarily well pads and access roads, needed for second half drilling to accelerate the addition of new well production.

In the second half of 2023, we currently plan to drill five (5.0 net) development wells targeting the Bluesky formation. Three (3.0 net) wells follow-up on the success of the Walrus 13-19 Pad exploration/appraisal well drilled during the first quarter that achieved peak production rate of 303 bbl/d (100 percent oil) and established a new development area for the Company. One (1.0 net) well at the Walrus 13-19 Pad will also test a deeper Bluesky zone. If successful, the results could add significant future well inventory and further expand our Bluesky play. The remaining two (2.0 net) wells will be drilled from existing pads in HVS and Cadotte where surface facilities are already in place. We began our second half development program drilling the first well at the HVS 4-32 Pad in July.

Clearwater Exploration/Appraisal

The core data analyzed from the OSE wells help to further delineate our land position in Peace River, providing detailed subsurface data for both Bluesky and Clearwater formations. Encouraged by these results, Obsidian Energy plans to drill three (3.0 net) exploration/appraisal wells targeting the Clearwater formation in the Dawson area. We believe there is strong potential for future development in this area.

Willesden Green

Obsidian Energy completed our first half development program at Willesden Green with all wells online, resulting in solid production additions to our core field. The final two (2.0 net) first half wells in the program at the 8-36 Crimson Pad exhibited strong results with an average 30-day IP rate of 310 boe/d (40 percent oil) per well.

Following spring break-up in the second quarter, Obsidian Energy began a major debottlenecking project in the East Crimson part of our Willesden Green area to both lower field pressures and expand facility capacity. In addition to increasing base production and reserves, this initiative will provide opportunities to accelerate new development locations. We anticipate that the project will be completed during the fourth quarter of 2023.

In the second half of 2023, we plan to drill seven (6.7 net) wells targeting the Cardium formation at Willesden Green. Three (2.7 net) wells are expected on production by the end of 2023 with the remainder in early 2024.

Pembina

During the second quarter of 2023, Obsidian Energy focused on planned facility turnaround maintenance and responding to the ongoing threat of the Alberta wildfires in the Pembina area. We temporarily shut-in approximately 11,100 boe/d of light oil weighted production in Pembina due to the wildfires, bringing it back on production by the end of the quarter. In total, the impact of the wildfires resulted in a production decrease of approximately 1,200 boe/d for the period.

We plan to drill two (2.0 net) wells in Pembina in the fourth quarter of 2023 as part of our second half development program.

Viking

Following up on the success of the 2022 step-out well on the western side of the play, we drilled and completed 11 (11.0 net) wells in our first half 2023 program by the end of April. All wells were on production in early May, showing robust average daily peak rate per well of 293 boe/d for the program, and daily cumulative rate of over 2,000 boe/d on multiple days.

The initial three (3.0 net) wells brought on production at the 4-22 Pad averaged a 30-day IP rate of 190 boe/d (87 percent light oil) per well. The four well 2-21 Pad and four well 13-16 Pad had average 30-day IP rates of 133 boe/d (86% oil) per well and 190 boe/d (75% oil) per well, respectively. Additionally, during the second quarter Obsidian Energy commissioned the new 13-16 battery in the Viking area to allow for continued growth in the expanded and delineated western region of the play.

HEDGING UPDATE

Earlier in 2023 the Company established AECO positions across 2023 and into early 2024 given our concerns on natural gas storage levels. With the recent strength in WTI prices and narrowing of WCS differentials, we put in place hedges for these commodities. In addition, we have begun to hedge power prices to help protect against their impact on net operating costs. Currently, the following contracts are in place on a weighted average basis:

Oil Contracts

Type Remaining Term Volume<br>(bbl/d) Swap Price (/bbl)
WTI Swap August 2023 4,000 bbl/d
WCS Differential July 2023 - September 2023 1,000 bbl/d
WCS Differential October – December 2023 1,500 bbl/d

All values are in US Dollars.

AECO Natural Gas Contracts

Type Term Volume<br>(mcf/d) Percentage Hedged1 Swap Price ($/mcf)
AECO Swap July 2023 – October 2023 49,929 76% 3.48
AECO Swap November 2023 – March 2024 26,588 41% 3.46

(1) Percentage calculated based on annual expected pre-royalty natural gas production of 65.3 mmcf/d (midpoint of 2023E guidance).

Electricity Contracts

Type Remaining Term Volume<br>(MWh/d) Swap Price (/MWh)
Power Swap January - December 2024 24 MWh/d

All values are in US Dollars.

SENIOR UNSECURED NOTES FREE CASH FLOW OFFER

As part of the terms of our 11.95 percent July 2027 senior unsecured notes, we are required to provide a repurchase offer (the “Offer”) on a semi-annual basis at a 103 percent of the principal amount to noteholders based on our FCF. The Offer is subject to the Company’s projected leverage and liquidity of our syndicated credit facility, which is required to be at least $60.0 million post the Offer. The FCF available for the Offer based on the results for the first six months of 2023 was $23.5 million. Based on our anticipated available liquidity, we expect to make an Offer of $5.0 million to the noteholders in early August 2023.

FCF offers to noteholders are required until $63.8 million of notes have been repurchased. The purchases made to date of $4.1 million (average price of 98.5 percent) reduce the amount of the Offer, which is now $59.7 million.

UPDATED CORPORATE PRESENTATION

For further information on these and other matters, Obsidian Energy will post an updated corporate presentation later today on our website, www.obsidianenergy.com.

ADDITIONAL READER ADVISORIES

OIL AND GAS INFORMATION ADVISORY

Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

TEST RESULTS AND INITIAL PRODUCTION RATES

Test results and initial production rates disclosed herein, particularly those short in duration, may not necessarily be indicative of long-term performance or of ultimate recovery. Readers are cautioned that short-term rates should not be relied upon as indicators of future performance of these wells and therefore should not be relied upon for investment or other purposes. A pressure transient analysis or well-test interpretation has not been carried out and thus certain of the test results provided herein should be considered preliminary until such analysis or interpretation has been completed.

NON-GAAP AND OTHER FINANCIAL MEASURES

Throughout this news release and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position, and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures provided by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income (loss) and cash flow from operating activities as indicators of our performance. The Company's unaudited consolidated financial statements and MD&A as at and for the three and six months ended June 30, 2023 are available on the Company's website at www.obsidianenergy.com and under our SEDAR profile at www.sedar.com and EDGAR profile at www.sec.gov. The disclosure under the section "Non-GAAP and Other Financial Measures" in the MD&A is incorporated by reference into this news release.

Non-GAAP Financial Measures

The following measures are non-GAAP financial measures: FFO; net debt; net operating costs; netback; and FCF. These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section "Non-GAAP and Other Financial Measures" in our MD&A for the three and six months ended June 30, 2023, for an explanation of the composition of these measures, how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.

For a reconciliation of FFO to cash flow from operating activities, being our nearest measure prescribed by IFRS, see “Non-GAAP Measures Reconciliations” below.

For a reconciliation of net debt to long-term debt, being our nearest measure prescribed by IFRS, see “Non-GAAP Measures Reconciliations” below.

For a reconciliation of net operating costs to operating costs, being our nearest measure prescribed by IFRS, see “Non-GAAP Measures Reconciliations” below.

For a reconciliation of netback to sales price, being our nearest measure prescribed by IFRS, see “Non-GAAP Measures Reconciliations” below.

For a reconciliation of FCF to cash flow from operating activities, being our nearest measure prescribed by IFRS, see “Non-GAAP Measures Reconciliations” below.

Non-GAAP Ratios

The following measures are non-GAAP ratios: FFO (basic per share ($/share) and diluted per share ($/share)), which use FFO as a component; net operating costs ($/boe), which uses net operating costs as a component; netback ($/boe), which uses netback as a component; and net debt to FFO, which uses net debt and FFO as components. These non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section "Non-GAAP and Other Financial Measures" in our MD&A for the three and six months ended June 30, 2023, for an explanation of the composition of these non-GAAP ratios, how these non-GAAP ratios provide useful information to an investor, and the additional purposes, if any, for which management uses these non-GAAP ratios.

Supplementary Financial Measures

The following measures are supplementary financial measures: average sales price; cash flow from operating activities (basic per share and diluted per share); and G&A costs ($/boe). See the disclosure under the section "Non-GAAP and Other Financial Measures" in our MD&A for the three and six months ended June 30, 2023, for an explanation of the composition of these measures.

Non-GAAP Measures Reconciliations

Cash Flow from Operating Activities, FFO and FCF

Three months ended June 30 Six months ended<br> June 30
(millions) 2023 2022 2023 2022
Cash flow from operating activities $ 67.1 $ 125.0 $ 139.7 $ 208.9
Change in non-cash working capital 13.7 26.0 20.3 8.0
Decommissioning expenditures 4.9 3.8 13.6 12.3
Onerous office lease settlements 2.2 2.3 4.5 4.6
Settlement of restricted share units - - 4.6 -
Deferred financing costs (0.6 ) (0.7 ) (1.1 ) (1.4 )
Restructuring charges1 - - - 2.5
Transaction costs - - - 0.1
Other expenses1 0.1 0.6 0.1 0.6
FFO 87.4 157.0 181.7 235.6
Capital expenditures (39.5 ) (40.3 ) (146.6 ) (143.7 )
Decommissioning expenditures (4.9 ) (3.8 ) (13.6 ) (12.3 )
Free Cash Flow $ 43.0 $ 112.9 $ 21.5 $ 79.6

(1) Excludes the non-cash portion of restructuring and other expenses.

Netback to Sales Price

Three months ended June 30 Six months ended<br> June 30
(millions) 2023 2022 2023 2022
Sales price $ 166.6 $ 277.3 $ 348.3 $ 481.3
Risk management gain (loss) 5.5 (13.4 ) 8.1 (30.8 )
Net sales price 172.1 263.9 356.4 450.5
Royalties (20.6 ) (44.7 ) (45.7 ) (74.7 )
Net operating costs (42.5 ) (40.3 ) (86.0 ) (77.2 )
Transportation (9.3 ) (9.5 ) (19.0 ) (16.8 )
Netback $ 99.7 $ 169.4 $ 205.7 $ 281.8

Net Operating Costs to Operating Costs

Three months ended June 30 Six months ended<br> June 30
(millions) 2023 2022 2023 2022
Operating costs $ 47.4 $ 43.9 $ 96.4 $ 84.2
Less processing fees (3.7 ) (2.0 ) (7.3 ) (3.9 )
Less road use recoveries (1.2 ) (1.6 ) (3.1 ) (3.1 )
Net operating costs $ 42.5 $ 40.3 $ 86.0 $ 77.2

Net Debt to Long-Term Debt

 As at
June 30
(millions) 2023 2022
Long-term debt
Syndicated credit facility $ 158.0 $ 282.1
Senior unsecured notes 124.0 -
Senior secured notes - 47.3
PROP Limited recourse loan - 5.9
Deferred interest - 0.6
Unamortized discount of senior unsecured notes (2.1 ) -
Deferred financing costs (4.7 ) (1.3 )
Total 275.2 334.6
Working capital deficiency
Cash (0.1 ) (9.2 )
Accounts receivable (69.6 ) (111.2 )
Prepaid expenses and other (17.2 ) (15.0 )
Accounts payable and accrued liabilities 136.0 143.8
Total 49.1 8.4
Net debt $ 324.3 $ 343.0

ABBREVIATIONS

Oil Natural Gas
API American Petroleum Institute mcf thousand cubic feet
bbl barrel or barrels mcf/d Thousand cubic feet per day
bbl/d barrels per day mmcf million cubic feet
boe barrel of oil equivalent mmcf/d Million cubic feet per day
boe/d barrels of oil equivalent per day bcf billion cubic feet
mmbbls million barrels NGL natural gas liquids
mmboe million barrels of oil equivalent GJ gigajoule
MSW Mixed Sweet Blend AECO Alberta benchmark price for natural gas
WTI West Texas Intermediate
WCS Western Canadian Select

FUTURE-ORIENTED FINANCIAL INFORMATION

This release contains future-oriented financial information (“FOFI”) and financial outlook information relating to the Company's prospective results of operations, operating costs, expenditures, production, FFO, FCF, net operating costs, and net debt, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth below under "Forward-Looking Statements". The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such FOFI, or if any of them do so, what benefits the Company will derive therefrom. The Company has included this FOFI to provide readers with a more complete perspective on the Company's business as of the date hereof and such information may not be appropriate for other purposes.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document constitute forward-looking statements or information (collectively “forward-looking statements”) within the meaning of the "safe harbour" provisions of applicable securities legislation. Forward-looking statements are typically identified by words such as

“anticipate”, “continue”, “estimate”, “expect”, “forecast”, “budget”, “may”, “will”, “project”, “could”, “plan”, “intend”, “should”, “believe”, “outlook”, “objective”, “aim”, “potential”, “target” and similar words suggesting future events or future performance. In addition, statements relating to “reserves” or “resources” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: that we will file the unaudited interim consolidated financial statements and MD&A on our website, SEDAR and EDGAR in due course; our updated timing for our onstream production with the deferral of the debottlenecking project; our expectations for development program completion and future development; our pricing assumptions; our expectations of G&A costs for the remainder of 2023; our updated guidance for production, production percentages, capital and decommissioning expenditures, net operating costs, G&A costs, FFO, FCF, net debt and net debt to FFO; our guidance sensitivities; our expectations for development in the Peace River area and when we plan to outline our multi-year development and appraisal plan for the area; our expected timing for the debottlenecking project; our hedges; our expectations in connection with the Offer; and our expectations for an updated corporate presentation.

With respect to forward-looking statements and FOFI contained in this document, the Company has made assumptions regarding, among other things: that the Company does not dispose of or acquire material producing properties or royalties or other interests therein other than stated herein (provided that, except where otherwise stated, the forward-looking statements and FOFI contained herein do not assume the completion of any transaction); the impact of regional and/or global health related events will not have any adverse impact on energy demand and commodity prices in the future; that the Company's operations and production will not be disrupted by circumstances attributable to the COVID-19 pandemic and the responses of governments and the public to any resurgence of the pandemic; global energy policies going forward, including the continued ability of members of OPEC, Russia and other nations to agree on and adhere to production quotas from time to time; our ability to qualify for (or continue to qualify for) new or existing government programs created as a result of the COVID-19 pandemic or otherwise, and obtain financial assistance therefrom, and the impact of those programs on our financial condition; Obsidian Energy's views with respect to its financial condition and prospects, the stability of general economic and market conditions, currency exchange rates and interest rates, the availability of cash or other financing sources to fund for repurchases of common shares under the NCIB and our ability to comply with applicable terms and conditions under the Company’s debt agreements, the existence of alternative uses for Obsidian Energy's cash resources and compliance with applicable laws and regulations (including Canadian and U.S. securities laws and Canadian corporate law) pertaining to the NCIB; our ability to execute our plans as described herein and in our other disclosure documents and the impact that the successful execution of such plans will have on our Company and our stakeholders; future capital expenditure and decommissioning expenditure levels; future net operating costs and G&A costs; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future hedging activities; future crude oil, natural gas liquids and natural gas production levels, including that we will not be required to shut-in production due to low commodity prices or the further deterioration of commodity prices; future exchange rates and interest rates; future debt levels; our ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including extreme weather events, wild fires, infrastructure access and delays in obtaining regulatory approvals and third party consents; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully to current and new customers; our ability to obtain financing on acceptable terms, including our ability (if necessary) to continue to extend the revolving period and term out period of our credit facility, our ability to maintain the existing borrowing base under our credit facility, our ability (if necessary) to replace our syndicated bank facility and our ability (if necessary) to finance the repayment of our senior unsecured notes on maturity or pursuant to the terms of the underlying agreement; and our ability to add production and reserves through our development and exploitation activities.

Although the Company believes that the expectations reflected in the forward-looking statements and FOFI contained in this document, and the assumptions on which such forward-looking statements and FOFI are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements and FOFI included in this document, as there can be no assurance that the plans, intentions or expectations upon which the

forward-looking statements are based will occur. By their nature, forward-looking statements and FOFI involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the forward-looking statements and FOFI contained herein will not be correct, which may cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements and FOFI. These risks and uncertainties include, among other things: our inability to repurchase common shares under the NCIB in the amounts permitted or at all due to a lack of financial resources, the inability to comply with our debt agreements, legal restrictions on share repurchases, competing demands for our financial resources, or other factors; the anticipated benefits of repurchasing our shares under the NCIB do not materialize; Obsidian Energy's future capital requirements; general economic and market conditions; demand for Obsidian Energy's products; and unforeseen legal or regulatory developments and other risk factors detailed from time to time in Obsidian Energy reports filed with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission; the possibility that we change our 2023 budget in response to internal and external factors, including those described herein; the possibility that the Company will not be able to continue to successfully execute our business plans and strategies in part or in full, and the possibility that some or all of the benefits that the Company anticipates will accrue to our Company and our stakeholders as a result of the successful execution of such plans and strategies do not materialize; the possibility that the Company is unable to complete one or more of the potential transactions being pursued, on favorable terms or at all; the possibility that the Company ceases to qualify for, or does not qualify for, one or more existing or new government assistance programs implemented in connection regional and/or global health related events or otherwise, that the impact of such programs falls below our expectations, that the benefits under one or more of such programs is decreased, or that one or more of such programs is discontinued; the impact on energy demand and commodity prices of regional and/or global health related events, and the responses of governments and the public to any pandemic, including the risk that the amount of energy demand destruction and/or the length of the decreased demand exceeds our expectations; the risk that there is another significant decrease in the valuation of oil and natural gas companies and their securities and the decrease in confidence in the oil and natural gas industry generally whether caused by a resurgence of the COVID-19 pandemic, the worldwide transition towards less reliance on fossil fuels and/or other factors; the risk that the financial capacity of the Company's contractual counterparties is adversely affected and potentially their ability to perform their contractual obligations; the possibility that the revolving period and/or term out period of our credit facility and the maturity date of our senior unsecured notes is not further extended (if necessary), that the borrowing base under our credit facility is reduced, that the Company is unable to renew or refinance our credit facilities on acceptable terms or at all and/or finance the repayment of our senior unsecured notes when they mature on acceptable terms or at all and/or obtain new debt and/or equity financing to replace one or all of our credit facilities and senior unsecured notes; the possibility that we breach one or more of the financial covenants pursuant to our agreements with our lenders and the holders of our senior unsecured notes; the possibility that we are unable to complete the Offer with our noteholders; the possibility that we are forced to shut-in production, whether due to commodity prices failing to rise or other factors; the risk that OPEC and other nations fail to agree on and/or adhere to production quotas from time to time that are sufficient to balance supply and demand fundamentals for crude oil; general economic and political conditions in Canada, the U.S. and globally, and in particular, the effect that those conditions have on commodity prices and our access to capital; industry conditions, including fluctuations in the price of crude oil, natural gas liquids and natural gas, price differentials for crude oil and natural gas produced in Canada as compared to other markets, and transportation restrictions, including pipeline and railway capacity constraints; fluctuations in foreign exchange or interest rates; unanticipated operating events or environmental events that can reduce production or cause production to be shut-in or delayed (including extreme cold during winter months, wild fires and flooding); the possibility that fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to hydrocarbons and technological advances in fuel economy and renewable energy generation systems could permanently reduce the demand for oil and natural gas and/or permanently impair the Company's ability to obtain financing on acceptable terms or at all, and the possibility that some or all of these risks are heightened as a result of the response of governments and consumers to the ongoing COVID-19 pandemic. Additional information on these and other factors that could affect Obsidian Energy, or its operations or financial results, are included in the Company's Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) which may be accessed through the SEDAR website (www.sedar.com), EDGAR website (www.sec.gov) or

Obsidian Energy's website. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

Unless otherwise specified, the forward-looking statements and FOFI contained in this document speak only as of the date of this document. Except as expressly required by applicable securities laws, we do not undertake any obligation to publicly update or revise any forward-looking statements. The forward-looking statements and FOFI contained in this document are expressly qualified by this cautionary statement.

Obsidian Energy shares are listed on both the Toronto Stock Exchange in Canada and the NYSE American in the United States under the symbol "OBE".

All figures are in Canadian dollars unless otherwise stated.

contact

OBSIDIAN ENERGY

Suite 200, 207 - 9th Avenue SW, Calgary, Alberta T2P 1K3

Phone: 403-777-2500

Toll Free: 1-866-693-2707

Website: www.obsidianenergy.com;

Investor Relations:

Toll Free: 1-888-770-2633

E-mail: investor.relations@obsidianenergy.com

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three and six months ended June 30, 2023

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) of Obsidian Energy Ltd. (“Obsidian Energy”, the “Company”, “we”, “us”, “our”) should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2023 and the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2022. The date of this MD&A is August 1, 2023. All dollar amounts contained in this MD&A are expressed in millions of Canadian dollars unless noted otherwise.

Throughout this MD&A and in other materials disclosed by the Company, we adhere to generally accepted accounting principles ("GAAP"), however the Company also employs certain non-GAAP measures to analyze financial performance, financial position, and cash flow, including funds flow from operations, netback, sales, gross revenues, net operating costs, net debt and free cash flow. Additionally, other financial measures are also used to analyze performance. These non-GAAP and other financial measures do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures provided by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income and cash flow from operating activities, as indicators of our performance.

This MD&A also contains oil and natural gas information and forward-looking statements. Please see the Company's disclosure under the headings "Non-GAAP and Other Financial Measures", "Oil and Natural Gas Information", and "Forward-Looking Statements" included at the end of this MD&A.

Quarterly Financial Summary

(millions, except per share and production amounts) (unaudited)

Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
Three months ended 2023 2023 2022 2022 2022 2022 2021 2021
Production revenues $ 166.0 $ 180.9 $ 206.5 $ 210.6 $ 276.5 $ 203.7 $ 149.8 $ 124.5
Cash flow from operating activities 67.1 72.6 126.5 121.4 125.0 83.9 62.6 65.5
Basic per share (1) 0.82 0.89 1.54 1.48 1.52 1.03 0.81 0.88
Diluted per share (1) 0.79 0.87 1.50 1.44 1.48 1.00 0.78 0.85
Funds flow from operations (2) 87.4 94.3 110.5 104.6 157.0 78.6 80.0 59.3
Basic per share (3) 1.07 1.15 1.34 1.27 1.91 0.97 1.04 0.79
Diluted per share (3) 1.03 1.12 1.31 1.24 1.86 0.94 1.00 0.77
Net income 18.4 30.5 631.7 40.7 113.9 23.8 21.7 46.6
Basic per share 0.22 0.37 7.69 0.50 1.39 0.29 0.28 0.62
Diluted per share $ 0.22 $ 0.36 $ 7.47 $ 0.48 $ 1.35 $ 0.28 $ 0.27 $ 0.60
Production
Light oil (bbl/d) 12,512 12,809 12,105 11,062 12,261 11,114 11,155 10,314
Heavy oil (bbl/d) 5,356 6,241 5,983 5,854 6,174 5,789 3,237 2,688
NGLs (bbl/d) 2,432 2,678 2,520 2,379 2,406 2,432 2,310 2,213
Natural gas (mmcf/d) 64 69 67 64 64 60 58 54
Total (boe/d)(4) 31,042 33,153 31,742 29,985 31,575 29,407 26,352 24,164

(1) Supplementary financial measure. See "Non-GAAP and Other Financial Measures".

(2) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

(3) Non-GAAP financial ratio. See "Non-GAAP and Other Financial Measures".

(4) Disclosure of production on a per boe basis in this MD&A consists of the constituent product types and their respective quantities. See also "Supplemental Production Disclosure" and "Oil and Natural Gas Information".

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 1

Cash flow from Operating Activities, Funds Flow from Operations and Free Cash Flow

Three months ended<br>June 30 Six months ended<br>June 30
(millions, except per share amounts) 2023 2022 2023 2022
Cash flow from operating activities $ 67.1 $ 125.0 $ 139.7 $ 208.9
Change in non-cash working capital 13.7 26.0 20.3 8.0
Decommissioning expenditures 4.9 3.8 13.6 12.3
Onerous office lease settlements 2.2 2.3 4.5 4.6
Settlement of restricted share units - - 4.6 -
Deferred financing costs (0.6 ) (0.7 ) (1.1 ) (1.4 )
Restructuring charges (1) - - - 2.5
Transaction costs - - - 0.1
Other expenses (1) 0.1 0.6 0.1 0.6
Funds flow from operations (2) 87.4 157.0 181.7 235.6
Capital expenditures (39.5 ) (40.3 ) (146.6 ) (143.7 )
Decommissioning expenditures (4.9 ) (3.8 ) (13.6 ) (12.3 )
Free Cash Flow (2) $ 43.0 $ 112.9 $ 21.5 $ 79.6
Per share – funds flow from operations (3)
Basic per share $ 1.07 $ 1.91 $ 2.22 $ 2.89
Diluted per share $ 1.03 $ 1.86 $ 2.14 $ 2.80

(1) Excludes the non-cash portion of restructuring and other expenses.

(2) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

(3) Non-GAAP financial ratio. See "Non-GAAP and Other Financial Measures".

Cash flow from operating activities and funds flow from operations decreased in both periods in 2023 from 2022 primarily due to lower commodity prices which resulted in lower production revenues. This was partially offset by higher production in Q1 2023 than in the first two quarters of 2022 and realized hedging gains in both periods in 2023 compared to realized hedging losses in both periods in 2022. In Q2 2023, production volumes were reduced by approximately 2,100 boe per day due to temporary shut-ins throughout May as a result of the wildfires in Alberta. These fires impacted our Cardium and Peace River operations and resulted in a reduction in funds flow from operations of approximately $6 million in Q2 2023. All production was restored by early June.

Business Strategy

Our strategy is focused on maintaining moderate production growth, operational excellence, improving our debt leverage and delivering top quartile total shareholder returns, including through a return of capital initiative to shareholders. We believe our plan to focus development activity primarily on our Cardium, Peace River and Viking assets will generate value for all stakeholders. Our industry leading Cardium position with a deep inventory of high return wells offers a predictable, light oil weighted, production profile that is capable of generating growth and sustainable free cash flow. Over the past two years our development success in Peace River, combined with our substantial land position in the area, results in an asset base with compelling Bluesky development and significant Clearwater potential for future heavy oil production growth and cash flow generation, offering further value for stakeholders. Additionally, we have been active in our Viking area which provides the Company with further light oil weighted opportunities with highly economic returns.

We plan to continue to decrease debt levels as we focus on meeting our absolute debt targets. With a stable debt structure that currently provides appropriate operational liquidity and a longer-term maturity profile, the Company anticipates being well positioned to continue developing our strong portfolio of assets while being able to act on new opportunities to our shareholders’ benefit.

During Q2 2023, we began our share buyback program under our normal course issuer bid (“NCIB”) and have re-purchased and cancelled 2,206,135 common shares for total consideration of approximately $18.2 million in 2023. Purchases under the NCIB are subject to having $65 million of liquidity and complying with the terms of our current credit facilities.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 2

In 2023, the Company has continued to progress on our environmental remediation efforts, with a focus on abandoning and reclaiming inactive fields in Northern Alberta. Currently, we anticipate spending between $26 - $28 million on our decommissioning expenditures in 2023.

Business Environment

The following table outlines quarterly averages for benchmark prices and Obsidian Energy’s realized prices for the previous eight quarters.

Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021
Benchmark prices
WTI oil (US/bbl) 73.78 $ 76.13 $ 82.65 $ 91.55 $ 108.41 $ 94.29 $ 77.19 $ 70.56
Edm mixed sweet par price (CAD/bbl) 95.12 99.06 110.03 116.88 137.76 115.64 93.36 83.77
Western Canada Select (CAD/bbl) 78.89 69.44 77.38 93.62 122.06 100.99 78.82 71.80
NYMEX Henry Hub (US/mmbtu) 2.10 3.42 6.26 8.20 7.17 4.95 5.83 4.01
AECO 5A Index (CAD/mcf) 2.45 3.22 5.11 4.16 7.24 4.74 4.66 3.60
Foreign exchange rate (US/CAD) 1.34 1.35 1.35 1.31 1.28 1.27 1.26 1.26
Benchmark differentials
WTI - Edm Light Sweet (US/bbl) (2.96 ) (2.86 ) (1.61 ) (2.05 ) (0.50 ) (2.96 ) (3.10 ) (4.08 )
WTI - WCS Heavy (US/bbl) (15.04 ) (24.77 ) (25.66 ) (19.86 ) (12.80 ) (14.53 ) (14.64 ) (13.58 )
Average sales price (1) (2)
Light oil (CAD/bbl) 96.92 101.51 110.45 118.66 139.88 117.91 92.55 84.27
Heavy oil (CAD/bbl) 61.63 44.98 62.19 81.78 106.18 84.77 51.76 60.87
NGLs (CAD/bbl) 50.45 59.37 64.33 69.12 82.93 68.09 59.46 52.79
Total liquids (CAD/bbl) 82.04 80.08 90.80 101.36 123.32 101.72 80.07 75.55
Natural gas (CAD/mcf) 2.56 $ 4.06 $ 5.66 $ 5.31 $ 7.38 $ 4.96 $ 5.05 $ 3.89

All values are in US Dollars.

(1) Excludes the impact of realized hedging gains or losses.

(2) Supplementary financial measures. See "Non-GAAP and Other Financial Measures".

Oil

WTI prices settled at US$79.44 per bbl in April before decreasing throughout the balance of the quarter, averaging US$70.27 per bbl in June, which resulted in an average of US$73.78 per bbl for Q2 2023. The decrease in pricing throughout the quarter was mainly due to global recession concerns and its implied impact on oil demand which more than offset announced production cuts from OPEC+.

In Q2 2023, WCS differentials significantly improved with some oil sands production offline for maintenance and averaged US$15.04 per bbl for the quarter compared to US$24.77 per bbl in Q1 2023. The MSW differential was relatively flat quarter over quarter, settling at a US$2.96 per bbl differential to WTI.

The Company currently has the following oil hedging contracts in place on a weighted average basis:

Type Volume <br>(bbls/d) Remaining<br>Term Swap Price <br>(bbl)
WTI Swap 4,000 August 2023 US$78.64
WCS Differential 1,000 July 2023 - September 2023 CAD$(21.72)
WCS Differential 1,500 October 2023 - December 2023 CAD$(21.20)

Natural Gas

NYMEX Henry Hub prices were volatile throughout Q2 2023 and were impacted by strong early storage builds and fluctuating weather related demand. Prices started at US$2.09 per mmbtu, then reached a low of US$1.74 per mmbtu which shifted to a high of US$2.71 per mmbtu in late June. The average NYMEX Henry Hub price settled at US$2.10 per mmbtu for Q2 2023 down from Q1 2023.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 3

In Alberta, AECO 5A started Q2 2023 at $2.71 per mcf. Strong TC Energy field receipts and high early storage builds caused prices to decline to a low for the quarter of $2.06 per mcf in early May. However, in mid-May prices increased to a high of $3.18 per mcf due to the impact of the Alberta wildfires and the resultant temporary production restrictions combined with lower storage injections. AECO 5A prices for the quarter averaged $2.45 per mcf.

The Company currently has the following natural gas hedging contracts in place on a weighted average basis:

Type Volume <br>(mcf/d) Remaining<br>Term Swap Price (C/mcf)
AECO Swap 49,929 July 2023 - October 2023
AECO Swap 26,588 November 2023 - March 2024

All values are in US Dollars.

RESULTS OF OPERATIONS

Average Sales Prices (1)

Three months ended<br>June 30 Six months ended<br>June 30
2023 2022 % <br>change 2023 2022 % <br>change
Light oil (per bbl) $ 96.92 $ 139.88 (31 ) $ 99.23 $ 129.49 (23 )
Heavy oil (per bbl) 61.63 106.18 (42 ) 52.71 95.88 (45 )
NGL (per bbl) 50.45 82.93 (39 ) 55.10 75.51 (27 )
Total liquids (per bbl) 82.04 123.32 (33 ) 81.03 112.98 (28 )
Realized risk management gain (loss) (per bbl) 0.15 (5.04 ) n/a 0.07 (7.45 ) n/a
Total liquids price, net (per bbl) 82.19 118.28 (31 ) 81.10 105.53 (23 )
Natural gas (per mcf) 2.56 7.38 (65 ) 3.33 6.21 (46 )
Realized risk management gain (loss) (per mcf) 0.89 (0.65 ) n/a 0.65 (0.33 ) n/a
Natural gas net (per mcf) 3.45 6.73 (49 ) 3.98 5.88 (32 )
Weighted average (per boe) 58.97 96.44 (39 ) 59.95 87.15 (31 )
Realized risk management gain (loss) (per boe) 1.94 (4.66 ) n/a 1.40 (5.58 ) n/a
Weighted average net (per boe) $ 60.91 $ 91.78 (34 ) $ 61.35 $ 81.57 (25 )

(1) Supplementary financial measures. See "Non-GAAP and Other Financial Measures".

Production

Three months ended<br>June 30 Six months ended<br>June 30
Daily production 2023 2022 % <br>change 2023 2022 % <br>change
Light oil (bbl/d) 12,512 12,261 2 12,660 11,689 8
Heavy oil (bbl/d) 5,356 6,174 (13 ) 5,797 5,982 (3 )
NGL (bbl/d) 2,432 2,406 1 2,554 2,419 6
Natural gas (mmcf/d) 64 64 - 66 62 6
Total production (boe/d) 31,042 31,575 (2 ) 32,092 30,497 5
OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 4
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In Q2 2023, production levels decreased from Q2 2022, mainly due to temporary production shut-ins associated with the Alberta wildfires which reduced our average production for Q2 2023 by approximately 2,100 boe per day. For the first six months of 2023, the Company’s production levels increased compared to 2022 due to the Company’s active development program and strong drilling results partially offset by the wildfire impacts. During the first six months of 2023, the Company brought on production 33 wells (32.6 net) across our Cardium, Peace River and Viking areas.

Average production within the Company’s key development areas and within the Company’s Legacy asset area were as follows:

Three months ended<br>June 30 Six months ended<br>June 30
Daily production (boe/d) (1) 2023 2022 %<br>change 2023 2022 %<br>change
Cardium 22,721 23,454 (3 ) 23,605 22,669 4
Peace River 5,920 6,964 (15 ) 6,400 6,718 (5 )
Viking 2,101 729 188 1,686 710 137
Legacy 300 428 (30 ) 401 400 -
Total 31,042 31,575 (2 ) 32,092 30,497 5

(1) Refer to “Supplemental Production Disclosure” for details by product type.

Netbacks

Three months ended June 30
(per boe) 2023 2022
Netback:
Sales price (1) $ 58.97 $ 96.44
Risk management gain (loss) (2) 1.94 (4.66 )
Royalties (7.30 ) (15.53 )
Transportation (3.28 ) (3.29 )
Net operating costs (3) (15.06 ) (14.02 )
Netback (3) $ 35.27 $ 58.94
(boe/d) (boe/d)
Production 31,042 31,575

(1) Includes the impact of commodities purchased and sold to/from third parties of $0.6 million (2022 – $0.8 million).

(2) Realized risk management gains and losses on commodity contracts, including the PROP Energy 45 Limited Partnership hedges in 2022.

(3) Non-GAAP financial ratios. See "Non-GAAP and Other Financial Measures".

Six months ended June 30
(per boe) 2023 2022
Netback:
Sales price (1) $ 59.95 $ 87.15
Risk management gain (loss) (2) 1.40 (5.58 )
Royalties (7.87 ) (13.53 )
Transportation (3.27 ) (3.04 )
Net operating costs (3) (14.81 ) (13.98 )
Netback (3) $ 35.40 $ 51.02
(boe/d) (boe/d)
Production 32,092 30,497

(1) Includes the impact of commodities purchased and sold to/from third parties of $1.4 million (2022 – $1.1 million).

(2) Realized risk management gains and losses on commodity contracts, including the PROP Energy 45 Limited Partnership hedges in 2022.

(3) Non-GAAP financial ratios. See "Non-GAAP and Other Financial Measures".

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 5

The Company's netback decreased in 2023 from the comparable periods in 2022 primarily due to lower commodity prices. This was partially offset by decreased royalties due to lower commodity prices and a realized risk management gain on our commodity contracts in 2023.

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Netback:
Sales (1) (2) $ 166.6 $ 277.3 $ 348.3 $ 481.3
Risk management gain (loss) (3) 5.5 (13.4 ) 8.1 (30.8 )
Royalties (20.6 ) (44.7 ) (45.7 ) (74.7 )
Transportation (9.3 ) (9.5 ) (19.0 ) (16.8 )
Net operating costs (2) (42.5 ) (40.3 ) (86.0 ) (77.2 )
Netback (2) $ 99.7 $ 169.4 $ 205.7 $ 281.8

(1) Includes the impact of commodities purchased and sold to/from third parties of $0.6 million (2022 – $0.8 million) for the second quarter of 2023 and $1.4 million (2022 – $1.1 million) for the first six months of 2023.

(2) Non-GAAP financial measures. See "Non-GAAP and Other Financial Measures".

(3) Realized risk management gains and losses on commodity contracts.

Production Revenues

A reconciliation from production revenues to gross revenues is as follows:

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Production revenues $ 166.0 $ 276.5 $ 346.9 $ 480.2
Sales of commodities purchased from third parties 4.5 3.7 9.9 6.8
Less: Commodities purchased from third parties (3.9 ) (2.9 ) (8.5 ) (5.7 )
Sales (1) 166.6 277.3 348.3 481.3
Realized risk management gain (loss) (2) 5.5 (13.4 ) 8.1 (30.8 )
Gross revenues (1) $ 172.1 $ 263.9 $ 356.4 $ 450.5

(1) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

(2) Relates to realized risk management gains and losses on commodity contracts.

The Company's production revenues and gross revenues were lower in the 2023 periods compared to the comparable periods in 2022, due to lower commodity prices. This was partially offset by higher production volumes from our active development program, less temporary wildfire impacts, and realized risk management gains in the 2023 periods compared to realized risk management losses in the 2022 comparable periods.

Change in Gross Revenues (1)

(millions)
Gross revenues – January 1 – June 30, 2022 $ 450.5
Increase in liquids production 20.8
Decrease in liquids prices (123.8 )
Increase in natural gas production 4.6
Decrease in natural gas prices (34.7 )
Increase in realized oil risk management gain 27.4
Increase in realized natural gas risk management gain 11.6
Gross revenues – January 1 – June 30, 2023 (2) $ 356.4

(1) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

(2) Excludes processing fees and other income.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 6

Royalties

Three months ended<br>June 30 Six months ended<br>June 30
2023 2022 2023 2022
Royalties (millions) $ 20.6 $ 44.7 $ 45.7 $ 74.7
Average royalty rate (1) 12 % 16 % 13 % 16 %

(1) Excludes effects of risk management activities and other income.

For the 2023 periods, both absolute royalties and the average royalty rate decreased from the comparable 2022 periods largely due to lower commodity prices.

Expenses

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Net operating (1) $ 42.5 $ 40.3 $ 86.0 $ 77.2
Transportation 9.3 9.5 19.0 16.8
Financing 12.9 10.5 24.6 20.3
Share-based compensation $ 0.9 $ 0.8 $ 3.1 $ 24.9

(1) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

Operating

A reconciliation of operating costs to net operating costs is as follows:

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Operating costs $ 47.4 $ 43.9 $ 96.4 $ 84.2
Less processing fees (3.7 ) (2.0 ) (7.3 ) (3.9 )
Less road use recoveries (1.2 ) (1.6 ) (3.1 ) (3.1 )
Net operating costs (1) $ 42.5 $ 40.3 $ 86.0 $ 77.2

(1) Non-GAAP financial measure. See “Non-GAAP and Other Financial Measures”.

Operating costs have increased in the 2023 periods compared to the 2022 periods due to higher power costs, increased power usage with a higher production base and general inflationary pressures experienced across the industry.

Transportation

The Company continues to utilize multiple sales points in the Peace River area to increase realized prices. New wells drilled in the Peace River area over the past year resulted in higher production and thus higher transportation costs in the first six months of 2023 compared to the first six months of 2022.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 7

Financing

Financing expense consists of the following:

Three months ended June 30 Six months ended June 30
(millions) 2023 2022 2023 2022
Interest $ 7.4 $ 7.1 $ 13.7 $ 13.4
Accretion on decommissioning liability 4.4 2.5 8.8 5.0
Accretion on office lease provision 0.2 0.4 0.5 0.8
Accretion on other non-current liability - 0.1 - 0.2
Accretion on discount of senior unsecured notes 0.1 - 0.2 -
Accretion on lease liabilities 0.1 0.1 0.2 0.2
Loss on repurchased senior unsecured notes 0.1 - 0.1 -
Deferred financing costs 0.6 0.7 1.1 1.4
Debt modification - (0.4 ) - (0.7 )
Financing $ 12.9 $ 10.5 $ 24.6 $ 20.3

Obsidian Energy’s debt structure includes short-term borrowings under our syndicated credit facility and term financing through our senior unsecured notes. Interest charges were higher in the 2023 periods compared to the 2022 periods as higher interest rates under the Company’s current debt agreements more than offset lower balances under our syndicated credit facility.

The Company has a reserve-based syndicated credit facility which is subject to a semi-annual borrowing base redetermination. The aggregate amount available under the syndicated credit facility is $240.0 million which was increased in May 2023, previously $200.0 million, as an additional lender was added to our syndicate. The syndicated credit facility is subject to semi-annual borrowing base redetermination typically in May and November of each year and currently has a revolving period to May 31, 2024 and a maturity date of May 31, 2025.

At June 30, 2023, the Company had senior unsecured notes outstanding totaling $124.0 million which mature on July 27, 2027. During Q2 2023, the Company re-purchased for cancellation $3.6 million principal amount of senior unsecured notes on the open market at an average price of $985.00 per $1,000.00 principal amount. The senior unsecured notes were initially issued at a price of $980.00 per $1,000.00 principal amount resulting in aggregate gross proceeds of $125.0 million and at an interest rate of 11.95 percent. The senior unsecured notes are direct senior unsecured obligations of Obsidian Energy ranking equal with all other present and future senior unsecured indebtedness of the Company. Subsequent to June 30, 2023, the Company re-purchased for cancellation an additional $0.5 million principal amount of senior unsecured notes at an average price of $990.00 per $1,000.00 principal amount.

As part of the terms of the senior unsecured notes, the Company is required to provide a repurchase offer in certain circumstances to an aggregate amount of $63.8 million (the "Repurchase Offer"), based on free cash flow for the six months ended June 30 (typically offered in August) and based on free cash flow for the six months ended December 31 (typically offered in March). Minimum available liquidity thresholds and projected leverage ratios under the Company's syndicated credit facilities are also required to be met in order to proceed with a Repurchase Offer. The free cash flow available for the Repurchase Offer for the first six months of 2023 was $23.5 million, however the Company is anticipating that $5.0 million will be available for the Repurchase Offer in August 2023, based on current liquidity estimates. This amount was recorded within the current portion of long-term debt at June 30, 2023.

At June 30, 2023, letters of credit totaling $4.9 million were outstanding (December 31, 2022 – $5.1 million) that reduce the amount otherwise available to be drawn on our syndicated credit facility.

Share-Based Compensation

Share-based compensation expense relates to the Company's Stock Option Plan (the “Option Plan”), restricted shares units (“RSUs") granted under the Restricted and Performance Share Unit Plan (“RPSU plan”), restricted awards granted under the Non-Treasury Incentive Award Plan (“NTIP”), Deferred Share Unit Plan (“DSU plan”) and performance share units (“PSUs”) granted under the RPSU plan.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 8

Share-based compensation expense consisted of the following:

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
DSUs $ (1.4 ) $ (1.2 ) $ (2.1 ) $ 10.9
PSUs 0.1 0.6 0.5 6.6
NTIP 0.2 0.4 0.6 5.0
Cash settled share-based incentive plans $ (1.1 ) $ (0.2 ) $ (1.0 ) $ 22.5
RSUs $ 1.7 $ 0.8 $ 3.5 $ 1.6
Options 0.3 0.2 0.6 0.8
Equity settled share-based incentive plans 2.0 1.0 4.1 2.4
Share-based compensation $ 0.9 $ 0.8 $ 3.1 $ 24.9

The change in share price at the balance sheet date results in a mark-to-market valuation which is used to calculate the PSU, DSU and NTIP future obligations. On June 30, 2023, the Company's share price closed at $7.75 per share (2022 - $9.94 per share), which resulted in a lower expense.

General and Administrative Expenses ("G&A")

Three months ended<br>June 30 Six months ended<br>June 30
(millions, except per boe amounts) 2023 2022 2023 2022
Gross $ 9.7 $ 8.6 $ 19.1 $ 16.2
Per boe (1) 3.43 2.98 3.28 2.94
Net 5.2 4.8 10.0 8.9
Per boe (1) $ 1.85 $ 1.64 $ 1.72 $ 1.60

(1) Supplementary financial measure. See “Non-GAAP and Other Financial Measures”.

The Company increased staffing levels in 2022 to align with our higher activity level and expanded capital program which has contributed to higher absolute G&A costs in the 2023 periods compared to the 2022 periods. Additionally, in 2023, general inflationary pressures have continued to impact G&A. The impact of the Alberta wildfires during Q2 2023 reduced production levels which impacted G&A on a per boe basis.

Restructuring and other expenses

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Restructuring $ - $ - $ - $ 2.5
Other $ 0.1 $ 0.6 $ 0.1 $ 0.6

Restructuring expenses in 2022 included severance charges as well as the acceleration of certain expenses under the RPSU plan due to staff changes.

Depletion, Depreciation and Impairment

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Depletion and depreciation (“D&D”) $ 50.9 $ 42.7 $ 102.5 $ 82.8
PP&E Impairment (reversal) $ 0.4 $ (0.6 ) $ 0.5 $ 10.7
OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 9
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The Company’s D&D expense increased in the 2023 periods from the 2022 periods, primarily due to higher production and non-cash impairment reversal charges recorded in 2022 in our Cardium cash generating unit (“CGU”), which increased the depletable base. These impairment reversals were recorded mainly due to the improved commodity price environment and our expanded capital program which increased reserve volumes.

For the first six months of 2023, we recorded a $0.5 million impairment in our Legacy CGU due to decommissioning spending in the area. The Legacy CGU has no recoverable amount, as such changes in our decommissioning liability are expensed each period.

Taxes

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Deferred income tax expense $ 6.2 $ - $ 15.9 $ -

In 2022, the Company recorded a $246.4 million deferred income tax asset as we determined that it was probable that the asset would be utilized. For the first six months of 2023, the Company generated income and utilized $15.9 million of the deferred income tax asset which led to the deferred income tax expense.

Net Income

Three months ended<br>June 30 Six months ended<br>June 30
(millions, except per share amounts) 2023 2022 2023 2022
Net income $ 18.4 $ 113.9 $ 48.9 $ 137.7
Basic per share 0.22 1.39 0.60 1.69
Diluted per share $ 0.22 $ 1.35 $ 0.58 $ 1.64

In the 2023 periods, net income was the result of the Company's strong netback and higher production in Q1. This was partially offset by lower commodity prices compared to 2022, and increased depletion and depreciation expenses. The Company also recorded a non-cash deferred income tax expense in the 2023 periods due to the recognition of a deferred income tax asset in 2022 in conjunction with our significant tax pool position.

In the 2022 periods, net income was the result of the Company's strong netback, predominantly due to higher commodity prices and strong production levels. This was partially offset by increased depletion and depreciation expenses and higher share-based compensation charges as a result of the Company's significant share price appreciation during the first six months of 2022.

Capital Expenditures

Three months ended<br>June 30 Six months ended<br>June 30
(millions) 2023 2022 2023 2022
Drilling and completions $ 12.1 $ 20.0 $ 88.8 $ 87.8
Well equipping and facilities 26.5 19.9 54.6 41.7
Land and geological/geophysical - - 1.9 13.7
Corporate 0.9 0.4 1.3 0.5
Capital expenditures 39.5 40.3 $ 146.6 $ 143.7
Property acquisitions, net 0.1 0.3 0.1 0.3
Total $ 39.6 $ 40.6 $ 146.7 $ 144.0

In the first six months of 2023, we completed an active development program with five rigs utilized across our Cardium, Peace River and Viking plays. During the first six months of 2023, we brought on 33 (32.6 net) wells which included 12 (11.6 net) wells in the Cardium, 10 (10.0 net) wells in Peace River, and 11 (11.0 net) wells in the Viking.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 10

Drilling

Six months ended June 30
2023 2022
(number of wells) Gross Net Gross Net
Oil 32 27 33 30
Injectors, stratigraphic and service 5 4 - -
Total 37 31 33 30

The Company drilled 29 (28.8 net) operated wells during the first six months of 2023. In addition, the Company had a minor non-operated working interest on 8 (2.4 net) wells that were drilled by various partners during the period.

Environmental and Climate Change

The oil and natural gas industry has a number of environmental risks and hazards and is subject to regulation by all levels of government. Environmental legislation includes, but is not limited to, operational controls, site rehabilitation requirements and restrictions on emissions of various substances produced in association with oil and natural gas operations. Compliance with such legislation is expected to require additional expenditures and a failure to comply may result in fines and penalties which could, in the aggregate and under certain assumptions, become material.

Obsidian Energy is dedicated to our environmental, social and governance ("ESG") initiatives to manage the environmental impact from our operations through our environmental programs which include resource conservation, water management and site abandonment/ reclamation/ remediation. Operations are continuously monitored to minimize our environmental impact and allocate sufficient capital to reclamation and other activities to mitigate the impact on the areas in which the Company operates. Obsidian Energy voluntarily entered into the Government of Alberta’s Area Based Closure program (the "ABC program") which allowed the Company to accelerate abandonment activities, specifically on inactive properties, in a more cost-effective manner through 2020 and 2021. Beginning in 2022, the Company follows the new Alberta Energy Regulator ("AER") guidance under Directive 088 where a minimum amount of spending is required to abandon inactive sites. In August 2022, our minimum spending targets for 2023 were increased by the Alberta Government.

The Company received Alberta Site Rehabilitation Program ("ASRP") grants and allocations of $30.2 million on a gross basis to the end of 2022 when the ASRP ended, a portion of which was received in allocation eligibility as an ABC program participant. Total grant support was determined once all project costs were finalized in 2023. These awards allowed the Company to expand our abandonment activities for wells, pipelines, facilities, and related site reclamation and thus reduced our decommissioning liability.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 11

Liquidity and Capital Resources

Net Debt

Net debt is the total of long-term debt and working capital deficiency as follows:

As at
(millions) June 30, 2023 December 31, 2022
Long-term debt
Syndicated credit facility $ 158.0 $ 105.0
Senior unsecured notes 124.0 127.6
Unamortized discount of senior unsecured notes (2.1 ) (2.3 )
Deferred financing costs (4.7 ) (5.0 )
Total 275.2 225.3
Working capital deficiency
Cash (0.1 ) (0.8 )
Accounts receivable (69.6 ) (82.6 )
Prepaid expenses and other (17.2 ) (10.7 )
Accounts payable and accrued liabilities 136.0 185.6
Total 49.1 91.5
Net debt (1) $ 324.3 $ 316.8

(1) Non-GAAP financial measure. See "Non-GAAP and Other Financial Measures".

Net debt increased compared to December 31, 2022, as a result of higher drawings under our syndicated credit facility due to our active development program in 2023 and return of capital initiatives.

Liquidity

The Company currently has a reserve-based syndicated credit facility with a borrowing limit of $240.0 million and senior unsecured notes totaling $123.5 million due in 2027. For further details on the Company’s debt instruments please refer to the “Financing” section of this MD&A.

The Company actively manages our debt portfolio and considers opportunities to reduce or diversify our debt capital structure. Management contemplates both operating and financial risks and takes action as appropriate to limit the Company’s exposure to certain risks. Management maintains close relationships with the Company’s lenders and agents to monitor credit market developments. These actions and plans aim to increase the likelihood of maintaining the Company’s financial flexibility and appropriate capital program, supporting the Company’s ongoing operations and ability to execute longer-term business strategies.

Financial Instruments

Obsidian Energy had the following financial instruments outstanding as at June 30, 2023. Fair values are determined using external counterparty information, which is compared to observable market data. The Company limits our credit risk by executing counterparty risk procedures which include transacting only with institutions within our syndicated credit facility or companies with high credit ratings, and by obtaining financial security in certain circumstances.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 12
Notional<br>Volume Remaining<br>Term Swap Price
--- --- --- --- --- ---
Oil
WCS Differential 1,000 bbl/d July 2023 - September 2023 (21.72)/bbl (0.6 )
WCS Differential 1,500 bbl/d October 2023 - December 2023 (21.20)/bbl (0.3 )
AECO
AECO Swap 49,929 mcf/d July 2023 - October 2023 3.48/mcf 6.7
AECO Swap 26,588 mcf/d November 2023 - March 2024 3.47/mcf 0.7
Electricity
Power Swap 24 MWh/d January 2024 - December 2024 96.75/MWh -
Total 6.5

All values are in US Dollars.

Refer to the Business Environment section above for a full list of hedges currently outstanding including contracts that were entered into subsequent to June 30, 2023.

Based on commodity prices and contracts in place at June 30, 2023, a $1.00 change in the price per barrel of liquids would change pre-tax unrealized risk management by $0.2 million and a $0.10 change in the price per mcf of natural gas would change pre-tax unrealized risk management by $1.0 million.

The components of risk management on the Consolidated Statements of Income are as follows:

Three months ended June 30 Six months ended June 30
(millions) 2023 2022 2023 2022
Realized
Settlement of oil contracts gain (loss) $ 0.3 $ (9.6 ) $ 0.3 $ (27.1 )
Settlement of natural gas contracts gain (loss) 5.2 (3.8 ) 7.8 (3.7 )
Total realized risk management gain (loss) $ 5.5 $ (13.4 ) $ 8.1 $ (30.8 )
Unrealized
Oil contracts gain (loss) $ (0.8 ) $ 4.6 $ (0.9 ) $ (0.5 )
Natural gas contracts gain (loss) (3.9 ) 2.5 1.2 (3.1 )
Total unrealized risk management gain (loss) (4.7 ) 7.1 0.3 (3.6 )
Risk management gain (loss) $ 0.8 $ (6.3 ) $ 8.4 $ (34.4 )

Sensitivity Analysis

Estimated sensitivities to selected key assumptions on funds flow from operations for the 12 months subsequent to the date of this MD&A, including risk management contracts entered into to date, are based on forecasted results.

Impact on funds flow from operations (1)
Change of: Change millions /share
Price per barrel of liquids WTI US1.00
Liquids production 1,000 bbl/day
Price per mcf of natural gas AECO 0.10
Natural gas production 1 mmcf/day
Effective interest rate %
Exchange rate ($US per $CAD)

All values are in US Dollars.

(1) Non-GAAP financial measure or non-GAAP financial ratio. See “Non-GAAP and Other Financial Measures”.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 13

Contractual Obligations and Commitments

Obsidian Energy is committed to certain payments over the next five calendar years and thereafter as follows:

2023 2024 2025 2026 2027 Thereafter Total
Long-term debt (1) $ - $ - $ 158.0 $ - $ 123.5 $ - $ 281.5
Transportation 4.8 10.0 8.3 6.4 4.6 11.4 45.5
Interest obligations 14.0 28.0 20.2 14.8 14.8 - 91.8
Office lease 5.0 10.0 0.8 - - - 15.8
Lease liability 1.4 1.5 0.9 0.3 0.1 4.8 9.0
Decommissioning liability (2) 12.8 23.6 21.9 20.3 18.9 79.4 176.9
Total $ 38.0 $ 73.1 $ 210.1 $ 41.8 $ 161.9 $ 95.6 $ 620.5

(1) The 2025 figure includes our syndicated credit facility which has a term-out date of May 2025. The 2027 figure includes our senior unsecured notes due in July 2027. Refer to the Financing section above for further details. Historically, the Company has successfully renewed our syndicated credit facility.

(2) These amounts represent the inflated, discounted future reclamation and abandonment costs that are expected to be incurred over the life of the Company’s properties.

At June 30, 2023, the Company had an aggregate of $124.0 million in senior unsecured notes maturing in July 2027. Also, the revolving period of our syndicated credit facility is May 31, 2024, with a term out period to May 31, 2025. In the future, if the Company is unsuccessful in renewing or replacing the syndicated credit facility or obtaining alternate funding for some or all of the maturing amounts of the senior unsecured notes, it is possible that we could be required to seek other sources of financing, including other forms of debt or equity arrangements if available. Please see the Financing section of this MD&A for further details regarding our outstanding debt instruments.

The Company is involved in various litigation and claims in the normal course of business and records provisions for claims as required.

Equity Instruments

Common shares issued:
As at June 30, 2023 81,193,264
Issuance under Stock option plan 11,938
Repurchase and cancellation of common shares (884,999 )
As at August 1, 2023 80,320,203
Options outstanding:
As at June 30, 2023 2,391,262
Exercised (11,938 )
As at August 1, 2023 2,379,324
RSUs outstanding:
As at June 30, 2023 1,256,941
Granted 12,300
As at August 1, 2023 1,269,241
OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 14
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Supplemental Production Disclosure

Outlined below is production by product type for each area and in total for the three and six months ended June 30, 2023 and 2022.

Three months ended<br>June 30 Six months ended<br>June 30
Daily production (boe/d) 2023 2022 2023 2022
Cardium
Light oil (bbl/d) 11,119 12,019 11,554 11,468
Heavy oil (bbl/d) 36 49 29 48
NGLs (bbl/d) 2,348 2,326 2,473 2,345
Natural gas (mmcf/d) 55 54 57 53
Total production (boe/d) 22,721 23,454 23,605 22,669
Peace River
Light oil (bbl/d) - - - -
Heavy oil (bbl/d) 5,164 6,008 5,618 5,802
NGLs (bbl/d) 13 6 12 5
Natural gas (mmcf/d) 4 6 5 5
Total production (boe/d) 5,920 6,964 6,400 6,718
Viking
Light oil (bbl/d) 1,343 136 1,007 139
Heavy oil (bbl/d) 118 103 109 104
NGLs (bbl/d) 52 39 45 31
Natural gas (mmcf/d) 4 3 3 3
Total production (boe/d) 2,101 729 1,686 710
Legacy
Light oil (bbl/d) 50 106 99 82
Heavy oil (bbl/d) 38 14 41 28
NGLs (bbl/d) 19 35 24 38
Natural gas (mmcf/d) 1 1 1 1
Total production (boe/d) 300 428 401 400
Total
Light oil (bbl/d) 12,512 12,261 12,660 11,689
Heavy oil (bbl/d) 5,356 6,174 5,797 5,982
NGLs (bbl/d) 2,432 2,406 2,554 2,419
Natural gas (mmcf/d) 64 64 66 62
Total production (boe/d) 31,042 31,575 32,092 30,497
OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 15
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Reconciliation of Cash flow from Operating Activities to Funds flow from Operations

Jun. 30 Mar. 31 Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
Three months ended 2023 2023 2022 2022 2022 2021 2021 2021
Cash flow from operating activities $ 67.1 $ 72.6 $ 126.5 $ 121.4 $ 125.0 $ 83.9 $ 62.6 $ 65.5
Change in non-cash working capital 13.7 6.6 (20.9 ) (21.9 ) 26.0 (18.0 ) 6.2 (9.1 )
Decommissioning expenditures 4.9 8.7 3.0 3.5 3.8 8.5 2.7 1.6
Onerous office lease settlements 2.2 2.3 2.3 2.3 2.3 2.3 2.1 2.3
Settlement of restricted share units - 4.6 - - - - - -
Deferred financing costs (0.6 ) (0.5 ) (0.4 ) (0.7 ) (0.7 ) (0.7 ) (1.1 ) (1.7 )
Financing fees paid - - - - - - 0.3 -
Restructuring charges (1) - - - - - 2.5 - 0.1
Transaction costs - - - - - 0.1 3.4 -
Other expenses (1) 0.1 - - - 0.6 - 0.1 0.6
Commodities purchased from third parties - - - - - - 3.7 -
Funds flow from operations $ 87.4 $ 94.3 $ 110.5 $ 104.6 $ 157.0 $ 78.6 $ 80.0 $ 59.3

(1) Excludes the non-cash portion of restructuring and other expenses.

Changes in Internal Control Over Financial Reporting (“ICFR”)

Obsidian Energy’s senior management has evaluated whether there were any changes in the Company's ICFR that occurred during the period beginning on April 1, 2023 and ending on June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's ICFR. No changes to the Company’s ICFR were made during the quarter.

Off-Balance-Sheet Financing

Obsidian Energy has off-balance-sheet financing arrangements consisting of operating leases. The operating lease payments are summarized in the Contractual Obligations and Commitments section.

Non-GAAP and Other Financial Measures

Throughout this MD&A and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position, and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures provided by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income and cash flow from operating activities, as indicators of our performance.

Non-GAAP Financial Measures

“Free cash flow” is funds flow from operations less both capital and decommissioning expenditures and the Company believes it is a useful measure to determine and indicate the funding available to Obsidian Energy for investing and financing activities, including the repayment of debt, reallocation to existing business units, deployment into new ventures and return of capital to shareholders. See “Cash flow from Operating Activities, Funds Flow from Operations and Free Cash Flow” above for a reconciliation of free cash flow to cash flow from operating activities, being our nearest measure prescribed by IFRS.

“Funds flow from operations” is cash flow from operating activities before changes in non-cash working capital, decommissioning expenditures, onerous office lease settlements, the effects of financing related transactions from foreign exchange contracts and debt repayments, restructuring charges, transaction costs, certain other expenses, settlement of RSUs and certain commodities purchased from third parties, and is representative of cash related to continuing operations. Funds flow from operations is used to assess the Company’s ability to fund our planned capital programs. See “Cash flow from Operating Activities, Funds Flow from Operations and Free Cash Flow” and "Reconciliation of Cash flow from operating activities to Funds flow from operations" above for reconciliations of funds flow from operations to cash flow from operating activities, being our nearest measure prescribed by IFRS.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 16

“Gross revenues” are production revenues including realized risk management gains and losses on commodity contracts and adjusted for commodities purchased from third parties and sales of commodities purchased from third parties and is used to assess the cash realizations on commodity sales. See “Results of Operations – Production Revenues” above for a reconciliation of gross revenues to production revenues, being our nearest measure prescribed by IFRS.

"Sales” are production revenues plus sales of commodities purchased from third parties less commodities purchased from third parties and is used to assess the cash realizations on commodity sales before realized risk management gains and losses. See “Results of Operations – Production Revenues” above for a reconciliation of gross revenues to production revenues, being our nearest measure prescribed by IFRS.

“Net debt” is the total of long-term debt and working capital deficiency and is used by the Company to assess our liquidity. See “Liquidity and Capital Resources – Net Debt” above for a reconciliation of net debt to long-term debt, being our nearest measure prescribed by IFRS.

“Net operating costs” are calculated by deducting processing income and road use recoveries from operating costs and is used to assess the Company’s cost position. Processing fees are primarily generated by processing third party volumes at the Company’s facilities. In situations where the Company has excess capacity at a facility, it may agree with third parties to process their volumes to reduce the cost of operating/owning the facility. Road use recoveries are a cost recovery for the Company as we operate and maintain roads that are also used by third parties. See “Results of Operations – Expenses – Operating” above for a reconciliation of net operating costs to operating costs, being our nearest measure prescribed by IFRS.

“Netback” is production revenues plus sales of commodities purchased from third parties less commodities purchased from third parties (sales), less royalties, net operating costs, transportation expenses and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects. See "Results of Operations – Netbacks" above for a reconciliation of netbacks to sales and "Results of Operations – Production Revenues" above for a reconciliation of sales to production revenues.

Non-GAAP Financial Ratios

“Funds flow from operations – basic per share” is comprised of funds flow from operations divided by basic weighted average common shares outstanding. Funds flow from operations is a non-GAAP financial measure. See “Cash flow from Operating Activities, Funds Flow from Operations and Free Cash Flow” and “Reconciliation of Cash flow from operating activities to Funds flow from operations” above.

“Funds flow from operations – diluted per share” is comprised of funds flow from operations divided by diluted weighted average common shares outstanding. Funds flow from operations is a non-GAAP financial measure. See “Cash flow from Operating Activities, Funds Flow from Operations and Free Cash Flow” and “Reconciliation of Cash flow from operating activities to Funds flow from operations” above.

“Net operating costs per bbl”, “Net operating costs per mcf” and “Net operating costs per boe” are net operating costs divided by weighted average daily production on a per bbl, per mcf or per boe basis, as applicable. Net operating costs is a non-GAAP financial measure. See “Results of Operations – Expenses – Operating" above.

“Netback per bbl”, “Netback per mcf” and “Netback per boe” are netbacks divided by weighted average daily production on a per bbl, per mcf or per boe basis, as applicable. Management believes that netback per boe is a key industry performance measure of operational efficiency and provides investors with information that is also commonly presented by other oil and natural gas producers. Netback is a non-GAAP financial measure. See “Results of Operations – Netbacks” above.

Supplementary Financial Measures

Average sales prices for light oil, heavy oil, NGLs, total liquids and natural gas are supplementary financial measures calculated by dividing each of these components of production revenues by their respective production volumes for the periods.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 17

“Cash flow from operating activities – basic per share” is comprised of cash flow from operating activities, as determined in accordance with IFRS, divided by basic weighted average common shares outstanding.

“Cash flow from operating activities – diluted per share" is comprised of cash flow from operating activities, as determined in accordance with IFRS, divided by diluted weighted average common shares outstanding.

"G&A gross – per boe" is comprised of general and administrative expenses on a gross basis, as determined in accordance with IFRS, divided by boe for the period.

"G&A net – per boe" is comprised of general and administrative expenses on a net basis, as determined in accordance with IFRS, divided by boe for the period.

Oil and Natural Gas Information

Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

Abbreviations

Oil Natural Gas
bbl barrel or barrels mcf thousand cubic feet
bbl/d barrels per day mcf/d thousand cubic feet per day
boe barrel of oil equivalent mmcf million cubic feet
boe/d barrels of oil equivalent per day mmcf/d million cubic feet per day
MSW Mixed Sweet Blend mmbtu Million British thermal unit
WTI West Texas Intermediate AECO Alberta benchmark price for natural gas
WCS Western Canadian Select NGL natural gas liquids
LNG liquefied natural gas
NYMEX New York Mercantile Exchange price for natural gas

References to Q1, Q2, Q3 and Q4 are to the three-month periods ended March 31, June 30, September 30 and December 31, respectively.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of the "safe harbour" provisions of applicable securities legislation. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: our strategy of maintaining moderate production growth, operational excellence, improving our debt leverage and delivering top quartile total shareholder return; our belief that our plan to focus development activity on our Cardium, Viking and Peace River assets will generate value for all stakeholders; that our Cardium position with a deep inventory of high return wells offers a predictable, liquids weighted, production profile capable of generating growth and sustainable free cash flow; that there is compelling Bluesky development and significant Clearwater potential for future heavy oil production growth and cash flow generation, offering further value for stakeholders; the opportunities that our Viking location provides the Company; our expectations for debt levels and targets; our expectations for decommissioning expenditures in 2023;our expectations in connection with the NCIB and Repurchase Offer; the terms and conditions under our syndicated credit facility and senior unsecured notes; our expectations in connection with compliance with environmental legislation; that we are dedicated to managing our ESG initiatives to manage the environmental impact from our operations through the environmental programs which include resource conservation, water management and site abandonment / reclamation / remediation; how we plan to manage our debt portfolio; our hedges; all information disclosed under "Sensitivity Analysis; our future payment obligations as disclosed under "Contractual Obligations and Commitments"; that management contemplates both operating and financial risks and takes action as appropriate to limit the Company’s exposure to certain risks and that management maintains close relationships with the Company's lenders and agents to monitor credit market

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 18

developments, and these actions and plans aim to increase the likelihood of maintaining the Company's financial flexibility and capital program, supporting the Company's ongoing operations and ability to execute longer-term business strategies.

With respect to forward-looking statements contained in this document, the Company has made assumptions regarding, among other things: that the Company does not dispose of or acquire material producing properties or royalties or other interests therein; the impact of regional and/or global health related events will not have any adverse impact on energy demand and commodity prices in the future; that the Company's operations and production will not be disrupted by circumstances attributable to the COVID-19 pandemic and the responses of governments and the public to any resurgence of the pandemic; global energy policies going forward, including the continued ability and willingness of members of OPEC and other nations to agree on and adhere to production quotas from time to time; our ability to qualify for (or continue to qualify for) new or existing government programs, and obtain financial assistance therefrom, and the impact of those programs on our financial condition; our ability to execute our plans as described herein and in our other disclosure documents and the impact that the successful execution of such plans will have on our Company and our stakeholders; future capital expenditure and decommissioning expenditure levels; future operating costs and G&A costs and the impact of inflation thereon; future oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future hedging activities; future oil, natural gas liquids and natural gas production levels; future exchange rates, interest rates and inflation rates; future debt levels; our ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including extreme weather events such as wild fires and flooding, infrastructure access and delays in obtaining regulatory approvals and third party consents; that our operations will not be further impacted by wild fires during 2023; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully to current and new customers; our ability to obtain financing on acceptable terms, including our ability (if necessary) to extend the revolving period and term out period of our credit facility, our ability to maintain the existing borrowing base under our credit facility, our ability (if necessary) to replace our syndicated bank facility and our ability (if necessary) to finance the repayment of our senior unsecured notes on maturity or pursuant to the terms of the underlying agreement; and our ability to add production and reserves through our development and exploitation activities.

Although the Company believes that the expectations reflected in the forward-looking statements contained in this document, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the forward-looking statements contained herein will not be correct, which may cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: the possibility that we change our budgets (including our capital expenditure budgets) in response to internal and external factors, including those described herein; the possibility that the Company will not be able to continue to successfully execute our business plans and strategies in part or in full, and the possibility that some or all of the benefits that the Company anticipates will accrue to our Company and our stakeholders as a result of the successful execution of such plans and strategies do not materialize; the possibility that the Company ceases to qualify for, or does not qualify for, one or more existing or new government assistance programs, that the impact of such programs falls below our expectations, that the benefits under one or more of such programs is decreased, or that one or more of such programs is discontinued; the impact on energy demand and commodity prices of regional and/or global health related events, including any resurgence of the COVID-19 pandemic, and the responses of governments and the public thereto, including the risk that the amount of energy demand destruction and/or the length of the decreased demand exceeds our expectations; the risk that there is another significant decrease in the valuation of oil and natural gas companies and their securities and in confidence in the oil and natural gas industry generally, whether caused by a resurgence of the COVID-19 pandemic, the worldwide transition towards less reliance on fossil fuels and/or other factors; the risk that the financial capacity of the Company's contractual counterparties is adversely affected and potentially their ability to perform their contractual obligations; the possibility that the revolving period and/or term out period of our credit facility and the maturity date of our senior unsecured notes is not extended (if necessary), that the borrowing base under our credit facility is reduced, that the Company is unable to renew or refinance our credit facilities on acceptable terms or at all and/or

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 19

finance the repayment of our senior unsecured notes when they mature on acceptable terms or at all and/or obtain new debt and/or equity financing to replace our credit facilities and/or senior unsecured notes or to fund other activities; the possibility that we are unable to complete the Repurchase Offer; the possibility that we are forced to shut-in production, whether due to commodity prices decreasing, extreme weather events such as the wild fires experienced in Alberta in Q2 2023 or other factors; the risk that OPEC and other nations fail to agree on and/or adhere to production quotas from time to time that are sufficient to balance supply and demand fundamentals for oil; general economic and political conditions in Canada, the U.S. and globally, and in particular, the effect that those conditions have on commodity prices and our access to capital; industry conditions, including fluctuations in the price of oil, natural gas liquids and natural gas, price differentials for oil and natural gas produced in Canada as compared to other markets, and transportation restrictions, including pipeline and railway capacity constraints; fluctuations in foreign exchange, including the impact of the Canadian/U.S. dollar exchange rate on our revenues and expenses; fluctuations in interest rates, including the effects of increased interest rates on our borrowing costs and on economic activity, and including the risk that higher interest rates cause or contribute to the onset of a recession; the risk that our costs increase significantly due to ongoing high levels of inflation, supply chain disruptions and/or other factors, adversely affecting our profitability; unanticipated operating events or environmental events that can reduce production or cause production to be shut-in or delayed (including extreme cold during winter months, wild fires and flooding); the risk that wars and other armed conflicts adversely affect world economies and the demand for oil and natural gas, including the ongoing war between Russian and Ukraine; the possibility that fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to hydrocarbons, government mandates requiring the sale of electric vehicles, and technological advances in fuel economy and renewable energy generation systems could permanently reduce the demand for oil and natural gas and/or permanently impair the Company's ability to obtain financing and/or insurance on acceptable terms or at all, and the possibility that some or all of these risks are heightened as a result of the response of governments, financial institutions and consumers to the COVID-19 pandemic and/or public opinion and/or special interest groups; and the other factors described under "Risk Factors" in our Annual Information Form and described in our public filings, available in Canada at www.sedar.com and in the United States at www.sec.gov. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this document speak only as of the date of this document. Except as expressly required by applicable securities laws, the Company does not undertake any obligation to publicly update any forward-looking statements. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Additional Information

Additional information relating to Obsidian Energy, including Obsidian Energy’s Annual Information Form, is available on the Company’s website at www.obsidianenergy.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

OBSIDIAN ENERGY SECOND QUARTER 2023 MANAGEMENT’S DISCUSSION AND ANALYSIS 20

EX-99.3

Exhibit 99.3

Obsidian Energy Ltd.

Consolidated Balance Sheets

As at
(CAD millions, unaudited) Note June 30, 2023 December 31, 2022
Assets
Current
Cash $ 0.1 $ 0.8
Accounts receivable 69.6 82.6
Risk management 7 7.4 6.2
Prepaid expenses and other 17.2 10.7
94.3 100.3
Non-current
Property, plant and equipment 3 1,901.9 1,857.6
Deferred income tax 11 230.5 246.4
2,132.4 2,104.0
Total assets $ 2,226.7 $ 2,204.3
Liabilities and Shareholders’ Equity
Current
Accounts payable and accrued liabilities $ 136.0 $ 185.6
Current portion of long-term debt 4 5.0 -
Current portion of lease liabilities 5 2.2 3.2
Current portion of provisions 6 33.3 34.1
Risk management 7 0.9 -
177.4 222.9
Non-current
Long-term debt 4 270.2 225.3
Lease liabilities 5 3.4 2.8
Provisions 6 157.1 165.7
Other non-current liabilities 1.0 7.9
609.1 624.6
Shareholders’ equity
Shareholders’ capital 9 2,211.6 2,221.9
Other reserves 100.5 101.2
Deficit (694.5 ) (743.4 )
1,617.6 1,579.7
Total liabilities and shareholders’ equity $ 2,226.7 $ 2,204.3

Subsequent event (Note 4, 7 and 9)

Commitments and contingencies (Note 12)

See accompanying notes to the unaudited interim consolidated financial statements.

OBSIDIAN ENERGY SECOND QUARTER 2023 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1

Obsidian Energy Ltd.

Consolidated Statements of Income

Three months ended<br>June 30 Six months ended<br>June 30
(CAD millions, except per share amounts, unaudited) Note 2023 2022 2023 2022
Production revenues 8 $ 166.0 $ 276.5 $ 346.9 $ 480.2
Processing fees 8 3.7 2.0 7.3 3.9
Royalties (20.6 ) (44.7 ) (45.7 ) (74.7 )
Sales of commodities purchased from third parties 4.5 3.7 9.9 6.8
153.6 237.5 318.4 416.2
Other income 8 1.2 1.6 3.1 3.1
Government decommissioning assistance 13 - (2.3 ) (0.4 ) 11.1
Risk management gain (loss) 7 0.8 (6.3 ) 8.4 (34.4 )
155.6 230.5 329.5 396.0
Expenses
Operating 47.4 43.9 96.4 84.2
Transportation 9.3 9.5 19.0 16.8
Commodities purchased from third parties 3.9 2.9 8.5 5.7
General and administrative 5.2 4.8 10.0 8.9
Share-based compensation 10 0.9 0.8 3.1 24.9
Depletion, depreciation and impairment 3 51.3 42.1 103.0 93.5
Foreign exchange loss - 1.5 - 0.8
Financing 4 12.9 10.5 24.6 20.3
Restructuring - - - 2.5
Transaction costs - - - 0.1
Other 0.1 0.6 0.1 0.6
131.0 116.6 264.7 258.3
Income before taxes 24.6 113.9 64.8 137.7
Deferred income tax expense 11 6.2 - 15.9 -
Net and comprehensive income $ 18.4 $ 113.9 $ 48.9 $ 137.7
Net income per share
Basic $ 0.22 $ 1.39 $ 0.60 $ 1.69
Diluted $ 0.22 $ 1.35 $ 0.58 $ 1.64
Weighted average shares outstanding (millions)
Basic 9 81.8 82.1 81.9 81.6
Diluted 9 84.7 84.6 84.8 84.1

See accompanying notes to the unaudited interim consolidated financial statements.

OBSIDIAN ENERGY SECOND QUARTER 2023 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2

Obsidian Energy Ltd.

Consolidated Statements of Cash Flows

Three months ended<br>June 30 Six months ended<br>June 30
(CAD millions, unaudited) Note 2023 2022 2023 2022
Operating activities
Net income $ 18.4 $ 113.9 $ 48.9 $ 137.7
Government decommissioning assistance 13 - 2.3 0.4 (11.1 )
Depletion, depreciation and impairment 3 51.3 42.1 103.0 93.5
Financing 4 5.3 3.4 10.7 6.9
Share-based compensation 10 2.0 1.0 4.1 2.4
Unrealized risk management loss (gain) 7 4.7 (7.1 ) (0.3 ) 3.6
Foreign exchange loss - 1.5 - 0.8
Deferred income tax expense 11 6.2 - 15.9 -
Decommissioning expenditures 6 (4.9 ) (3.8 ) (13.6 ) (12.3 )
Onerous office lease settlements 6 (2.2 ) (2.3 ) (4.5 ) (4.6 )
Settlement of RSUs - - (4.6 ) -
Change in non-cash working capital (13.7 ) (26.0 ) (20.3 ) (8.0 )
67.1 125.0 139.7 208.9
Investing activities
Capital expenditures 3 (39.5 ) (40.3 ) (146.6 ) (143.7 )
Property acquisitions 3 (0.1 ) (0.3 ) (0.1 ) (0.3 )
Change in non-cash working capital (31.1 ) (41.1 ) (29.6 ) (4.3 )
(70.7 ) (81.7 ) (176.3 ) (148.3 )
Financing activities
Increase (decrease) in long-term debt 4 19.0 (29.7 ) 53.0 (39.4 )
Repayment of senior notes/PROP limited recourse loan (3.6 ) (5.9 ) (3.6 ) (18.5 )
Financing fees paid (0.2 ) - (0.8 ) -
Lease liabilities settlements 5 (1.1 ) (1.0 ) (2.2 ) (2.0 )
Exercised compensation plans - 0.2 - 1.2
Repurchase of common shares 9 (10.5 ) - (10.5 ) -
3.6 (36.4 ) 35.9 (58.7 )
Change in cash and cash equivalents - 6.9 (0.7 ) 1.9
Cash and cash equivalents, beginning of period 0.1 2.3 0.8 7.3
Cash and cash equivalents, end of period $ 0.1 $ 9.2 $ 0.1 $ 9.2

See accompanying notes to the unaudited interim consolidated financial statements.

OBSIDIAN ENERGY SECOND QUARTER 2023 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3

Obsidian Energy Ltd.

Statements of Changes in Shareholders’ Equity

(CAD millions, unaudited) Note Shareholders’ Capital Other <br>Reserves Deficit Total
Balance at January 1, 2023 $ 2,221.9 $ 101.2 $ (743.4 ) $ 1,579.7
Net and comprehensive income - - 48.9 48.9
Share-based compensation 10 - 4.1 - 4.1
Issued on exercise of equity compensation plans 9 0.2 (4.8 ) - (4.6 )
Repurchase of shares for cancellation 9 (10.5 ) - - (10.5 )
Balance at June 30, 2023 $ 2,211.6 $ 100.5 $ (694.5 ) $ 1,617.6
(CAD millions, unaudited) Note Shareholders’ Capital Other <br>Reserves Deficit Total
--- --- --- --- --- --- --- --- --- --- --- ---
Balance at January 1, 2022 $ 2,213.8 $ 103.2 $ (1,553.5 ) $ 763.5
Net and comprehensive income - - 137.7 137.7
Share-based compensation 10 - 2.4 - 2.4
Issued on exercise of equity compensation plans 9 7.8 (6.6 ) - 1.2
Balance at June 30, 2022 $ 2,221.6 $ 99.0 $ (1,415.8 ) $ 904.8

See accompanying notes to the unaudited interim consolidated financial statements.

OBSIDIAN ENERGY SECOND QUARTER 2023 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 4

Notes to the Unaudited Interim Consolidated Financial Statements

(All tabular amounts are in CAD millions except numbers of common shares, per share amounts, percentages and various figures in Note 7)

  1. Structure of Obsidian Energy

Obsidian Energy Ltd. (“Obsidian Energy”, the “Company”, “we”, “us” or “our”) is an exploration and production company and is governed by the laws of the Province of Alberta, Canada. The Company's registered office is located at Suite 200, 207 - 9th Avenue S.W. Calgary, Alberta, Canada T2P 1K3. The Company operates in one segment, to explore for, develop and hold interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. Obsidian Energy’s portfolio of assets is managed at an enterprise level, rather than by separate operating segments or business units. The Company assesses our financial performance at the enterprise level and resource allocation decisions are made on a project basis across our portfolio of assets, without regard to the geographic location of projects. Obsidian Energy owns the petroleum and natural gas assets or 100 percent of the equity, directly or indirectly, of the entities that carry on the remainder of the oil and natural gas business of Obsidian Energy.

  1. Basis of presentation and statement of compliance

a) Basis of Presentation

The unaudited condensed interim consolidated financial statements ("interim consolidated financial statements") include the accounts of Obsidian Energy and our wholly owned subsidiaries. Results from acquired properties are included in Obsidian Energy’s reported results subsequent to the closing date and results from properties sold are included until the closing date.

All intercompany balances, transactions, income and expenses are eliminated on consolidation.

Certain comparative figures have been reclassified to correspond with current period presentation.

b) Statement of Compliance

These interim consolidated financial statements are prepared in compliance with IAS 34 “Interim Financial Reporting” and accordingly do not contain all of the disclosures included in Obsidian Energy’s annual audited consolidated financial statements. These financial statements should be read in conjunction with Obsidian Energy’s audited annual consolidated financial statements as at and for the year ended December 31, 2022. Additionally, these interim consolidated financial statements were prepared using the same accounting policies, with the addition of note 2(c), as in the annual consolidated financial statements as at and for the year ended December 31, 2022.

All tabular amounts are in millions of Canadian dollars, except numbers of common shares, per share amounts, percentages and other figures as noted.

These interim consolidated financial statements were approved for issuance by the Board of Directors on August 1, 2023.

c) Accounting policy

Share capital

In the first quarter of 2023, the Company received approval from the Toronto Stock Exchange for a normal course issuer bid ("NCIB") and began utilizing the NCIB during the second quarter of 2023. Common shares repurchased and cancelled are accounted for as a reduction in Shareholders' Capital based on the total consideration paid. The total consideration paid includes any commissions or fees paid as part of the transaction.

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5
  1. Property, plant and equipment ("PP&E")

Oil and Gas assets/ Facilities, Corporate assets

Cost Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 10,931.7 $ 10,528.7
Capital expenditures 146.6 314.8
Property acquisitions 0.1 4.6
Net decommissioning changes (1.0 ) 83.6
Balance, end of period $ 11,077.4 $ 10,931.7
Accumulated depletion and depreciation Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
--- --- --- --- --- ---
Balance, beginning of period $ 9,079.4 $ 9,194.6
Depletion and depreciation 100.5 170.4
Impairment 0.5 36.4
Impairment reversal - (322.0 )
Balance, end of period $ 9,180.4 $ 9,079.4
As at
--- --- --- --- ---
Net book value June 30, 2023 December 31, 2022
Total $ 1,897.0 $ 1,852.3

Right-of-use assets

The following table includes a break-down of the categories for right-of-use assets.

Cost Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 25.8 $ 24.8
Additions 1.6 1.0
Balance, end of period $ 27.4 $ 25.8
Accumulated amortization Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
--- --- --- --- ---
Balance, beginning of period $ 20.5 $ 16.8
Amortization 2.0 3.7
Balance, end of period $ 22.5 $ 20.5
As at
--- --- --- --- ---
Net book value June 30, 2023 December 31, 2022
Total $ 4.9 $ 5.3

Total PP&E

Total PP&E including Oil and Gas assets/Facilities, Corporate assets and Right-of-use assets is as follows:

As at
PP&E June 30, 2023 December 31, 2022
Oil and Gas assets/Facilities, Corporate assets $ 1,897.0 $ 1,852.3
Right-of-use assets 4.9 5.3
Total $ 1,901.9 $ 1,857.6
OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 6
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At June 30, 2023, the Company completed an assessment to determine if indicators of impairment or an impairment reversal were present. No indicators were noted for our Cardium, Peace River and Viking cash generating units ("CGUs").

During the first half of 2023, we recorded a $0.5 million impairment in our Legacy CGU due to decommissioning spending in the area. The Legacy CGU has no recoverable amount, as such changes in our decommissioning liability are expensed each period.

  1. Long-term debt
As at
December 31, 2022
Syndicated credit facility 158.0 $ 105.0
Senior unsecured notes
11.95% 124.0 million, maturing July 27, 2027 124.0 127.6
Total 282.0 232.6
Unamortized discount of senior unsecured notes (2.1 ) (2.3 )
Deferred financing costs (4.7 ) (5.0 )
Total long-term debt 275.2 $ 225.3
Current portion 5.0 $ -
Non-current portion 270.2 $ 225.3

All values are in US Dollars.

The Company has a reserve-based syndicated credit facility. The aggregate amount available under the syndicated credit facility is $240.0 million which was increased in May 2023, previously $200.0 million, as an additional lender was added to our syndicate. The syndicated credit facility is subject to semi-annual borrowing base redeterminations typically in May and November of each year and currently has a revolving period to May 31, 2024 and a maturity date of May 31, 2025.

At June 30, 2023, the Company had senior unsecured notes outstanding totaling $124.0 million which mature on July 27, 2027. During the second quarter of 2023, the Company re-purchased for cancellation $3.6 million principal amount of senior unsecured notes on the open market at an average price of $985.00 per $1,000.00 principal amount. The senior unsecured notes were initially issued at a price of $980.00 per $1,000.00 principal amount resulting in aggregate gross proceeds of $125.0 million and at an interest rate of 11.95 percent. The senior unsecured notes are direct senior unsecured obligations of Obsidian Energy ranking equal with all other present and future senior unsecured indebtedness of the Company. Subsequent to June 30, 2023, the Company re-purchased for cancellation an additional $0.5 million principal amount of senior unsecured notes at an average price of $990.00 per $1,000.00 principal amount.

As part of the terms of the senior unsecured notes, the Company is required to provide a repurchase offer in certain circumstances to an aggregate amount of $63.8 million (the "Repurchase Offer"), based on free cash flow for the six months ended June 30 (typically offered in August) and based on free cash flow for the six months ended December 31 (typically offered in March). Minimum available liquidity thresholds and projected leverage ratios under the Company's syndicated credit facilities are also required to be met in order to proceed with a Repurchase Offer. The free cash flow available for the Repurchase Offer for the first six months of 2023 was $23.5 million, however, the Company is anticipating that $5.0 million will be available for the Repurchase Offer to be made in August 2023, based on current liquidity estimates. This amount was recorded within the current portion of long-term debt at June 30, 2023.

At June 30, 2023, letters of credit totaling $4.9 million were outstanding (December 31, 2022 – $5.1 million) that reduce the amount otherwise available to be drawn on our syndicated credit facility.

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 7

Financing expense consists of the following:

Three months ended June 30 Six months ended June 30
2023 2022 2023 2022
Interest $ 7.4 $ 7.1 $ 13.7 $ 13.4
Accretion on decommissioning liability 4.4 2.5 8.8 5.0
Accretion on office lease provision 0.2 0.4 0.5 0.8
Accretion on other non-current liability - 0.1 - 0.2
Accretion on discount of senior unsecured notes 0.1 - 0.2 -
Accretion on lease liabilities 0.1 0.1 0.2 0.2
Loss on repurchased senior unsecured notes 0.1 - 0.1 -
Deferred financing costs 0.6 0.7 1.1 1.4
Debt modification - (0.4 ) - (0.7 )
Financing $ 12.9 $ 10.5 $ 24.6 $ 20.3
  1. Lease liabilities

Total lease liabilities included in the Consolidated Balance Sheets are as follows:

Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 6.0 $ 8.7
Additions 1.6 1.0
Accretion charges 0.2 0.6
Lease payments (2.2 ) (4.3 )
Balance, end of period $ 5.6 $ 6.0
Current portion $ 2.2 $ 3.2
Non-current portion $ 3.4 $ 2.8
  1. Provisions
As at
June 30, 2023 December 31, 2022
Decommissioning liability $ 176.9 $ 182.3
Office lease provision 13.5 17.5
Total $ 190.4 $ 199.8
Current portion $ 33.3 $ 34.1
Non-current portion $ 157.1 $ 165.7

Decommissioning liability

At June 30, 2023, the decommissioning liability was determined by applying an inflation factor of 2.0 percent (December 31, 2022 - 2.0 percent) and the inflated amount was discounted using a credit-adjusted rate of 10.0 percent (December 31, 2022 – 10.0 percent) over the expected useful life of the underlying assets, currently extending over 50 years into the future. At June 30, 2023, the total decommissioning liability on an undiscounted, uninflated basis was $582.5 million (December 31, 2022 - $582.7 million).

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 8

Changes to the decommissioning liability were as follows:

Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 182.3 $ 121.6
Net liabilities added (1) 0.9 0.3
Increase (decrease) due to changes in estimates (1.9 ) 83.3
Liabilities settled (13.6 ) (18.8 )
Government decommissioning assistance 0.4 (15.7 )
Accretion charges 8.8 11.6
Balance, end of period $ 176.9 $ 182.3
Current portion $ 24.6 $ 25.4
Non-current portion $ 152.3 $ 156.9

(1) Includes additions from drilling activity, facility capital spending and disposals related to net property dispositions.

Office lease provision

The office lease provision represents the net present value of non-lease components on future office lease payments. The office lease provision was determined by applying an asset specific credit-adjusted discount rate of 6.5 percent (December 31, 2022– 6.5 percent) over the remaining life of the lease contracts, extending into 2025.

Changes to the office lease provision were as follows:

Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 17.5 $ 25.6
Decrease due to changes in estimates - (0.3 )
Settlements (4.5 ) (9.2 )
Accretion charges 0.5 1.4
Balance, end of period $ 13.5 $ 17.5
Current portion $ 8.7 $ 8.7
Non-current portion $ 4.8 $ 8.8
  1. Risk management

Financial instruments consist of cash, accounts receivable, fair values of derivative financial instruments, accounts payable and accrued liabilities and long-term debt. At June 30, 2023, the fair values of these financial instruments approximate their carrying amounts.

The fair values of all outstanding financial commodity related contracts are reflected on the Consolidated Balance Sheets with the changes during the period recorded in income as unrealized gains or losses.

At June 30, 2023 and December 31, 2022, the only asset or liability measured at fair value on a recurring basis was the risk management asset and liability, which was valued based on “Level 2 inputs” being quoted prices in markets that are not active or based on prices that are observable for the asset or liability.

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 9

The following table reconciles the changes in the fair value of financial instruments outstanding:

Risk management asset (liability) Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 6.2 $ (2.4 )
Unrealized gain (loss) on financial instruments:
Oil (0.9 ) 4.0
Natural gas 1.2 4.6
Total fair value, end of period $ 6.5 $ 6.2
Current asset portion $ 7.4 $ 6.2
Current liability portion $ (0.9 ) $ -

Obsidian Energy had the following financial instruments outstanding as at June 30, 2023. Fair values are determined using external counterparty information, which is compared to observable market data. The Company limits our credit risk by executing counterparty risk procedures which include transacting only with institutions within our syndicated credit facility or companies with high credit ratings and by obtaining financial security in certain circumstances.

Notional<br>Volume Remaining<br>Term Swap Price
Oil
WCS Differential 1,000 bbl/d July 2023 - September 2023 (21.72)/bbl (0.6 )
WCS Differential 1,500 bbl/d October 2023 - December 2023 (21.20)/bbl (0.3 )
AECO
AECO Swap 49,929 mcf/d July 2023 - October 2023 3.48/mcf 6.7
AECO Swap 26,588 mcf/d November 2023 - March 2024 3.47/mcf 0.7
Electricity
Power Swap 24 MWh/d January 2024 - December 2024 96.75/MWh -
Total 6.5

All values are in US Dollars.

Subsequent to June 30, 2023, the Company entered into the following additional financial hedges:

Notional<br>Volume Remaining<br>Term Swap <br>Price
Oil
WTI Swap 4,000 bbl/d August 2023 US$78.64/bbl

The components of risk management on the Consolidated Statements of Income are as follows:

Three months ended June 30 Six months ended June 30
2023 2022 2023 2022
Realized
Settlement of oil contracts gain (loss) $ 0.3 $ (9.6 ) $ 0.3 $ (27.1 )
Settlement of natural gas contracts gain (loss) 5.2 (3.8 ) 7.8 (3.7 )
Total realized risk management gain (loss) $ 5.5 $ (13.4 ) $ 8.1 $ (30.8 )
Unrealized
Oil contracts gain (loss) $ (0.8 ) $ 4.6 $ (0.9 ) $ (0.5 )
Natural gas contracts gain (loss) (3.9 ) 2.5 1.2 (3.1 )
Total unrealized risk management gain (loss) (4.7 ) 7.1 0.3 (3.6 )
Risk management gain (loss) $ 0.8 $ (6.3 ) $ 8.4 $ (34.4 )
OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 10
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Market Risks

Obsidian Energy is exposed to normal market risks inherent in the oil and natural gas business, including, but not limited to, commodity price risk, foreign currency rate risk, credit risk, interest rate risk, liquidity risk, supply cost risks and climate change risk. The Company seeks to mitigate these risks through various business processes and management controls and from time to time by using financial instruments.

There have been no material changes to these risks from those discussed in the Company’s annual audited consolidated financial statements as at and for the year ended December 31, 2022.

Alberta Wildfire impact

During the second quarter of 2023, the Company's financial results were impacted by wildfires in Northern and Central Alberta which resulted in the temporary shut-in of production during parts of May. The Company did not incur material damage to our PP&E from the wildfires.

  1. Revenue and Other Income

The Company’s significant revenue streams consist of the following:

Three months ended June 30 Six months ended June 30
2023 2022 2023 2022
Oil $ 139.8 $ 215.1 $ 281.3 $ 376.9
NGLs 11.2 18.2 25.5 33.1
Natural gas 15.0 43.2 40.1 70.2
Production revenues 166.0 276.5 346.9 480.2
Processing fees 3.7 2.0 7.3 3.9
Oil and natural gas sales 169.7 278.5 354.2 484.1
Other income 1.2 1.6 3.1 3.1
Oil and natural gas sales and other income $ 170.9 $ 280.1 $ 357.3 $ 487.2
  1. Shareholders’ equity

i) Issued

Shareholders’ capital Common Shares Amount
Balance, December 31, 2021 80,753,516 $ 2,213.8
Issued pursuant to equity compensation plans (1) 1,688,694 8.1
Balance, December 31, 2022 82,442,210 $ 2,221.9
Issued pursuant to equity compensation plans (1) 72,190 0.2
Repurchase of common shares for cancellation (1,321,136 ) (10.5 )
Balance, June 30, 2023 81,193,264 $ 2,211.6

(1) Upon vesting or exercise of equity awards, the net benefit is recorded as a reduction of other reserves and an increase to shareholders’ capital.

Pursuant to our return of capital initiative to our shareholders, in the first quarter of 2023 we received approval from the Toronto Stock Exchange for a normal course issuer bid ("NCIB"). Purchases under the NCIB will be subject to having $65 million of liquidity and complying with the terms of our current credit facilities. During the second quarter of 2023, the Company began utilizing the NCIB which resulted in 1,321,136 common shares being repurchased and canceled at an average price of $7.97 per share for total consideration of $10.5 million. The total consideration paid includes commissions and fees and is recorded as a reduction to Shareholders' Equity.

Subsequent to June 30, 2023, the Company repurchased and cancelled an additional 884,999 common shares for total consideration of $7.7 million at an average price of $8.72 per share.

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 11

ii) Earnings per share - Basic and Diluted

The weighted average number of shares used to calculate per share amounts was as follows:

Three months ended<br>June 30 Six months ended<br>June 30
Average shares outstanding (millions) 2023 2022 2023 2022
Basic 81.8 82.1 81.9 81.6
Dilutive impact (1) 2.9 2.5 2.9 2.5
Diluted 84.7 84.6 84.8 84.1

(1) Includes impact of stock options and restricted share units.

  1. Share-based compensation

Restricted and Performance Share Unit plan ("RPSU plan")

Restricted Share Unit ("RSU") grants under the RPSU plan

Obsidian Energy awards RSU grants under the RPSU plan whereby employees receive consideration that fluctuates based on the Company’s share price on the Toronto Stock Exchange ("TSX"). Consideration can be in the form of cash or shares purchased on the open market or issued from treasury.

RSUs (number of shares equivalent) Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Outstanding, beginning of period 874,130 1,167,351
Granted 927,690 537,225
Vested (1) (526,053 ) (784,514 )
Forfeited (18,826 ) (45,932 )
Outstanding, end of period 1,256,941 874,130

(1) Vested RSUs in 2023 were settled in cash and in 2022 were settled in shares.

The fair value and weighted average assumptions of the RSUs granted during the periods were as follows:

Six months ended June 30
2023 2022
Average fair value of RSUs granted (per RSU) $ 9.79 $ 10.56
Expected life of RSUs (years) 2.6 2.9
Expected forfeiture rate 0.1 % 0.5 %

Performance Share Unit (“PSU”) grants under the RPSU plan

The RPSU plan allows Obsidian Energy to grant PSUs to employees of the Company. The PSU obligation is classified as a liability due to the cash settlement feature and could be settled in cash, shares purchased on the open market or shares issued from treasury.

PSUs (number of shares equivalent) Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Outstanding, beginning of period 949,040 1,138,465
Granted 152,760 124,610
Vested (291,710 ) (181,018 )
Forfeited - (133,017 )
Outstanding, end of period 810,090 949,040
OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 12
--- ---
As at
--- --- --- --- ---
PSU liability June 30, 2023 December 31, 2022
Current $ 5.6 $ 5.2
Non-current 1.0 6.1
Total $ 6.6 $ 11.3

Stock Option Plan

Obsidian Energy has a Stock Option Plan that allows the Company to issue options to acquire common shares (“Options”) to officers, employees, directors and other service providers.

Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Options Number of<br>Options Weighted Average<br>Exercise Price Number of<br>Options Weighted Average<br>Exercise Price
Outstanding, beginning of period 2,274,672 $ 2.30 3,021,672 $ 1.56
Granted 188,780 9.81 156,400 10.64
Exercised (72,190 ) 1.77 (903,400 ) 1.27
Outstanding, end of period 2,391,262 $ 2.91 2,274,672 $ 2.30
Exercisable, end of period 1,074,244 $ 2.11 749,498 $ 1.69

The fair value and weighted average assumptions of the Options granted during the periods were as follows:

Six months ended June 30
2023 2022
Average fair value of Options granted (per Option) $ 6.34 $ 6.56
Expected volatility 82.4 % 87.0 %
Expected life of Options (years) 3.9 3.9
Expected forfeiture rate 0.2 % 0.3 %

Non-Treasury Incentive Award Plan (“NTIP”)

The NTIP allows the Company to issue restricted awards whereby employees receive consideration that fluctuates based on the Company’s share price on the TSX. The NTIP obligation is classified as a liability due to the cash settlement feature and could be settled in the form of cash or shares purchased on the open market.

NTIP Restricted Awards Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Outstanding, beginning of period 689,228 1,093,800
Granted - 3,400
Vested (333,707 ) (363,871 )
Forfeited (9,822 ) (44,101 )
Outstanding, end of period 345,699 689,228
As at
--- --- --- --- ---
NTIP liability June 30, 2023 December 31, 2022
Current $ 2.0 $ 2.6
Non-current - 1.8
Total $ 2.0 $ 4.4
OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 13
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Deferred Share Unit (“DSU”) plan

The DSU plan allows the Company to grant DSUs in lieu of cash fees to non-employee directors providing a right to receive, upon retirement from the Board, a cash payment based on the volume-weighted-average trading price of the common shares on the TSX. The DSU obligation is classified as a liability due to the cash settlement feature.

Deferred Share Units Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Outstanding, beginning of period 1,811,245 2,018,499
Granted 47,367 42,509
Exercised - (249,763 )
Outstanding, end of period 1,858,612 1,811,245
As at
--- --- --- --- ---
DSU Liability June 30, 2023 December 31, 2022
Current $ 14.5 $ 16.6
Non-current - -
Total $ 14.5 $ 16.6

At June 30, 2023, the Company had no outstanding DSUs that were redeemable.

Share-based compensation

Share-based compensation consisted of the following:

Three months ended<br>June 30 Six months ended<br>June 30
2023 2022 2023 2022
DSUs $ (1.4 ) $ (1.2 ) $ (2.1 ) $ 10.9
PSUs 0.1 0.6 0.5 6.6
NTIP 0.2 0.4 0.6 5.0
Cash settled share-based incentive plans $ (1.1 ) $ (0.2 ) $ (1.0 ) $ 22.5
RSUs $ 1.7 $ 0.8 $ 3.5 $ 1.6
Options 0.3 0.2 0.6 0.8
Equity settled share-based incentive plans 2.0 1.0 4.1 2.4
Share-based compensation $ 0.9 $ 0.8 $ 3.1 $ 24.9

The share price used in the fair value calculation of the DSU, NTIP and PSU obligations at June 30, 2023 was $7.75 per share (2022 – $9.94).

  1. Deferred income tax asset
Six months ended<br>June 30, 2023 Year ended<br>December 31, 2022
Balance, beginning of period $ 246.4 $ -
Deferred income tax expense (15.9 ) -
Recognition of deferred income tax asset - 246.4
Balance, end of period $ 230.5 $ 246.4

The Company recorded a deferred tax asset in 2022, as we expect to have sufficient taxable profits in future years in order to fully utilize the remaining deferred tax asset balance. The deferred tax asset is reduced by net income for the period on an after-tax basis.

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 14
  1. Commitments and contingencies

The Company is involved in various litigation and claims in the normal course of business and records provisions for claims as required.

  1. Government grants

The Company received grant allocations under the Alberta Site Rehabilitation Program (“ASRP”) beginning in 2020. The ASRP ended on December 31, 2022, however, costs were able to be submitted into 2023. These awards allowed the Company to expand our abandonment activities for wells, pipelines, facilities, and related site reclamation and thus reduce our decommissioning liability. The Company's grants were adjusted by $0.4 million during the first quarter of 2023 (2022 – $13.4 million of grant utilization).

OBSIDIAN ENERGY SECOND QUARTER 2023 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 15

EX-99.4

Exhibit 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Stephen Loukas, President and Chief Executive Officer of Obsidian Energy Ltd., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together the “interim filings”) of Obsidian Energy Ltd. (the “issuer”) for the interim period ended June 30, 2023.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A.

5.3 N/A.

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 2, 2023

(signed) “Stephen Loukas”

_______________________

Stephen Loukas

President & Chief Executive Officer

EX-99.5

Exhibit 99.5

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Peter Scott, Senior Vice President and Chief Financial Officer of Obsidian Energy Ltd., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Obsidian Energy Ltd. (the “issuer”) for the interim period ended June 30, 2023.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A.

5.3 N/A.

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: August 2, 2023

(signed) “Peter Scott”

_______________________

Peter Scott

Senior Vice President and Chief Financial Officer

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