Birchcliff Energy

May 15, 2012 Operations Update

Production

Current production (at May 15, 2012) is estimated at 21,900 boe per day, based on field estimates. Production during the month of April averaged 21, 500. Birchcliff expects its 2012 exit production rate to be approximately 26,000 boe per day.

Production in the first quarter of 2012 consisted of approximately 75% natural gas and 25% light oil and natural gas liquids.

Drilling Activities

Drilling activities in the first quarter of 2012 resulted in 14 (13.03 net) wells, of which all were cased. Birchcliff drilled 8 (8.0 net) Montney/Doig horizontal natural gas wells, 5 (5.0 net) Worsley horizontal light oil wells and 1 (0.03 net) Charlie Lake horizontal well.

Expansion of Pouce Coupe South Gas Plant

The Phase III expansion of our 100% owned Pouce Coupe South Natural Gas Plant ("PCS Gas Plant") is on schedule to commence operation by November 1, 2012.

The Energy Resource Conservation Board ("ERCB") recently approved Birchcliff's application for re-licensing the permitted processing volume of the PCS Gas Plant to 150 MMcf per day of raw inlet volume, from 120 MMcf per day. This re-licencing recognizes the design processing capacity of the PCS Gas Plant once the Phase III expansion is complete. To operate the PCS Gas Plant at 150 MMcf per day will require twinning of the sale gas pipeline, but the capital involved is not material in amount.

Birchcliff expects the PCS Gas Plant to be processing approximately 100 MMc per day of natural gas at the end of 2012. This leaves 50 MMcf per day of expected processing capacity available for significant future production growth when natural gas prices return to levels that warrant additional drilling activity.

Equity Financing

On April 19, 2012, the Corporation completed an equity financing, which raised $110.2 million. The net aggregate proceeds of $106.5 million were used to reduce the indebtedness under Birchcliff's revolving credit facilities.

Syndicated Bank Credit Facilities

Birchcliff's total unused credit under its $520 million of credit facilities at March 31, 2012 pro forma the equity financing, was $176.4 million.

The Corporation has arranged for a 40 day extension of the date for the annual renewal of the revolving credit facility from May 18, 2012 to June 27, 2012, as the Corporation seeks to add new banks into the banking syndicate and to increase the amount available under its revolving credit facilities.

The current credit facilities aggregate $520 million, of which $70 million is under a non-revolving five-year term credit facilty with a maturity date of May 25, 2016 and $450 million is under revolving credit facilities with a two-year term out.

Reserves Evaluation and Montney/Doig Resource Assessment

Birchcliff received the following year-end reports from AJM Deloitte, the details of which were disclosed in Birchcliff's March 14, 2012 press release:

Reserves Evaluation dated February 21, 2012, which evaluated all of Birchcliff's reserves as at December 31, 2011
Montney/Doig Resource Assessment dated March 8, 2012, which evaluated the resources existing on Birchcliff's Montney/Doig lands as at December 31, 2011.

Advisories

BOE Conversions: Barrels of oil equivalent ("boe") amounts have been calculated by using the ratio of six thousand cubic feet (6 Mcf) to one barrel of oil (1 bbl). Boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward Looking Information: This document contains forward-looking information within the meaning of applicable Canadian securities laws. Forward looking information relates to future events or future performance and is based upon the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. All information other than historical fact is forward-looking information. In particular, this Operations Update contains forward looking information relating to expected annual exit rate production, expected renewal of revolving credit facilities and the expected processing capacity and commissioning date of the PCS Gas Plant.

Forward looking information is based upon assumptions as to future commodity prices, currency exchange rates, inflation rates, well production rates, well drainage areas, success rates for future drilling and availability of labour and services. Undue reliance should not be placed on forward looking information as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.

All such forward-looking information necessarily involves both known and unknown risks associated with oil and gas exploration, production, marketing and transportation such as uncertainty of geological and technical data, imprecision of reserves and resources estimates, operational risks, environmental risks, loss of market demand, general economic conditions affecting ability to access sufficient capital, changes in government regulation of the oil and gas industry and competition from others for scarce resources.

The foregoing list of risk factors is not exhaustive. Additional information on these and other risk factors that could affect operations or financial results is included in the Corporation's most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities. Forward looking information is based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward looking information to conform such information to actual results or to changes in the Corporation's plans of expectations, except as otherwise required by applicable securities laws.