CALGARY, AB — January 16, 2026 — Leads & Copy — Headwater Exploration Inc. (TSX: HWX) has announced its fourth-quarter average production volumes, 2025 reserves information, and an operations update.
The company reported exceptional results across its asset base, positioning it for strong fourth-quarter production volumes of approximately 24,250 boe/d and 2025 annual production volumes of approximately 22,750 boe/d, representing 12% year-over-year production per share growth. Adjusted funds flow from operations is estimated at approximately $326 million (unaudited), providing an estimated adjusted funds flow netback of approximately $39.25 per boe.
During 2025, Headwater executed a capital expenditure program of approximately $228 million (unaudited), including $60 million for waterflood capital, $58 million on land and exploration, and $110 million for development capital. The development capital, representing 34% of adjusted funds flow from operations, generated 12% production per share growth.
Reserve additions for the year-end 2025 were exceptional due to continued success with exploration efforts and secondary recovery implementation. Proved developed producing reserves increased by 53% to 44.5 mmboe from 29.2 mmboe, resulting in a production replacement of 285% and a reserves life index (RLI) of 5.0 years. Total proved reserves increased by 59% to 68.3 mmboe from 43.1 mmboe, resulting in a production replacement of 403% and an RLI of 7.6 years. Total proved plus probable reserves increased by 54% to 104.5 mmboe from 67.9 mmboe, resulting in a production replacement of 541% and an RLI of 11.7 years.
Finding and development (F&D) costs, including changes in future development capital, were $9.65 per boe on a proved developed producing basis, $11.04 per boe on a total proved basis, and $9.97 per boe on a total proved plus probable basis.
Based on a 2025 adjusted funds flow netback of $39.25/boe, Headwater achieved recycle ratios of 4.1 on a proved developed producing basis, 3.6 on a total proved basis, and 3.9 on a total proved plus probable basis.
In the Grand Rapids Formation in Marten Hills West, the first production commenced in May 2025, and this zone now contributes over 2,000 bbls/d of production, of which more than 750 bbls/d will be supported under waterflood by mid-February 2026. A 3-mile step-out well drilled in the fourth quarter of 2025 achieved a 15-day initial production rate of 300 bbls/d of 19 API oil. The team immediately followed up with an injection well, which will be placed on injection in mid-February 2026. Success from this test has expanded the main pools’ boundaries to an estimated 20 sections.
In the Greater Pelican Area, two development wells drilled in the fourth quarter of 2025 achieved 30-day initial production rates of 382 and 470 bbls/d, respectively. Polymer injection wells were drilled to support these producers and have been on polymer injection at encouraging rates since mid-December. A Wabiskaw exploration test encountered a structural low at the toes of its laterals. A follow-up single lateral well achieved a 20-day initial production rate of 37 bbls/d.
Production from the Greater Pelican has grown to 1,500 bbls/d, with more than 850 bbls/d supported by secondary recovery. Headwater is enthusiastic about advancing additional polymer flood development in 2026, as well as drilling 2-3 untested exploration prospects.
Headwater finished 2025 with a total of 10 sections and 11,500 bbls/d supported by secondary recovery, representing more than 50% of the company’s oil production. By year-end 2026, it is estimated that 14,000 bbls/d, equivalent to 60% of Headwater’s corporate oil production, will be supported by secondary recovery.
Headwater currently has reserves primarily located in the greater Marten Hills area of Alberta and reserves in the McCully Field near Sussex, New Brunswick. McDaniel & Associates Consultants Ltd. assessed the company’s reserves in its report dated effective December 31, 2025. Additional information regarding reserves data and other oil and gas information will be included in Headwater’s Annual Information Form for the year ended December 31, 2025, expected to be filed on SEDAR+ on or around March 5, 2026.
Headwater anticipates exiting 2026 with a decline rate of less than 20% and maintenance capital of less than 30% of adjusted funds flow from operations at US$60 WTI. Headwater currently estimates that it is fully funded to maintain production and pay its base dividend at US$46 WTI.
Additional corporate information can be found in the company’s corporate presentation and on Headwater’s website.
Source: Headwater Exploration Inc.
