THIRD QUARTER 2013 REPORT - Pine Cliff Energy

MESSAGETOSHAREHOLDERSPineCliffEnergyLtd.ispleasedtoreportitsresultsforthethirdquarterof2013.Highlightsduringthequarterareasfollows:

Closedtwosignificantacquisitions.The firstacquisitionwasanadditional interest in theMonogramuniton July24,2013whichaddedapproximately 1,600 boe/d of production. The second included the purchase of additional interests in, and more importantly theassumption of operatorship of, our Southern Alberta and Southern Saskatchewan assets on August 30, 2013. This acquisition addedapproximately850boe/dofproduction;

Achieved record oil and gas sales volumes of 5,784 boe/d, a 546% increase over the same period in 2012,mainly as a result of ouracquisitions;and

Generatedquarterlyfundsflowfromoperationsof$3.0million,anincreaseof582%whencomparedtothethirdquarterof2012,despitehavingextremelylownaturalgasprices.

BusinessStrategyandEnvironmentNaturalgaspriceshaveshownlimitedrecoveryin2013anddemonstratedincreasedvolatilityinthethirdquarterasAECOpricesaveraged$2.43permcfascomparedto$3.52permcfinthesecondquarterof2013.Priceshaveincreasedtoanaveragepriceof$3.25permcfinOctoberbutremainvolatile.Thisdepressedpricingenvironmentcontinuestofavourourstrategyofmakingcounter‐cyclical,gasweightedacquisitionsaswecontinuetobelievethattherearegreaterreturnsavailableinpurchasingexistingproductionthandrillingatthistime.Subsequenttoquarterend,wecompletedacommonshareissuanceforgrossproceedsof$20.0millionwhicheliminatedPineCliff’sbankdebtandincreasedour financial flexibility for furtheracquisitions. It remainsa “buyer’smarket” fornaturalgasassetsandwithour increasedsize, strongbalance sheet and access to capitalwehave a competitive advantage overmanyof the other prospective bidders.We remain active in assessingavailable private andpublic sales processes andas always,wewillmaintainourdiscipline in seekingopportunitieswhichwill create valuewithstrongpersharegrowth.Althoughintheshort‐termwebelievethatnaturalgaspriceswillcontinuetofluctuate,weremainconvincedthatovertimewewillseeanincreasingrecovery in pricing. Key indicators supporting this outlook include: strong forecasted natural gas demand growth in U.S. power generation andindustrialsectors;increasingexportsofU.S.gastoMexico;increasedusagebyAlbertaoilsandsproducers;conversiontonaturalgasfromcoal;andoverseasnaturalgasmarketsthatarecontendingwithbothinsufficientLNGsupplyandincreasingdemandgrowth.Asaresult,weanticipatenaturalgas prices will eventually increase as demand is placed on U.S. and Canadian producers to bring more supply to market while maintainingappropriatestoragelevels.BuildingaStrongAssetBaseLeveragedtoNaturalGasPriceRecoveryOverthepasttwoyears,wehavepursuedacounter‐cyclicalstrategyofacquiringpropertiesthatarecharacterizedbylowdeclinerates(ourcurrentcorporatedeclinerateisapproximately15%)andlowcostproductionwhilemaintainingalowcorporateoverheadtoprovidePineCliffwithstrongfundsflowleveragetoanynaturalgaspricerecovery.Usingourthirdquarter2013volumesannualizedfortwelvemonths,aCdn$0.10increasepermcfinAECOpricingwouldimproveannualfundsflowfromoperationsby$1.1million.Withthistypeofleverage,evenalimitednaturalgaspricerecoverycansignificantlyimprovefinancialresultsandshareholdervalue.PineCliff is currentlyproducingapproximately6,200boe/d(weekendedNovember2,2013)withapproximately500boe/dofproductionbeingdeferredasa resultofdewpoint issuesandmaintains its2013averagedailyproductionguidanceat4,350 to4,850boe/d. Capitalexpendituresduringthefirstninemonthsof2013were$7.1million.Weremainfocusedonmaintainingourstrongfinancialpositionandplantofullyfundthe2013capitalexpenditurebudgetof$10.8millionfromfundsflowfromoperations.Ourdrillingprogramin2013hasbeenlimitedtoafewstrategictargetsresultinginincreasedproductionandanimprovedunderstandingofourassetbase.Themajorityofourdrillinglocationswillbeinventorieduntilnaturalgaspricesrecoveratwhichtimeweintendtoinitiateamoresubstantivedrillprogram,providingadditionalupsideforshareholders.OutlookThefoundationofPineCliff’sbusinessstrategycontinuestobevaluecreationthroughstrongpersharecashflowandreservesgrowth,conservativefiscal management and capital discipline. Management and insiders hold approximately 20% of shares outstanding on a fully diluted basis andtherefore continue tobehighly alignedwith shareholder interests.We remaindedicated to executingour company strategy and look forward tocapitalizingonadditionalopportunitiestoaddfurthervalueonbehalfofinvestors.Thankyouforyourcontinuedsupport.

PhilHodgePresidentandChiefExecutiveOfficerNovember12,2013Please refer to theattachedManagement’sDiscussionandAnalysis forReaderAdvisories regarding forward‐looking information,non‐IFRSmeasuresandoilandgasmeasurements. ThisMessage toShareholdersshouldbereadinconjunctionwiththeunauditedcondensedconsolidatedinterimfinancialstatementsofPineCliffEnergyLtd.togetherwithManagement’sDiscussionandAnalysisforthethreeandninemonthsendedSeptember30,2013and2012,whichcanbefoundonwww.sedar.com,andissubjecttothesamecautionarystatementsassetouttherein.

TSX-V: PNE WWW.PINECLIFFENERGY.COM

THIRD QUARTER 2013 REPORT

FINANCIALANDOPERATIONSHIGHLIGHTS Q3‐2013

2 PINECLIFFENERGYLTD.

ThreemonthsendedSeptember30 NinemonthsendedSeptember302013 2012 2013 2012

($000s,unlessotherwiseindicated)

FINANCIALOilandgassales 9,719 2,197 24,261 5,228Cashflowfromoperatingactivities 2,579 246 9,431 1,113Fundsflowfromoperations1 3,014 442 9,136 927Basicpershare($/share) 0.02 0.01 0.06 0.02Dilutedpershare($/share) 0.02 0.01 0.05 0.02

Earnings(loss) (709) (472) 7,379 (209)Basicpershare($/share) (0.00) (0.01) 0.04 (0.00)Dilutedpershare($/share) (0.00) (0.01) 0.04 (0.00)

Capitalexpenditures,excludingacquisitions 3,076 14 7,131 630Acquisitions 45,463 ‐ 43,987 22,608Netdebt2 21,423 19,161 21,423 19,161Weighted‐averagecommonsharesoutstanding(000s)Basic 181,927 63,564 164,231 61,466Diluted 181,927 63,564 170,858 61,466

OPERATIONSProduction3

Naturalgas(mcf/d) 33,157 4,217 23,850 3,556Crudeoil(bbls/d) 67 29 64 23Naturalgasliquids(bbls/d) 191 163 190 141

Total(boe/d) 5,784 895 4,229 757CommoditysalespricesNaturalgas($/mcf) 2.45 2.76 2.91 2.32Crudeoil($/bbl) 104.53 80.57 98.66 79.24Naturalgasliquids($/bbl) 86.76 60.84 68.58 64.12

Combined($/boe) 18.26 26.69 21.01 25.22Netback($/boe)Operatingnetback($/boe)4 7.32 13.36 9.04 12.641Fundsflowfromoperationsisanon‐IFRSmeasurethatrepresentsthetotaloffundsprovidedbyoperatingactivities,beforeadjustingforchangesinnon‐cashworkingcapitalandchangesininterestpayable.2Netdebtisanon‐IFRSmeasurecalculatedasbankdebt,relatedpartynotepayableandtradeandotherpayableslesstradeandotherreceivables,andcash.3TheresultsfortheninemonthsendedSeptember30,2013includetheresultsoftheSkopeAcquisitionforthe223dayperiodofFebruary19,2013toSeptember30,2013,theresultsoftheMonogramAssetAcquisitionforthe68dayperiodofJuly24toSeptember30,2013,andtheAugust30,2013AdditionalInterestsAcquisitionforthe31dayperiodofAugust30toSeptember30,2013,averagedover273days.Theresultsfortheninemonths endedSeptember30,2012 include the resultsof theCarrotCreekAssets for theperiodofMarch1, 2012 to September30,2012,averagedover274days.4Operatingnetbackisanon‐IFRSmeasurecalculatedastheCompany’soilandgassales,lessroyaltiesandoperatingexpenses,averagedovertheboeproductionoftheCompany.

MANAGEMENT’SDISCUSSIONANDANALYSIS Q3‐2013


November11,2013INTRODUCTIONThe followingManagement’sDiscussionandAnalysis (“MD&A”) isareviewof theoperationsandcurrent financialposition for thethreeandninemonths endedSeptember30,2013 forPineCliffEnergyLtd. (“PineCliff”or the “Company”)and shouldbe read inconjunctionwiththeunauditedcondensedconsolidatedinterimfinancialstatementsasatandforthethreeandninemonthperiodsendedSeptember30,2013and2012,togetherwiththenotesrelatedthereto,andtheauditedconsolidatedfinancialstatementsasatandfortheyearendedDecember31,2012,togetherwiththenotesrelatedthereto(“2012AnnualFinancialStatements”).Additionalinformation relating to theCompany, including theCompany’sAnnual InformationForm,maybe foundonwww.sedar.comandbyvisitingPineCliff’swebsiteatwww.pinecliffenergy.com.PineCliff’sheadofficeisbasedinCalgary,Alberta,Canada.CommonsharesoftheCompanyarelistedandpostedfortradingontheTorontoStockExchangeVentureunderthesymbol“PNE”.READERADVISORIESThisMD&AcontainsfinancialmeasuresthatarenotdefinedunderInternationalFinancialReportingStandards(“IFRS”)andforward‐lookingstatements. ReadersarecautionedthattheMD&AshouldbereadinconjunctionwiththeCompany’sdisclosureunder“Non‐IFRSMeasures”and“Forward‐LookingInformation”includedattheendoftheMD&A.OtherMeasurementsAllamountshereinarepresentedinCanadiandollarsunlessotherwisespecified.AllreferencestoC$or$aretoCanadiandollarsandreferencestoUS$aretoUnitedStatesdollars.Where amounts are expressed in a barrel of oil equivalent (“boe” or daily equivalent of “boe/d”),naturalgas volumes have beenconvertedtobarrelsofoilequivalentonthebasisthatninethousandcubicfeetofnaturalgas(“mcf”ordailyequivalentof“mcf/d”)isequaltoonebarrelofoil(“bbl”ordailyequivalentof“bbl/d”).Thisconversionratioisbasedonenergyequivalenceprimarilyattheburner tip and does not represent a value equivalency at thewellhead. The term boemay bemisleading, particularly ifused inisolation.SENSITIVITIESPine Cliff’s results are sensitive to changes in the business environment in which it operates. The following chart shows theCompany’s sensitivity to key commodity price variables and interest rates. The sensitivity calculations are performedindependentlyshowingtheeffectofthechangeofonevariable;allothervariablesareheldconstant.

Businessenvironmentsensitivities Impactonannualfundsflowfromoperations1

Change $000s $pershare3

Crudeoilprice‐Edmontonpar($/bbl)2 $1.00 90 0.00Naturalgasprice‐AECO($/mcf)2 $0.10 1,040 0.01Interestrateonvariableratedebt $0.01 200 0.001Thisanalysisdoesnotadjustforchangesinworkingcapitalandusescurrentroyaltyrates.2PineCliffhaspreparedthisanalysisusingitsthirdquarter2013dailysalesvolumesannualizedfortwelvemonths.3Basedonthethirdquarterof2013basicweightedaveragesharesoutstandingof181,927,000.PINECLIFF’SSTRATEGICOBJECTIVESANDACQUISITIONSPineCliffisagrowthorientedoilandgasexplorationandproductioncompanyseekingtoacquirematerialassetpositionsintheWesternCanadianSedimentaryBasin (“WCSB”) to enlarge its current core areas and createnewcore areasofproductionwithsignificant reserves and drilling inventories. The Company’s vision is to deliver long‐term value to shareholders by building aportfolio of high‐return assets for future growth focusing on counter cyclical natural gas opportunitieswhile also acceleratingcurrentoilandliquidsdrillingandoptimizationopportunities.TheCompanyhasexecutedfivekeytransactionsinthepast19months:

OnMarch1,2012,PineCliffacquiredcertainoilandnaturalgasassets intheCarrotCreekareaofAlberta(the“CarrotCreek Assets”) for cash consideration of $22,684,000. The acquisition had an effective date of January 1, 2012 and



providedPineCliffwithitsfirstcoreareaintheWCSB.TheresultsoftheCarrotCreekAssetshavebeenincludedinthefinancialresultsoftheCompanyeffectiveMarch1,2012;

OnOctober19,2012,PineCliffcombineditsoperationswiththoseofGeomarkExplorationLtd.(“Geomark”),arelatedparty, in an all share transactionwhich resulted in the issuance of 81,767,641 common shares of Pine Cliff valued at$60,508,000(the“GeomarkTransaction”). Geomarkbecameawholly‐ownedsubsidiaryand itsstrongworkingcapitalposition,nodebtandhighlyliquidinvestmentsinarelatedpartyaddedsignificantstrengthtothecombinedCompany;

OnNovember9,2012,PineCliff completed thepurchase fromaCanadian financial institutionofallof theoutstanding

indebtednessandliabilitiesowingbySkopeEnergyInc.(“Skope”)andallofthesecuritydocumentsgrantedbySkopetothe financial institution (the “SkopeDebt Purchase”), for cash consideration of $28,000,000. OnNovember 27, 2012,SkopeobtainedaninitialordergrantingreliefundertheCompanies’CreditorsArrangementAct(“CCAA”)andonFebruary19,2013,therestructuringofSkopepursuanttotheCCAAwascompletedandPineCliffbecamethesoleshareholderofSkope(the“SkopeAcquisition”).Skopeholdsan80%workinginterestinapackageofhighquality,lowdeclineshallowgas assets (the Southern Assets, as defined below) that have provided Pine Cliff with increased cash flow andshareholders with considerable upside with any increase in natural gas prices. The Skope Acquisition addedapproximately3,500boe/dofproductiontoPineCliff’sproductionbase;

On July 24, 2013, Pine Cliff completed the acquisition of an additional approximate 52% working interest in theMonogram unit (the “Monogram Unit”) that is a portion of the Southern Assets, as defined herein, and relatedinfrastructure(the“MonogramAssetAcquisition”).TheMonogramUnitislocatedneartheCityofMedicineHat,AlbertaandproducesdrynaturalgasmainlyfromtheMilkRiver,MedicineHatandSecondWhiteSpeckszones.TheMonogramAssetAcquisitionaddedapproximately1,600boeperdayofproductiontoPineCliff’sproductionbase;and

OnAugust30,2013,PineCliffcompletedtheacquisitionofadditionalinterestsintheSouthernAssets,asdefinedherein

(the“AdditionalInterestsAcquisition”).AspartoftheAdditionalInterestsAcquisition,theassetmanagementagreementthatpreviouslygovernedPineCliff'sinterestsintheSouthernAssetswasterminatedandPineCliffbecametheoperatoroftheSouthernAssets. TheAdditionalInterestsAcquisitionincludedafurtherapproximate7%workinginterestintheMonogramUnit, a further approximate 20%working interest in the Pendor, BlackButte andEagleButte areas in theProvinceofAlberta and a further approximate18%working interest in theVidora, Cadillac andWymark areas in theProvinceofSaskatchewan.Subsequenttothisacquisition,PineCliffownsapproximately91%oftheMonogramUnit.TheAdditionalInterestsAcquisitionaddedapproximately850boeperdayofproductiontoPineCliff’sproductionbase.

Management ispleasedwith itsprogress andbelieves that the assets that havebeenassembled todateprovidePineCliffwithsignificantopportunitiesforreturnscorrelatedwiththerecoveryofnaturalgasprices.Inthenear‐term,PineCliffwillcontinuetomaintain a strong balance sheet and drill selected strategic wells. Pine Cliff fully intends to continue to aggressively pursue,evaluate,andwhenwarranted,executeaccretivebusinessopportunitiesin2013andbeyond.PINECLIFF’SOPERATIONSPineCliff’sreportablesegmentsaredeterminedbasedontheCompany’soperationsasfollows:OilandGasDivision – includes the exploration, development and productionof natural gas, crude oil and natural gas liquids(“liquids”or“NGLs”).PineCliff’smainareasofproductionareasfollows:

CarrotCreek–PineCliffholdsaworkinginterestintheCarrotCreekAssetswhicharelocatedsoutheastofthetownofEdson,Albertaandproducesliquidsrichnaturalgasaswellasasmallamountofoil.Inadditiontotheproducingassets,PineCliffhas, inaggregate,17.5gross(6.89net)sectionsofundevelopedlandinthisarea. PineCliff increasedits landpositionintheCarrotCreekareainthethirdquarterof2013throughafarm‐indealthathasearnedPineCliff5.75gross(3.375 net) sections of land. The Carrot Creek area has multi‐zone potential which can be further exploited usinghorizontaldrillingtechnology.PineCliffistheoperatorofapproximately90%oftheCompany’sproductioninthearea;

SouthernAssets–AtSeptember30,2013,PineCliffholdsanapproximate94%working interest inapackageofhigh‐quality, low decline, producing shallow gas assets in southeast Alberta and southwest Saskatchewan (collectively, the“SouthernAssets”). ThemajorityoftheproducingzonesinthesepropertiesarefromtheupperCretaceousMilkRiver,MedicineHatandSecondWhiteSpeckssands,whichtogetherconstituteasmallinterestforPineCliffinoneofthelargestCanadiangasfieldsinWesternCanada.Thesefieldsarecharacterizedbytheirshallowdepths,low‐permeabilityandclay‐richsands;and



Other – the balance of Pine Cliff’s 2013 production comes from non‐operated properties in the Sundance area innorthwestAlberta(the“SundanceAssets”)andfromnon‐operatedpropertiesintheHarmatten,GarringtonandCarstairsareasincentralAlberta(the“CentralAlbertaAssets”)howevertheCompanydoesnotcurrentlyhavelargeenoughlandpositionsorworkinginterestsintheseareastoconsiderthemsignificantcoreareas.

MineralsDivision– includestheexploration forpreciousmetals inUtah,Ontario,NunavutandtheNorthwestTerritories. TheCompany recently completed the secondphaseof itsdrillingprogramon itsUtahgoldpropertyand is currentlyevaluating theresults.Unlessotherwisenoted,thediscussioninthisMD&Awillfocusontheoilandgasdivision,asthemineralsdivisiondoesnothaveanyrevenuein2013andincurredexpendituresof$795,000oncapitaland$293,000ongeneralandadministrativeexpensesinthefirstninemonthsof2013.GUIDANCEFOR2013The2013guidanceprovidesinformationastomanagement’sexpectationforresultsofoperationsfor2013.Readersarecautionedthatthe2013guidancemaynotbeappropriateforotherpurposes.TheCompany’sexpectedresultsaresensitivetofluctuationsinthebusinessenvironmentandmayvaryaccordingly. Thisguidancecontainsforward‐lookinginformationandshouldbereadinconjunctionwiththeCompany’sdisclosureunder“Forward‐LookingInformation”includedonthefinalpageoftheMD&A.Production

2013OutlookNinemonthsendedSeptember30,2013

Barrelsofoilequivalentperday 4,350‐4,850 4,229 PineCliffmaintainsits2013productionguidanceof4,350–4,850boeperday.PineCliff’syeartodateproductionisonlyslightlylowerthanitsbudgetedproductionrangeasthetheseresults,andtheannualbudget,donotreflecttheSouthernAssetsforthefullyear. Pine Cliff’s net estimated sales volumes for the week ending November 2, 2013 were approximately 6,200 boe/d.Approximately500boe/doftheSouthernAssetsproductioniscurrentlybeingdeferredwhiletheCompanyrectifiesadewpointissue.CapitalExpenditures

2013OutlookNinemonthsendedSeptember30,2013

($000's)

Total 10,800 7,131 Capitalexpenditures,excludingacquisitions,duringthefirstninemonthsof2013were$7,131,000,inclusiveofboththeoilandgasdivisionandthemineralsdivision. PineCliffiscommittedtomaintainingitsstrongfinancialpositionandplanstofundits2013capitalexpendituresfromfundsflowfromoperations,andfundsraisedthroughequity.In total,PineCliffmaintains itscapitalguidanceandplans tospendapproximately$10millionof it in itsoilandgasdivision in2013.PineCliff’scapitalexpenditureprogramissensitivetocommoditypricingandPineCliff’sbudgetisdesignedtobeflexibletobalance capital expenditures against available funds flow. Before participating in any drill or recompletion program,Pine Cliffrigorouslyscrutinizesthepotentialreturnoninvestmentandthetimingoftheproject.CapitalspendingonthemineraldrillingatKing’sCanyon,Utahin2013wasapproximately$0.8million.FuturecapitalspendingatKing’sCanyon,includingwhetheritwillmaketheDecember6,2013optionpaymentofUS$1milliontoacquire100%ofaclaimblock,iscurrentlybeingevaluated.



SELECTEDQUARTERLYFINANCIALINFORMATION

($000s,unlessotherwiseindicated) Q31 Q2 Q12 Q4 3Q3 Q2 Q14 Q4

Averagesalesvolumes(boe/d) 5,784 4,335 2,536 832 895 972 401 88Operatingnetback($/boe)5 7.32 10.75 10.26 11.94 13.36 11.78 13.14 12.20Oilandgassales 9,719 9,084 5,458 2,319 2,197 2,130 901 164Oilandgassales,netofroyalties 8,595 8,546 4,584 1,894 1,824 1,735 750 159Totalrevenue 8,783 8,727 5,346 2,752 1,824 1,735 750 159Cashflow(deficiency)fromoperatingactivities 2,579 3,751 3,101 660 246 1,198 (331) (4)

Fundsflow(deficiency)fromoperations 3,014 3,721 2,401 775 442 520 (35) 55Pershare‐basic($/share) 0.02 0.02 0.02 0.01 0.01 0.01 (0.00) 0.00Pershare‐diluted($/share) 0.02 0.02 0.02 0.01 0.01 0.01 (0.00) 0.00

Earnings(loss) (709) (183) 8,271 (862) (472) (450) 713 (47)Pershare‐basic($/share) ‐ 0.00 0.05 (0.01) (0.01) (0.01) 0.01 (0.00)Pershare‐diluted($/share) ‐ 0.00 0.05 (0.01) (0.01) (0.01) 0.01 (0.00)

201120122013

1 The results for Q3‐2013 include the results of theMonogramAsset Acquisition for the 68 day period of July 24 to September 30, 2013, andAdditionalInterestsAcquisitionforthe31dayperiodofAugust30toSeptember30,2013.2TheresultsforQ1‐2013includetheresultsoftheSouthernAssetsAcquisitionforthe40dayperiodofFebruary19toMarch31,2013.3ThesalesvolumesforQ4‐2012includetheresultsoftheCentralAlbertaAssetsforthe73dayperiodofOctober19toDecember31,2012.4TheresultsforQ1‐2012includetheresultsoftheCarrotCreekAssetsforthe31dayperiodofMarch1toMarch31,2012.5Operatingnetbackisanon‐IFRSmeasurecalculatedastheCompany’soilandgassales,lessroyaltiesandoperatingexpenses,averagedovertheboeproductionoftheCompany.6Fundsflowfromoperationsisanon‐IFRSmeasurethatrepresentsthetotaloffundsprovidedbyoperatingactivities,beforeadjustingforchangesinnon‐cashworkingcapitalandchangesininterestpayable.Thirdquarter2013highlightsDuringthethirdquarterof2013,PineCliffreportsthatit:

Attainedrecordaveragedailysalesvolumesof5,784boe/dascomparedto895boe/dinthethirdquarterof2012.Thesignificantincreaseismainlyaresultofthethreeacquisitionsin2013,beingtheSkopeAcquisitiononFebruary19,2013,theMonogramAssetAcquisitiononJuly24,2013andtheAdditionalInterestsAcquisitiononAugust30,2013;

Achieved quarterly funds flow from operations of $3,014,000 (third quarter of 2012 – $442,000), due to increasedrevenues from the Southern Assets as well as finance and dividend income, offset by higher royalties, operating andgeneralandadministrationexpenses;and

Realizedaquarterlylossof$709,000(thirdquarterof2012–lossof$472,000),mainlyaresultofnon‐cashdepletionanddepreciation,sharebasedpaymentexpense,andhigheroperatingcosts;

SALESVOLUMES

Totalsalesvolumesbyproduct 2013 2012 2013 2012

Naturalgas(mcf) 3,050,451 387,945 6,511,049 974,412Crudeoil(bbls) 6,165 2,680 17,550 6,314NGLs(bbls) 17,543 14,961 51,750 38,537Barrelsofoilequivalent 532,116 82,299 1,154,475 207,253Oilandliquidsweighting 4% 21% 6% 22%

ThreemonthsendedSeptember30 NinemonthsendedSeptember30



Averagedailysalesvolumesbyproduct 2013 2012 2013 2012

Naturalgas(mcf/d) 33,157 4,217 23,850 3,556

Crudeoil(bbls/d) 67 29 64 23NGLs(bbls/d) 191 163 190 141Total(boe/d) 5,784 895 4,229 757


Averagedailysalesvolumesbyproperty 2013 2012 2013 2012(boe/d)

CarrotCreek 912 821 833 680Sundance 62 74 68 77CentralAlberta 97 ‐ 117 ‐SouthernAssets 4,713 ‐ 3,211 ‐Total 5,784 895 4,229 757


PineCliff’ssalesvolumesincreasedby546%inthethirdquarterof2013to5,784boe/dascomparedto895boe/dinthethirdquarterof2012. The significant increasewasa resultof theacquisitionof theCentralAlbertaAssetsonOctober19,2012, theSkopeAcquisitiononFebruary19,2013,theMonogramAssetAcquisitiononJuly24,2013andtheAdditionalInterestsAcquisitiononAugust30,2013.Pine Cliff began operating its Carrot Creek Assets in the fourth quarter of 2012 and the Company is evaluating long‐termoptimizationopportunitiesforitswellsinthisarea.PineCliffbeganoperatingitsSouthernAssetsinthethirdquarterof2013andisevaluatingopportunitiestominimizetheproductiondeclines.OPERATINGANDCORPORATENETBACKSThecomponentsoftheoperatingandcorporatenetbackaresummarizedasfollows:


($perboe)Oilandgassales 18.26 26.69 21.01 25.22

Royalties (2.11) (4.53) (2.20) (4.43)Operatingexpenses (8.83) (8.80) (9.77) (8.15)Operatingnetback 7.32 13.36 9.04 12.64Generalandadministrativeexpense (1.70) (5.48) (1.94) (5.67)Interestandbankcharges (0.32) (2.45) (0.18) (2.47)Financeanddividendincome 0.35 ‐ 0.98 ‐Corporatenetback 5.65 5.43 7.90 4.50 PineCliffgeneratedanoperatingnetbackof$7.32and$9.04perboe for thethreeandninemonthsendedSeptember30,2013,respectively,ascomparedto$13.36and$12.64perboe for thethreeandninemonthsrespectively,endedSeptember30,2012.Thisreductionisaresultoflowernaturalgasprices,lowerliquidsweightingandhigheroperatingexpensesperboeoffsetbylowerroyaltiesperboe.Overall,PineCliffgeneratedacorporatenetbackof$5.65and$7.90perboeforthethreeandninemonthsendedSeptember30,2013,respectively,ascomparedto$5.43and4.50perboeinthesameperiodsof2012.



OILANDGASSALESThreemonthsendedSeptember30 NinemonthsendedSeptember30

(000s,exceptperboeamounts) $ $perboe $ $perboe $ $perboe $ $perboe

Naturalgas1 7,552 2.45 1,071 2.76 18,926 2.91 2,257 2.32Crudeoil 644 104.53 216 80.57 1,731 98.66 500 79.24NGLs 1,523 86.76 910 60.84 3,549 68.58 2,471 64.12Totalsales 9,719 18.26 2,197 26.69 24,261 21.01 5,228 25.22

20122013 2013 2012

1Perunitvaluesareexpressedin$permcf.Oil and gas sales increased by 342% from$2,197,000 in the third quarter of 2012 to $9,719,000 in the third quarter of 2013,reflectingincreasedsalesvolumesfromtheSkopeAcquisitionthatclosedonFebruary19,2013,theMonogramAssetAcquisitionthat closed on July 24, 2013 and the Additional Interests Acquisition that closed onAugust 30, 2013. Conversely, in the thirdquarterof2012,oilandgassalesweremainlycomprisedofrevenuefromtheCarrotCreekAssets.Thelowerliquidsweightingin2013resultedinaloweraverageoverallrealizedpricethatwaspartiallyoffsetbyanoverallhighercommoditypriceenvironment in2013. PineCliff’s realizedprice in the threeandninemonthsendedSeptember30,2013was$18.26, and $21.01 per boe, respectively, as compared to $26.69, and $25.22 per boe in the three and nine months endedSeptember30,2012,respectively.CommoditypricesandforeignexchangeratesPine Cliff’s financial results are significantly influenced by fluctuations in commodity prices, including price differentials. Thefollowing tableshowsselectmarketbenchmarkaveragepricesand foreignexchangerates in the lasteightquarters toassist inunderstandingthevolatilityinpricesandforeignexchangeratesthathaveimpactedPineCliff’sbusiness.

1mmbtuistheabbreviationformillionsofBritishthermalunits.Onemcfofnaturalgasisapproximately1.02mmbtu.TheaverageNYMEXgaspriceintheUnitedStatesincreasedby28%inthethirdquarterof2013ascomparedtothethirdquarterof2012,whilebenchmarkAECOnaturalgaspricesinCanadaincreasedby5%inthesameperiod.ThedifferentialbetweenNYMEXandAECOwidenedsubstantiallyinthethirdquarterof2013owinginparttoalongertermshifttohighergastransportationcoststotherestofNorthAmerica.ThenaturalgasmarketisfacingtoughstructuralchallengesandPineCliff’sshort‐termviewisthattherewillbecontinuedpressureonAECOgaspricesandthatthedifferentialbetweenNYMEXandAECOwillremainvolatile.Tomitigatethisrisk,subsequenttoSeptember30,2013,PineClifflockedinthedifferentialbetweenNYMEXandAECOatUS$0.36permmbtu for themonths of November andDecember 2013 for approximately 40% of the Company’s natural gas production. AderivativetransactionofthisnatureexposesthesePineCliffvolumestopricefluctuationsoftheNYMEXpricecurveasopposedtotheAECOpricecurve.WTIoilpricesaveragedUS$105.82perbblinthethirdquarterof2013ascomparedtoUS$92.22perbblinthethirdquarterof2012.CanadiancrudepricesarebaseduponrefinerpostingsatEdmonton,AlbertaandarelinkedtoWTIthroughtransportationtariffstocommonmarketsandtheforeignexchangerate. In2012,thepricedifferentialsbetweenEdmontonlightoilpricesandWTIsubstantially increased,due inpart torefineryoutagesandseasonal turnaroundsaswellas transportationcapacity issues.Thedisconnectbetweentheindiceslargelyevaporatedbytheendof2012.Thereremainspotentialforthepricedifferentialstoremainvolatileinfutureperiods.InthethreemonthsendedSeptember30,2013,therealizedpriceofPineCliff’soilwas$104.53perbbl,asaresultofqualityadjustmentsto theaveragepostedEdmonton lightcrudeoilpriceof$105.18perbbl for thesameperiod.

Q3‐2013 Q2‐2013 Q1‐2013 Q4‐2012 Q3‐2012 Q2‐2012 Q1‐2012 Q4‐2011

NaturalgasNYMEX(US$/mmbtu)1 3.60 4.09 3.35 3.36 2.81 2.26 2.77 3.61AECO(C$/mcf) 2.43 3.52 3.18 3.20 2.31 1.89 2.15 3.19

CrudeoilWTI(US$/bbl) 105.82 94.22 94.37 88.18 92.22 93.49 102.93 94.06Edmontonlight(C$/bbl) 105.18 93.03 88.65 84.47 84.79 84.42 92.70 97.86

ForeignexchangeC$/US$ 1.0385 1.0234 1.0089 0.9913 0.9948 1.0102 1.0012 1.0231



Historically,theaveragepriceofNGLshastrackedthepriceofoil.However,beginninginthelatterpartofthesecondquarterof2012,changesinthesupplyanddemandforcertainNGLssuchasethane,propaneandbutaneaffectedtherelationshipbetweenthepriceofNGLsandthepriceofoil.InthethreemonthsendedSeptember30,2013,therealizedpriceofPineCliff’sNGLswas$86.76perbbl,representingapproximately82%oftheEdmontonlightcrudeoilpricesascomparedto66%inthethreemonthsendedSeptember30,2012.Pricedifferentialsforcommoditieshavethepotentialtoremainvolatilefortheremainderof2013.ROYALTIES



Total 1,124 2.11 373 4.53 2,536 2.20 919 4.43%ofoilandgassales 12% 17% 10% 18%

2013 2012 2013 2012

Royalties for thethreeandninemonthsendedSeptember30,2013were$2.11and$2.20perboe,respectively,ascomparedto$4.53and$4.43perboe for thethreeandninemonthsendedSeptember30,2012,respectively. Asapercentageofoilandgassales, royaltiesaveraged12%and10%for the threeandninemonthsendedSeptember30,2013, respectively,as compared to17%and18%forthethreeandninemonthsendedSeptember30,2012,respectively.ThedecreaseinroyaltiesonaperboebasisandasapercentageofoilandgassalesisduetoalowerroyaltyrateontheSouthernAssets,higherthananticipatedroyaltycreditsandlowerroyaltyratesonnewlydrilledwells.OPERATINGEXPENSES



Operatingexpenses 4,696 8.83 729 8.80 11,282 9.77 1,695 8.15%ofoilandgassales 48% 33% 47% 32%

2013 2012 2013 2012

Ascomparedtothesameperiodin2012,operatingexpensesperboeincreased20%intheninemonthsendedSeptember30,2013to$9.77perboe. TheincreaseisdueinparttohigherthanaverageoperatingexpensesfortheSouthernAssetsstemmingfromdowntimeexperiencedasaresultofapipelinebreak,weatherissuesandturnarounds.OperatingexpensesforthethreemonthsendedSeptember30,2013areconsistentwiththesameperiodin2012.Pine Cliff is committed to seekingways to increase efficiencies in the field on its operated properties and isworkingwith itspartnersonitsnon‐operatedpropertiestoattempttodecreasetheoperatingexpensesperboeinfutureperiods.GENERALANDADMINISTRATIVEEXPENSES



Total 905 1.70 451 5.48 2,234 1.94 1,175 5.67Less:non‐recurringtransactioncosts 40 0.08 203 2.47 194 0.17 378 1.82

865 1.62 248 3.01 2,040 1.77 797 3.85%ofoilandgassales 9% 11% 8% 15%

2013 2012 2013 2012

Generalandadministrativeexpenses(“G&A”),excludingnon‐recurringtransactioncosts,decreasedonaperboebasisto$1.62and$1.77perboeinthethreeandninemonthsendedSeptember30,2013,respectively,ascomparedto$3.01and$3.85perboeinthethreeandninemonthsendedSeptember30,2012,respectively.InthethreeandninemonthsendedSeptember30,2013,PineCliffincurred$132,000and$293,000,respectively,ofG&Arelatedtoitsmineralsdivision,whichhasbeenincludedintheconsolidatedtotalsabove. Onanabsolutedollarbasis,G&Ahas increasedconsiderablyduetotherevitalizedstrategic focusof theCompanywhichhas,mostnotably,increasedcostsforadditionalstaff.TokeepG&Aatalowlevel,PineCliffsharessomecommonexpenseswithBonterraEnergyCorp.(“Bonterra”),arelatedparty.In theninemonthsendedSeptember30,2013,PineCliff incurred$59,000 in transactioncosts related to theacquisitionof theMonogram Asset Acquisition and the Additional Interests Acquisition. In the three months ended March 31, 2013, Pine Cliff



incurred$135,000intransactioncostsrelatedtotheacquisitionofSkope.Thetransactioncostsarecomprisedoflegal,accounting,consultingandregulatoryexpensesassociatedwiththosebusinesstransactions.SHARE‐BASEDPAYMENTS



Total 578 1.09 203 2.47 1,676 1.45 516 2.49%ofoilandgassales 6% 9% 7% 10%

2013 2012 2013 2012

The Company has an equity settled stock‐based compensation plan. Stock options are granted to certain officers, directors,employees and consultants,with the term and vesting period of the options granted being determined at the discretion of theCompany’sboardofdirectors.Anoption’smaximumtermisfiveyears.In the threeandninemonthsendedSeptember30,2013,PineCliffgrantedstockoptions topurchase1,410,000and1,930,000commonshares,respectively,ataweightedaverageexercisepriceof$1.00and$0.96pershare,respectively.AsatSeptember30,2013,theCompanyhad11,954,000stockoptionsoutstanding(September30,2012–3,525,000). InthethreeandninemonthsendedSeptember30,2013,PineCliffrecordedshare‐basedpaymentexpenseof$578,000and$1,676,000,respectively(threeandninemonthsendedSeptember30,2012‐$203,000and$516,000,respectively),relatedtothestockoptionsissued.Inthethreeand nine months ended September 30, 2013, Pine Cliff incurred $39,000 and $116,000, respectively, of share‐based paymentexpensesrelatedtoitsmineralsdivision,whichhasbeenincludedintheconsolidatedtotalsabove.DEPLETIONANDDEPRECIATION



Oilandgasassets 4,845 9.11 793 9.64 10,089 8.74 1,994 9.62Officefurnitureandequipment 58 0.11 ‐ ‐ 58 0.05 ‐ ‐Total 4,903 9.22 793 9.64 10,147 8.79 1,994 9.62%ofoilandgassales 50% 36% 42% 38%

2013 2012 2013 2012

Pine Cliff’s depletion and depreciation expense decreased 4% and 9%on a per boe basis in the three and ninemonths endedSeptember30,2013,respectively,ascomparedtothesameperiodin2012.Thedecreaseindepletionanddepreciationexpenseperboe in2013 isa resultof theSouthernAssets, added in2013,whichrealizea lowerdepletionrateperboe than theCarrotCreekAssetsduetoahigherreservebase.FINANCEEXPENSES



Unwindingofthediscountedvalueofdecommissioningliabilities 262 0.49 14 0.17 590 0.51 30 0.14Interestandbankcharges 168 0.32 202 2.45 204 0.18 512 2.47Total 430 0.81 216 2.62 794 0.69 542 2.62%ofoilandgassales 4% 10% 3% 10%

2013 2012 2013 2012

In the three and nine months ended September 30, 2013, Pine Cliff incurred finance expenses of $430,000 and $794,000respectively, as compared to $216,000 and $542,000 in the three and nine months ended September 30, 2012, respectively.Finance expenses in 2013 primarily relate to the unwinding of the discounted value of decommissioning liabilities, which hasincreased as a result of the significant decommissioning liabilities associated with the Southern Assets. Conversely, financeexpenses in2012predominatelyconsistedof intereston therelatedpartynotepayablewhichwasrepaidonOctober31,2012,interestonPineCliff’srevolvingdemandcreditfacilityandbankchargesincurredasaresultoftheimplementationoftherevolvingdemandcreditfacility.Interestexpensein2013relatestointerestonPineCliff’srevolvingdemandcreditfacilityandbankchargesincurredasa resultof increasingPineCliff’s borrowingbaseon the revolvingdemandcredit facility to$40million in the thirdquarter.



AmountsdrawnundertherevolvingdemandcreditfacilityareintheformofCanadianprimelendingratebasedloans,guaranteednotesor lettersof credit. The revolvingdemand credit facilitybears interest at theprime lending rateplus0.75%per annum.Overall,PineCliffrealizedaneffectiveinterestrateof3.75%forthethreeandninemonthsendedSeptember30,2013.FINANCEANDDIVIDENDINCOME



Financeincome 17 0.03 ‐ ‐ 624 0.54 ‐ ‐Dividendincome 171 0.32 ‐ ‐ 507 0.44 ‐ ‐Total 188 0.35 ‐ ‐ 1,131 0.98 ‐ ‐%ofoilandgassales 2% 0% 5% 0%

2013 2012 2013 2012

FinanceincomeintheninemonthsendedSeptember30,2013ismainlyaresultofinterestreceivedfromtheSkopeDebtPurchase.During theperiodofNovember9,2012toFebruary19,2013,PineCliff collected8.2%intereston the facevalueofdebt,being$53.5million,purchasedfromthefinancialinstitution.PineCliffreceivedinterestontheSkopeDebtPurchaseuntilFebruary19,2013atwhichtimePineCliffbecamethesoleshareholderofSkopeandasaresulttheloanceased.In the threeandninemonthsendedSeptember30,2013,PineCliff received$171,000and$507,000, respectively, individendsfromitsinvestmentinBonterra.TheinvestmentinBonterracommonshareswasacquiredthroughtheGeomarkTransaction.INCOMETAXES



Deferredtaxexpense(recovery) (2,020) (3.80) (96) (1.17) 417 0.36 (1,404) (6.77)

2013 2012 2013 2012

DuringthethreemonthsendedSeptember30,2013,PineCliffrecordeddeferredtaxrecoveryof$2,020,000,whileduringtheninemonthsendedSeptember30,2013,PineCliffrecordeddeferredtaxexpenseof$417,000(threeandninemonthsendedSeptember30,2012 ‐ deferred tax recoveryof$96,000and$1,404,000 respectively).Thedeferred taxexpense in theninemonthsendedSeptember30,2013isprimarilyrelatedtothegainrecognizedonthepurchaseofSkope.PineCliffhasapproximately$165,000,000 intaxpoolsatSeptember30,2013(December31,2012–$39,375,000)available forfutureuseasdeductionsfromtaxableincome.Thesignificantincreaseintaxpoolsisaresultofapproximately$93,000,000oftaxpoolsthatwereacquiredintheSkopeAcquisition.EARNINGSYeartodatetoyeartodatevarianceanalysis:($000s)

LossfortheninemonthsendedSeptember30,2012 (209)Pricevariance (873)Volumevariance 19,906Royalties (1,617)Operatingexpenses (9,587)Generalandadministrative (1,059)Share‐basedpayments (1,160)Depletionanddepreciation (8,153)Financeexpenses (252)Gainonacquisition 11,117Dividendincome 507Financeincome 624Deferredtaxexpense (1,821)Impairmentofinvestment (44)

EarningsfortheninemonthsendedSeptember30,2013 7,379



IntheninemonthsendedSeptember30,2013,earningsincreasedby$7,588,000to$7,379,000ascomparedtotheninemonthsended September 30, 2012. The increase in earnings is mainly due to the non‐cash gain of $11,117,000 recognized on theacquisitionof Skopeandapositivevolumevariance resulting in increasedoil andgas salesas a resultof theacquisitionof theSouthernAssets.Thepositivevariancesweremainlyoffsetbyhigheroperatingexpenses,depletionanddepreciationanddeferredtaxexpense.OthercomprehensiveearningsOther comprehensive earnings relates to the increase and decrease in fair value of Pine Cliff’s investment in Bonterra. AtSeptember30,2013,PineCliff’sinvestmentinBonterrahasafairvalueof$11,494,000ascomparedto$9,339,000atDecember31,2012.FUNDSFLOWFROMOPERATIONS


($000s,exceptperboeamounts)

Earnings(loss) (709) (472) 7,379 (209)Adjustmentsfor:Share‐basedpayments 578 203 1,676 516Depletionanddepreciation 4,903 793 10,147 1,994Impairmentofinvestment ‐ ‐ 44 ‐

262 14 590 30

Gainonacquisition ‐ ‐ (11,117) ‐Deferredtaxexpense(recovery) (2,020) (96) 417 (1,404)

Fundsflowfromoperations 3,014 442 9,136 927Fundsflowfromoperations($/boe) 5.65 5.37 7.90 4.47

Unwindingofthediscountondecommissioningliabilities

Fundsflowfromoperations,whichrepresentscashflowfromoperatingactivitiesbeforechangesinnon‐cashworkingcapitalandinterest payable, was $3,014,000 and $9,136,000 in the three and nine months ended September 30, 2013, respectively, ascomparedto$442,000and$927,000inthethreeandninemonthsendedSeptember30,2012,respectively.TheincreaseinfundsflowfromoperationsisprimarilyduetotheincreaseinactivitywiththeacquisitionoftheCarrotCreekAssetsandtheSouthernAssets,inadditiontofinanceanddividendincome.SHARECAPITALAsof September30, 2013,a total of 181,952,759PineCliff shareswere issued andoutstanding. Subsequent to September30,2013,PineCliffcompletedapublicshareissuanceof18,200,000commonsharesandissued20,000commonsharesasaresultofstockoptionexercises.Asofthedatehereof,200,172,759PineCliffshareswereissuedandoutstanding.ADDITIONSTOPROPERTY,PLANTANDEQUIPMENTANDEXPLORATIONANDEVALUATIONASSETS

Ninemonthsended YearendedSeptember30,2013 December31,2012

($000s)

Explorationandevaluationassets‐oilandgasdivision 74 92Explorationandevaluationassets‐mineralsdivision 795 248Oilandgasassets 6,086 1,961Furnitureandofficeequipment 176 3Acquistions 93,866 32,007Capitalizedassetretirementcosts 6,792 169Total 107,789 34,480



IntheninemonthsendedSeptember30,2013,PineCliffadded$107,789,000incapitalassetstoitsbalancesheetascomparedto$34,480,000 in theyearendedDecember31,2012. TheSkopeAcquisition, theMonogramAssetAcquisitionand theAdditionalInterestsAcquistionincludedproperty,plantandequipmentof$89,199,000andexplorationandevaluationassetsof$4,667,000.PineCliffdrilledonegrossoilwell(0.30netwell)inDecember2012intheRockCreekzonewhichwasbroughtonproductioninApril2013.TheflowratesfromtheRockCreekwellhavebeenverypositivetodateandtheCompany’soilandliquidsproductionhas increasedsince thewell cameonproduction. PineCliffdrilledonegrossgaswell (0.1875netwell) in January2013 in theWilrichzonewhichwasbroughtonproductioninMarch2013.TheinitialflowratesfromtheWilrichgaswellweredisappointingandPineCliffanditspartnerscontinuetoreviewtheiralternativesforthiswell.PineCliffdrilledonegross(0.1875net)GethinggaswellinAugust2013whichwasbroughtonproductiononNovember1,2013anddrilledonegross(1.0net)WilrichgaswellinSeptember2013onlandsacquiredinafarm‐indeal,whichwillbebroughtonproductioninmid‐November2013.Inthefirstninemonths of 2013, Pine Cliff also acquired a section of prospective land at a crown land sale, recompleted an existingwellboretargetingasecondaryzoneandsuccessfullyreworkedanunderperformingwell.MineralsdivisionAspartof itsMineralsDivision, in the firstquarterof2013,PineCliff spent$168,000tocomplete the firstphaseof thedrillingprogramontheKing’sCanyongoldpropertyinUtahthatwasinitiatedinthefourthquarterof2012andwasencouragedwiththeinitial results. Thesecondphaseofdrillingcommenced inthesecondquarterof2013to testexploration targetsand followupresultsoftheinitialprogram,forwhichPineCliffspentanadditional$627,000.PineCliffiscurrentlyreviewingthedrillingresults.DrillingwascompletedonboththeportionofthepropertyonwhichtheCompanyhasanoptiontoacquirea100%interestonaclaimblock forUS$1,000,000(which includesthehistorical,butpresentlynon‐compliantNational Instrument43‐101StandardsforDisclosureforMineralProjects,goldmineralresourceintheCrownZone)andonthe100%ownedlandsurroundingtheCrownOptionClaims,whichincludestheRoyalZone.RELATEDPARTYTRANSACTIONSRelatedpartytransactionsareinthenormalcourseofoperationsandaremeasuredattheexchangeamount,whichistheamountoftheconsiderationestablishedandagreedtobytherelatedparties.ManagementservicesagreementPineCliffhasamanagementservicesagreementwithBonterra,anoilandgascorporationthatispubliclytradedontheTorontoStock Exchange with some common directors and management, to provide executive services, technical services, accountingservices,oilandgasadministrationandofficeadministrationforPineCliff.Totalfeesforeachofthethreeandninemonthperiodsended September 30, 2013 and 2012 were $15,000, and $45,000, respectively, plus administrative costs. The managementservices agreementmay be cancelled by either partywith 90 days notice. As at September 30, 2013, Pine Cliff owedBonterra$145,000(December31,2012–$48,000).InvestmentinBonterraAsatSeptember30,2013,PineCliffowns204,633commonsharesinBonterra(December31,2012–204,633)representinglessthan1%oftheoutstandingsharesofBonterraatthatdate.ThesharesasofSeptember30,2013haveafairvalueof$11,494,000(December31,2012–$9,339,000).ForthethreeandninemonthsendedSeptember30,2013,PineCliffreceiveddividendincomeof$171,000,and$507,000,respectively,fromthisinvestment(September30,2012–$nil).BusinesscombinationwithGeomarkOnOctober19, 2012GeomarkandPineCliff combined their operationspursuant to an arrangement agreement. GeomarkhadsomecommondirectorsandsomecommonmanagementwithPineCliff.AtthetimeoftheGeomarkTransaction,Geomarkowned432,812commonsharesofPineCliffwhichweresubsequentlysoldinthepublicmarketforalossonsaleofinvestmentof$34,000,netoftax.LIQUIDITYLiquiditydescribesacompany’sabilitytoaccesscash.Growthcompaniesoperatingintheupstreamoilandgasbusiness,suchasPineCliff, require sufficient cash to fundexplorationanddevelopmentprojects, to increaseproductionand reserves, toacquirestrategicoilandgasassetsandtorepaydebt.



ThefollowingtablehighlightsPineCliff’ssourcesandusesofcashforthethreeandninemonthsendedSeptember30,2013and2012:


($000s)

Fundsflow(deficiency)fromoperations 3,014 442 9,136 927Bankdebtproceeds(repayment) 20,485 (178) 17,448 11,918Proceedsfromrelatedpartynotepayable ‐ ‐ ‐ 7,000Purchaseoftermdeposit ‐ ‐ (21,500) ‐Maturityoftermdeposit 21,500 ‐ 21,500 ‐

Issuanceofcommonshares,netofshareissuecosts 4 ‐ 23,707 2,885Exerciseofstockoptions 46 ‐ 46 ‐Interestpayable ‐ (38) ‐ ‐Cashfromacquisitions ‐ ‐ 1,476 ‐Changesinnon‐cashworkingcapital 2,224 (212) 284 231Decreaseincash 1,266 ‐ 497 277Totalcapitalexpenditures,includingacquisitions 48,539 14 52,594 23,238

Capitalexpenditures,includingacquisitions:Oilandgasdivision 48,425 14 51,799 23,238Miningdivision 114 ‐ 795 ‐

Inthethirdquarterof2013,PineClifffundeditscapitalexpendituresfromfundsflowfromoperationsandfundsraisedthroughanissuanceofsharesthatwascompletedinthesecondquarterfor$25,080,000($23,888,000,netofshareissuecosts).TheexistingbankingarrangementsatSeptember30,2013arecomprisedofarevolvingdemandcreditfacilityintheamountof$40,000,000,ofwhich$20,485,000isdrawnatSeptember30,2013.ThecurrentrevolvingperiodwillendonMarch31,2014andiftherevolvingdemandcreditfacilityisnotrenewedanyamountsowingwillbecomepayableinfullondemand.TheCompanywasincompliancewithitsquantitativebankdebtcovenantsduringtheninemonthsendedSeptember30,2013andwilltakestepstoensurethatitremainsincompliancewithitscovenantsinfutureperiodsandanticipatesrenewingthecreditfacilityattheendoftherevolvingperiod.SubsequenttoSeptember30,2013,PineCliffrepaidallofitsoutstandingbankdebt.Funds flow from operations and the unused portion of the credit facility will allow Pine Cliff to meet its short‐term financialliabilities,aswellasfuturecapitalrequirements,atareasonablecost.TheCompanybelievesithassufficientfundingandaccesstocapitaltomeetitsobligationsastheycomedueand,ifrequired,willconsideradditionalshort‐termfinancingorissuingequityinordertomeetitsfutureliabilities.Working capital is calculated as current assetsminus current liabilities and represents the ability of a company to satisfy bothmaturingshort‐termdebtandupcomingoperationalexpenses.Thecapitalintensivenatureoftheoilandgasbusinessmayresultinworkingcapitaldeficienciesfromtimetotime.PineCliffmanagesitsworkingcapitalratiotoensurethatithassufficientunusedfundsunderitscreditfacilityandaccesstocapitaltoaccommodatesuchcircumstances.Additionally,therevolvingdemandcreditfacility requires Pine Cliff tomaintain aworking capital ratio computed as current assets less current liabilities, excluding thecurrentportionofbankdebtandinclusiveofunusedfundsunderthecreditfacility,ofgreaterthan1:1.AsatSeptember30,2013,the Company had negativeworking capital of $6,973,000 (December 31, 2012 – positiveworking capital of $35,077,000). Tomanagetheworkingcapitaldeficiency,onOctober17,2013PineCliffcompleteda$20,020,000shareofferingandsubsequentlypaidoffalloutstandingbankdebt.



COMMITMENTSANDCONTINGENCIESInthenormalcourseofbusiness,PineCliffhasenteredintoarrangementsandincurredobligationsthatwillimpacttheCompany’sfutureoperationsandliquidity.ThematuritydatesoftheCompany’scommitmentsareasfollows:

Total <6months 6‐12months >12months($000s)Tradeandotherpayables 6,242 6,242 ‐ ‐Bankloan‐principal 20,485 20,485 ‐ ‐Bankloan‐futureinterest 384 384 ‐ ‐

27,111 27,111 ‐ ‐ OFFBALANCESHEETTRANSACTIONSPineCliffwasnotinvolvedinanyoff‐balancesheettransactionsduringtheperiodspresented,norhaveweenteredintoanysucharrangementsasoftheeffectivedateofthisMD&A.FINANCIALINSTRUMENTSANDRISKMANAGEMENTTheCompanyfacesbothfinancialandnon‐financialrisksinherentintheoilandgasbusiness.Financialrisksinclude:commoditypricerisk,foreignexchangerisk,interestraterisk,andcreditrisk.Financialriskscanbemanaged,atleasttoadegree,throughtheutilizationof financial instruments. Certainnon‐financial risks canbemitigated through theuseof insurance and/orother risktransfermechanisms, good business practices and process controls, while othersmust simply be borne. All risks can have animpactuponthefinancialperformanceoftheCompany.AcomprehensivediscussionofPineCliff’sfinancialinstrumentsandriskmanagementisprovidedintheCompany’sMD&AfortheyearendedDecember31,2012.CRITICALACCOUNTINGESTIMATESThe preparation of financial statements in conformity with IFRS requires management to make judgments, assumptions andestimatesthataffectthereportedamountsofassetsandliabilitiesandthedisclosureofcontingentassetsandliabilitiesatthedateof the financial statements, and revenues andexpenses for theperiod reported.The significant accountingpoliciesusedby theCompany are disclosed in the notes to the consolidated financial statements. Management believes that the most criticalaccountingpoliciesthatmayhaveanimpactontheCompany’sfinancialresultsarethosethatspecificallyrelatetotheaccountingforitsoilandgasinterests,includingamountsrecordedfordepletionandtheimpairmenttestwhicharebothbasedonestimatesofprovedandprobablereserves,productionrates,oilprices,futurecostsandotherrelevantassumptions.Actualresultscoulddiffermateriallyfromsuchestimates.A comprehensive discussion of the judgments, assumptions and estimatesmade bymanagement is provided in the Company’sannualMD&AfortheyearendedDecember31,2012.ACCOUNTINGPOLICYANDSTANDARDCHANGESTheaccountingpoliciesandmethodofcomputationfollowedinthepreparationoftheFinancialStatementsarethesameasthosefollowed in the preparation of Pine Cliff’s 2012 Annual Financial Statements, except for the adoption of new standards andinterpretationseffectiveasofJanuary1,2013.Thenatureandimpactofeachnewstandardoramendmentisdescribedbelow:IFRS10ConsolidatedFinancialStatements(“IFRS10”),IAS28InvestmentsinAssociatesandJointVentures(“IAS28”),IFRS11JointArrangements(“IFRS11”)andIFRS12DisclosureofInterestsinOtherEntities(“IFRS12”)Asdisclosedinthe2012AnnualFinancialStatements,effectiveJanuary1,2013,theCompanyadopted,asrequired,IFRS10,IAS28andIFRS12. PineCliffrevieweditsconsolidationmethodologyanddeterminedthattheadoptionofIFRS10didnotresult inachangeintheconsolidationstatusofitssubsidiaries.



UnderIFRS11,interestsinjointarrangementsareclassifiedaseitherjointoperationsorjointventures,dependingontherightsandobligationsofthepartiestothearrangements.PineCliffperformedareviewofitsinterestinotherentitiesanddidnotidentifyanysignificantinterestsforwhichitsharesjointcontrol.IFRS12setsouttherequirementsfordisclosuresrelatingtoanentity’sinterestsinsubsidiaries,jointarrangements,associatesandstructuredentities.Noneofthesedisclosurerequirementsareapplicableforinterimcondensedconsolidatedfinancialstatements,unlesssignificanteventsandtransactionsintheinterimperiodrequiresthattheyareprovided.Accordingly,theCompanyhasnotmadesuchdisclosures.IFRS13FairValueMeasurement(“IFRS13”)Effective January 1, 2013, the Company adopted, as required, IFRS 13 and applied the standard prospectively as required bytransitionalprovisions.IFRS13establishesasinglesourceofguidanceunderIFRSforallfairvaluemeasurements.IFRS13doesnotchangewhenanentity is required touse fairvalue,butratherprovidesguidanceonhowtomeasure fairvalueunder IFRSwhenfairvalueisrequiredorpermitted.TherehasbeennochangetoPineCliff’smethodologyfordeterminingthefairvalueforits financial assets and liabilities and, as such, the application of IFRS 13 has not resulted in any adjustments to the fair valuemeasurementscarriedoutbytheCompany.IFRS13alsorequiresspecificdisclosuresonfairvalues,someofwhichreplaceexistingdisclosurerequirementsinotherstandards,includingIFRS7FinancialInstruments:Disclosures.SomeofthesedisclosuresarespecificallyrequiredforfinancialinstrumentsbyIAS34.16A(j),therebyaffectingtheinterimcondensedconsolidatedfinancialstatementsperiod.TheapplicationhadnoimpactonthefinancialstatementsforthethreemonthsendedSeptember30,2013.IAS1PresentationofFinancialStatements(“IAS1”)EffectiveJanuary1,2013,theCompanyappliedtheamendmenttoIAS1requiringitemswithinothercomprehensiveearningstobegrouped into two categories: items that will not be subsequently reclassified to earnings or loss and items that may besubsequentlyreclassifiedtoearningsorlosswhenspecificconditionsaremet.Theamendmenthasbeenappliedretrospectivelyand,assuch,thepresentationofitemsinothercomprehensiveearningshasbeenmodified.TheapplicationofIAS1didnotresultinanyadjustmentstoothercomprehensiveearningsoraccumulatedothercomprehensiveincome.IAS34Interimfinancialreporting(“IAS34”)andsegmentinformationfortotalassetsandliabilities(Amendment)The amendment clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities for eachreportablesegmenttoenhanceconsistencywiththerequirementsinIFRS8OperatingSegments. Totalassetsandliabilitiesforareportable segment need to be disclosed onlywhen the amounts are regularly provided to the chief operating decisionmaker(“CODM”)andtherehasbeenamaterialchangeinthetotalamountdisclosedintheentity’spreviousannualconsolidatedfinancialstatementsforthatreportablesegment. TheCompanydoesnotregularlyprovidethisdisclosuretotheCODMandasaresultofthisamendment,theCompanydoesnotprovidethisinformationinitsfinancialstatementsforthethreemonthsendedSeptember30,2013.FutureaccountingpronouncementsTheIASBissuedamendmentstoIAS36,“ImpairmentofAssets”thatrequireretrospectiveapplicationandwillbeadoptedbytheCompanyonJanuary1,2014.TheCompanyiscurrentlyassessingtheimpacttheadoptionoftheseamendedstandardswillhaveontheCompany'sconsolidatedfinancialstatements.SUBSEQUENTEVENTSOnOctober17,2013,PineCliffcompletedapublicofferingof18,200,000commonsharesatapriceof$1.10percommonshareforgrossproceedsof$20,020,000.OnOctober16,2013,PineCliffobtainedaletterofcreditintheamountof$4,928,000inconnectionwithitslimitedliabilityratingintheProvinceofSaskatchewan.Subsequent to September 30, 2013, Pine Cliff issued 750,000 stock options to its employees and consultantswith aweighted‐averageexercisepriceof$1.13pershare,basedonthemarketprice immediatelyprecedingthedateofgrant. TheoptionsvestbetweenoneandthreeyearsandexpirebetweenApril22,2015andMay4,2017.OnOctober10,2013,PineCliffenteredintoafinancialderivativefortheperiodofNovember1,2013toDecember31,2013for15,000mmbtuperdayatadifferentialofUS$0.36permmbtu.



NON‐IFRSMEASURESThisMD&Auses the terms “funds flow fromoperations”, “operatingnetbacks”, “corporatenetbacks”and “netdebt”whicharenotrecognized under IFRS andmay not be comparable to similarmeasures presented by other companies. The Company uses thesemeasurestoevaluateitsperformance,leverageandliquidity,aswellastoassesspotentialacquisitions.TheCompanyconsidersfundsflowfromoperationsakeyperformancemeasureasitdemonstratestheCompany’sabilitytogeneratethefundsnecessarytorepaydebtandfundfuturegrowththroughcapitalinvestment.Fundsflowfromoperationsandfundsflowfromoperationspershareshouldnotbeconsideredasanalternativeto,ormoremeaningfulthan,cashflowfromoperatingactivitiesasperthe statementofcash flowswhich isconsidered themostdirectlycomparablemeasureunder IFRS. Funds flow fromoperations iscalculatedascashflowfromoperatingactivitiesbeforechangesinnon‐cashworkingcapitalandchangesininterestpayable.Fundsflow fromoperationsper share is calculatedusing the sameweightedaveragenumberof sharesoutstandingas in the caseof theearningspersharecalculationforareportingperiod.


($000s)

Cashflowfromoperatingactivities 2,579 246 9,431 1,113Less:Changeinnon‐cashworkingcapital (435) (158) 295 186Changeininterestpayable ‐ (38) ‐ ‐

Fundsflowfromoperations 3,014 442 9,136 927 The Company considers operating netback to be a key indicator of profitability relative to current commodity prices. Operatingnetbackandoperatingnetbackperboearecalculatedasoilandgassales,lessroyaltiesandoperatingexpensesonanabsoluteandaperboebasis,respectively.TheCompanyconsiderscorporatenetbacktobeakeyindicatorofoverallprofitability.Corporatenetbackandcorporatenetbackperboearecalculatedasoperatingnetback, lessG&Aand interestexpenseplus financeanddividend incomeonanabsoluteandonanabsoluteandaperboebasis,respectively.NetdebtisatermusedinthecontextofliquidityinthisMD&A.Netdebtisthetotalofbankdebt,relatedpartynotepayableandtradeandotherpayables,lesstradeandotherreceivables,cashandtermdeposit.ThereisnoIFRSmeasurethatisreasonablycomparabletonetdebt.FORWARD‐LOOKINGINFORMATIONCertainstatementscontained inthisMD&A includestatementswhichcontainwordssuchas“anticipate”,“could”, ‘should”,“expect”,‘seek”,“may”,“intend”,“likely”,“will”,“believe”andsimilarexpressions,statementsrelatingtomattersthatarenothistoricalfacts,andsuchstatementsofourbeliefs,intentionsandexpectationsaboutdevelopment,resultsandeventswhichwillormayoccurinthefuture,constitute“forward‐looking information”within themeaningofapplicableCanadiansecurities legislationandarebasedoncertainassumptions and analysismade by us derived from our experience and perceptions. Forward‐looking information in thisMD&Aincludes,butisnotlimitedto:expectedproductionlevels;futurecapitalexpenditures,includingtheamountandnaturethereof;oilandnaturalgaspricesanddemand;expansionandotherdevelopment trendsoftheoilandnaturalgas industry;businessstrategyandguidance;theclosingoftheAdditionalInterestsAcquisition;expansionandgrowthofourbusinessandoperations; maintenanceofexistingcustomer,supplierandpartnerrelationships;supplychannels;accountingpolicies;risks;andothersuchmatters.All such forward‐looking information is based on certain assumptions and analysesmade by us in light of our experience andperception of historical trends, current conditions and expected future developments, as well as other factors we believe areappropriateinthecircumstances.Therisks,uncertaintiesandassumptionsaredifficulttopredictandmayaffectoperations,andmayinclude,withoutlimitation:foreignexchangefluctuations;equipmentandlabourshortagesandinflationarycosts;generaleconomicconditions; industryconditions;changes inapplicableenvironmental, taxationandother lawsand regulationsaswellashow suchlawsandregulationsareinterpretedandenforced;theabilityofoilandnaturalgascompaniestoraisecapital;theeffectofweatherconditionsonoperationsand facilities; theexistenceofoperatingrisks;volatilityofoilandnaturalgasprices;oilandgasproductsupply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and futureobligations; increasedcompetition; stockmarketvolatility;opportunitiesavailable toorpursuedbyus;andother factors,manyofwhicharebeyondourcontrol.Theforegoingfactorsarenotexhaustive.



Actual results, performance or achievements could differmaterially from those expressed in, or implied by, this forward‐lookinginformationand,accordingly,noassurancecanbegiventhatanyoftheeventsanticipatedbythe forward‐looking informationwilltranspireoroccur,or ifanyofthemdo,whatbenefitswillbederivedtherefrom.Exceptasrequiredby law,PineCliffdisclaimsanyintentionorobligationtoupdateorreviseanyforward‐lookinginformation,whetherasaresultofnewinformation,futureeventsorotherwise. Theforward‐lookinginformationcontainedinthisMD&Aisexpresslyqualifiedbythiscautionarystatement.

MANAGEMENT’SRESPONSIBILITYFORFINANCIALSTATEMENTS Q3‐2013


Theinformationprovidedinthisreport,includingtheinterimcondensedconsolidatedfinancialstatements,istheresponsibilityofPineCliff’smanagement. Inthepreparationofthesestatements,estimatesaresometimesnecessarytomakeadeterminationoffuturevaluesforcertainassetsorliabilities.Managementbelievessuchestimateshavebeenbasedoncarefuljudgmentsandhavebeenproperlyreflectedintheaccompanyingfinancialstatements.ManagementmaintainsasystemofinternalcontrolstoprovidereasonableassurancethattheCompany’sassetsaresafeguardedandtofacilitatethepreparationofrelevantandtimelyinformation.TheauditcommitteehasreviewedtheseinterimcondensedconsolidatedfinancialstatementswithmanagementandhasreportedtotheBoardofDirectors.TheBoardofDirectorshaveapprovedtheconsolidatedfinancialstatementsaspresentedinthisinterimreport.

INTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS Q3‐2013


CONDENSEDCONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION(Canadiandollars,000s)(unaudited)

Asat AsatNote September30,2013 December31,2012

ASSETSCurrentassets

Cash 320 817Tradeandotherreceivables 4,984 3,499Prepaidexpensesanddeposits 2,906 193Loanreceivable 3 ‐ 28,000Investments 4 11,544 9,418

Totalcurrentassets 19,754 41,927

Explorationandevaluationassets 5 8,326 2,790Property,plantandequipment 6 122,779 30,673Restrictedcash 33 33Goodwill 3,535 3,535Deferredtaxes 20,593 1,731

Totalassets 175,020 80,689

LIABILITIESCurrentliabilities

Tradeandotherpayables 6,242 3,813Bankdebt 7 20,485 3,037

Totalcurrentliabilities 26,727 6,850

Decommissioningliabilities 42,236 2,818Totalliabilities 68,963 9,668

SHAREHOLDERS'EQUITYSharecapital 8 107,671 83,542Contributedsurplus 3,392 1,749Accumulatedothercomprehensiveearnings 1,928 43Deficit (6,934) (14,313)

Totalshareholders'equity 106,057 71,021Totalliabilitiesandshareholders'equity 175,020 80,689

Theaccompanyingnotesareanintegralpartoftheseinterimcondensedconsolidatedfinancialstatements.



CONDENSEDCONSOLIDATEDSTATEMENTSOFEARNINGS(LOSS)(Canadiandollars,000sexceptpersharedata)(unaudited)

Note 2013 2012 2013 2012

Oilandgassales 9,719 2,197 24,261 5,228Royalties (1,124) (373) (2,536) (919)Dividendincome 171 ‐ 507 ‐Financeincome 17 ‐ 624 ‐

REVENUE 8,783 1,824 22,856 4,309

EXPENSESOperating 4,696 729 11,282 1,695Generalandadministration 905 451 2,234 1,175Depletionanddepreciation 6 4,903 793 10,147 1,994Share‐basedpayments 8 578 203 1,676 516Impairmentofinvestment ‐ ‐ 44 ‐Financeexpenses 430 216 794 542

Totalexpenses 11,512 2,392 26,177 5,922

Lossbeforeotherincomeandincometaxes (2,729) (568) (3,321) (1,613)

Gainonacquisition 3 ‐ ‐ 11,117 ‐Earnings(loss)beforeincometaxes (2,729) (568) 7,796 (1,613)

Deferredtaxexpense(recovery) (2,020) (96) 417 (1,404)EARNINGS(LOSS)FORTHEPERIOD (709) (472) 7,379 (209)

Earnings(loss)pershare($) 8Basic (0.00) (0.01) 0.04 (0.00)Diluted (0.00) (0.01) 0.04 (0.00)


CONDENSEDCONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEEARNINGS(LOSS)(Canadiandollars,000s)(unaudited)

2013 2012 2013 2012

Earnings(loss)fortheperiod (709) (472) 7,379 (209)

OTHERCOMPREHENSIVEEARNINGS(LOSSES)Unrealizedgain(loss)oninvestment 1,372 (14) 2,154 (101)Deferredtaxesonunrealizedgain(loss)oninvestment (171) 2 (269) 13

OTHERCOMPREHENSIVEEARNINGS(LOSS)FORTHEPERIOD 1,201 (12) 1,885 (88)COMPREHENSIVEEARNINGS(LOSS)FORTHEPERIOD 1,693 (484) 9,264 (297)






CONDENSEDCONSOLIDATEDSTATEMENTSOFCASHFLOWS(Canadiandollars,000s)(unaudited)

Note 2013 2012 2013 2012

CASHPROVIDEDBY(USEDIN):

OPERATINGACTIVITIESEarnings(loss)fortheperiod (709) (472) 7,379 (209)Itemsnotaffectingcash:Share‐basedpayments 578 203 1,676 516Depletionanddepreciation 4,903 793 10,147 1,994Financeexpenses 430 216 794 542Gainonacquisition ‐ ‐ (11,117) ‐Deferredtaxexpense(recovery) (2,020) (96) 417 (1,404)Impairment(recovery)ofinvestment ‐ ‐ 44 ‐

Changesinnon‐cashworkingcapitalaccounts (435) (158) 295 186Interestandbankchargespaid (168) (240) (204) (512)

Cashprovidedbyoperatingactivities 2,579 246 9,431 1,113

INVESTINGACTIVITIESExpendituresonpropertyandequipment 6 (2,928) (14) (6,262) (539)

5 (148) ‐ (869) (91)Acquisitions,netofcashacquired 3 (45,463) ‐ (43,987) (22,608)Purchaseoftermdeposit ‐ ‐ (21,500) ‐Maturityoftermdeposit 21,500 ‐ 21,500 ‐Changesinnon‐cashworkingcapitalaccounts 2,719 (54) (136) 45

Cashusedininvestingactivities (24,320) (68) (51,254) (23,193)

FINANCINGACTIVITIES

8 4 ‐ 23,707 2,885Exerciseofstockoptions 46 ‐ 46 ‐Proceedsfromrelatedpartynotepayable ‐ ‐ ‐ 7,000Bankdebt 20,485 (178) 17,448 11,918Changesinnon‐cashworkingcapitalaccounts (60) ‐ 125 ‐

Cashprovidedby(usedin)financingactivities 20,475 (178) 41,326 21,803Increase(decrease)incash (1,266) ‐ (497) (277)Cash‐beginningofperiod 1,586 ‐ 817 277CASH‐ENDOFPERIOD 320 ‐ 320 ‐


NinemonthsendedSeptember30ThreemonthsendedSeptember30

Expendituresonexplorationandevaluationassets

Issuanceofcommonshares,netofshareissuecosts



CONDENSEDCONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY(Canadiandollars,000s)(unaudited)

Accumulatedother

Contributed comprehensiveNote Sharecapital surplus1 earnings2 Deficit Totalequity

BALANCEATJANUARY1,2012 14,819 766 (137) (13,242) 2,206Sharesissuedpursuanttoarightsoffering 1,961 ‐ ‐ ‐ 1,961Sharesissuedpursuanttoaprivateplacement 1,000 ‐ ‐ ‐ 1,000Shareissuecosts,netoftax (76) ‐ ‐ ‐ (76)Comprehensiveearnings(loss)fortheperiod ‐ ‐ (88) (209) (297)Share‐basedpayments 8 ‐ 516 ‐ ‐ 516BALANCEATSEPTEMBER30,2012 17,704 1,282 (225) (13,451) 5,310Sharesissuedpursuanttoaprivateplacement 5,600 ‐ ‐ ‐ 5,600SharesissuedtoGeomarkshareholders 60,508 ‐ ‐ ‐ 60,508Shareissuecosts,netoftax (236) ‐ ‐ ‐ (236)Comprehensiveearnings(loss)fortheperiod ‐ ‐ 267 (862) (595)Share‐basedpayments 8 ‐ 467 ‐ ‐ 467Cancellationofshares (280) ‐ ‐ ‐ (280)Issuanceofshares 246 ‐ ‐ ‐ 246BALANCEATDECEMBER31,2012 83,542 1,749 43 (14,313) 71,021Issuanceofshares 25,080 ‐ ‐ ‐ 25,080Shareissuecosts,netoftax (1,030) ‐ ‐ ‐ (1,030)Comprehensiveearningsfortheperiod ‐ ‐ 1,885 7,379 9,264Share‐basedpayments 8 ‐ 1,676 ‐ ‐ 1,676Exerciseofoptions 79 (33) ‐ ‐ 46BALANCEATSEPTEMBER30,2013 107,671 3,392 1,928 (6,934) 106,0571Contributedsurplusiscomprisedofshare‐basedpayments.2Accumulatedothercomprehensiveearningsiscomprisedofunrealizedgainsandlossesonavailable‐for‐saleinvestments.




NOTESTOTHEINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTSAsatSeptember30,2013andDecember31,2012andforthethreeandninemonthperiodsendedSeptember30,2013and2012(unaudited)(alltabularamountsinCanadiandollars000s,unlessotherwiseindicated)1. NATUREOFBUSINESSPineCliffEnergyLtd. (“PineCliff”or the“Company”) isapubliccompany listedon theTSXVentureExchangeand incorporatedundertheBusinessCorporationsAct(Alberta). TheaddressoftheCompany’sregisteredofficeisSuite850,10154thStreetSW,Calgary,Alberta,T2R1J4.PineCliffisengagedintheexploration,developmentandproductionofoilandnaturalgasintheWesternCanadianSedimentaryBasin and conducts many of its activities jointly with others; these interim condensed consolidated financial statements (the“FinancialStatements”)reflectonlytheCompany’sproportionateinterestinsuchactivities. TheCompanyisalsoinvolvedintheexplorationforpreciousmetalsthroughitssubsidiaries.2. BASISOFPREPARATIONANDCHANGESTOPINECLIFF’SACCOUNTINGPOLICIESa)BasisofpreparationThe Financial Statements have been prepared in accordance with IAS 34 – Interim Financial Reporting (“IAS 34”) usingInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”).The Financial Statements do not include all of the information required for annual financial statements and should be read inconjunctionwiththeCompany’sannualconsolidated financialstatements for theyearendedDecember31,2012(“2012AnnualFinancialStatements”).TheFinancialStatementswereauthorizedforissuebytheCompany’sboardofdirectorsonNovember11,2013.b)Newstandards,interpretationsandamendmentsadoptedbyPineCliffTheaccountingpoliciesandmethodofcomputationfollowedinthepreparationoftheFinancialStatementsarethesameasthosefollowed in the preparation of Pine Cliff’s 2012 Annual Financial Statements, except for the adoption of new standards andinterpretationseffectiveasofJanuary1,2013.Thenatureandimpactofeachnewstandardoramendmentisdescribedbelow:IFRS10ConsolidatedFinancialStatements(“IFRS10”),IAS28InvestmentsinAssociatesandJointVentures(“IAS28”),IFRS11JointArrangements(“IFRS11”)andIFRS12DisclosureofInterestsinOtherEntities(“IFRS12”)EffectiveJanuary1,2013,theCompanyadopted,asrequired,IFRS10,IAS28andIFRS12. PineCliffrevieweditsconsolidationmethodologyanddeterminedthattheadoptionofIFRS10didnotresultinachangeintheconsolidationstatusofitssubsidiaries.UnderIFRS11,interestsinjointarrangementsareclassifiedaseitherjointoperationsorjointventures,dependingontherightsandobligationsofthepartiestothearrangements.PineCliffperformedareviewofitsinterestinotherentitiesanddidnotidentifyanysignificantinterestsforwhichitsharesjointcontrol.IFRS12setsouttherequirementsfordisclosuresrelatingtoanentity’sinterestsinsubsidiaries,jointarrangements,associatesandstructuredentities.Noneofthesedisclosurerequirementsareapplicableforinterimcondensedconsolidatedfinancialstatements,unlesssignificanteventsandtransactionsintheinterimperiodrequirethattheyareprovided.Accordingly,theCompanyhasnotmadesuchdisclosures.IFRS13FairValueMeasurement(“IFRS13”)Effective January 1, 2013, the Company adopted, as required, IFRS 13 and applied the standard prospectively as required bytransitionalprovisions.IFRS13establishesasinglesourceofguidanceunderIFRSforallfairvaluemeasurements.IFRS13doesnotchangewhenanentity is required touse fairvalue,butratherprovidesguidanceonhowtomeasure fairvalueunder IFRSwhenfairvalueisrequiredorpermitted.TherehasbeennochangetoPineCliff’smethodologyfordeterminingthefairvalueforits financial assets and liabilities and, as such, the application of IFRS 13 has not resulted in any adjustments to the fair valuemeasurementscarriedoutbytheCompany.IFRS13alsorequiresspecificdisclosuresonfairvalues,someofwhichreplaceexistingdisclosurerequirementsinotherstandards,includingIFRS7FinancialInstruments:Disclosures.Someofthesedisclosuresarespecificallyrequiredforfinancialinstrumentsby



IAS34.16A(j),therebyaffectingtheinterimcondensedconsolidatedfinancialstatementsperiod.TheapplicationhadnoimpactontheFinancialStatements;howevertheCompanyprovidesadditionaldisclosuresinNote9.IAS1PresentationofFinancialStatements(“IAS1”)EffectiveJanuary1,2013,theCompanyappliedtheamendmenttoIAS1requiringitemswithinothercomprehensiveearningstobegrouped into two categories: items that will not be subsequently reclassified to earnings or loss and items that may besubsequentlyreclassifiedtoearningsorlosswhenspecificconditionsaremet.Theamendmenthasbeenappliedretrospectivelyand,assuch,thepresentationofitemsinothercomprehensiveearningshasbeenmodified.TheapplicationofIAS1didnotresultinanyadjustmentstoothercomprehensiveearningsoraccumulatedothercomprehensiveincome.IAS34Interimfinancialreportingandsegmentinformationfortotalassetsandliabilities(Amendment)The amendment clarifies the requirements in IAS 34 relating to segment information for total assets and liabilities for eachreportablesegmenttoenhanceconsistencywiththerequirementsinIFRS8OperatingSegments. Totalassetsandliabilitiesforareportable segment need to be disclosed onlywhen the amounts are regularly provided to the chief operating decisionmaker(“CODM”)andtherehasbeenamaterialchangeinthetotalamountdisclosedintheentity’spreviousannualconsolidatedfinancialstatementsforthatreportablesegment. TheCompanydoesnotregularlyprovidethisdisclosuretotheCODMandasaresultofthisamendment,theCompanydoesnotprovidethisinformationinitsFinancialStatements.FutureaccountingpronouncementsTheIASBissuedamendmentstoIAS36,“ImpairmentofAssets”thatrequireretrospectiveapplicationandwillbeadoptedbytheCompanyonJanuary1,2014.TheCompanyiscurrentlyassessingtheimpacttheadoptionoftheseamendedstandardswillhaveontheCompany'sconsolidatedfinancialstatements.3. ACQUISITIONSSkopeEnergyInc.On November 9, 2012, Pine Cliff completed the purchase from a Canadian financial institution of all of the outstandingindebtedness and liabilities owing by Skope Energy Partners (“Skope” will collectively refer to Skope Energy Partners, SkopeEnergyInc.andSkopeEnergyInternationalInc.)andallofthesecuritydocumentsgrantedbySkopetothefinancialinstitution(the“SkopeDebtPurchase”). Thesecuritydocuments includeda$200,000,000demanddebenturesecuredbya first floatingchargeoverallofSkope’sassets.ConsiderationfortheSkopeDebtPurchasewas$28,000,000whichwasfundedwithcashacquiredintheGeomarkTransactionof$20,000,000andadrawdownof$8,000,000onPineCliff’sCreditFacility.OnFebruary19,2013,theCourtofQueen’sBenchofAlbertaapprovedthePlanofCompromiseandArrangement(the“Plan”)filedundertheCompanies’CreditorsArrangementAct(“CCAA”)byPineCliff.ThepurposeofthePlanwastorestructureSkope’sdebtandtoeffectacompromiseoftheclaimsofallunsecuredcreditorsofSkope.InadditiontorestructuringSkope'sunsecuredclaims,theimplementationofthePlanresultedintheredemption,withoutcompensation,ofalloftheoutstandingsharesofSkope(andthecancellation,withoutcompensation,ofallrelatedoptions,warrantsandotherrightstoacquiresuchshares)andthecreationofanewclassofClassAVotingShares,100ofwhichwereissuedtoPineCliff(the“SkopeShares”).Accordingly,PineCliffbecamethesoleshareholderofSkopeEnergyInc.onFebruary19,2013. ConsiderationforSkopeShareswas$28,000,000,representingtheamountthatPineCliffpaidtoaCanadianfinancialinstitutionfortheSkopeDebtPurchase,less$202,000receivedduringtheCCAAprocessasconsiderationforPineCliff’sunsecuredclaim.Skope’sassetsincludean80%workinginterestinapackageofproducingshallow gas assets located in southeast Alberta and southwest Saskatchewan. This transaction has been accounted for as abusinesscombinationwithPineCliffidentifiedastheacquirer.TheresultsofSkope’sassetshavebeenincludedinthefinancialstatementssinceFebruary19,2013.Skope’sassetscontributedoiland gas sales, net of royalties, of $11,320,000 and operating expenses of $6,783,000 for the period fromFebruary 19, 2013 toSeptember30,2013.IftheacquisitionhadoccurredonJanuary1,2013,totaloilandgassales,netofroyalties,wouldhavebeenapproximately $23,238,000 and operating expenses would have been approximately $12,171,000 for the nine months endedSeptember30,2013.PineCliffdoesnotbelieveitispracticaltoestimatetheeffectonfutureperiods.



Theacquisitionhasbeenaccountedforusingtheacquisitionmethodandthepurchasepricewasallocatedtotheassetsacquiredandtheliabilitiesassumedasfollows:

Asthetotalnetassetsacquiredaregreaterthanthepurchasepriceoftheassets,PineCliffhasrecognizedagainontheacquisitionofSkope.ThegainonacquisitionisattributedtotheuniquenatureofthistransactionwherebyPineCliffpurchasedSkope’sdebtandsecurityfromaCanadianfinancialinstitutionandrealizedonitssecuritythroughtheCCAAprocesstoacquireSkope.Transaction costs of $135,000 have been expensed in the three month period ended March 31, 2013 and are included inadministrativeexpensesintheincomestatementandarepartofoperatingcashflowsintheconsolidatedstatementofcashflows.Inadditiontothetransactioncostsincurredin2013,PineCliffincurredtransactioncostsof$350,000inthethreemonthsendedDecember31,2012.AdditionalinterestinMonogramunit OnJuly24,2013,PineCliffcompletedtheacquisitionofanadditionalapproximate52%workinginterestintheMonogramunitandrelated infrastructure (the “MonogramAssets”). TheMonogramAssets are located near the City ofMedicineHat, Alberta andproducedrynaturalgasmainlyfromtheMilkRiver,MedicineHatandSecondWhiteSpeckszones. Thetotalconsiderationpaidwas$33,738,000,priortoadjustments.TheresultsoftheadditionalinterestintheMonogramAssetshavebeenincludedinthefinancialstatementssinceJuly24,2013.TheMonogramAssetshavecontributedoilandgassales,netofroyalties,of$1,360,000andoperatingexpensesof$595,000fortheperiodfromJuly24,2013toSeptember30,2013.IftheacquisitionhadoccurredonJanuary1,2013,totaloilandgassales,netofroyalties,wouldhavebeenapproximately$26,853,000andoperatingexpenseswouldhavebeenapproximately$13,091,000fortheninemonthsendedSeptember30,2013.PineCliffdoesnotbelieveitispracticaltoestimatetheeffectonfutureperiods.Theacquisitionhasbeenaccountedforusingtheacquisitionmethodandthepurchasepricewasallocatedtotheassetsacquiredandtheliabilitiesassumedasfollows:Netassetsacquired:Propertyandequipment 32,958Decommissioningprovision (963)Totalnetassetsacquired 31,995

Consideration:Cash 31,995Totalpurchaseprice 31,995 Transaction costs of $20,000 have been expensed in the three month period ended September 30, 2013 and are included inadministrativeexpensesintheincomestatementandarepartofoperatingcashflowsintheconsolidatedstatementofcashflows.AcquisitionofinterestinshallowgasassetsOn August 30, 2013, Pine Cliff completed the acquisition of anadditional interest in the Southern Alberta and SouthernSaskatchewanproperties(“SouthernAssets”)thatPineCliffhadoriginallyacquiredaninterestinthroughtheacquisitionofSkope

Netassetsacquired:Propertyandequipment 41,638Explorationandevaluationassets 3,565Decommissioningprovision (28,805)Workingcapital,includingcashof$1,275 3,313Deferredtaxasset 19,204Totalnetassetsacquired 38,915

Consideration:RealizationofsecurityoftheSkopeDebtPurchase 28,000Less:cashconsiderationforPineCliff'sunsecuredclaim (202)Totalpurchaseprice 27,798

Gainonacquisition 11,117



inFebruary2013.Aspartoftheacquisition,thecurrentassetmanagementagreementgoverningPineCliff'scurrentandadditionalinterests in the Southern Assets was terminated and Pine Cliff became the operator of the Southern Assets. The acquisitionincludesafurtherapproximate7%workinginterestintheMonogramunitintheProvinceofAlberta,afurtherapproximate20%working interest in the Pendor, Black Butte and Eagle Butte areas in the Province of Alberta and a further approximate 18%workinginterestintheVidora,CadillacandWymarkareasintheProvinceofSaskatchewan.Thetotalconsiderationtobepaidisapproximately$13,250,000,priortoadjustments.TheresultsoftheadditionalinterestintheSouthernAssetshavebeenincludedinthefinancialstatementssinceAugust30,2013.TheMonogramAssetshavecontributedoilandgassales,netofroyalties,of$280,000andoperatingexpensesof$225,000fortheperiodfromAugust30,2013toSeptember30,2013.IftheacquisitionhadoccurredonJanuary1,2013,totaloilandgassales,netofroyalties,wouldhavebeenapproximately$25,088,000andoperatingexpenseswouldhavebeenapproximately$12,452,000fortheninemonthsendedSeptember30,2013.PineCliffdoesnotbelieveitispracticaltoestimatetheeffectonfutureperiods.Theacquisitionhasbeenaccountedforusingtheacquisitionmethodandthepurchasepricewasallocatedtotheassetsacquiredandtheliabilitiesassumedasfollows:Netassetsacquired:Propertyandequipment 14,603Explorationandevaluationassets 1,102Decommissioningprovision (2,237)Totalnetassetsacquired 13,468

Consideration:Cash 13,468Totalpurchaseprice 13,468 Transaction costs of $40,000 have been expensed in the three month period ended September 30, 2013 and are included inadministrativeexpensesintheincomestatementandarepartofoperatingcashflowsintheconsolidatedstatementofcashflows.InformationonprioryearacquisitionsOnMarch1,2012,PineCliffacquiredcertainoilandnaturalgasassetsintheCarrotCreekareaofAlbertaforcashconsiderationof$22,684,000.OnOctober19,2012,PineCliffacquired100%oftheissuedandoutstandingsharesofGeomarkExplorationLtd.(“Geomark”),arelated party, in an all share transaction which resulted in the issuance of 81,767,641 common shares of Pine Cliff valued at$60,508,000.GeomarkwasapublicoilandgasandmineralcompanywithoilandgaspropertiesinAlbertaandmineralassetsinUtah,Ontario,NunavutandtheNorthwestTerritories.4. TRANSACTIONSWITHRELATEDPARTIESManagementservicesagreementPine Cliff has a management services agreement with Bonterra Energy Corp. (“Bonterra”), an oil and gas corporation that ispublicly traded on the Toronto Stock Exchange with some common directors andmanagement, to provide executive services,technicalservices,accountingservices,oilandgasadministrationandofficeadministrationforPineCliff.TotalfeesforeachofthethreeandninemonthperiodsendedSeptember30,2013and2012were$15,000,and$30,000,respectively,plusadministrativecosts.Themanagementservicesagreementmaybecancelledbyeitherpartywith90daysnotice.AsatSeptember30,2013,PineCliffowedBonterra$145,000(December31,2012–$48,000).InvestmentinBonterraAsatSeptember30,2013,PineCliffowns204,633commonsharesinBonterra(December31,2012–204,633)representinglessthan1%oftheoutstandingsharesofBonterraatthatdate.ThesharesasofSeptember30,2013haveafairvalueof$11,494,000(December31,2012–$9,339,000).ForthethreeandninemonthsendedSeptember30,2013,PineCliffreceiveddividendincomeof$171,000and$507,000,respectively,fromthisinvestment(September30,2012–$nil).



BusinesscombinationwithGeomarkOnOctober19, 2012GeomarkandPineCliff combined their operationspursuant to an arrangement agreement. GeomarkhadsomecommondirectorsandsomecommonmanagementwithPineCliff.AtthetimeoftheGeomarkTransaction,Geomarkowned432,812commonsharesofPineCliffwhichweresubsequentlysoldinthepublicmarketforalossonsaleofinvestmentof$34,000,netoftax.Relatedpartytransactionsareinthenormalcourseofoperationsandaremeasuredattheexchangeamount,whichistheamountoftheconsiderationestablishedandagreedtobytherelatedparties.5. EXPLORATIONANDEVALUATIONASSETSThefollowingtablereconcilesPineCliff’sexplorationandevaluationassets:

Cost:Oilandgasproperties

Mineralsproperties Total

BalanceatDecember31,2011 ‐ ‐ ‐Additions 92 248 340Acquisitions 507 1,943 2,450

BalanceatDecember31,2012 599 2,191 2,790Additions 74 795 869Acquisitions 4,667 ‐ 4,667

BalanceatSeptember30,2013 5,340 2,986 8,326 During the three and nine months ended September 30, 2013, $nil, and $67,000, respectively (September 30, 2012 ‐ $nil) ofdirectlyattributablegeneralandadministrationcostsrelatedtomineralexplorationandevaluationassetswerecapitalized.6. PROPERTY,PLANTANDEQUIPMENTThefollowingtablereconcilesPineCliff’sproperty,plantandequipmentassets:

Cost:Oilandgasproperties

Officeequipment Total

BalanceatDecember31,2011 4,600 2 4,602Additions 2,130 3 2,133Acquisitions 29,557 ‐ 29,557

BalanceatDecember31,2012 36,287 5 36,292Additions 12,878 176 13,054Acquisitions 88,851 348 89,199

BalanceatSeptember30,2013 138,016 529 138,545

Accumulateddepletionanddepreciation:Oilandgasproperties


BalanceatDecember31,2011 (2,796) ‐ (2,796)Depletionanddepreciation (2,823) ‐ (2,823)

BalanceatDecember31,2012 (5,619) ‐ (5,619)Depletionanddepreciation (10,089) (58) (10,147)

BalanceatSeptember30,2013 (15,708) (58) (15,766)

Carryingvalueat:Oilandgasproperties


December31,2012 30,668 4 30,673September30,2013 122,308 471 122,779



7. BANKDEBTOnAugust29,2013,PineCliff increased theborrowingbaseof its revolvingdemandcredit facility (the“CreditFacility”)withaCanadian chartered bank to $40,000,000, of which $20,485,000 was drawn at September 30, 2013. The Credit Facility isconsideredacurrentliabilityatSeptember30,2013asthecurrentrevolvingperiodwillendonMarch31,2014andiftheCreditFacility is not renewed itwill become payable in full on demand. Amount drawn under this Credit Facility are in the form ofCanadian prime lending rate based loans, guaranteed notes or letters of credit. The Credit Facility bears interest at the primelendingrateplus0.75%perannumandPineCliffrealizedaneffectiveinterestrateof3.75%fortheperiodendedSeptember30,2013.TheCreditFacilityissecuredbyafirstprioritysecurityinterestonallpresentandafteracquiredpropertyoftheCompany.OnOctober17,2013PineCliffcompleteda$20,020,000shareofferingandsubsequentlypaidoffalloutstandingbankdebt.8. SHARECAPITALAuthorizedTheCompanyisauthorizedtoissueanunlimitednumberofcommonshareswithoutnominalorparvalue.TheCompanyisalsoauthorizedtoissue,inoneormoreseries,anunlimitednumberofClassBPreferredShareswithoutnominalorparvalue.IssuedIssuedandoutstandingsharecapitalcontinuity: Commonshares(000s) SharecapitalBalanceatJanuary1,2011 46,146 14,819Sharesissuedpursuanttoarightsoffering 11,536 1,961Sharesissuedpursuanttoprivateplacements 13,882 6,600SharesissuedtoGeomarkshareholders 81,768 60,508Cancellationofshares (433) (280)Issuanceofshares 433 246Shareissuecosts,netoftax ‐ (312)BalanceatDecember31,2012 153,332 83,542Exerciseofoptions 121 79Issuanceofshares 28,500 25,080Shareissuecosts,netoftax ‐ (1,030)BalanceatSeptember30,2013 181,953 107,671 PersharecalculationsTheaveragemarketvalueoftheCompany’ssharesforthepurposesofcalculatingthedilutiveeffectofshareoptionswasbasedonquotedmarketprices for theperiod that theoptionswereoutstanding. In calculating theweightedaveragenumberofdilutedsharesoutstandingforninemonthperiodendedSeptember30,2013,theCompanyexcluded810,000optionsastheireffectisanti‐dilutive.ForthethreemonthperiodsendedSeptember30,2013and2012andtheninemonthperiodendedSeptember30,2012alloptionswereexcludedastherewasalossintheperiodsthenended.

Losspersharecalculation: 2013 2012 2013 2012NumeratorEarnings(loss)fortheperiod (709) (472) 7,379 (209)

Denominator(000s)Weighted‐averagecommonsharesoutstanding‐basic 181,927 63,564 164,231 61,466Effectofoptionsoutstanding ‐ ‐ 6,627 ‐Weighted‐averagecommonsharesoutstanding‐diluted 181,927 63,564 170,858 61,466

Earningspershare‐basic($) (0.00) (0.01) 0.04 (0.00)Earningspershare‐diluted($) (0.00) (0.01) 0.04 (0.00)

NinemonthsendedSeptember30ThreemonthsendedSeptember30

Share‐basedpaymentsTheCompanyprovidesanequitysettledstockoptionplan(the“OptionPlan”)foritsdirectors,employeesandconsultants.UndertheOptionPlan,theCompanymaygrantoptionsforupto10%ofoutstandingcommonsharesatSeptember30,2013.Thetermandvestingperiodof theoptionsgrantedaredeterminedat thediscretionof theboardofdirectors. TheexercisepriceofeachoptiongrantedequalsthemarketpriceoftheCompany’sstockimmediatelyprecedingthedateofgrantandtheoption’smaximumtermisfiveyears.



AsummaryofthestatusoftheCompany’sstockoptionplanasatSeptember30,2013andchangesduringtheperiodthenendedispresentedasfollows:

Stockoptionsissuedandoutstanding:Options(000s)

Weighted‐averageexerciseprice($pershare)

Outstanding,December31,2011 ‐ ‐Granted 10,400 0.58Forfeitedorexpired (160) 0.38

Outstanding,December31,2012 10,240 0.58Granted 1,930 0.96Exercised (121) 0.38Forfeitedorexpired (95) 0.65

Outstanding,September30,2013 11,954 0.65ExercisableasatSeptember30,2013 1,474 0.44 ThefollowingtablesummarizesinformationaboutstockoptionsoutstandingatSeptember30,2013:

Exerciseprice:

Stockoptionsoutstanding

(000s)

Weighted‐averageremainingterm

(years)

Stockoptionsexercisable

(000s)

Weighted‐averageremainingterm

(years)$0.38 2,694 2.5 1,124 2.1$0.50‐$0.65 6,935 1.5 125 2.0$0.66‐$1.07 2,325 2.2 225 1.4

11,954 1.9 1,474 2.0 TheCompanyrecordsshare‐basedpaymentexpenseoverthevestingperiod,whichrangesbetweenonetothreeyears,basedonthefairvalueoftheoptionsgrantedtoemployees,directorsandconsultants.IntheninemonthsendedSeptember30,2013,theCompanygranted1,930,000stockoptionswithanestimatedfairvalueof$1,081,000or$0.56peroptionusingtheBlack‐Scholesoptionpricingmodelwiththefollowingkeyassumptions(weighted‐average):

NinemonthsendedAssumptions: September30,2013Exerciseprice($) 0.96Estimatedvolatilityofunderlyingcommonshares(%) 146Weightedaverageexpectedlife(years) 2.5Risk‐freerate(%) 1.2Forfeiturerate(%) 3.8Expecteddividendyield(%) 0.0 Estimatedvolatilityismeasuredasthestandarddeviationofexpectedsharepricereturnsbasedonstatisticalanalysisofhistoricaldailysharepricesforarepresentativeperiod.9. FINANCIALINSTRUMENTS

FinancialinstrumentsandfairvaluemeasurementFinancialinstrumentsoftheCompanyconsistofcash,restrictedcash,termdeposit,tradeandotherreceivables,investments,tradeandotherpayablesandbankdebt.PineCliffcategorizesitstermdepositasalevel1financialinstrumentatSeptember30,2013.ThecarryingvaluesofthefinancialinstrumentspresentedintheFinancialStatementsapproximatetheirrespectivefairvaluesduetotheirshort‐termtomaturity.FinancialassetsandliabilitiesareonlyoffsetifPineCliffhasthecurrentlegalrighttooffsetandintendstosettleonanetbasisorsettletheassetandliabilitysimultaneously.RisksassociatedwithfinancialassetsandliabilitiesTheCompany isexposedtoanumberofrisksassociatedwith its financialassetsand liabilities. Theserisks includecommodityprice risk, interest rate risk, equity price risk, foreign exchange risk, credit risk and liquidity risk. The Company has severalpracticesandpoliciesinplacetohelpmitigatetheserisks.



A descriptionof thenature and extent of risks arising fromPineCliff’s financial assets and liabilities canbe found in the2012AnnualFinancialStatements.TheCompany’sexposuretotheseriskshasnotchangedsignificantlysinceDecember31,2012.10. BUSINESSSEGMENTINFORMATIONPineCliff’sactivities for thethreeandninemonthperiodendedSeptember30,2013arerepresentedby two industrysegmentscomprisedofoilandgasexplorationandproduction,andmineralexploration. FortheninemonthperiodendedSeptember30,2012,PineCliff’sresultswererepresentedbyonlytheoilandgasexplorationandproductionsegmentasthemineralexplorationsegmentwasacquiredthroughthebusinesscombinationwithGeomarkonOctober19,2012(Note3).

Oilandgas Minerals Total Oilandgas Minerals Total

Oilandgassales 9,719 ‐ 9,719 24,261 ‐ 24,261Royalties (1,124) ‐ (1,124) (2,536) ‐ (2,536)Dividendincome 171 ‐ 171 507 ‐ 507Financeincome 17 ‐ 17 624 ‐ 624

REVENUE 8,783 ‐ 8,783 22,856 ‐ 22,856

EXPENSESOperating 4,696 ‐ 4,696 11,282 ‐ 11,282Generalandadministration 773 132 905 1,941 293 2,234Depletionanddepreciation 4,903 ‐ 4,903 10,147 ‐ 10,147Share‐basedpayments 539 39 578 1,560 116 1,676Impairmentofinvestment ‐ ‐ ‐ 44 ‐ 44Financeexpenses 430 ‐ 430 794 ‐ 794

Totalexpenses 11,341 171 11,512 25,768 409 26,177

Lossbeforeotherincomeandincometaxes (2,558) (171) (2,729) (2,912) (409) (3,321)

Gainonacquisition ‐ ‐ ‐ 11,117 ‐ 11,117Earnings(loss)beforeincometaxes (2,558) (171) (2,729) 8,205 (409) 7,796

Deferredtaxexpense(recovery) (2,020) ‐ (2,020) 417 ‐ 417EARNINGS(LOSS)FORTHEPERIOD (538) (171) (709) 7,788 (409) 7,379

FortheninemonthsendedSeptember30,2013

ForthethreemonthsendedSeptember30,2013

11. SUBSEQUENTEVENTSOnOctober17,2013,PineCliffcompletedapublicofferingof18,200,000commonsharesatapriceof$1.10percommonshareforgrossproceedsof$20,020,000.OnOctober16,2013,PineCliffobtainedaletterofcreditintheamountof$4,928,000inconnectionwithitslimitedliabilityratingintheProvinceofSaskatchewan.Subsequent to September 30, 2013, Pine Cliff issued 750,000 stock options to its employees and consultantswith aweighted‐averageexercisepriceof$1.13pershare,basedonthemarketprice immediatelyprecedingthedateofgrant. TheoptionsvestbetweenoneandthreeyearsandexpirebetweenApril22,2015andMay4,2017.OnOctober10,2013,PineCliffenteredintoafinancialderivativefortheperiodofNovember1,2013toDecember31,2013for15,000MMBtuperdayatadifferentialofUS$0.36perMMBtu.

CORPORATEINFORMATION Q3‐2013


BOARDOFDIRECTORS

GaryJ.DrummondGeorgeF.FinkPhilipB.HodgeRandyM.JarockCarlR.JonssonF.WilliamWoodwardOFFICERS

GeorgeF.FinkExecutiveChairmanoftheBoard

PhilipB.HodgePresidentandChiefExecutiveOfficer

RobbD.ThompsonChiefFinancialOfficerandSecretaryHEADOFFICE

850,1015–4thStreetSWCalgary,AlbertaT2R1J4

Phone:(403)269‐2289Fax:(403)265‐7488

REGISTRARANDTRANSFERAGENT

OlympiaTrustCompanyCalgary,AlbertaAUDITORS

DeloitteLLPCalgary,AlbertaSOLICITORS

BordenLadnerGervaisLLPCalgary,AlbertaBANKERS

AlbertaTreasuryBranchCalgary,AlbertaSTOCKEXCHANGELISTING

TSXVentureExchangeTradingSymbol:PNEWEBSITE

www.pinecliffenergy.com

THIRD QUARTER 2013 REPORT - Pine Cliff Energy

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