Perpetual Energy Inc. (“Perpetual”, the “Corporation” or the “Company”) announces that it has entered into a definitive agreement to effect the strategic disposition of a large percentage of its high liability mature shallow gas properties in east central and northeast Alberta (the “Shallow Gas Properties”). The transaction includes the disposition of all of Perpetual’s shallow gas assets and liabilities in eastern Alberta, specifically excluding heavy oil and natural gas assets in the Mannville and Panny areas and other bitumen leases in northeast Alberta. Closing is expected to occur on or around October 1, 2016 and is subject to customary closing conditions. Macquarie Capital Markets Canada Ltd. is acting as financial advisor to the Corporation with respect to the transaction.

The transaction also includes an effective deferred purchase price component whereby Perpetual will continue to benefit from the Shallow Gas Properties for close to two years, given a recovery in natural gas pricing, through marketing arrangements which provide a call on 33,611 GJ/d, representing close to 90% of current production, at $2.81/GJ at AECO from October 1, 2016 through August 31, 2018. Further to this, arrangements have been made to provide for an AECO floor price of $2.58/GJ for the Purchaser’s account for the same volume and term. The marketing arrangements will be settled monthly by a third party marketing company through an adjustment in the price paid to Perpetual for future physical gas sales.

The Shallow Gas Properties include approximately 35.5 MMcfe/d of current production and an estimated 83.8 Bcfe of proved plus probable natural gas reserves (based on the Company’s third party reviewed engineering report prepared by McDaniel and Associates Consultants Ltd. (“McDaniel”), as at December 31, 2015, and adjusted for production to the effective date of October 1, 2016). At year-end 2015, Perpetual forecast the undiscounted cost of future asset retirement obligations (“ARO”) for the Shallow Gas Properties at $133.6 million. Also included in the transaction are 353,777 net acres of undeveloped lands not assigned reserves at year-end 2015.

Perpetual’s funds flow is expected to be positively impacted by the disposition as the Shallow Gas Properties continue to operate on a negative cash flow basis as a result of depressed natural gas prices combined with high fixed operating costs which include extremely high municipal property taxes. Including adjustments related to the estimated value of its proved and probable reserves, future asset retirement obligations net of salvage value and the fair market value of undeveloped land, the Company estimates that the transaction increases its net asset value discounted at 10 percent on a pro forma basis at McDaniel’s April 1, 2016 commodity price forecasts by $28.5 million.

Perpetual is also pleased to announce the refinancing of its financial arrangement secured by 1 million of the Company’s 1.85 million shares of Tourmaline Oil Corp. (“TOU Shares”) and maturing in November 2016. The refinancing results in an extension of the maturity to March 15, 2017 as well as a reduction in the number of shares pledged as collateral to 840,619 TOU Shares, establishing a floor price on these shares of $27.72/TOU Share on the same underlying obligation plus refinancing costs for repayment at maturity of $23.3 million. The TOU Share financial arrangement continues to represent a collateralization of TOU Page 2 Shares, not a sale, and Perpetual retains substantially all rights and privileges associated with the ownership of such shares.

The Company further advises that it has initiated a search for the position of Vice President, Finance and Chief Financial Officer. In the interim, Bill Hahn (CPA-CA), the Corporation’s Financial Controller and Manager, Corporate Finance will assume the responsibilities of acting Vice President, Finance and Chief Financial Officer on an interim basis. The Board of Directors and management of Perpetual would like to express our gratitude to Mr. Cameron Sebastian for his past years of service to Perpetual and wish him all the best in his future endeavours.

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