Looking Ahead at 2016

Delphi remains well positioned with its Bigstone Montney asset, capable of long term sustainable growth with the large development inventory assembled on 140 gross sections of Montney lands, together with ownership in strategic infrastructure. The business strategies and initiatives in place serve to both mitigate the impacts of the current commodity price environment and enhance the Company’s long term growth plans.

The Bigstone Montney well performance over time and the resulting impressive capital efficiencies are proving to be primary differentiating elements in successfully navigating through this challenging commodity price cycle. Overall, average well performance continues to be consistent with our type well expectations. The Bigstone Montney play is a top tier play that remains economic in this low commodity price environment.

Efforts to further reduce capital, operating and transportation costs are proceeding and will further enhance the Company’s profitability through this environment. Processing arrangements and firm service transportation contracts undertaken provide certainty to field processing and delivery to sales. This has become a critically important strategic element to a producer’s full cycle business as significant growth continues in the Deep Basin of Northwest Alberta.

The Company remains committed to a conservative approach to its capital spending plans in 2016 to preserve its financial flexibility. Capital spending will be dependent upon realized commodity prices and level of service cost reductions.

Capital Costs

Delphi’s capital efficiencies in 2015 were excellent as a result of continued success in achieving type well results from a production and reserves perspective while reducing drill and completions costs by 22 percent over the previous year. In 2015, Delphi achieved gross average drilling and completion costs of $8.1 million per well compared to $10.4 million per well in 2014. So far in 2016, drilling and completion costs have been further reduced to an average of $7.0 million on the Company’s most recent three wells.

Operating Costs

Delphi continues to focus on operating efficiencies at its Montney development at Bigstone. In 2015, operating costs were reduced to $7.51 per boe, a decrease of nine percent over the previous year. Further operating cost reductions are expected in 2016 through disposal of produced Montney water into the Company’s 100 percent owned water disposal facility in the area and higher quality fuel gas to power the Company’s facilities in the area resulting in improved run time and capacity in addition to reduced repairs and maintenance costs.

Financial Flexibility

Delphi continues to maintain a strong risk management program for the production of both its natural gas and natural gas liquids, primarily condensate produced in the field and extracted at the processing plants, to protect the Company’s cash flow. In the current low pricing environment, protecting the downside risk of volatile changes in the price of the Company’s production provides stability to cash flow and the flexibility of pursuing a minimum level of capital spending directed at the Montney in East Bigstone.

Early in 2015, Delphi recognized the importance of disposing of its lower netback producing assets to improve the Company’s financial flexibility and focus its efforts on the higher netback Montney at Bigstone. During the year, Delphi disposed of its lower netback assets at Wapiti, Hythe and other miscellaneous properties for total net proceeds of $60.2 million and sold an overriding royalty on three wells for proceeds of $6.9 million. Net debt at December 31, 2015 was reduced by 30 percent from the previous year to $121.7 million. While credit facilities are challenged in a lower commodity price environment, the production growth and strong operating netbacks of the Montney and the Company’s significant risk management program provide a solid foundation for the Company’s lenders.