EX-99.2 3 exhibit99-2.htm EXHIBIT 99.2 Alpine Summit Energy Partners, Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

 

 

Alpine Summit Energy Partners, Inc.

(formerly Red Pine Petroleum Ltd.)

Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022 and 2021

(Unaudited)

 

 

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)
Condensed Consolidated Statements of Financial Position
(amounts in US dollars)(Unaudited)
As at

      September 30,     December 31,  
  Notes   2022     2021  
               
ASSETS              
Current assets              
Cash   $ 22,230,780   $ 8,622,815  
Restricted cash     2,980,044     -  
Accounts receivable     29,379,396     18,797,635  
Prepaid expenses     1,176,112     535,474  
      55,766,332     27,955,924  
Non-current assets              
Right-of-use-assets     331,282     414,076  
Commodity contracts 23(c)   2,586,690     -  
Exploration and evaluation assets 5   38,920,365     24,987,312  
Property, plant and equipment (net) 6   216,404,570     92,270,130  
               
Total assets   $ 314,009,239   $ 145,627,442  
LIABILITIES              
Current liabilities              
Accounts payable and accrued liabilities   $ 74,510,929   $ 48,245,677  
Current lease obligations     131,462     115,095  
Current portion of long-term debt (net) 8   56,887,027     7,059,834  
Development partnership liabilities 7   100,904,095     44,694,643  
Accrued liability for automatic share purchase plan 12   8,297,298     -  
Corporate credit facility 9   -     2,200,000  
Commodity contracts 23(c)   6,972,796     6,479,508  
      247,703,607     108,794,757  
Non-current liabilities              
Long-term debt (net) 8   60,270,141     16,139,307  
Asset backed preferred instrument 11   -     18,687,351  
Commodity contracts 23(c)   -     13,901,672  
Long-term lease obligations     299,392     374,848  
Deferred tax liability 19   2,832,215     2,832,215  
Decommissioning liabilities 10   2,384,230     1,946,306  
      65,785,978     53,881,699  
               
Total liabilities     313,489,585     162,676,456  
               
SHAREHOLDERS' DEFICIENCY              
Share capital 12 $ 43,345,838   $ 43,414,147  
Capital reserve 14   46,068,567     34,459,432  
Contributed surplus     5,218,494     5,405,548  
Accumulated deficit     (78,065,943 )   (81,314,105 )
Equity/(deficiency) attributable to Alpine              
Summit Energy Partners, Inc. Shareholders     16,566,956     1,965,022  
Non-controlling interest 14   (16,047,302 )   (19,014,036 )
Total Shareholders' equity/(deficiency)
     519,654     (17,049,014 )
Total liabilities and Shareholders' equity/(deficiency)   $ 314,009,239   $ 145,627,442  

Subsequent events (Note 24)

 
   

Approved by the Board:

 
   

"signed" Craig Perry                           

"signed" Stephen Schaefer                                

Director

Director

See accompanying notes to the condensed interim consolidated financial statements.

- 1 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)
Condensed Interim Consolidated Statements of Income and Comprehensive Income

For the three and nine months ended September 30, 2022 and 2021
(unaudited)(amounts in US dollars) 

      Three months     Three months     Nine months     Nine months  
      ended     ended     ended     ended  
      September 30,     September 30,     September 30,     September 30,  
      2022     2021     2022     2021  
  Notes                        
Revenue                          
  Revenue from petroleum and natural gas sales 17 $ 78,362,838   $ 23,427,075   $ 202,815,005   $ 55,889,227  
  Royalties     (20,650,728 )   (6,689,789 )   (55,591,593 )   (15,611,640 )
      57,712,110     16,737,286     147,223,412     40,277,587  
  Unrealized gains/(losses) on derivative commodity contracts                          
  Realized losses on derivative commodity contracts 23(c)   20,110,296     (7,534,986 )   14,358,774     (25,105,949 )
Total revenue, net of royalties and derivative commodity contracts 23(c)   (12,980,832 )   (6,438,425 )   (31,604,687 )   (14,276,940 )
    $ 64,841,574   $ 2,763,875   $ 129,977,499   $ 894,698  
Expenses                          
  Operating and transportation     15,381,299     3,018,084     29,720,467     6,598,663  
  General and administrative expense 20   3,854,845     1,661,449     11,764,179     7,650,282  
  Listing expense 2   -     1,301,692     -     1,301,692  
  Transaction costs 2   -     1,567,967     -     1,567,967  
  Stock-based compensation 15   3,978,831     -     9,498,501     9,073,228  
  Depletion and depreciation expense     13,121,973     3,815,509     27,503,795     10,521,936  
  Finance income and expense (net) 18   5,966,790     10,991,673     32,003,711     16,751,963  
                             
Total expenses     42,303,738     22,356,374     110,490,653     53,465,731  
                           
Income/(loss) before taxes and non-controlling interest:   $ 22,537,836   $ (19,592,499 ) $ 19,486,846   $ (52,571,033 )
                           
Deferred taxes 19   -     (2,398,924 )   -     (2,398,924 )
Net income/(loss) and comprehensive loss for the period before non-controlling interest   $ 22,537,836   $ (21,991,423 ) $ 19,486,846   $ (54,969,957 )
Net income/(loss) and comprehensive loss attributable to non- controlling interest     7,953,578     (3,355,382 )   6,977,736     (3,355,382 )
Net income/(loss) and comprehensive loss for the period attributable to Alpine Summit Energy Inc. Shareholders   $ 14,584,258   $ (18,636,041 ) $ 12,509,110   $ (51,614,575 )
                           
Income/(loss) per share attributable to Alpine Shareholders                          
Income/(loss) and comprehensive loss per share - basic 12 $ 0.42   $ (0.42 ) $ 0.37   $ (1.13 )
Weighted average number of shares outstanding basic 12   34,900,145     43,882,747     34,268,827     45,632,956  
Income/(loss) and comprehensive loss per share - diluted 12 $ 0.40   $ (0.42 ) $ 0.35   $ (1.13 )
Weighted average number of shares outstanding diluted 12   36,038,530     43,882,747     35,384,262     45,632,956  

See accompanying notes to the condensed interim consolidated financial statements.

- 2 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Condensed Interim Consolidated Statements of Changes in Members' Equity/(Deficiency)

(amounts in US dollars)

(Unaudited)

      HB2 Member     SVS Shares     MVS Shares     PVS Shares                       Accumulated     Non-controlling     Total shareholders'  
  Note   Units     Number     Number     Number     Share Capital      Contributed surplus     Capital Reserve     deficit     interest     equity/(deficiency)  
Opening Balance January 1, 2021     17,083,501     -     -     -   $ 37,097,376     -   $ 5,023,375   $ (39,757,844 ) $ -   $ 2,362,907  
Issuance of member units for cash 12   819,215     -     -     -     8,044,700     -     -     -     -     8,044,700  
Issuance of member units exchanged for promissory notes 12   353,870     -     -     -     3,475,000     -     -     -     -     3,475,000  
Issuance of member units for exploration and evaluation assets     356,415     -     -     -     3,499,995     -     -     -     -     3,499,995  
Issuance of member units to contractors 12   923,954     -     -     -     9,073,228     -     -     -     -     9,073,228  
Redemption of member units 12   (3,992,629 )   -     -     -     (8,680,786 )   -     -     (11,884,916 )   -     (20,565,702 )
Allocation of opening non-controlling interest 14   (16,168,422 )   -     -     -     (18,721,276 )   -     29,436,057     -     (10,714,781 )   -  
Issuance of member units exchanged for promissory notes 13   234,216     -     -     -     2,300,000     -     -     -     -     2,300,000  
Origination Unit split 1:3 2   31,557,084     -     -     -     -     -     -     -     -     -  
Shares issued for cash, net of share issuance costs of $247,218 13   -     161,976     17,057.000     -     5,499,832     -     -     -     -     5,499,832  
Exchange of units for SVS and MVS 13   (31,167,204 )   1,427,421     297,397.830     -     -     -     -     -     -     -  
Proportionate Voting Shares issued for cash 2   -     -     -     15,947.292     128,213     -     -     -     -     128,213  
Shares issued on business acquisition 2   -     534,384     -     -     1,697,865     -     -     -     -     1,697,865  
Net loss and comprehensive loss for the period     -     -     -     -     -     -     -     (51,614,575 )   (3,355,382 )   (54,969,957 )
Ending Balance September 30, 2021     -     2,123,781     314,454.830     15,947.292   $ 43,414,147     -   $ 34,459,432   $ (103,257,335 ) $ (14,070,163 ) $ (39,453,919 )
                                                               
                                                               
Opening Balance January 1, 2022     -     32,535,731     10,335.330     15,947.292   $ 43,414,147   $ 5,405,548   $ 34,459,432   $ (81,314,105 ) $ (19,014,036 ) $ (17,049,014 )
Exchange of units for SVS and MVS 12   -     195,541     (1,955.410 )   -     -     -     -     -     -     -  
Stock based compensation 15   -     -     -     -     -     9,498,501     -     -     -     9,498,501  
Settlement of RSUs 12, 14   -     2,024,401     -     -     9,685,555     (9,685,555 )   11,609,135     -     (11,609,135 )   -  
Repurchase of SVS for cancellation 12   -     (265,900 )   -     -     (1,456,566 )   -     -     -     -     (1,456,566 )
Development partnership redemtion for HB2 Origination LLC Units 7, 14   -     -     -     -     -     -     -     -     12,422,733     12,422,733  
Dividends declared 13   -     -     -     -     -     -     -     (9,260,948 )   (4,824,600 )   (14,085,548 )
Accrued liability for automatic share purchase plan commitment 12         -     -     -     (8,297,298 )   -     -     -     -     (8,297,298 )
Net income and comprehensive loss for the period     -     -     -     -     -     -     -     12,509,110     6,977,736     19,486,846  
Ending Balance September 30, 2022     -     34,489,773     8,379.920     15,947.292   $ 43,345,838   $ 5,218,494   $ 46,068,567   $ (78,065,943 ) $ (16,047,302 ) $ 519,654  

See accompanying notes to the condensed interim consolidated financial statements.

- 3 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Condensed Interim Consolidated Statements of Cash Flows

For the three and nine months ended September 30, 2022 and 2021
(unaudited)(amounts in US dollars)

      Three months ended September 30,     Nine months ended September 30,  
  Note   2022     2021     2022     2021  
Operating Activities                          
Net income/(loss) for the period before non-controlling interest   $ 22,537,836   $ (21,991,423 ) $ 19,486,846   $ (54,969,957 )
Items not affecting cash:                          
Depletion and depreciation expense 6   13,121,972     3,815,509     27,503,794     10,521,936  
Stock-based compensation 15   3,978,831     -     9,498,501     9,073,228  
Deferred taxes 19   -     2,398,924     -     2,398,924  
Listing expenses 2   -     1,301,692     -     1,301,692  
Accretion expense 10   28,207     4,613     56,942     13,556  
Interest on lease liability     3,674     3,927     11,596     5,229  
Amortization of debt issuance costs 8   797,920     236,961     2,836,188     833,260  
Asset back preferred instrument interest 11   -     532,593     658,047     1,310,975  
Fair value change on development partnership 7   3,108,510     9,638,401     24,100,765     12,310,373  
Unrealized loss on commodity contracts 23(c)   (20,110,296 )   7,534,985     (14,358,774 )   25,105,949  
Net change in non-cash working capital 21   179,955     (13,450,912 )   (4,842,937 )   (9,095,806 )
Cash flows from in operating activities     23,646,609     (9,974,730 )   64,950,968     (1,190,641 )
                           
Investing Activities                          
                           
Expenditures on property, plant and equipment 6   (63,132,318 )   (23,614,898 )   (133,790,292 )   (38,498,017 )
Expenditures of exploration and evaluation assets 5   (8,323,687 )   (3,294,209 )   (31,693,118 )   (6,763,605 )
Right of use payments     (35,612 )   -     (70,685 )   -  
Margin returns/(calls) on commodity contracts 23(c)   9,811,494     -     (1,636,300 )   -  
Net change in non cash working capital 21   11,259,445     16,062,271     19,885,790     25,828,660  
Cash flows used in investing activities     (50,420,678 )   (10,846,836 )   (147,304,605 )   (19,432,962 )
                           
Financing Activities                          
Issuance of shares for cash 12   -     5,628,045     -     13,672,745  
Cash acquired on acquisition 2   -     396,173     -     396,173  
Dividends paid 13, 14   (4,826,085 )   -     (14,085,548 )   -  
Proceeds from development partnerships 7   8,861,608     4,023,733     48,657,273     33,955,569  
Distributions to development partnerships 7   (1,477,684 )   (1,853,127 )   (3,749,954 )   (1,853,127 )
Proceeds from promissory notes     -     -     -     3,375,000  
Repayment of promissory notes     -     -     -     (1,875,000 )
(Repayments)/proceeds from corporate credit facility 9   (17,000,000 )   -     (2,200,000 )   -  
Proceeds from long-term debt 8   55,000,000     -     135,000,000     -  
Repayment of long-term debt 8   (10,465,896 )   (3,767,189 )   (39,639,497 )   (15,184,356 )
Long-term debt issuance costs 8   (1,697,189 )   -     (4,238,664 )   -  
Repayment of asset backed preferred instruments 11   -     -     (19,345,398 )   (4,735,700 )
Cash used for share repurchase 12   (1,174,388 )   -     (1,456,566 )   -  
Net change in non-cash working capital 21   -     2,881,549     -     -  
Cash flows from financing activities     27,220,366     7,309,184     98,941,646     27,751,304  
                           
Increase in cash     446,297     (13,512,382 )   16,588,009     7,127,701  
                           
Cash and restricted cash, beginning of period     24,764,527     23,529,641     8,622,815     2,889,558  
                           
Cash and restricted cash, end of period   $ 25,210,824   $ 10,017,259   $ 25,210,824   $ 10,017,259  

See accompanying notes to the condensed interim consolidated financial statements. 

- 4 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021

(amounts in US dollars unless otherwise noted) (Unaudited)

1. General business description

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd. ("Red Pine") (the "Company" or "Alpine Summit") was incorporated on July 30, 2008 under the Business Corporations Act (British Columbia) ("BCBCA"). On April 8, 2021, the Company entered into a Business Combination Agreement ("BCA") pursuant to which the Company agreed to complete the BCA with HB2 Origination LLC ("Origination") and change its name to "Alpine Summit Energy Partners, Inc." upon completion of the BCA (refer to Note 2 for a complete description of the BCA).

The Company's registered office is located at 2200 HSBC Building, 885 West Georgia Street Vancouver BC V6C 3E8 and its principal office is located at 3322 West End Ave. Suite 450 Nashville TN, 37203.

These condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on November 14, 2022.

2. Business Combination Agreement and Finco Financing

On April 8, 2021, Alpine Summit, Origination, Alpine Summit Energy Partners Finco, Inc ("Finco"), Red Pine Petroleum Subco Ltd. ("Subco") and Alpine Summit Energy Investors, Inc. ("Blocker") entered into the BCA pursuant to which the parties agreed to complete a series of transactions to effect a business combination between Alpine Summit and Origination and that resulted in a reverse take-over of Alpine Summit by the members of Origination.

(a) Finco issued subscription receipts for gross proceeds of approximately CDN$7.5 million (Note 12) and "The Finco Financing" later in Note 2:

(b) immediately prior to the closing of the BCA:

(i) Alpine Summit amended its articles to (A) reclassify its common shares as Subordinate Voting Shares ("SVS"), (B) create a new class of Multiple Voting Shares ("MVS") and a new class of Proportionate Voting Shares ("PVS"), and (C) change its name from "Red Pine Petroleum Ltd." to "Alpine Summit Energy Partners, Inc.";

(ii) each outstanding membership unit of Origination ("Origination Member Unit") would be converted into three membership units of Origination;

(iii) the Subscription Receipts converted into Finco Shares, with each holder of a Subordinate Voting Subscription Receipt receiving one Class A Finco Share in exchange therefor and each holder of a Multiple Voting Subscription Receipt receiving one Class B Finco Share in exchange therefor; and

(c) on closing of the BCA:

(i) the Company, Finco and Subco completed a three-cornered amalgamation under the BCBCA pursuant to which all Finco shareholders (including former holders of the Subscription Receipts) exchanged their Class A Finco shares held for SVS or their Class B Finco Shares held for Multiple Voting Shares, as applicable, in each case on a one-for-one basis, and Finco and Subco amalgamated, with the resulting entity ("Amalco") to continue as a wholly-owned subsidiary of Alpine Summit;

(ii) Amalco wound up into Alpine Summit, and the assets of Amalco (which consist of the funds invested by the holders of the Subscription Receipts, net of expenses) transferred to the Company by operation of law;

- 5 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

(iii) certain U.S. holders of Origination Member Units (other than Blocker) contributed their Origination Member Units to the Company in exchange for MVS on a one-hundred membership units for one MVS basis;

(iv) certain non-U.S. holders of Origination Member Units contributed their Origination Member Units to the Company in exchange for SVS on a one membership unit for one SVS basis subject to adjustment for any applicable withholding taxes;

(v) each holder of Blocker Shares contributed their Blocker Shares to the Company in exchange for SVS on a one Blocker Share for three SVS basis;

(vi) A related party, being an officer, director and shareholder of Origination pre-closing of the BCA, and of Alpine Summit post closing of the BCA, subscribed for 15,947.292 PVS carrying voting rights that would, in the aggregate, represent approximately 32.2% (Note 13 and 14) of the voting rights of the Company upon completion of the BCA on a fully diluted basis for a purchase price equivalent to their estimated fair market value of USD$128,213;

(vii) the Company used certain proceeds of the Finco Financing and the membership units of Origination received by it to subscribe for Blocker Shares, following which the proceeds of Finco Financing received by Blocker were contributed to Origination in exchange for membership units of Origination; and

(vii) Origination Member Units held by Blocker were re-designated as Class A Voting Units of Origination and Origination Member Units held by other remaining members of Origination were re-designated as Class B Non-Voting Units of Origination.

The reclassification of the common shares of the Company into SVS and the creation of the MVS in connection with the BCA is for the purpose of allowing the Company to maintain its status as a "foreign private issuer" as determined in accordance with Rule 3b-4(c) under the U.S. Exchange Act.

The Finco Financing

On August 18, 2021, Finco completed a brokered private placement of an aggregate of 161,976 subordinate voting subscription receipts at a subscription price of CDN$4.01 per subordinate voting subscription receipt and 17,057 multiple voting subscription receipts at a subscription price of CDN$401.29 per multiple voting subscription receipt for aggregate gross proceeds of approximately CDN$7.5 million (US$5,995,461). Finco is a special purpose British Columbia company incorporated solely for the purpose of the Finco Financing.

The Finco Financing was completed pursuant to the terms of an agency agreement dated August 18, 2021 among Finco, the Company and Eight Capital ("Agent"), as lead agent and sole bookrunner (the "Agency Agreement"). The subscription receipts are governed by the terms of a subscription receipt agreement (the "Subscription Receipt Agreement") dated August 18, 2021 among Finco, the Agent and Odyssey Trust Company in its capacity as subscription receipt agent.

Each subordinate voting subscription receipt and each multiple voting subscription receipt entitled the holder thereof to receive, upon automatic exchange in accordance with the terms of the Subscription Receipt Agreement, without payment of additional consideration or further act or formality on the part of the holder thereof, one Class A Finco share and one Class B Finco share, respectively, upon the satisfaction or waiver of the escrow release conditions at or before the escrow release deadline. Each Class A Finco share would then be exchanged for one SVS and each Class B Finco share would be exchanged for one MVS upon completion of the BCA.

- 6 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

In connection with the Finco financing, the Agent was entitled to receive a cash commission of CDN$26,525 and an advisory fee of CDN$197,500 (collectively, the "Agent's Fees"). On closing of the Finco Financing, the Agent received payment of 50% of the Agent's Fees. The remaining 50% of the Agent's Fees were paid to the Agent upon the satisfaction of the escrow release conditions.

Reverse Takeover

On September 7, 2021, the Company completed the BCA (as described above).  As a result of the transaction, the former shareholders of Origination acquired control of the combined Company and, thereby constitutes a reverse takeover of Red Pine by Origination.  The BCA is considered a purchase of the Red Pine's net assets by Origination.  The transaction is accounted for in accordance with guidance provided in International Financial Reporting Standards  ("IFRS") 2 Share-Based Payments. 

As Red Pine did not qualify as a business according to the definitions in IFRS 3 - Business Combination, the BCA does not constitute a business combination; rather, it is treated as an issuance of Alpine Summit shares for the net assets of Red Pine and Red Pine's listing status with Alpine Summit as the continuing entity.  The resulting condensed interim consolidated financial statements are presented as a continuation of Origination and comparatives figures presented in the condensed interim consolidated financial statements of are those of Origination.

As a part of the reverse takeover, the Company issued 534,384 SVS on September 7, 2021, for total consideration of US$1,697,865 based on the Finco Financing value of CDN$4.01/SVS or US$3.18/SVS, for the Red Pine net assets, which are made up primarily of cash valued at US$396,173.  The excess of purchase consideration over net assets acquired resulted in a listing expense of US$1,301,692 and is presented in the consolidated statements of income and comprehensive income.

Acquisition related costs totalling $1,567,967 have been excluded from consideration paid and were recognized as transaction costs on the consolidated statements of income and comprehensive income for the year ended December 31, 2021, when the costs were incurred.

3. Basis of preparation

(a) Statement of compliance

These condensed interim consolidated financial statements of the Company have been prepared in accordance with International Accounting Standards (IAS) 34, "Interim Financial Reporting", using accounting policies consistent with IFRS as issued by the International Accounting Standards Board (IASB). Certain information and disclosures normally included in the annual financial statements prepared in accordance with IFRS have been condensed or omitted.

The condensed interim consolidated financial statements should be read in conjunction with the Company's audited annual consolidated financial statements as at and for the year ended December 31, 2021, and the notes thereto.

The condensed interim consolidated financial statements have been prepared on a historical cost basis, except as detailed in the accounting policies disclosed in Note 4 of the Company's audited consolidated financial statements for the year ended December 31, 2021. All accounting policies and methods of computation followed in the preparation of these condensed interim consolidated financial statements are consistent with those of the previous financial year.

(b) Basis of measurement

The condensed interim consolidated financial statements have been prepared on the historical cost basis except as otherwise stated and allowed for in accordance with IFRS. 

- 7 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

(c) Functional and presentation currency

These condensed interim consolidated financial statements are presented in US dollars ("$").  The Company's functional currency is Canadian dollars, however, all of the Company's individual subsidiaries have functional currencies in US$ which represents the primary economic environment in which the entities operate.

(d) Management's significant accounting judgements, estimates and assumptions

The preparation of condensed interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Judgments made by management in the application of IFRS that have significant effect on the consolidated financial statements and major sources of assumptions and estimation uncertainty are discussed in the Company's consolidated financial statements for the year ended December 31, 2021.

The global spread of the COVID-19 virus during 2022 and 2021 had a negative impact on the global demand for oil and natural gas and caused significant commodity market volatility.  While the increase in domestic vaccination programs and reduced spread of COVID-19 virus has contributed to an improvement in the economy and higher realized prices for commodities, the current price environment remains uncertain as responses to the COVID-19 pandemic and newly emerging variants of the virus continue to evolve. There was also increased supply due to the dispute between Saudi Arabia and Russia which had a further adverse impact on oil prices. After the severe price drop in 2020, oil prices rebounded and increased from levels immediately preceding the pandemic. In addition to recovering demand, the recent conflict between Russia and Ukraine has contributed to significant increases and volatility in the price for oil and natural gas.  Given the dynamic nature of these events, the Company cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist.  While the Company uses derivative and risk management instruments to partially mitigate the impact of commodity price volatility, revenues and operating results depend significantly on the prevailing prices for oil and natural gas.

More specifically, assumptions may change that are involved in the estimates of valuation of exploration and evaluation assets and property, plant and equipment cash generating units, the timing of decommissioning obligations, the fair value of commodity contracts, fair value of development partnerships, the expected credit loss provisions related to accounts receivable as well as liquidity and going concern assessments.

4. Significant accounting policies

All significant accounting policies used in the preparation of these condensed interim consolidated financial statements are described in the Company's consolidated financial statements for the year ended December 31, 2021.

- 8 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

5. Exploration and evaluation ("E&E") assets

    September 30, 2022     December 31, 2021  
Balance, beginning of period $ 24,987,312   $ 1,243,615  
Additions   31,693,118     20,243,702  
Acquisition for members units (Note 12)   -     3,499,995  
Transfers (Note 6)   (17,760,065 )   -  
Balance, end of period $ 38,920,365   $ 24,987,312  

 E&E assets consist of undeveloped lands, unevaluated seismic data and unevaluated drilling and completion costs and associated decommissioning costs on the Company's exploration projects which are pending the determination of proved reserves. Transfers are made to property, plant and equipment ("PP&E") as proved reserves are determined and technical feasibility and commercial viability is established. E&E assets are expensed due to uneconomic drilling and completion activities and lease expiries.

Additions during the nine months ended September 30, 2022, and year ended December 31, 2021, mainly relate to undeveloped lands and drilling costs on wells without assigned proved reserves prior to their transfer to property, plant and equipment.

The Company reviews many factors when determining if an impairment test should be performed.  As at September 30, 2022 and December 31, 2021, the Company conducted an assessment of impairment indicators for the Company's exploration and evaluation assets and noted no impairment indicators were present.

6. Property, plant and equipment

Cost   September 30, 2022     December 31, 2021  
Balance, beginning of period $ 110,205,126   $ 56,955,325  
   Additions   133,790,292     52,187,091  
   Acquisitions   -     -  
   Transfers from E&E assets (Note 5)   17,760,065     -  
   Decommissioning obligations (Note 9)   380,982     1,062,710  
   Disposal   (375,899 )   -  
Balance, end of period $ 261,760,566   $ 110,205,126  
             
Accumulated depletion and impairment   September 30, 2022     December 31, 2021  
             
Balance, beginning of period $ (17,934,996 ) $ (1,292,996 )
   Depletion   (27,421,000 )   (16,642,000 )
             
Balance, end of period $ (45,355,996 ) $ (17,934,996 )
             
Carrying amount $ 216,404,570   $ 92,270,130  

- 9 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

Depletion

The depletion calculation for the nine months ended September 30, 2022, includes estimated future development costs of $248,395,000 (year ended December 31, 2021 - $324,295,000) associated with the development of the Company's proved plus probable reserves included in property, plant and equipment.

Impairment

The Company assesses many factors when determining if an impairment test should be performed. For the nine months ended September 30, 2022 and year ended December 31, 2021, the Company assessed impairment indicators for the Company's cash generating unit and noted no indicators of impairment were present.

7. Development Partnership liabilities

The Company, through its subsidiary, Origination, sponsors and manages development programs to participate in its drilling initiatives and accelerate its growth. Most of Origination's drilling programs are limited partnerships structured to minimize drilling risks on repeatable prospects and optimize tax advantages for private investors. At the commencement of operations, Origination assigns drilling rights for specified wells to an operating partnership.

(a) Development Partnership 1

During the first quarter of 2021, the Company formed Development Partnership 1 ("DP1") with 13 external limited partners and Origination as a limited partner and the general partner.  The intention of the DP1 was to partially finance the drilling and completion of 5 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company raised $13,140,240 from external limited partners of which $1,366,709 was raised from officers and directors of the Company.  Investors chose to receive DP Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors participated as to $3,243,728 in Flat Payout units and $9,896,512 in IRR based payout units. Flat Payout Units participated in 75% of the income of the DP (along with IRR based Payout Units) until that income equaled their invested capital and thereafter participated in 20% of the income of the DP1 (along with IRR based Payout Units). IRR Based Payout Units participated in 75% of the income of the DP1 (along with Flat Payout Units) until that income equaled their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever was greater and thereafter participated in 6% of the income of the DP1 (along with Flat Payout Units).  The Company would receive 25% of the income of the DP1 before payout and received 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.  During the year ended December 31, 2021, the Company distributed $1,853,127 to external partners.

After payout, the external limited partners had a put right to effectively put their DP1 units (with ongoing rights to 20% and 6% of the income generated by the DP1) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of the DP.

On October 7, 2021, the Company repaid and paid out the reversion of DP1.  As part of the completion of the DP1 program, the Company retired liabilities of $15,288,594.

One of the DP1 partners exercised the put right provided to such partners by DP1 regarding residual interests in their associated investment and elected to exchange the remaining interest in DP1 for 339,372 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company, having a deemed value of US$3.515 per unit, or a total of $1,192,893 (Note 12)).

Fair value was determined by present valuing the expected cash flows to be received by the unit holders at a discount rate of 15%.

(b) Development Partnership 2

During the third quarter of 2021, the Company formed Development Partnership 2 ("DP2") with 25 external limited partners and Origination as a limited partner and the general partner.  The intention of the DP2 was to partially finance the drilling and completion of 5 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company raised $20,815,329 from external limited partners of which $1,724,967 was raised from officers and directors of the Company.  Investors chose to receive DP Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors had participated as to $7,390,362 in Flat Payout units and $13,424,967 in IRR based payout units. Flat Payout Units participated in 75% of the income of the DP2 (along with IRR based Payout Units) until that income equaled their invested capital and thereafter participated in 20% of the income of the DP2 (along with IRR based Payout Units). IRR Based Payout Units participated in 75% of the income of the DP2 (along with Flat Payout Units) until that income equaled their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever was greater and thereafter participated in 6% of the income of the DP2 (along with Flat Payout Units).  The Company received 25% of the income of the DP2 before payout and received 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.  During the year ended December 31, 2021, the Company distributed $4,535,743 to external partners.

- 10 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

After payout, the external limited partners also had a put right to effectively put their DP2 units (with ongoing rights to 20% and 6% of the income generated by the DP2) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of the DP.

In January 2022, the Company repaid and paid out the reversion of DP2.  As part of the completion of the DP2 program, the Company retired liabilities of $23,511,818.

Ten of the DP2 partners exercised the put right provided to such partners by DP2 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP2 for 826,063 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company, having a deemed value of US$3.825 per unit, or a total of $3,159,706 (Note 12)). Two of the DP2 partners elected to retain their ongoing rights of working interest in the DP2 wells and as a result, the fair value of their liability related to working interest was settled with an offset disposition from PP&E (Note 6).

Fair value was determined by present valuing the expected cash flows to be received by the unit holders at a discount rate of 15%.

(c) Development Partnership 3

During the fourth quarter of 2021, the Company formed Development Partnership 3 ("DP3") with 23 external limited partners and Origination as a limited partner and the general partner.  The intention of the DP3 was to partially finance the drilling and completion of 5 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company raised $21,182,826 from external limited partners of which $4,032,612 was raised from officers and directors of the Company.  Investors chose to receive DP Units that distributed profits either based on a Flat payout option or an IRR based payout option.  Investors participated as to $10,413,322 in Flat Payout units and $10,769,504 in IRR based payout units. Flat Payout Units participated in 75% of the income of the DP3 (along with IRR based Payout Units) until that income equaled their invested capital and thereafter participated in 20% of the income of the DP3 (along with IRR based Payout Units). IRR Based Payout Units participated in 75% of the income of the DP3 (along with Flat Payout Units) until that income equaled their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever was greater and thereafter participated in 6% of the income of the DP3 (along with Flat Payout Units).  The Company received 25% of the income of the DP3 before payout and received 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.

After payout, the external limited partners also had a put right to effectively put their DP3 units (with ongoing rights to 20% and 6% of the income generated by the DP3) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of the DP3.

- 11 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

In April 2022, the Company repaid and paid out the reversion of DP3.  As part of the completion of the DP3 program, the Company retired liabilities of $30,171,337.

Twelve of the DP3 partners exercised the put right provided to such partners by DP3 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP3 for 894,929 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company, having a deemed value of US$5.70 per unit, or a total of $5,127,229 (Note 12)).

Fair value was determined by present valuing the expected cash flows to be received by the unit holders at a discount rate of 15%. 

(d) Development Partnership 4

During the first quarter of 2022, the Company formed Development Partnership 4 ("DP4") with 29 external limited partners and Origination as a limited partner and the general partner.  The intention of DP4 was to partially finance the drilling and completion of 5 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company has raised $25,225,079 from external limited partners of which $1,484,256 was raised from officers and directors of the Company.  Investors can choose to receive DP Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors have participated as to $11,638,948 in Flat Payout units and $13,586,130 in IRR based payout units. Flat Payout Units will participate in 75% of the income of the DP4 (along with IRR based Payout Units) until that income equals their invested capital and thereafter will participate in 20% of the income of the DP4 (along with IRR based Payout Units). IRR Based Payout Units will participate in 75% of the income of the DP4 (along with Flat Payout Units) until that income equals their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever is greater and thereafter will participate in 6% of the income of the DP4 (along with Flat Payout Units).  The Company will receive 25% of the income of the DP4 before payout and will receive 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.

After payout, the external limited partners will also have a put right to effectively put their DP4 units (with ongoing rights to 20% and 6% of the income generated by the DP4) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of the DP4.

In July 2022, the Company repaid and paid out the reversion of DP4.  As part of the completion of the DP4 program, the Company retired liabilities of $31,734,290.

Nine of the DP4 partners exercised the put right provided to such partners by DP4 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP4 for 706,975 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company, having a deemed value of US$5.85 per unit, or a total of $4,135,804 (Note 12)). Two of the DP4 partners elected to retain their ongoing rights of working interest in the DP4 wells and as a result, the fair value of their liability related to working interest was settled with an offset disposition from PP&E (Note 6).

Fair value was determined by present valuing the expected cash flows to be received by the unit holders at a discount rate of 15%. 

(e) Development Partnership Red Dawn 1

During the first quarter of 2022, the Company formed Development Partnership Red Dawn ("Red Dawn 1") with 37 external limited partners and Origination as a limited partner and the general partner.  The intention of Red Dawn 1 is to partially finance the drilling and completion of 5 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company has raised $30,269,095 from external limited partners of which $778,836 was raised from officers and directors of the Company.  Investors can choose to receive Red Dawn 1 Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors have participated as to $16,692,200 in Flat Payout units and $13,576,895 in IRR based payout units. Flat Payout Units will participate in 75% of the income of Red Dawn 1 (along with IRR based Payout Units) until that income equals their invested capital and thereafter will participate in 20% of the income of Red Dawn 1 (along with IRR based Payout Units). IRR Based Payout Units will participate in 75% of the income of Red Dawn 1 (along with Flat Payout Units) until that income equals their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever is greater and thereafter will participate in 6% of the income of Red Dawn 1 (along with Flat Payout Units).  The Company will receive 25% of the income of Red Dawn 1 before payout and will receive 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.

- 12 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

After payout, the external limited partners will also have a put right to effectively put their Red Dawn 1 units (with ongoing rights to 20% and 6% of the income generated by Red Dawn 1) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of Red Dawn 1.

The Company, through the structure of Red Dawn 1, will maintain control of Red Dawn 1 and will continue to consolidate 100% of the operations of Red Dawn 1.

The Company has categorized the development partnership liability as current based on the anticipated timing of repayments.  For the three and nine months ended September 30, 2022, an increase in the Red Dawn 1 liability of $6,305,770 was recorded related to the change in fair value of the liability, with a corresponding increase to finance expense (Note 18).  Refer to subsequent event note below.

(f) Development Partnership 5

During the second quarter of 2022, the Company formed Development Partnership 5 ("DP5") with 25 external limited partners and Origination as a limited partner and the general partner.  The intention of DP5 is to partially finance the drilling and completion of 6 net wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company has raised $30,171,337 from external limited partners of which $4,308,462 was raised from officers and directors of the Company.  Investors can choose to receive DP5 Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors have participated as to $19,657,921 in Flat Payout units and $10,513,413 in IRR based payout units. Flat Payout Units will participate in 75% of the income of DP5 (along with IRR based Payout Units) until that income equals their invested capital and thereafter will participate in 20% of the income of DP5 (along with IRR based Payout Units). IRR Based Payout Units will participate in 75% of the income of DP5 (along with Flat Payout Units) until that income equals their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever is greater and thereafter will participate in 6% of the income of DP5 (along with Flat Payout Units).  The Company will receive 25% of the income of DP5 before payout and will receive 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.

After payout, the external limited partners will also have a put right to effectively put their DP5 units (with ongoing rights to 20% and 6% of the income generated by DP5) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of DP5.

The Company, through the structure of DP5, will maintain control of DP5 and will continue to consolidate 100% of the operations of DP5.

The Company has categorized the development partnership liability as current based on the anticipated timing of repayments.  For the nine months ended September 30, 2022, there was no increase in the liability related to the change in fair value of the liability as no associated drilling or reserve results were completed.

- 13 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

(g) Development Partnership 6

During the third quarter of 2022, the Company formed Development Partnership 6 ("DP6") with 39 external limited partners and Origination as a limited partner and the general partner.  The intention of DP6 is to partially finance the drilling and completion of 10 wells, with the external partners funding approximately 60% and the Company funding 40%.  The Company has raised $34,157,891 from external limited partners of which $1,995,096 was raised from officers and directors of the Company.  Investors can choose to receive DP6 Units that distribute profits either based on a Flat payout option or an IRR based payout option.  Investors have participated as to $21,176,246 in Flat Payout units and $12,981,645 in IRR based payout units. Flat Payout Units will participate in 75% of the income of DP6 (along with IRR based Payout Units) until that income equals their invested capital and thereafter will participate in 20% of the income of DP6 (along with IRR based Payout Units). IRR Based Payout Units will participate in 75% of the income of DP6 (along with Flat Payout Units) until that income equals their invested capital plus a 15% annualized return on invested capital or 120% of their initial investment, whichever is greater and thereafter will participate in 6% of the income of DP6 (along with Flat Payout Units).  The Company will receive 25% of the income of DP6 before payout and will receive 80% and 94% of the income related to Flat and IRR based payout Units respectively after payout.

After payout, the external limited partners will also have a put right to effectively put their DP6 units (with ongoing rights to 20% and 6% of the income generated by DP6) back to the Company for either i) Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company) or ii) cash, subject to certain restrictions, and with the number of shares or cash to be distributed to be calculated based on future net present values of the oil and gas reserves of DP6.

The Company, through the structure of DP6, will maintain control of DP6 and will continue to consolidate 100% of the operations of DP6.

The Company has categorized the development partnership liability as current based on the anticipated timing of repayments.  For the nine months ended September 30, 2022, there was no increase in the liability related to the change in fair value of the liability as no associated drilling or reserve results were completed.

8. Long-term debt

(a) Asset backed securitization facility

On April 27, 2022 the Company entered into an asset backed securitization of certain producing oil and gas wells (the "ABS Facility"). The ABS Facility is led by an insurance company and had an initial size of $80 million ("Tranche 1") with additional capacity to expand up to $150 million in total. 

All borrowings under Tranche 1 of the ABS Facility are secured by working interests in a subset of the Company's producing assets, which are held by a subsidiary of its operating subsidiary, HB2 Origination, LLC.  Tranche 1 of the ABS Facility carries an interest rate of LIBOR+6% (with a 1% LIBOR floor) for the initial year, LIBOR +12% for the second year and an ultimate maturity date of May 2024.  Interest payments are required monthly. 

On September 12, the ABS Facility was increased by $55 million ("Tranche 2"), to a total size of $135 million. All borrowings under Tranche 2 of the ABS Facility are secured by working interests in a subset of the Company's producing assets, which are held by a subsidiary of its operating subsidiary, HB2 Origination, LLC.  Tranche 2 of the ABS Facility carries an interest rate of LIBOR+8% (with a 1% LIBOR floor) for the initial year, LIBOR +14% for the second year and an ultimate maturity date of September 2024.  Interest payments are required monthly.             

As at September 30, 2022, the Company had $120,597,912 outstanding under the ABS Facility. 

The Company's subsidiaries have certain financial covenants under the ABS Facility, including maintaining a debt service coverage ratio of no less that 1.1 to 1.0.

- 14 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

Under the terms of the ABS Facility, the Company is also required to;

(i) As at the initial borrowing date, enter into certain forward commodity swap contracts included in Note 23 (c)(i) which it has done.

(ii) Maintain an interest reserve account that will hold a cash balance sufficient to cover three months of scheduled interest payments.

Repayments of principal required under the ABS Facility are as follows:

September 30, 2022      
2022 $ 10,615,235  
2023   61,630,567  
2024   48,352,110  
2025   -  
Thereafter   -  
  $ 120,597,912  

In addition to the required principal repayments outlined above, the Company's subsidiaries could also be required to make additional payments:

(i) if the debt service coverage ratio is less than 1.20 to 1.00, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

(ii) if the production tracking ratio is less than 80%, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

(iii) if the loan to value is above 85%, the Company must make an additional principal prepayment equal to net income/(loss) adjusted for all non-cash charges, plus/(minus) working capital not including the current portion of debt under this facility and other adjustments required under the terms of the agreement.

At September 30, 2022, the Company was not subject to any other additional principal prepayments.

Details of the loan balances are as follows;

September 30, 2022   Current     Long-term     Total  
Drawn balance $ 59,337,758   $ 61,260,154     120,597,912  
Borrowing costs   (2,450,731 )   (990,013 )   (3,440,744 )
Total (net)
 $ 56,887,027   $ 60,270,141     117,157,168  

(b) Goldman facility

On December 22, 2020, the Company entered into a credit facility with Goldman Sachs (the "Goldman Facility").  All borrowings under the Goldman Facility were secured by the Company's oil and gas producing wells as well as all assets of three of the Company's subsidiaries.  The Goldman Facility carried an interest rate of LIBOR+6% (with a 1% LIBOR floor) and a maturity date of December 22, 2031.  Interest payments were required quarterly. 

In April 2022, in connection with the ABS Facility (Note 8(a)), the Company repaid the Goldman Facility in full and amortized the remaining unamortized borrowing costs (Note 18).

- 15 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

9. Corporate credit facility

In October 2021, the Company's operating subsidiary Origination closed on a Corporate Credit Facility ("Corporate Facility").  The Corporate Facility had a maximum borrowing capacity of $12.5 million, subject to quarterly borrowing base determinations by the lender.  The loan charged interest at prime +2.25% and had a one-year maturity.  A subset of certain Company working interests in producing assets were secured in connection with the Corporate Facility. 

During the first quarter of 2022, Origination closed a new Corporate Facility to replace the previous facility. The new Corporate Facility had a total size of $30 million. The Corporate Facility is secured by working interests in a subset of the Company's producing assets and charges interest at the greater of 5.00% and Prime +1.75% and has a one-year maturity.  Refer to subsequent events section (Note 24) for additional information.

As at September 30, 2022, the Company had drawn $Nil under the Corporate Facility (December 31, 2021 - $2,200,000), and for the three and nine months ended September 30, 2022, incurred $477,155 and $972,989, respectively, of interest and finance expense related to the facility.  The borrowing base as at September 30, 2022 was $17,373,964 (December 31, 2021- $6,579,750).

10. Decommissioning liabilities

    September 30, 2022     December 31, 2021  
Balance, beginning of period $ 1,946,306   $ 864,000  
Liabilities incurred and acquired   1,519,155     1,081,218  
Liabilities settled   -     (29,913 )
Accretion (Note 18)   56,942     19,589  
Change in estimates   (1,138,173 )   11,412  
Balance, end of period $ 2,384,230   $ 1,946,306  

The total future decommissioning obligations were estimated based on the Company's net ownership interest in petroleum and natural gas assets including well sites and gathering systems, the estimated costs to abandon and reclaim the petroleum and natural gas assets and the estimated timing of the costs to be incurred in future periods. As at September 30, 2022, the Company estimated the total undiscounted amount of cash flows required to settle its decommissioning obligations to be approximately $2,370,500 (December 31, 2021 - $1,326,500) which will be incurred between 2025 and 2050. As at September 30, 2022, an average risk-free rate of 3.99% (December 31, 2021 - 1.92%) and an inflation rate of 4.0% (December 31, 2021 - 4.5%) were used to calculate the decommissioning obligations. 

The risk-free rate used in the calculation of the net present value has a significant impact on the carrying value of
decommissioning liabilities. A 1% increase in the risk-free rate at September 30, 2022 would decrease the decommissioning liability by approximately $364,000.

11. Asset backed preferred instrument

On March 5, 2021, Origination executed an Origination Member Units buy back structure, in which a member exchanged 100% of their holdings (3,992,629 Origination Member Units representing approximately 23.4% of the outstanding Origination Member Units at the time) along with a $1,000,000 promissory note for a preferred instrument (23,500,000 LP units) in a newly created limited partnership controlled by the Company ("the LP Units").  Origination was required to redeem 6,670,000 LP Units on or before May 1, 2021 at $0.71 per LP Unit, or before June 1, 2021 at $0.8809 per LP Unit, or before September 1, 2021 at $1.00 per LP Unit or would be considered in default.  The remaining 16,830,000 LP Units were required to be be redeemed at $1.00 per LP Unit by March 5, 2024.  If the remaining 16,830,000 LP Units were not redeemed by this date, the redemption price would increase to $1.35 per LP Unit and the Company would be considered to be in default.  While outstanding, all LP Units earned a fixed rate of return of 12% per annum, which increased to 17% in any event of default.  6,670,000 LP units were redeemed at $0.71 per LP unit in the second quarter of 2021 for a total amount of $4,735,700.

- 16 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

As a result of the transaction, the Company recorded a reduction to Origination Member Units of $8,680,786 (weighted average issue price to date of $2.17/unit), a reduction in promissory note liability of $1,000,000, a liability at an initial fair value of $21,565,700 and a reduction to accumulated deficit of $11,884,914.  The fair value of the liability was determined by discounting the expected cash flows related to the instrument at a market-based rate of 12% per annum.

In second quarter of 2022, the Company redeemed all of the LP units for $19,345,398, in connection with the ABS Facility (Note 8(a)).

For the three and nine months ended September 30, 2022, the Company recorded finance expense related to the outstanding instrument in the amount of $Nil and $658,047 (September 30, 2021 - $532,592 and $1,310,975) (Note 18). 

12. Share Capital

Authorized share capital:

The Company is authorized to issue an unlimited number of Subordinate Voting, Multiple Voting and Proportionate Voting Shares.  Subject to certain restriction set out in the Company's articles, each SVS is entitled to one vote per share, each MVS is convertible, at the option of the holder, into 100 SVS and entitles the holder to 100 votes per share and each PVS is convertible into one SVS and entitles the holder to 1,000 votes per share.  Each PVS will automatically convert to one SVS upon the holder's equity interest in Origination reducing to less than 75% of the interest held on the date of the closing of the BCA.

- 17 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

Issued:

      Origination
Member Units		     SVS     MVS     PVS     Amount  
Balance at January 1, 2021 Note   17,083,501     -     -     -   $ 37,097,376  
Issuance of member units for cash 12   819,215     -     -     -     8,044,700  
Issuance of member units exchanged for promissory notes 12   353,870     -     -     -     3,475,000  
Issuance of member units for exploration and evaluation assets 12   356,415     -     -     -     3,499,995  
Issuance of member units to contractors 12   923,954     -     -     -     9,073,228  
Redemption of member units 12   (3,992,629 )   -     -     -     (8,680,786 )
Issuance of member units exchanged for promissory notes 12   234,216     -     -     -     2,300,000  
Origination Unit split 1:3 2   31,557,084     -     -     -     -  
Allocation of opening non-controlling interest 14   (16,168,422 )   -     -     -     (18,721,276 )
Shares issued for cash, net of issuance costs of $247,218 2   -     161,976.000     17,057.000     -     5,499,832  
Exchange of units for SVS and MVS 2   (31,167,204 )   1,427,421.000     297,397.830     -     -  
Proportionate Voting Shares issued for cash 2   -     -     -     15,947.292     128,213  
Shares issued on reverse takeover 2   -     534,384.000     -     -     1,697,865  
MVS converted to SVS 12   -     30,411,950.000     (304,119.500 )   -     -  
Balance at December 31, 2021     -     32,535,731.000     10,335.330     15,947.292   $ 43,414,147  
                                 
RSU settlement 12   -     2,024,401.000     -     -     9,685,555  
Repurchase of SVS 12   -     (265,900.000 )   -     -     (1,456,566 )
Accrued liability for automatic share purchase plan commitment 12   -     -     -     -     (8,297,298 )
MVS converted to SVS 12   -     195,541.000     (1,955.410 )   -     -  
Balance at September 30, 2022     -     34,489,773.000     8,379.920     15,947.292   $ 43,345,838  

2022 Activity

During the nine months ended September 30, 2022, 1,955.410 MVS were converted into 195,541 SVS on a 100 to 1 basis. 

During the nine months ended September 30, 2022, 2,024,401 SVS were issued as a result of settling certain restricted share units ("RSU") (Note 15).  Previously recorded stock-based compensation of $9,685,555 has been removed from contributed surplus and has been reclassified to share capital to reflect the impact of settlement.

On June 10, 2022, the TSX Venture Exchange ("TSXV") approved the Company's normal course issuer bid ("NCIB").  Under the NCIB, the Company may purchase, for cancellation, up to 1,648,783 SVS of the Company (representing approximately 5% of its issued and outstanding SVS as of June 6, 2022) over a 12-month period commencing on June 10, 2022. The NCIB will expire no later than June 9, 2023.  During 2022, the Company purchased and cancelled 265,900 SVS at an average price of $5.48/share for an aggregate value of $1,456,566.

On September 27, 2022, the TSXV approved an amendment to the Company's NCIB, which permits the Company to enter into an automatic share purchase plan ("ASPP") to facilitate the purchase of SVS under the NCIB during times when the Company would not ordinarily be permitted to purchase such shares due to regulatory restrictions of self imposed black-out periods.  The Company recorded an accrual of $8.3 million representing the contractual maximum share purchases remaining under the ASPP.

2021 Activity

The Company entered into an agreement, with a third party, to acquire 16,201 net acres in the Eagle Ford formation, located in the Austin, Fayette, Lee and Washington counties of Texas.  In exchange for the acreage, the Company issued 203,666 Origination Member Units valued at $2,000,000 ($9.82/Unit). 

- 18 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

In addition, the Company issued 152,749 Origination Member Units, valued at $1,499,995 ($9.82/Unit) in exchange for approximately 630 net mineral acreage in Washington county, Texas.

In May of 2021, the Company issued 923,954 Origination Member Units to officers and consultants of the Company for services at an estimated value of $9.82 per Origination Member Unit for total consideration of $9,073,228 in connection with the listing application.

On July 2, 2021, the Company exercised its option to convert all the existing convertible promissory notes ($2,300,000) into 234,216 units ($9.82/unit) of the Company effective as of July 7, 2021.

During the year ended December 31, 2021, 304,119.500 MVS shares were converted into 30,411,950 SVS.  During the year ended December 31, 2021, the Company issued 819,215 Origination Member Units for aggregate cash of $8,044,700 ($9.82/unit).  In addition, the Company issued 353,870 Origination Member Units in exchange for the retirement of $3,475,000 in promissory notes ($9.82/Unit). 

Income / (Loss) per share:

    Nine months ended September 30, 2022     Nine months ended September 30, 2021  
    Net Income     Shares     Loss per share     Net Loss     Shares     Loss per share  
   Loss - basic $ 12,509,110     34,268,827   $ 0.37   $ (51,641,575 )   45,632,956   $ (1.13 )
   Diliutive effect of outstanding awards   -     1,115,435     -     -     -     -  
Income - diluted $ 12,509,110     35,384,262   $ 0.35   $ (51,641,575 )   45,632,956   $ (1.13 )
             
    Three months ended September 30, 2022     Three months ended September 30, 2021  
    Net Income     Shares     Income per share     Net Loss     Shares     Loss per share  
   Income/(loss) - basic $ 14,584,258     34,900,145   $ 0.42   $ (18,636,041 )   43,882,747   $ (0.42 )
   Diliutive effect of outstanding awards   -     1,138,385     -     -     -     -  
Income/(loss) - diluted $ 14,584,258     36,038,530   $ 0.40   $ (18,636,041 )   43,882,747   $ (0.42 )

The Company had share purchase options ("Options"), RSUs and deferred share units ("DSUs") outstanding for the three and nine months ended September 30, 2022 (September 30, 2021 - none outstanding) (Note 15).  The effect of the conversion or exercise of Options, RSU's and DSU's (three months 1,138,385, nine months 1,115,435) are included in the three months ended calculation of diluted income per share and excluded for the nine months ended as they are anti-dilutive.  The Company used an average market price of $5.33 and $5.45 per share, respectively, to calculate the dilutive effect of stock options, RSUs and DSUs outstanding.

The Company's NCI interest, which can be freely converted to SVS on a one-for-one basis, would have no dilutive impact and therefore has not been included in the calculation of diluted income per share (2022 - three months 18,735,964, nine months 17,886,552) (2021 - three months 4,042,106 nine months 1,362,175).

13. Dividends

On December 14, 2021, the Company announced that its Board of Directors had declared a dividend distribution policy, beginning in January 2022.  Monthly dividends of $0.03 per SVS and $3.00 per MVS were declared and paid for each month ended during the three and nine months ended September 30, 2022, with an aggregate distribution of $3,148,427 and $9,260,948, respectively (2021 - $Nil).  See Note 24 for additional information.

- 19 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

14. Non-Controlling Interest

2022 Activity

In connection with the BCA (Note 2), certain Origination equity holders elected not to convert their equity holdings in Origination into SVS/MVS of the Company.  The non-converting equity holders hold 18,935,761 Class B non-voting units of Origination, which amount to a 34.886% economic interest in Origination as at September 30, 2022 (December 31, 2021 - 32.954%).

In January 2022, ten of the DP2 partners exercised the put right provided to such partners by DP2 regarding residual interests in their associated investment and elected to exchange the remaining interest in DP2 for 826,063 Class B non-voting units of Origination (Note 7.(b)).  As a result, a credit to NCI for the fair value of the put right for DP2 of $3,159,706 was recorded to settle liabilities. 

During the nine months ended September 30, 2022, certain RSUs were settled (Note 15) and as a part of the amended and restated LLC agreement between Origination and the Company, an equivalent number of Origination Units were issued.  Based on the fair value of shares issued on the date of settlement $11,609,135 has been recorded as a decrease to non-controlling interest and a corresponding offset to capital reserve.  The RSU settlements are outlined below:

September 30, 2022            
Date   Share Price     Fair value  
January 18, 2022 $ 5.00   $ 1,406,250  
June 6, 2022   6.49   $ 5,407,338  
September 1, 2022   5.27     4,795,547  
  $ 5.59   $ 11,609,135  

In May 2022, twelve of the DP3 partners exercised the put right provided to such partners by DP3 regarding residual interests in their associated investment and elected to exchange the remaining interest in DP3 for 894,929 Class B non-voting units of Origination (Note 7.(c)).  As a result, a credit to NCI for the fair value of the put right for DP3 of $5,127,229 was recorded to settle liabilities. 

In July 2022, nine of the DP4 partners exercised the put right provided to such partners by DP4 regarding residual interests in their associated investment and elected to exchange the remaining interest in DP4 for 706,975 Class B non-voting units of Origination (Note 7.(b)).  As a result, a credit to NCI for the fair value of the put right for DP4 of $4,135,804 was recorded to settle liabilities. 

During the first quarter of 2022, the Company declared and paid monthly dividends (Note 13) to shareholders.  In connection with the dividend distributions from Origination, non-converting equity holders received their non-controlling interest share totalling $4,829,951, for the nine months ended September 30, 2022, resulting in a decrease of non-controlling interest.

For the nine months ended September 30, 2022, $6,977,736 was recorded to reduce net income on the condensed interim consolidated statements of income and comprehensive income, with an offset to NCI, representing NCI share of net loss (2021 - $3,355,382).

2021 Activity

On closing the BCA, Origination's consolidated book value of net liabilities was $32,968,557, which results in an opening NCI balance of $10,714,781. This NCI balance along with the weighted average stated capital of the equity interests surrendered by the NCI holder of $18,721,276, for a total of $29,436,057, has been credited to capital reserve.

- 20 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

For the 23 days of September 2021 following the closing of the BCA, $3,355,382 was recorded to decrease net loss on the interim consolidated statements of income and comprehensive income, with an offset to NCI, representing NCI share of net loss for the 23 day period.

In October 2021, one of the DP1 partners exercised the put right provided to such partners by DP1 regarding residual interests in their associated investment and elected to exchange the remaining interest in DP1 for 339,372 Class B non-voting units of Origination (Note 7.(a)).  As a result, a credit to NCI, for the fair value of DP1 liabilities settled has been recorded.

For the fourth quarter of 2021, $6,136,766 was recorded to reduce net loss on the consolidated statements of operations and comprehensive icnome, with an offset to NCI, representing NCI share for the three-month period.

15. Stock based compensation

During the three and nine months ended September 30, 2022, the Company recorded $3,978,831 and $9,498,501, respectively, in stock-based compensation relating to the various incentive plans (discussed below) (September 30, 2021 - three and nine months - $Nil and $9,073,228).

(a) Share purchase options

During 2021, the Company's shareholders approved the share purchase option plan. As at September 30, 2022 and December 31, 2021, the Company's options outstanding are as follows: 

    Stock options outstanding     Weighted average
exercise price		  
December 31, 2021   2,384,288   $ 3.56  
Granted   -     -  
Forfeited   -     -  
Expired   -     -  
September 30, 2022   2,384,288   $ 3.56  

The fair value of each option granted by the Company were estimated on the grant date using the Black-Scholes options pricing model and expensed over the vesting period of the Options. 

    September 30, 2022     December 31, 2021  
Fair value of options granted $ 2.19   $ 2.19  
Risk-free interest rate   1.27%     1.27%  
Average forfeiture rate   0.00%     0.00%  
Expected life (years)   5.55     5.55  
Expected share price volatility   71.62%     71.62%  
Expected dividend yield   0.00%     0.00%  

The Company did not issue any Options during the nine months ended September 30, 2022 (December 31, 2021 - 2,834,288).  For the three and nine months ended September 30, 2022, $529,335 and $1,570,443, respectively, was recorded to stock-based compensation (2021 - $Nil).

- 21 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

(b) Restricted Share Units

During 2021, the Company's shareholders approved the RSU plan.  As at September 30, 2022, the Company's RSUs outstanding are as follows:

    Equity settled RSU  
December 31, 2021   1,030,221  
Granted   1,303,015  
Forfeited   -  
Settled/released   (2,024,401 )
Expired   -  
September 30, 2022   308,835  

The Company's RSU grants are valued using the intrinsic value method, utilizing the closing share price on the day before the grant and are expensed over the vesting period for each grant.  For the three and nine months ended September 30, 2022, $3,449,497 and $7,928,070, respectively, was recorded to stock-based compensation (September 30, 2021 - $Nil).

During the nine months ended September 30, 2022, 2,024,401 RSUs were settled and a corresponding issuance of SVS were issued (2021 - Nil).  As a result, $9,685,555 was added to Common Stock with a corresponding decrease to contributed surplus in the consolidated statement of changes in shareholders' equity/(deficiency).

16. Key management compensation

The remuneration of the key management personnel of the Company which includes all executive officers is set out below in aggregate:

    Three months
ended
September 30,
2022		     Three months
ended September
30, 2021		     Nine months
ended
September 30,
2022		     Nine months ended
September 30,
2021		  
Salaries and bonuses $ 1,762,687   $ 1,023,781   $ 5,796,361   $ 3,261,349  
Share based compensation (Note 13)   3,978,832     -     9,498,502     8,230,054  
Balance, end of period $ 5,741,519   $ 1,023,781   $ 15,294,863   $ 11,491,403  

17. Revenue from petroleum and natural gas sales

The amount of each significant category of revenue recognized for the three and nine months ended September 30, 2022 and 2021 is as follows:

- 22 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

    Three months
ended September
30, 2022		     Three months
ended September
30, 2021		     Nine months
ended September
30, 2022		     Nine months ended
September 30, 2021		  
Crude oil $ 24,713,099   $ 17,825,375   $ 106,515,776   $ 38,363,632  
Natural gas   47,467,929     2,185,538     73,646,169     10,602,674  
Natural gas liquids   6,181,810     3,416,162     22,653,060     6,922,921  
  $ 78,362,838   $ 23,427,075   $ 202,815,005   $ 55,889,227  

18. Finance expenses

The amount of each significant category of finance expense recognized for the three and nine months ended September 30, 2022, and 2021 is as follows:

    Three months
ended
September 30,
2022		     Three months
ended September
30, 2021		     Nine months
ended
September 30,
2022		     Nine months ended
September 30,
2021		  
Accretion of decommissioning liabilities (Note 10) $ 28,207   $ 4,613   $ 56,942   $ 13,556  
Interest on asset back preferred liability (Note 11)   -     532,592     658,047     1,310,975  
Fair value change in development partnership liabilities (Note 7)   3,108,510     9,638,401     24,100,765     12,310,373  
Amortization of debt issuance costs (Note 8)   618,082     236,961     2,836,188     833,260  
Interest on promissory notes   -     4,323     -     295,230  
Accretion on lease liability   3,674     3,927     11,596     5,229  
Interest on debt and credit facilities (Note 8 and 9)   2,208,317     570,856     4,340,173     1,983,340  
  $ 5,966,790   $ 10,991,673   $ 32,003,711   $ 16,751,963  

19. Taxes

Prior to the RTO, Origination was not subject to U.S. income taxes, because, as a limited liability company classified as a partnership for U.S. federal income tax purposes, it was treated as a pass-through entity for income tax purposes, and the members of Origination were subject to income tax with respect to each such members' allocable share of Origination's taxable income. Subsequent to the RTO, while Origination remains classified as a partnership for U.S. federal income tax purposes, the Company is taxed as a United States corporation and is subject to U.S. federal income tax on its allocable share of pass-through taxable income from Origination, any tax balances related to the Company, together with those of the acquired entity, are therefore part of these consolidated financial statements. Any income attributable to Origination's members outside the Company is not reflected in the Company's consolidated statements of financial position and the consolidated statements of income and comprehensive income.

The income tax expense (benefit) for the three and nine months ended September 30, 2022 is computed based on the Company's estimated annual effective tax rate for the full calendar year. The Company's estimated annual effect tax rate is 0% and when applied to pre-tax book income results in zero tax expense (benefit) being recorded for the three and nine months ended September 30, 2022.

Deferred tax assets are recognized only to the extent that it is probable that the assets can be recovered.  As at September 30, 2022 and December 31, 2021, the Company has non‐capital loss carry forwards in Canada of CDN$1.9 million which expire between 2029 and 2040 and which were acquired mainly as part of the BCA, for which no deferred tax asset is recognized.

During the period ended September 30, 2022, no cash income tax was paid.

- 23 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

20. General and administrative expense

The amount of each significant category of general and administrative expenses recognized for the three and nine months ended September 30, 2022 and 2021 is as follows:

    Three months     Three months     Nine months   Nine months ended  
    ended   ended September     ended     September 30,  
    September 30,     30, 2021     September 30,     2021  
    2022           2022        
Employee salaries and benefits $ 2,745,026   $ 1,499,485   $ 8,323,482   $ 4,510,884  
Travel and accommodation   27,063     39,096     146,784     119,689  
Professional, legal and advisory   1,065,050     (37,804 )   2,994,202     2,315,358  
Software   121,502     113,448     330,761     176,794  
Office and administration   146,204     47,224     718,950     527,557  
G&A recovery   (250,000 )   -     (750,000 )   -  
  $ 3,854,845   $ 1,661,449   $ 11,764,179   $ 7,650,282  

21. Supplemental cashflow information

(a) Change in non-cash working capital

    Three months
ended
September 30,
2022		     Three months
ended September
30, 2021		     Nine months
ended
September 30,
2022		     Nine months ended
September 30,
2021		  
Change in non-cash working capital:                        
Accounts receivable $ (5,553,018 ) $ (4,106,455 ) $ (10,581,761 ) $ (6,637,905 )
Prepaid assets   (443,779 )   (146,211 )   (640,638 )   (210,092 )
Accounts payable and accrued liabilities   17,436,197     9,745,574     26,265,252     23,580,851  
                         
Change in non-cash working capital operating activities $ 11,439,400   $ 5,492,908   $ 15,042,853   $ 16,732,854  

Changes in non-cash working capital related to   Three months
ended
September 30,
2022		     Three months
ended September
30, 2021		     Nine months
ended
September 30,
2022		     Nine months ended
September 30,
2021		  
Operating activities $ 179,955   $ (13,450,912 ) $ (4,842,937 ) $ (9,095,806 )
Investing activities   11,259,445     16,062,271     19,885,790     25,828,660  
Financing activities   -     2,881,549     -     -  
  $ 11,439,400   $ 5,492,908   $ 15,042,853   $ 16,732,854  
                         
Cash interest paid $ 2,244,025   $ 575,178   $ 4,309,354   $ 2,278,570  
Cash taxes paid $ -   $ -   $ -   $ -  

(b) Non-cash transactions

In January 2022, the Company closed DP2 (Note 7) and ten of the DP2 partners exercised their put right provided to such partners by DP2 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP2 for 826,064 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for SVS of the Company, having a deemed value of US$3.825 per unit, or a total of $3,159,695 (Note 12)). Two of the DP2 partners elected to retain their ongoing rights of working interest in the DP2 wells and as a result, the fair value of their liability related to working interest was settled with an offset a disposition from PP&E (Note 6).

- 24 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

In May 2022, the Company closed DP3 (Note 7) and ten of the DP3 partners exercised their put right provided to such partners by DP3 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP3 for 894,929 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for SVS of the Company, having a deemed value of US$5.73 per unit, or a total of $5,127,229 (Note 14)).

In July 2022, the Company closed DP4 (Note 7) and nine of the DP4 partners exercised their put right provided to such partners by DP4 regarding residual interests in their associated investment and, elected to exchange the remaining interest in DP4 for 706,975 Class B non-voting units of Origination (which are exchangeable on a one-for-one basis for SVS of the Company, having a deemed value of US$5.85 per unit, or a total of $4,135,804 (Note 14)). Two of the DP4 partners elected to retain their ongoing rights of working interest in the DP2 wells and as a result, the fair value of their liability related to working interest was settled with an offset a disposition from PP&E (Note 6).

During the period ended December 31, 2021, the Company issued 356,415 Origination Member Units in exchange for $3,499,995 of exploration and evaluation assets ($9.82/unit) (Note 12).

During the period ended December 31, 2021, the Company issued 353,870 Origination Member Units in exchange for the retirement of promissory notes (Note 12).

During the period ended December 31, 2021, the Company redeemed 3,992,629 Origination Member Units and converted a $1,000,000 promissory note in exchange for an asset backed preferred instrument valued at $21,565,700 (Note 11 and 12).

On July 2, 2021, the Company exercised its option to convert all the existing convertible promissory notes ($2,300,000) into 234,216 units ($9.82/unit) of the Company effective as of July 7, 2021 (Note 12).

22. Related party transactions and balances not disclosed elsewhere in the financial statements

2022

Related Party Transactions Management Services Agreement

In the second quarter of 2021, the Company entered into a new Letter Agreement (the "Letter") with a company related by virtue of common equity holders, directors, and officers. The Letter requires the Company to hire its own employees, obtain its own office lease, and assume certain management obligations. In exchange, the Company is paid an annual fee of $1,000,000 on a quarterly basis. During the three and nine months ended September 30, 2022, the Company has been paid $250,000 and $750,000 in cash.

2021

Related Party Transactions Management Services Agreement

On December 22, 2020, the Company entered into a Management Services Agreement (the "MSA") with a company related by virtue of common equity holders, directors and officers. Under this Agreement, the related Company provided management, finance, operations and administrative services. The Agreement had an initial period of 11 years with a 90 day cancellation notice. The Company was obligated to pay for these services on a quarterly basis amounting to the lesser of; i) $2.00 per produced barrel of oil equivalent (converting natural gas to BOE equivalent of 6:1), and ii) 0.375% of measured assets as defined in the credit agreement. During the twelve months ended December 31, 2021, the Company incurred and paid fees of $287,126 and is included in general and administrative expenses. In the second quarter of 2021, the MSA was effectively terminated by assigning the MSA to one of the Company's subsidiaries, thereby eliminating the requirement to pay any fees going forward as outlined above. In the second quarter of 2021, the Company entered into a new Letter Agreement (the "Letter") with the same related company by virtue of common equity holders, directors and officers. The Letter requires the Company to hire its own employees, obtain its own office lease and assume certain management obligations. In exchange, the Company is paid an annual fee of $1,000,000 on a quarterly basis. During the twelve months ended December 31, 2021, the Company was paid $215,080 via a payroll credit and $451,587 in cash, with a corresponding decrease to general and administrative expenses in the statement of income and loss.

- 25 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

Related party balances

At September 30, 2022, the accounts payable included $89,107 (December 31, 2021 - accounts payable of $120,501) due from a company related by virtue of common equity holders, officers and directors under normal credit terms.

23. Financial instruments and risk management

Risk management:

The Company has exposure to credit risk, liquidity and market risk from its use of financial instruments. This note presents information about the Company's exposure to each of the risks, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities.

There were no changes to the Company's risk management policies or processes during the nine months ended September 30, 2022.

(a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter-party to a financial instrument fails to meet its contractual obligations. The maximum exposure to credit risk is as follows:

    September 30, 2022     December 31, 2021  
Cash $ 22,230,780   $ 8,622,815  
Accounts receivable   29,379,396     18,797,635  
Total $ 51,610,176   $ 27,420,450  

Accounts receivable

The Company’s accounts receivable are with customers in the oil and natural gas industry and are subject to normal industry credit risk. The Company is the operator of the oil and gas properties. Petroleum and natural gas sales are normally collected by the Company between 30 and 60 days from deliveries. Joint interest receivables are typically collected within one to three months of the joint interest bill being issued to the partner. Changes in economic, business and political conditions, including resulting commodity price volatility, as well as industry factors such as limited capital availability and success of drilling programs, are expected to impact these customers and their related credit risk.  The Company's practice is to manage credit risk by performing a thorough analysis of the credit worthiness of new customers before credit terms are offered. Additionally, the Company continually evaluates individual customer trade receivables for collectability taking into consideration payment history and aging of the trade receivables. The Company's oil and gas sales are with purchasers it considers credit-worthy, and the Company has not experienced any material collection issues with its marketers to date.

As at September 30, 2022 and December 31, 2021, the Company's accounts receivable were comprised of the following:

- 26 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

    September 30, 2022     December 31, 2021  
Trade receivables from sales of crude oil and natural gas $ 27,397,521   $ 18,110,135  
Joint interest billing receivables and other $ 1,981,875     687,500  
Balance, end of period $ 29,379,396   $ 18,797,635  

Accounts receivable aging as at September 30, 2022 and December 31, 2021 are as follows:

    September 30, 2022     December 31, 2021  
Current $ 26,949,584   $ 15,420,816  
31 - 60 days   1,882,605     3,376,819  
61 - 90   87,265     -  
Greater than 90 days   459,942     -  
Balance, end of period $ 29,379,396   $ 18,797,635  

All amounts shown as current and 31 - 60 days aging have been collected subsequent to period end.  Amounts greater than 90 days are being pursued by management and the expected credit loss is believed to be insignificant.

Cash

All of the Company's cash is held at four financial institutions as at September 30, 2022 and December 31, 2021. The Company manages its credit exposure to cash, if any, by selecting institutions with high credit ratings.

(b) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities as they become due.  The Company's financial liabilities consist of accounts payable and accrued liabilities and promissory notes, all of which are due within a year, commodity contract liabilities which will all be settled over the life of their contract terms (see below), lease liabilities which will be settled over the life of the lease, asset backed preferred instruments which will be repaid based on available cash flows, development partnership liabilities that will be repaid based on cash flows generated by the wells included in the partnership and a credit facility with portions due in the following year. The Company also maintains and monitors a certain level of cash flow which is used to partially finance all operating and capital expenditures.  The Company also attempts to match its payment cycle with collection of oil and natural gas sales which are usually collected within 30 to 60 days.

At September 30, 2022, the Company had negative working capital of $191,937,275.  The Company expects to repay its financial liabilities in the normal course of operations and to fund future operational and capital requirements through operating cash flows and through issuance of debt and/or equity.

The Company may need to conduct asset sales, equity issues or issue debt if liquidity risk increases in a given period.  Liquidity risk may increase as a result of a change in the amounts settled monthly from the commodity contracts (Note 23 (c)). The Company believes it has sufficient funds to meet foreseeable obligations by actively monitoring its credit facilities through use of the loans/notes, asset sales, coordinating payment and revenue cycles each month, and an active commodity hedge program to mitigate commodity price risk and secure cash flows.

More specifically, in an attempt to increase liquidity, the Company has during and subsequent to the nine months ended September 30, 2022: (i) continued its drilling program to increase cash flows from operating activities, (ii) raised significant funds through development partnerships (Note 7), (iii) entered into a new revolving corporate credit facility (Note 9), and iv) refinanced indebtedness (Note 8 and 11).

The Company is required to meet certain financial covenants under the ABS Facility (Note 9). 

- 27 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

The following table details the Company's financial liabilities and their scheduled maturities as at September 30, 2022; 

    Carrying value     Contractual cash flow     Less than one year     1 - 3 years     Greater than 3 years  
Accounts payable and $ 74,510,929   $ 74,510,929   $ 74,510,929   $ -   $ -  
accrued liabilities
                             
Commodity contracts   6,972,796     6,972,796     6,972,796     -     -  
Lease liability   430,854     430,854     131,462     299,392     -  
Corporate credit facility   -     -     -     -     -  
Development partnerships liabilities   100,904,095     100,904,095     100,904,095     -     -  
Long term debt   117,157,168     120,597,912     59,337,758     61,260,154     -  
Total $ 299,975,842   $ 303,416,586   $ 241,857,040   $ 61,559,546   $ -  

(c) Market risk

Market risk is the risk that changes in market metrics, such as commodity prices, foreign exchange rates and interest rates that will affect the Company's valuation of financial instruments, as well as its net income (loss) and cash flow from operating activities. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

(i) Commodity price risk

Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for oil and natural gas are impacted by North American and global economic events that dictate the levels of supply and demand. The nature of the Company's operations results in exposure to fluctuations in commodity prices. The Company's production is sold using "spot" pricing with prices fixed at the time of transfer of custody or on the basis of a monthly average market price. 

- 28 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

As at September 30, 2022, the Company had entered into the following risk management contracts to manage commodity price risk:

Commodity

Expiry

Type

Fixed Price

Remaining Notional
Total Volumes (1)

Index

Ethane (gallons)

2022-2024

Swap

$0.13

2,371,199

NGL-Mont Belvieu

Ethane (gallons)

2022-2025

Swap

$0.35

6,437,511

NGL-Mont Belvieu

Ethane (gallons)

2022-2025

Swap

$0.38

2,858,171

NGL-Mont Belvieu

Propane (gallons)

2022-2024

Swap

$0.43

1,457,884

NGL-Mont Belvieu

Propane (gallons)

2022-2025

Swap

$0.91

1,588,684

NGL-Mont Belvieu

Propane (gallons)

2022-2025

Swap

$0.96

3,913,519

NGL-Mont Belvieu

Natural gas (gallons)

2022-2024

Swap

$0.83

934,138

NGL-Mont Belvieu

Natural gas (gallons)

2022-2025

Swap

$1.52

715,221

NGL-Mont Belvieu

Natural gas (gallons)

2022-2025

Swap

$1.70

1,484,085

NGL-Mont Belvieu

Isobutane (gallons)

2022-2024

Swap

$0.46

305,048

NGL-Mont Belvieu

Isobutane (gallons)

2022-2025

Swap

$0.97

308,623

NGL-Mont Belvieu

Isobutane (gallons)

2022-2025

Swap

$1.15

738,487

NGL-Mont Belvieu

Norbutane (gallons)

2022-2024

Swap

$0.47

709,296

NGL-Mont Belvieu

Norbutane (gallons)

2022-2025

Swap

$0.96

653,694

NGL-Mont Belvieu

Norbutane (gallons)

2022-2025

Swap

$1.14

1,500,921

NGL-Mont Belvieu

Natural gas (mmbtu)

2022-2025

Swap

$2.47

1,262,598

Henry Hub -Nymex

Natural gas (mmbtu)

2022-2025

Swap

$5.15

1,043,576

Henry Hub -Nymex

Natural gas (mmbtu)

2022-2025

Swap

$5.99

7,116,633

Henry Hub -Nymex

Crude oil (bbl)

2022-2025

Swap

$40.99

375,326

WTI-Nymex

Crude oil (bbl)

2022-2025

Swap

$78.80

229,406

WTI-Nymex

Crude oil (bbl)

2022-2025

Swap

$82.40

413,076

WTI-Nymex

The commodity contracts had a total negative fair value of $4,386,106 at September 30, 2022 (December 31, 2021 - $20,381,180) comprised of a short term commodity contract liability of $6,972,796 (December 31, 2021 - liability $6,479,508) and long term commodity contract assets of $2,586,690 (December 31, 2021 - liability $13,901,672).  The corresponding unrealized gain for the three and nine months ended September 30, 2022, was $20,110,296 and $14,358,774 (September 30, 2021 - loss $7,534,986 and $25,105,949) and is included in the interim condensed consolidated statements of income and comprehensive income.  Total realized losses on risk management contracts totalled $12,980,832 and $31,604,687(September 30, 2021 - $6,438,425 and $14,276,940) for the three and nine months ended September 30, 2022 and are also included in the consolidated statements of income and comprehensive income. 

For the nine months ended September 30, 2022, a 10% increase/decrease in commodity prices would have a negative/positive impact on net income of approximately $3.1 million.

(ii) Interest rate risk

The Company is exposed to interest rate risk in relation to interest expense on its ABS Facility as future cash flow may fluctuate as a result of market interest rates. If interest rates applicable to the facility were to have increased by 100 basis points (1%) it is estimated that the Company's net income for the nine months ended September 30, 2022, would have decreased by approximately $430,000 (before effect of income taxes) (2021 - $Nil). A decrease in interest rates by 1% would result in an increase in net income by an equivalent amount.

(iii) Foreign currency risk

The Company mainly trades in US dollars which is also its functional currency hence, there is nominal foreign currency exposure.

- 29 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

(d) Capital management

The Company's objectives when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its continued operations, and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets.

There has been no change to management's approach to managing capital during the period ended September 30, 2022, with the exception of the addition of development partnership liabilities and asset back preferred instruments to the definition of managed capital.

The Company considers its capital employed to be long-term debt, affiliate loans (if any), development partnership liabilities and asset back preferred instruments and shareholders' equity/(deficiency):

    September 30, 2022     December 31, 2021  
Long-term debt (Note 8) $ 117,157,168   $ 23,199,141  
Corporate credit facility (Note 9)   -   $ 2,200,000  
Development partnership liabilities (Note 7)   100,904,095     44,694,643  
Asset backed preferred instrument (Note 11)   -     18,687,351  
Shareholder's Equity excluding NCI   16,566,956     1,965,022  
Capital Employed $ 234,628,219   $ 90,746,157  

24. Subsequent events

Dividends declared

On October 1, 2022, the Company's Board of Directors declared a dividend of $0.03 per SVS/PVS and $3.00 per MVS, for a total amount of $1,060,311, payable on October 31, 2022, to shareholders of record on the close of business on October 17, 2022.

On November 1, 2022, the Company's Board of Directors declared a dividend of $0.03 per SVS/PVS and $3.00 per MVS, for an estimated total amount of $1,060,311, payable on November 30, 2022, to shareholders of record on the close of business on November 16, 2022.

Corporate credit facility amendment

In October 2022, the Company amended and expanded its Corporate Facility (Note 9) from an initial size of $30.0 million up to $65.0 million, with a current borrowing base of $20.5 million.  The Corporate Facility's maturity and interest rates remain unchanged.

Completion of Red Dawn 1 and creation of Red Dawn 2

On November 9, 2022, the Company successfully completed the repayment and reversion of Red Dawn 1 that it formed during the first quarter of 2022, along with the concurrent closing of its Red Dawn 2 development partnership ("Red Dawn 2").

Red Dawn 1 funded the drilling and completion of a total of five wells and comprised a total capital program of approximately $50.4 million, with 60% funded by external partners. As part of the completion of the Red Dawn 1 program, Alpine Summit has retired liabilities of approximately $38.5 million.

- 30 -

Alpine Summit Energy Partners, Inc. (formerly Red Pine Petroleum Ltd.)

Notes to the condensed interim consolidated financial statements
For the three and nine months ended September 30, 2022 and 2021 (continued)

(amounts in US dollars unless otherwise noted) (Unaudited)

Twelve of the Red Dawn 1 partners exercised the put right provided to such partners by Red Dawn 1 regarding residual interests in their associated investment and, subject to the approval of the TSX Venture Exchange (the "TSXV"), elected to sell their remaining interest in Red Dawn 1 for 617,103 Class B non-voting units of HB2 Origination, LLC (which are exchangeable on a one-for-one basis for Subordinate Voting Shares of the Company), having a deemed value of $5.16 per unit (which was calculated with reference to the trailing 30 day share price and the allowable discounts permitted by the policies of the TSXV), or a total of approximately $3.2 million.

Red Dawn 2 has an expanded capital program of approximately $57.7 million, with approximately $34.6 million of external development capital, and is expected to continue to develop assets within the Company's existing operational footprint.

- 31 -