S.TO · 2018-02-12 12:00:00

Sherritt Reports Fourth Quarter and Year End 2017 Results

Financials

Sherritt International Corporation 1

For immediate release

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED

STATES

Toronto, Ontario – February 12, 2018 – Sherritt International Corporation (“Sherritt” or the “Corporation”) (TSX: S), a world

leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, today reported its financial results

for the fourth quarter and year ended December 31, 2017. All amounts are in Canadian currency unless noted.

CEO COMMENTARY

“Sherritt ended 2017 with a significantly strengthened balance sheet and a much improved outlook as a result of a number of

key developments over the past year,” said David Pathe, President and CEO of Sherritt International. “Most notably, we

completed the restructuring of the Ambatovy Joint Venture, achieved our nickel and cobalt production as well as our unit cost

targets at the Moa Joint Venture, and benefitted from higher realized prices for each of the primary commodities that we

produce.”

Mr. Pathe added, “We have sustained this momentum since the start of 2018 with our first equity financing in more than a

decade, and are currently conducting a modified Dutch auction tender process to reduce our debt even further. With the strong

outlook for Class 1 nickel and cobalt given electric vehicle market trends and the maturities on our outstanding debentures not

due until the fourth quarter of 2021, we are particularly encouraged by our prospects in 2018 and beyond.”

Q4 HIGHLIGHTS

 Sherritt and its partners successfully completed the restructuring of the Ambatovy Joint Venture. Following the

restructuring, Sherritt eliminated $1.4 billion in debt from its balance sheet, retained a 12% ownership interest in

Ambatovy and continues to serve as operator.

 Net direct cash cost (NDCC)(1) at the Moa Joint Venture (“Moa JV”) was US$1.80 per pound of finished nickel sold,

the lowest total since the third quarter of 2004 . The decline was primarily driven b y higher cobalt prices and the

US$0.50 per pound cost savings achieved with the commission ing of the third acid plant at Moa in the fourth quarter

of 2016.

 Sherritt’s share of finished nickel production at the Moa JV was 4,134 tonnes, up 9% from Q4 2016, while its share of

finished cobalt was 465 tonnes, up 22% from Q4 2016. Production increased on a year -over-year basis despite the

negative impact heavy rains had on lowering mixed sulphide production in November and December 2017.

 Received $19.9 million from the Moa JV as repayment on its working capital facility and US$7.5 million in Cuban

energy payments.

 Adjusted EBITDA was $49.6 million, up 33% from Q4 2016.

 Including a gain of $629 .0 million related to the Ambatovy restructuring, earnings were $537.8 million , or $1.80 per

share outstanding, up from a net loss of $106.7 million, or $0.36 per share outstanding, in Q4 2016.

2017 HIGHLIGHTS

 Sherritt ended the year with cash, cash equivalents a nd short -term investments of $203.0 million after reflecting

payments related to the Ambatovy JV restructuring, interest payments related to outstanding debentures and the

$35.0 million repayment of a syndicated revolving-term loan.

 Sherritt’s share of finished nickel and finished cobalt production at the Moa JV were 15,762 tonnes and 1,801 tonnes,

respectively. The production totals were in line with guidance for the year.

 NDCC at the Moa Joint Venture was US$2.35 per pound of finished nickel , below the US$2.80 - $3.30 per pound

guidance that the Company provided for the year.

 Adjusted EBITDA was $149.8 million, up from $40.0 million in 2016.

2017 Fourth Quarter Report

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2 Sherritt International Corporation

 Including the gain related to the Ambatovy JV restructuring, net earnings were $293.8 million, or $0.99 per share

outstanding, up from a net loss of $378.9 million, or $1.29 per share outstanding, in 2016.

 Sherritt’s efforts to strengthen its balance sheet were reflected in a number of improved financial ratios at year end.

Net debt to Adjusted EBITDA reduc ed from 48.9 at the end 2016 to 4. 4 at December 31, 2017 while total debt to

shareholders’ equity improved from 2.1 at the end of 2016 to 0.8 at December 31, 2017.(2)

HIGHLIGHTS SUBSEQUENT TO YEAR END

 Closed a unit offering financing transaction that generated gross proceeds of $132.0 million. Net proceeds will be

used to reduce Sherritt’s outstanding indebtedness, for general corporate purposes and to fund future growth

initiatives.

 Launched a modifi ed Dutch Auction tender offer to repurchase up to $75.0 million of outstanding unsecured

debentures. The tender offering is expected to close on February 16, 2017.

 Executed a three-year extension of the Puerto Escondido/Yumuri production sharing contract to 2021.

 Although facilities at the Ambatovy Joint Venture in Madagascar were impacted by Tropical Cyclone Ava, a Category

2 hurricane equivalent storm, all personnel were unhurt and safely accounted for. Damage to equipment and the acid

production facili ties resulted in a temporary halt in production. Repairs have since been completed and partial

production has resumed. A ramp up in production is expected through the end of Q2 2018.

(1) For additional information see the Non-GAAP measures section of this press release.

(2) Net debt is defined as debt due within one year plus the book value of long-term debt, less cash, cash equivalents and short-term investments, as shown in Sherritt’s

consolidated statement of financial position. Total debt is defined as debt due within one year plus the book value of long-term debt plus the non-recourse debt.

Q4 AND 2017 FINANCIAL HIGHLIGHTS

For the three months ended For the years ended

2017 2016 2017 2016

$ millions, except per share amount December 31 December 31 Change December 31 December 31 Change

Revenue 54.8 70.5 (22%) $ 267.3 $ 262.3 2%

Combined Revenue(1) 223.8 240.3 (7%) 917.5 820.2 12%

Net earnings (loss) for the period 537.8 (106.7) 604% 293.8 (378.9) 178%

Adjusted EBITDA(1) 49.6 37.4 33% 149.8 40.0 275%

Cash provided (used) by continuing operations (33.9) (22.6) (50%) (9.6) 1.6 (700%)

Combined free cash flow (1) (41.2) (45.5) 9% (62.1) (111.9) 45%

Net earnings (loss) from continuing operations per share 1.85 (0.37) 600% 1.04 (1.30) 180%

(1) For additional information, see the Non-GAAP measures section of this release.

$ millions, except as otherwise noted, as at December 31 2017 2016 Change

Cash, cash equivalents and short-term investments 203.0 308.6 (34%)

Non-recourse loans and borrowings - 1,367.5 (100%)

Other loans and borrowings 824.1 860.7 (4%)

In Q4 2017, Sherritt generated negative cash flow from operations of $33.9 million. The consolidated total included $32.5

million in positive cash flow contributions from the Moa JV and Fort Site and $5.4 million in positive cash flow contributions

from the Power division. Total transaction costs of $11.3 million related to the restructuring of the Ambatovy JV contributed

negatively to the consolidated total.

Cash, cash equivalents and short-term investments at year end were $203.0 million, down from $290.3 million at September

30, 2017. The decrease was primarily driven by payments related to the restructuring of the Ambatovy JV, lower Cuban

energy payments received and the repayment of $8.0 million in Q4 on the Company’s syndicated revolving-term loan and

partly offset by a $19.9 million repayment from the Moa JV on its working capital facility to Sherritt.

Sherritt International Corporation 3

During Q4, US$7.5 million of Cuban energy payments were received compared to US$32.6 million in the third quarter of 2017.

Total Cuban overdue receivables were US$132.6 million at December 31, 2017 compared to US$100.5 million at September

30, 2017. The increase in overdue receivables was attributable to a number of factors, including the impact of Hurricane Irma

and resulting recovery costs on Cuba’s economy. Sherritt has experienced variability in its Cuban receivables over the years

but has not incurred any losses related to any Cuban receivables.

Adjusted earnings (loss) from continuing operations(1)

2017 2016

For the three months ended December 31 $ millions $/share $ millions $/share

Net earnings (loss) from continuing operations 552.9 1.85 (109.6) (0.37)

Adjusting items, net of tax:

Unrealized foreign exchange (gain) loss 24.1 0.08 25.7 0.09

Gain on Ambatovy restructuring (629.0) (2.11) - -

Other 1.8 0.01 2.6 0.01

Adjusted net earnings (loss) from continuing operations (50.2) (0.17) (81.3) (0.28)

2017 2016

For the year ended December 31 $ millions $/share $ millions $/share

Net earnings (loss) from continuing operations 308.9 1.04 (381.8) (1.30)

Adjusting items, net of tax:

Unrealized foreign exchange (gain) loss 7.7 0.03 (35.9) (0.12)

Gain on Ambatovy restructuring (629.0) (2.12) - -

Other (4.7) (0.02) (10.2) (0.03)

Adjusted net earnings (loss) from continuing operations (317.1) (1.07) (427.9) (1.46)

(1) For additional information, see the Non-GAAP measures section of this release.

Excluding the gain from the restructuring of the Ambatovy JV, Sherritt incurred an adjusted net loss from operations of $50.2

million, or $0.17 per share outstanding, in Q4 2017. These compare to an adjusted net loss of $81.3 million, or $0.28 per

share, for the same period of 2016.

Sherritt’s adjusted net loss for the 12-month period of 2017 was $317.1 million or $1.07 per share outstanding. These

compare to an adjusted net loss of $427.9 million, or $1.46 per share outstanding, for 2016.

2017 Fourth Quarter Report

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4 Sherritt International Corporation

REVIEW OF OPERATIONS

METALS

$ millions except as otherwise noted, for the three months ended December 31 2017 2016

Moa JV & Ambatov

Moa JV and Ambatovy

Fort Site(1) JV(2) Total Fort Site(1) JV(2)

(50%) (12%) Other(3) (50%) (40%) Other(3) Total Change

FINANCIAL HIGHLIGHTS

Revenue $ 122.9 $ 58.1 $ 3.0 $ 184.0 $ 92.5 $ 88.2 $ 14.9 $ 195.6 (6%)

Earnings (loss) from operations 19.9 (7.7) - 12.2 (7.6) (15.0) 0.2 (22.4) 154%

Adjusted EBITDA(4) 32.1 18.1 - 50.2 5.6 24.4 0.2 30.2 66%

Cash provided (used) by operations 32.5 (3.4) (0.5) 28.6 (6.1) (0.8) 3.3 (3.6) 894%

Free cash flow(4) 24.9 (20.7) (0.5) 3.7 (9.8) (10.6) 3.3 (17.1) 122%

PRODUCTION VOLUMES (tonnes)

Mixed Sulphides 4,090 3,329 - 7,419 3,674 6,036 - 9,710 (24%)

Finished Nickel 4,134 3,111 - 7,245 3,782 5,111 - 8,893 (19%)

Finished Cobalt 465 245 - 710 382 404 - 786 (10%)

Fertilizer 61,923 10,011 - 71,934 61,460 16,650 - 78,110 (8%)

NICKEL RECOVERY (%) 79% 84% 85% 87%

SALES VOLUMES (tonnes)

Finished Nickel 4,129 2,602 - 6,731 3,975 4,935 - 8,910 (24%)

Finished Cobalt 480 225 - 705 487 360 - 847 (17%)

Fertilizer 51,141 8,114 - 59,255 45,698 15,485 - 61,183 (3%)

AVERAGE EXCHANGE RATE (CAD/US) 1.271 1.334 (5%)

AVERAGE REFERENCE PRICES (US$ per pound)

Nickel $ 5.25 $ 4.90 7%

Cobalt 31.60 13.51 134%

AVERAGE-REALIZED PRICES(4)

Nickel ($ per pound) $ 6.72 $ 6.56 $ - $ 6.66 $ 6.39 $ 6.50 $ - $ 6.45 3%

Cobalt ($ per pound) 38.78 39.03 - 38.86 16.85 18.73 - 17.68 120%

Fertilizer ($ per tonne) 348 173 - 324 326 160 - 284 14%

UNIT OPERATING COSTS(4) (US$ per pound)

Nickel - net direct cash cost $ 1.80 $ 3.27 - 2.37 $ 3.80 $ 3.10 - 3.41 (31%)

SPENDING ON CAPITAL

Sustaining $ 7.7 $ 10.0 $ - $ 17.7 $ 4.7 $ 19.0 $ - $ 23.7 (25%)

Expansion - - - - (2.1) - - (2.1) 100%

$ 7.7 $ 10.0 $ - $ 17.7 $ 2.6 $ 19.0 $ - $ 21.6 (15%)

(1) Includes results for certain 100% owned assets at Fort Saskatchewan plant.

(2) Sherritt’s share for Ambatovy Joint Venture reflects its interest at 40% to December 10, 2017 and 12% thereafter.

(3) Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales.

(4) For additional information, see the Non-GAAP measures section of this release.

Sherritt International Corporation 5

$ millions, except as otherwise noted, for the years ended December 31 2017 2016

Moa JV and Ambatovy Moa JV and Ambatovy

Fort Site(1) JV(2) Fort Site(1) JV(2)

(50%) (12%) Other(3) Total (50%) (40%) Other(3) Total Change

FINANCIAL HIGHLIGHTS

Revenue $ 417.0 $ 279.2 $ 43.1 $ 739.3 $ 339.3 $ 264.8 $ 48.0 $ 652.1 13%

Earnings (loss) from operations 31.3 (109.5) 0.9 (77.3) (28.4) (150.9) 0.8 (178.5) 57%

Adjusted EBITDA(4) 80.5 26.0 0.9 107.4 19.6 (7.0) 0.8 13.4 701%

Cash provided (used) by operations 58.3 (26.7) 3.0 34.6 (2.7) (34.6) 3.1 (34.2) 201%

Free cash flow(4) 37.4 (55.6) 3.0 (15.2) (33.9) (55.9) 3.1 (86.7) 82%

PRODUCTION VOLUMES (tonnes)

Mixed Sulphides 17,297 14,836 - 32,133 16,923 18,271 - 35,194 (9%)

Finished Nickel 15,762 13,618 - 29,380 16,464 16,842 - 33,306 (12%)

Finished Cobalt 1,801 1,173 - 2,974 1,847 1,309 - 3,156 (6%)

Fertilizer 243,682 43,118 - 286,800 256,812 53,908 - 310,720 (8%)

NICKEL RECOVERY (%) 85% 85% 87% 86%

SALES VOLUMES (tonnes)

Finished Nickel 15,679 13,694 - 29,373 16,402 16,844 - 33,246 (12%)

Finished Cobalt 1,783 1,220 - 3,003 1,846 1,281 - 3,127 (4%)

Fertilizer 178,491 42,016 - 220,507 167,525 52,482 - 220,007 -

AVERAGE EXCHANGE RATE (CAD/USD) 1.299 1.325 (2%)

AVERAGE REFERENCE PRICES (US$ per pound)

Nickel $ 4.72 $ 4.36 8%

Cobalt 26.53 11.77 125%

AVERAGE-REALIZED PRICES(4)

Nickel ($ per pound) $ 6.14 $ 6.05 $ - $ 6.10 $ 5.63 $ 5.66 $ - $ 5.65 8%

Cobalt ($ per pound) 32.98 33.35 - 33.13 14.82 16.08 - 15.33 116%

Fertilizer ($ per tonne) 361 168 - 325 377 164 - 326 -

UNIT OPERATING COSTS (US$ per pound)(4)

Nickel - net direct cash cost $ 2.35 $ 3.83 $ - $ 3.04 $ 3.42 $ 4.27 $ - $ 3.85 (21%)

SPENDING ON CAPITAL

Sustaining $ 20.9 $ 44.2 $ - $ 65.1 $ 22.6 $ 33.1 $ - $ 55.7 17%

Expansion - - - - 10.3 - - 10.3 (100%)

$ 20.9 $ 44.2 $ - $ 65.1 $ 32.9 $ 33.1 $ - $ 66.0 (25%)

(1) Includes results for certain 100% owned assets at Fort Saskatchewan plant.

(2) Sherritt’s share for Ambatovy Joint Venture reflects its interest at 40% to December 10, 2017 and 12% thereafter.

(3) Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales.

(4) For additional information, see the Non-GAAP measures section of this release.

2017 Fourth Quarter Report

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6 Sherritt International Corporation

METAL MARKETS

Nickel

Nickel prices rallied in the second half of 2017 after experiencing considerable volatility in the first six months of the year. The

average nickel reference price in the fourth quarter was US$5.25 per pound, up 7% from US$4.90 for Q4 2016. The average

nickel reference price for the 12-months of 2017 was US$4.72 per pound, up 8% from US$4.36 per pound for 2016.

The year-over-year price improvements were largely driven by the growing understanding of the important role that Class 1

nickel will play in the burgeoning electric vehicle (EV) market. Class 1 nickel, along with cobalt, are key elements needed to

manufacture EV batteries. Demand for Class 1 nickel and cobalt are expected to grow significantly beginning in 2019 when

China expects to begin production quotas requiring that 10% of all vehicles manufactured be electric.

During Q4, the nickel price was supported by news that nickel pig iron (NPI) producers in China were asked to reduce

production to alleviate pollution with China’s largest NPI-only producer ordered to halve production from November 2017 to

March 2018. Actual and anticipated reductions from existing nickel producers also continued to help underpin the nickel

price, with nickel supply expected to be in a deficit for 2018 and 2019.

Nickel reference price improvements in the second half were also driven by the decline in inventories. Combined LME and

SHFE nickel inventories at year-end declined to 410,828 tonnes (from 464,696 tonnes at the beginning of the year). Any

further decline in visible inventories could give momentum to nickel price increases in the future.

Cobalt

Cobalt prices strengthened considerably in 2017. The average reference price in the fourth quarter was US$31.60 per pound

for 2017, up 134% from Q4 2016. The average reference cobalt price for the 12-month period of 2017 was US$26.53, up

125% from US$11.77 per pound for 2016.

The price increase is primarily linked to the growing strong demand emanating from the EV battery market. The double-digit

price growth experienced over the past year was also driven by geopolitical and supply risk concerns given that the

Democratic Republic of Congo is currently the world’s largest source of cobalt.

As cobalt prices have a limited impact on overall battery pack costs, high prices are not expected to cause supply-chain

disruptions or delay EV market growth. As a result, the risk of cobalt substitution in EV battery production in the near term is

relatively low given cobalt’s unique energy transference properties. While battery manufacturers continue to explore

alternatives to cobalt, the likely beneficiary of any substitution is expected to be Class 1 nickel.

Cobalt supply deficits are expected to continue over the next few years. In addition to demand from industrial end users,

speculative investors are also driving up cobalt prices by stockpiling inventory, further exacerbating supply deficit concerns.

Moa Joint Venture (50% interest) and Fort Site (100%)

The Moa JV produced 4,134 tonnes of finished nickel in Q4 2017, up from 3,782 tonnes produced in Q4 2016, despite mixed

sulphides production being negatively impacted by abnormally heavy rainfalls in November and December 2017. Finished

nickel production on a 12-month basis was 15,679 tonnes in 2017, in line with expectations for the year.

Q4 2017 revenue for the Moa JV and the Fort Site totaled $123.0 million, up 32% from $92.5 million last year. The growth was

driven by higher production and higher realized prices for nickel, cobalt and fertilizer. Nickel sales represented 50% of total Q4

2017 revenue while cobalt sales represented 33%. Fertilizer sales in Q4 2017 were up 19% from last year, reflecting stronger

demand and higher realized prices.

Mining, processing and refining (MPR) costs for Q4 2017 were US$4.89 per pound, down from US$4.93 per pound for Q4

2016. The decline was largely due to higher production volumes in Q4 2017. MPR costs on the full-year basis were US$4.80

per pound for 2017, up from US$4.63 per pound for 2016. The US$0.17 increase per pound in 2017 was attributable to higher

energy costs, although partly offset by cost savings of approximately US$0.50 per pound achieved with the commissioning of

the third acid plant at Moa in the fourth quarter of 2016.

Sherritt International Corporation 7

Despite higher energy and sulphur input costs, Moa’s NDCC of US$1.80/lb of finished nickel in Q4 2017 was the lowest

experienced since Q3 2004. The cobalt credit of US$3.54/lb reflects Moa’s high cobalt to nickel production ratio as well as the

125% growth in cobalt prices since Q4 2016. NDCC improvement also benefited from the commissioning of a third sulphuric

acid plant at Moa in 2016 that generated approximate savings of US$0.50/lb. NDCC on a 12-month basis was $2.35/lb, down

from $3.42/lb for 2016. NDCC for 2017 was significantly lower than expectations for the year, due largely to higher cobalt by-

product credits.

Cash provided by operations in Q4 2017 totaled $32.5 million, up from a loss in Q4 2016 when Hurricane Matthew and the

subsequent collapse of bridge infrastructure negatively impacted production. Cash flow from operations in Q4 2017 was also

positively impacted higher realized nickel and cobalt prices..

Moa’s sustaining capital spending in Q4 2017 was $7.7 million, up from $4.7 million in Q4 last year. The increase was

attributable to the timing of expenditures.

Ambatovy Joint Venture (12% interest effective December 11, 2017)

Along with its partners, Sherritt completed the restructuring of the Ambatovy Joint Venture on December 11, 2017. The

restructuring led to Sherritt’s ownership interest being reduced to 12% in exchange for the elimination of $1.4 billion of debt.

Sherritt’s financial and operational results at Ambatovy are presented on a 40% basis to December 10, 2017 and on a 12%

basis effective December 11, 2017. Sherritt will continue to serve as operator of Ambatovy at least through 2024, however, as

a result of the reduction in its ownership interest, Sherritt’s ability to direct local decision-making at Ambatovy has diminished.

Finished nickel production at Ambatovy in Q4 2017 was 3,111 tonnes, down from 5,111 tonnes for the comparable period of

2016, which represented Ambatovy’s highest ever production total. The year-over-year decline was due to a number of

developments that impacted plant reliability. Most notably, the failure of an economizer in one of the acid plants reduced

production capacity to approximately 50% during November and December of 2017.

Finished nickel production on a 12-month basis for 2017 was 13,618 tonnes, down from 16,842 tonnes for 2016. The year-

over-year decline was primarily due to equipment failures that reduced the reliability of Ambatovy’s acid plant and pressure

acid leach circuit. Maintenance activities and replacement of equipment completed in 2017 are expected to improve plant

reliability and production stability over time.

Finished cobalt production in Q4 2017 was 245 tonnes, down from 404 tonnes for the same period of 2016. The decrease was

tied to plant reliability issues previously cited that lowered production. Cobalt production for 2017 was 1,173 tonnes, down

from 1,309 tonnes for 2016.

MPR costs for Q4 2017 were US$5.76 per pound, up from US$3.97 per pound in Q4 2016. MPR costs on a full-year basis

were US$6.01 per pound in 2017, up from US$4.89 per pound in 2016. The year-over-year increases were largely due to

higher input costs as well as lower production volumes in 2017.

NDCC for finished nickel at Ambatovy in Q4 2017 was $3.26/lb, up from the $3.10/lb for Q4 2016. The increase was due to

lower production, higher maintenance costs, higher energy and sulphur input costs offset by higher cobalt by-product credits.

NDCC on a 12-month basis $3.83/lb for 2017, down from $4.27/lb for 2016. Ambatovy’s NDCC for 2017 places it slightly

above the 50th percentile of industry average cost.

Subsequent to year end, facilities at the Ambatovy Joint Venture were impacted by Tropical Cyclone Ava, a Category 2

hurricane equivalent storm. Damage to equipment and the acid production facilities resulted in a temporary halt in production.

Repairs have since been completed and partial production has resumed. A ramp up in production is expected through the end

of Q2 2018.

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8 Sherritt International Corporation

OIL AND GAS

For the three months ended For the years ended

2017 2016 2017 2016

$ millions, except as otherwise noted December 31 December 31 Change December 31 December 31 Change

FINANCIAL HIGHLIGHTS

Revenue $ 27.7 $ 30.6 (9%) $ 127.0 $ 108.6 17%

Earnings (loss) from operations 7.9 2.8 182% 33.6 (16.3) 306%

Adjusted EBITDA(1) 10.5 11.6 (9%) 61.9 35.6 74%

Cash provided by operations (2.3) 11.4 (120%) 30.8 76.4 (60%)

Free cash flow(1) (9.9) 3.3 (400%) 8.9 50.4 (82%)

PRODUCTION AND SALES (bopd)

Gross working-interest (GWI) - Cuba 10,378 14,470 (28%) 13,479 15,452 (13%)

Total net working-interest (NWI) 6,101 8,163 (25%) 7,856 9,483 (17%)

AVERAGE EXCHANGE RATE (CAD/USD) 1.271 1.334 (5%) 1.299 1.325 (2%)

AVERAGE REFERENCE PRICE (US$ per barrel)

West Texas Intermediate (WTI) $ 55.19 $ 49.21 12% $ 50.78 $ 43.37 17%

Gulf Coast Fuel Oil No. 6 52.81 41.12 28% 47.02 32.13 46%

Brent 61.77 48.53 27% 54.18 43.31 25%

AVERAGE-REALIZED PRICE(1) (NWI)

Cuba ($ per barrel) $ 48.82 $ 39.75 23% $ 43.81 $ 29.93 46%

UNIT OPERATING COSTS(1) (GWI)

Cuba ($ per barrel) $ 12.24 $ 10.95 12% $ 9.78 $ 9.75 -

SPENDING ON CAPITAL(2)

Development, facilities and other $ (1.4) $ 0.4 (450%) $ (1.7) $ 8.9 (119%)

Exploration 8.6 7.8 10% 21.1 17.0 24%

$ 7.2 $ 8.2 (12%) $ 19.4 $ 25.9 (25%)

(1) For additional information, see the Non-GAAP measures section of this release.

(2) Spending on capital includes accruals.

Gross working-interest oil production in Q4 2017 in Cuba was 10,378 barrels of oil per day (bopd), down from 14,470 bopd for

the comparable period of 2016. The decrease was primarily due to the expiration of the Varadero West Production Sharing

Contract (PSC) in November 2017 and natural reservoir declines. Gross working-interest oil production on a 12-month basis

for 2017 was 13,479 bopd, in line with guidance for the year.

Revenue in Q4 2017 was $27.7 million, down 9% from $30.6 million for last year. The decline was due to lowered production,

partially offset by an increase in realized prices of 23% to $48.82 per barrel in Cuba, though partially offset by the negative

impact of a stronger Canadian dollar. Revenue on a full-year basis was $127.0 million, up 17%. The increase was driven

largely by higher realized prices.

Total net working interest production for Q4 2017 was 6,101 barrels of oil equivalent per day, down from 8,163 barrels in the

same period of 2016. The decline was due to lower cost-recovery spending, the impact of the expiration of the Varadero West

PSC already cited and the impact of higher oil prices in the current year period.

Unit operating costs in Q4 2017 in Cuba were $12.24 per barrel, up 12% from $10.95 in Q4 2016, driven largely by reduced

production. On a full-year basis, unit costs in Cuba were $9.78 in line with 2017 guidance.

Capital spending in Q4 2017 totaled $7.2 million and was largely focused on Block 10 drilling activities. Drilling of the second

development well began in August and was temporarily suspended in December 2017. Drilling results for the second well on

Block 10 are expected in Q3 of 2018.

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