Exhibit 99.3



CONSOLIDATED MANAGEMENT’S DISCUSSION
& ANALYSIS



The following Management’s Discussion
and Analysis (“MD&A”), dated as of March 3, 2016, provides a detailed explanation of the consolidated financial
and operating results of Advantage Oil & Gas Ltd. (“Advantage”, the “Corporation”, “us”,
“we” or “our”) for the three months and year ended December 31, 2015 and should be read in conjunction
with the December 31, 2015 audited consolidated financial statements. The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards (“IFRS”), representing generally accepted accounting
principles (“GAAP”) for publicly accountable enterprises in Canada. All references in the MD&A and consolidated
financial statements are to Canadian dollars unless otherwise indicated. The term “boe” or barrels of oil equivalent
and “mcfe” or thousand cubic feet equivalent may be misleading, particularly if used in isolation. A boe or mcfe conversion
ratio of six thousand cubic feet of natural gas equivalent to one barrel of oil (6 mcf: 1 bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value
ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.



Forward-Looking Information



This MD&A contains certain forward-looking
statements, which are based on our current internal expectations, estimates, projections, assumptions and beliefs. These statements
relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might", "should",
"believe", "would" and similar or related expressions. These statements are not guarantees of future performance.



In particular, forward-looking statements included
in this MD&A include, but are not limited to, effect of commodity prices on the Corporation's financial results, condition
and performance; industry conditions, including effect of changes in commodity prices, weather and general economic conditions
on the crude oil and natural gas industry and demand for crude oil and natural gas; the Corporation's hedging activities; terms
of the Corporation's derivative contracts, including the timing of settlement of such contracts; effect of fluctuations in commodity
prices as compared to valuation assumptions on actual gains or losses realized on cash settlement of derivatives; average royalty
rates and the impact of well depths, well production rates, commodity prices and gas cost allowance on average corporate royalty
rates; terms of the Corporation's equity compensation plans; estimated tax pools at December 31, 2015, including the components
thereof; future commitments and contractual obligations; terms of the Corporation's credit facilities, including timing of the
next review of the credit facilities, effect of revisions or changes in reserve estimates and commodity prices on the borrowing
base, and limitations on the utilization of hedging contracts; the Corporation's expectations regarding extension of Advantage's
credit facilities at each annual review; the Corporation's strategy for managing its capital structure, including the use of equity
and/or debt financing arrangements, share repurchases, refinancing current debt, issuing other financial or equity-based instruments,
declaring a dividend, adjusting capital spending and financial and operational forecasting processes to facilitate management of
the Corporation's capital structure; the timing of reviews of capital structure and forecast information by management and the
Board of Directors; effect of the Corporation's continual financial assessment processes on the Corporation's ability to mitigate
risks; the Corporation's budgeted capital expenditures and anticipated funds from operations and total debt to funds from operations
for 2016; the Corporation's belief that its existing financial strength will improve in 2016 as a result of it's credit facility
together with planned expenditures on property, plant and equipment below expected funds from operations; the Corporation's ability
to satisfy all liabilities and commitments, including a working capital deficit, and meet future obligations as they become due;
the Corporation's expectation that its expenditures on property, plant and equipment will be fully funded from funds from operations;
the Corporation's intentions to monitor debt levels to ensure an optimal mix of financing and cost of capital to provide a maximum
return to the Corporation's shareholders; the anticipated processing capability of the Glacier gas plant and its ability to maintain
and increase production to the levels disclosed herein; the focus of the Corporation's capital expenditures and operations, including
the Corporation's drilling and facility expansion plans; and the statements under "critical accounting estimates" in
this MD&A. In addition, statements relating to "reserves" are deemed to be forward-looking statements, as they involve
the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the
future.



Advantage Oil & Gas Ltd. - 1







These forward-looking statements involve substantial
known and unknown risks and uncertainties, many of which are beyond our control, including, but not limited to, risks related to
changes in general economic, market and business conditions; continued volatility in market prices for oil and natural gas; the
impact of significant declines in market prices for oil and natural gas; stock market volatility; changes to legislation and regulations
and how they are interpreted and enforced; our ability to comply with current and future environmental or other laws; actions by
governmental or regulatory authorities including increasing taxes, changes in investment or other regulations; changes in tax laws,
royalty regimes and incentive programs relating to the oil and gas industry; the effect of acquisitions; our success at acquisition,
exploitation and development of reserves; unexpected drilling results; failure to achieve production targets on timelines anticipated
or at all; changes in commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt
service requirements; the occurrence of unexpected events involved in the exploration for, and the operation and development of,
oil and gas properties; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial
damage to wells, production facilities, other property and the environment or in personal injury; changes or fluctuations in production
levels; individual well productivity; delays in anticipated timing of drilling and completion of wells; delays in timing of completion
of the Corporation's plant expansion at Glacier; the failure to extend our credit facilities at each annual review; competition
from other producers; the lack of availability of qualified personnel or management; ability to access sufficient capital from
internal and external sources; credit risk; and the risks and uncertainties described in the Corporation’s Annual Information
Form which is available at www.sedar.com and www.advantageog.com. Readers are also referred to risk factors described in other
documents Advantage files with Canadian securities authorities.



With respect to forward-looking statements
contained in this MD&A, in addition to other assumptions identified herein, Advantage has made assumptions regarding, but not
limited to: current and future prices of oil and natural gas; that the current commodity price and foreign exchange environment
will continue or improve; conditions in general economic and financial markets; effects of regulation by governmental agencies;
receipt of required regulatory approvals; royalty regimes; future exchange rates; royalty rates; future operating costs; availability
of skilled labour; availability of drilling and related equipment; timing and amount of capital expenditures; the impact of increasing
competition; the price of crude oil and natural gas; that the Corporation will have sufficient cash flow, debt or equity sources
or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Corporation’s
conduct and results of operations will be consistent with its expectations; that the Corporation will have the ability to develop
the Corporation’s crude oil and natural gas properties in the manner currently contemplated; that current or, where applicable,
proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; and that
the estimates of the Corporation’s production, reserves and resources volumes and the assumptions related thereto (including
commodity prices and development costs) are accurate in all material respects.



Management has included the above summary of
assumptions and risks related to forward-looking information provided in this MD&A in order to provide shareholders with a
more complete perspective on Advantage's future operations and such information may not be appropriate for other purposes. Advantage’s
actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits that Advantage will derive there from. Readers are cautioned that the
foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this MD&A and Advantage
disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future
events or results or otherwise, other than as required by applicable securities laws.



Disposition of Longview and Discontinued
Operations



Advantage owned 21,150,010 common shares of
Longview Oil Corp. (“Longview”) prior to February 28, 2014, representing an interest of approximately 45.1% of Longview.
Since Advantage held the single largest ownership interest of Longview and other ownership interests were comparatively dispersed,
Advantage was considered to control Longview. Accordingly, prior to February 28, 2014, the financial and operating results of Longview
were consolidated 100% within Advantage and non-controlling interest was recognized which represented Longview’s independent
shareholders 54.9% ownership interest in the net assets and income of Longview. On February 28, 2014, Advantage sold the 21,150,010
common shares of Longview and received net proceeds of $90.2 million, all of which were used to reduce existing bank indebtedness.
Concurrently, Advantage derecognized all assets and liabilities of Longview from the consolidated statement of financial position
and ceased to consolidate Longview subsequent to February 28, 2014.



Given that the Longview legal entity was an
operating segment, the financial results for the Advantage legal entity are presented as “continuing operations” and
for the Longview legal entity are presented as “discontinued operations” for all periods in the consolidated financial
statements, as required by IFRS. This presentation has been consistently applied throughout this MD&A on a similar basis with
the term “continuing operations” referring to the Advantage legal entity and “discontinued operations”
referring to the Longview legal entity.



Advantage Oil & Gas Ltd. - 2







Non-GAAP Measures



The Corporation discloses several financial
measures in the MD&A that do not have any standardized meaning prescribed under GAAP. These financial measures include funds
from operations and cash netbacks. Management believes that these financial measures are useful supplemental information to analyze
operating performance and provide an indication of the results generated by the Corporation’s principal business activities.
Investors should be cautioned that these measures should not be construed as an alternative to net income, comprehensive income,
and cash provided by operating activities or other measures of financial performance as determined in accordance with GAAP. Advantage’s
method of calculating these measures may differ from other companies, and accordingly, they may not be comparable to similar measures
used by other companies.



Funds from operations, as presented, is based
on cash provided by operating activities, before expenditures on decommissioning liability and changes in non-cash working capital,
reduced for finance expense excluding accretion. Management believes these adjustments to cash provided by operating activities
increase comparability between reporting periods. Cash netbacks are dependent on the determination of funds from operations and
include the primary cash sales and expenses on a per mcfe basis that comprise funds from operations. Funds from operations reconciled
to cash provided by operating activities is as follows:



|                                                              |  | Three months ended |        |   |      |   |        | Year ended      |  |  |      |   
|------------------------------------------------------------- |  | ------------------ | ------ | - | ---- | - | ------ | --------------- |  |  | ---- | --
|                                                              |  | December
    31    |        |   |      |   |        | December
    31 |  |  |      |   
|($000)                                                        |  | 2015               |        |   | 2014 |   |        | % change        |  |  | 2015 |   
|Cash provided by operating activities - continuing operations |  | $                  | 29,772 |   |      | $ | 48,218 |                 |  |  | (38  | )%
|Expenditures on decommissioning liability                     |  |                    | 552    |   |      |   | 367    |                 |  |  | 50   | % 
|Changes in non-cash working capital                           |  |                    | 4,297  |   |      |   | (6,901 | )               |  |  | (162 | )%
|Finance expense(1)                                            |  |                    | (2,965 | ) |      |   | (2,502 | )               |  |  | 19   | % 
|Funds from operations - continuing operations                 |  | $                  | 31,656 |   |      | $ | 39,182 |                 |  |  | (19  | )%
|Funds from operations - discontinued operations               |  |                    | -      |   |      |   | -      |                 |  |  | -    | % 
|Funds from operations                                         |  | $                  | 31,656 |   |      | $ | 39,182 |                 |  |  | (19  | )%



(1) Finance expense excludes non-cash accretion expense.



Advantage Oil & Gas Ltd. - 3







FINANCIAL AND OPERATING REVIEW – CONTINUING
OPERATIONS



Overview





|                                         |  | Three months ended |        |   | Year ended  |  
|---------------------------------------- |  | ------------------ | ------ | - | ----------- | -
|                                         |  | December 31        |        |   | December 31 |  
|                                         |  | 2015               |        |   | 2014        |  
|                                         |  | $000               |        |   | per mcfe    |  
|Natural gas and liquids sales            |  | $                  | 33,867 |   |             | $
|Realized gains (losses) on derivatives   |  |                    | 8,787  |   |             |  
|Royalties                                |  |                    | (1,379 | ) |             |  
|Operating expense                        |  |                    | (4,998 | ) |             |  
|Operating  income and operating netbacks |  |                    | 36,277 |   |             |  
|General and administrative expense (1)   |  |                    | (1,581 | ) |             |  
|Finance expense(2)                       |  |                    | (2,965 | ) |             |  
|Other income (expense) (3)               |  |                    | (75    | ) |             |  
|Funds from operations and cash netbacks  |  | $                  | 31,656 |   |             | $
|Per basic weighted average share         |  | $                  | 0.19   |   |             |  







(1) General and administrative expense excludes share based compensation.

(2) Finance expense excludes non-cash accretion expense.

(3) Other income (expense) excludes non-cash other income.



For the three months and year ended December
31, 2015, Advantage realized funds from operations of $31.7 million and $123.6 million with cash netbacks of $2.20/mcfe and $2.40/mcfe,
respectively. On a per share basis, funds from operations was $0.19/share and $0.72/share for the three months and year ended December
31, 2015, respectively. The decrease in funds from operations and cash netbacks for 2015 as compared to 2014 was the result of
a significant decrease in natural gas prices (see “Commodity Prices and Marketing”). The effect of lower natural gas
prices was partially mitigated by our significant hedging position that resulted in realized gains of $8.8 million and $32.7 million
for the three months and year ended December 31, 2015, respectively. Additionally, total cash costs for the three months and year
ended December 31, 2015, including royalties, operating expense, general and administrative expense, and finance expense have been
reduced by 7% and 8% to $0.77/mcfe and $0.82/mcfe, respectively, as compared to the same periods of 2014. The lower total cash
cost structure resulted from transforming Advantage into a pure play Montney producer with a single focus on development of our
Glacier, Alberta area. Production for the fourth quarter of 2015 increased 16% compared to the fourth quarter of 2014 and 4% above
the third quarter of 2015 resulting from the successful expansion of Advantage’s 100% owned Glacier gas plant in July 2015
(see “Production”).



Advantage Oil & Gas Ltd. - 4







Natural Gas and Liquids Sales and Hedging



|                                       |  | Three months ended |        |  |      |   |        | Year ended  |  |  |        |   
|-------------------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ------ | --
|                                       |  | December 31        |        |  |      |   |        | December 31 |  |  |        |   
|($000)                                 |  | 2015               |        |  | 2014 |   |        | % change    |  |  | 2015   |   
|Natural gas sales                      |  | $                  | 33,155 |  |      | $ | 46,446 |             |  |  | (29    | )%
|Realized gains (losses) on derivatives |  |                    | 8,787  |  |      |   | (777   | )           |  |  | (1,231 | )%
|Natural gas sales including hedging    |  |                    | 41,942 |  |      |   | 45,669 |             |  |  | (8     | )%
|Liquids sales                          |  |                    | 712    |  |      |   | 740    |             |  |  | (4     | )%
|Total(1)                               |  | $                  | 42,654 |  |      | $ | 46,409 |             |  |  | (8     | )%



(1) Total excludes unrealized derivative gains and losses.



Total sales including hedging for the three
months ended December 31, 2015 was $42.7 million, a decrease of $2.3 million or 5% as compared to the third quarter of 2015 and
a decrease of $3.8 million or 8% as compared to the fourth quarter of 2014. For the year ended December 31, 2015 total sales including
hedging was $165.1 million, a decrease of $38.0 million or 19% when compared to 2014 The decrease in total sales was the result
of the significant decline in natural gas prices partially offset by increased production and realized hedging gains of $8.8 million
and $32.7 million for the three months and year ended December 31, 2015, respectively.



Production



|                    |  | Three months ended |         |   |      |  |         | Year ended  |  |  |      |  
|------------------- |  | ------------------ | ------- | - | ---- |  | ------- | ----------- |  |  | ---- | -
|                    |  | December 31        |         |   |      |  |         | December 31 |  |  |      |  
|                    |  | 2015               |         |   | 2014 |  |         | % change    |  |  | 2015 |  
|Natural gas (mcf/d) |  |                    | 154,241 |   |      |  | 133,433 |             |  |  | 16   | %
|Liquids (bbls/d)    |  |                    | 179     |   |      |  | 113     |             |  |  | 58   | %
|Total   - mcfe/d    |  |                    | 155,315 |   |      |  | 134,111 |             |  |  | 16   | %
|- boe/d             |  |                    | 25,886  |   |      |  | 22,352  |             |  |  | 16   | %
|Natural gas (%)     |  |                    | 99      | % |      |  | 99      | %           |  |  |      |  
|Liquids (%)         |  |                    | 1       | % |      |  | 1       | %           |  |  |      |  



Production for the fourth quarter of
2015 was 16% higher as compared to the fourth quarter of 2014 and 4% higher compared to the third quarter of 2015. In 2015, we
successfully completed the Glacier gas plant expansion and production ramp-up consistent with our multi-year development plan.
However, production for the second half of 2015 was negatively affected by Trans-Canada Pipelines Ltd. (“TCPL”) unplanned
maintenance outages resulting in firm and interruptible transportation service restrictions on their northwest Alberta main gas
pipeline. TCPL restrictions impacted our production for 40 days during the fourth quarter 2015 with no interruptible service available
in the Glacier area. The amount of TCPL restrictions in the fourth quarter of 2015 were slightly more than anticipated. Production
growth was achieved in 2015 despite a total of 107 days of TCPL firm service sales pipeline restrictions and outages realized
from April to December 2015 and additional production interruptions required during the construction and expansion of Advantage’s
Glacier gas plant. These restrictions have continued into January and February 2016 although pipeline capacity in TCPL’s
northwest Alberta segment has recently experienced increasing capacity.



Advantage Oil & Gas Ltd. - 5







Commodity Prices and Marketing



|                                       |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|-------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                                       |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|                                       |  | 2015               |       |  | 2014 |   |       | % change    |  |  | 2015 |   
|Average Realized Pricing               |  |                    |       |  |      |   |       |             |  |  |      |   
|Natural gas, excluding hedging ($/mcf) |  | $                  | 2.34  |  |      | $ | 3.78  |             |  |  | (38  | )%
|Natural gas, including hedging ($/mcf) |  | $                  | 2.96  |  |      | $ | 3.72  |             |  |  | (20  | )%
|Liquids, including hedging ($/bbl)     |  | $                  | 43.24 |  |      | $ | 71.35 |             |  |  | (39  | )%
|                                       |  |                    |       |  |      |   |       |             |  |  |      |   
|Benchmark Prices                       |  |                    |       |  |      |   |       |             |  |  |      |   
|AECO daily ($/mcf)                     |  | $                  | 2.46  |  |      | $ | 3.61  |             |  |  | (32  | )%
|AECO monthly ($/mcf)                   |  | $                  | 2.65  |  |      | $ | 4.01  |             |  |  | (34  | )%
|NYMEX ($US/mmbtu)                      |  | $                  | 2.28  |  |      | $ | 3.95  |             |  |  | (42  | )%
|Edmonton Light ($/bbl)                 |  | $                  | 51.99 |  |      | $ | 75.54 |             |  |  | (31  | )%



Advantage’s natural gas production at
Glacier is delivered and sold directly into TCPL. The prices we receive are based on a combination of AECO daily and monthly. Specifically,
Advantage sells production at the AECO monthly price equal to our hedged production volumes for any given month as all of our hedges
are based on the AECO monthly index (see “Commodity Price Risk”). The remainder of our production is sold at the AECO
daily index. Realized natural gas prices, excluding hedging, were lower than those of the prior year corresponding to the significant
decline in AECO prices. Natural gas prices in early 2014 were much higher as a result of an extremely cold 2013/2014 winter that
increased demand and reduced North American storage levels well below the five-year average. Commencing in the second half of 2014,
natural gas prices began decreasing due to the continued strong growth of U.S. domestic natural gas production without a similar
corresponding growth in demand. This supply and demand imbalance has continued throughout 2015 and into 2016 with a particularly
weak North American natural gas pricing environment.



Commodity Price Risk



The Corporation’s financial results and
condition will be dependent on the prices received for natural gas production. Natural gas prices have fluctuated widely and are
determined by supply and demand factors, including weather, and general economic conditions in natural gas consuming and producing
regions throughout North America. Management has been proactive in entering into derivative contracts to March 31, 2018 for the
purpose of fixing the minimum prices that we receive for our natural gas production in support of our Glacier multi-year development
plan. Our Credit Facilities allow Advantage to hedge up to 65% of total estimated natural gas and liquids production over the first
three years and 50% over the fourth year.



Our current hedging positions are summarized
as follows:





|                   |  |                   |  | Forecast Production |  | Average      
|------------------ |  | ----------------- |  | ------------------- |  | -------------
|                   |  | Average           |  | Hedged              |  | Minimum Price
|Period             |  | Production Hedged |  | (net of royalties)  |  | AECO         
|Q1 2016 to Q4 2016 |  | 94.8 mmcf/d       |  | 52%                 |  | $3.62/mcf    
|Q1 2017 to Q4 2017 |  | 64.8 mmcf/d       |  | 31%                 |  | $3.24/mcf    
|Q1 2018            |  | 80.6 mmcf/d       |  | 37%                 |  | $3.12/mcf    





A summary of realized and unrealized hedging
gains and losses for the three months and years ended December 31, 2015 and 2014 are as follows:



|                                         |  | Three months ended |        |  |      |   |        | Year ended  |  |  |        |   
|---------------------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ------ | --
|                                         |  | December 31        |        |  |      |   |        | December 31 |  |  |        |   
|($000)                                   |  | 2015               |        |  | 2014 |   |        | % change    |  |  | 2015   |   
|Realized gains (losses) on derivatives   |  | $                  | 8,787  |  |      | $ | (777   | )           |  |  | (1,231 | )%
|Unrealized gains (losses) on derivatives |  |                    | 6,374  |  |      |   | 55,243 |             |  |  | (88    | )%
|Total gains on derivatives               |  | $                  | 15,161 |  |      | $ | 54,466 |             |  |  | (72    | )%



Advantage Oil & Gas Ltd. - 6







For the three months and year ended December
31, 2015, we realized derivative gains as a result of the significant decline in natural gas prices as compared to our average
hedge prices. For the year ended December 31, 2015, an unrealized derivative loss of $2.3 million was recognized, being the decrease
in fair value to a net derivative asset of $44.3 million at December 31, 2015 as compared to a net derivative asset of $46.6 million
at December 31, 2014. The fair value of the net derivative asset is the estimated value to settle the outstanding contracts as
at a point in time. As such, unrealized derivative gains and losses are not cash and the actual gains or losses realized on eventual
cash settlement can vary materially due to subsequent fluctuations in commodity prices as compared to the valuation assumptions.
These derivative contracts will settle between January 1, 2016 to March 31, 2018 corresponding to when the Corporation will recognize
sales from production.



Royalties



|                                                           |  | Three months ended |       |   |      |   |       | Year ended  |  |  |      |   
|---------------------------------------------------------- |  | ------------------ | ----- | - | ---- | - | ----- | ----------- |  |  | ---- | --
|                                                           |  | December 31        |       |   |      |   |       | December 31 |  |  |      |   
|                                                           |  | 2015               |       |   | 2014 |   |       | % change    |  |  | 2015 |   
|Royalties ($000)                                           |  | $                  | 1,379 |   |      | $ | 2,209 |             |  |  | (38  | )%
|per mcfe                                                   |  | $                  | 0.10  |   |      | $ | 0.18  |             |  |  | (44  | )%
|Royalty Rate (percentage of natural gas and liquids sales) |  |                    | 4.1   | % |      |   | 4.7   | %           |  |  | (0.6 | )%





Advantage pays royalties to the owners of mineral
rights from which we have leases. The Corporation has mineral leases with provincial governments, individuals and other companies.
Our current average royalty rates are impacted by well depths, well production rates, and commodity prices. Royalties also include
the impact of gas cost allowance which is a reduction of royalties payable to the Alberta Provincial Government to recognize capital
and operating expenditures incurred by Advantage in the gathering and processing of the province’s share of our natural gas
production. Total royalties paid during the three months and year ended December 31, 2015 are lower than the same periods of 2014
due to the significant decline in natural gas prices.



On January 29, 2016, the Alberta government
released its new Modernized Royalty Framework which is based on a revenue minus cost model and is effective for wells drilled after
January 1, 2017. We are not yet able to assess the impact of the new Royalty Framework as the full details and royalty formulae
have not been determined and released.



Operating Expense





|                         |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |  
|------------------------ |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | -
|                         |  | December 31        |       |  |      |   |       | December 31 |  |  |      |  
|                         |  | 2015               |       |  | 2014 |   |       | % change    |  |  | 2015 |  
|Operating expense ($000) |  | $                  | 4,998 |  |      | $ | 4,184 |             |  |  | 19   | %
|per mcfe                 |  | $                  | 0.35  |  |      | $ | 0.34  |             |  |  | 3    | %





Operating expense per mcfe for 2015 was comparable
to the same periods of 2014. Operating expenses for the three months and year ended December 31, 2015 increased by 19% as compared
to the same periods of 2014 due to additional third party water disposal and trucking costs resulting from the flowback of high
volumes of water used during slick water completion operations in the second and third quarters of 2015 and higher daily production
in the third and fourth quarters of 2015.



Advantage Oil & Gas Ltd. - 7







General and Administrative Expense



|                                                |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |  
|----------------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | -
|                                                |  | December 31        |       |  |      |   |       | December 31 |  |  |      |  
|                                                |  | 2015               |       |  | 2014 |   |       | % change    |  |  | 2015 |  
|General and administrative expense              |  |                    |       |  |      |   |       |             |  |  |      |  
|Cash expense ($000)                             |  | $                  | 1,581 |  |      | $ | 1,371 |             |  |  | 15   | %
|per mcfe                                        |  | $                  | 0.11  |  |      | $ | 0.11  |             |  |  | -    | %
|Share based compensation ($000)                 |  | $                  | 1,078 |  |      | $ | 577   |             |  |  | 87   | %
|per mcfe                                        |  | $                  | 0.08  |  |      | $ | 0.05  |             |  |  | 60   | %
|Total general and administrative expense ($000) |  | $                  | 2,659 |  |      | $ | 1,948 |             |  |  | 36   | %
|per mcfe                                        |  | $                  | 0.19  |  |      | $ | 0.16  |             |  |  | 19   | %
|Employees at December 31                        |  |                    |       |  |      |   |       |             |  |  |      |  



Cash general and administrative (“G&A”)
expense in total and on a per mcfe basis for 2015 was reasonably comparable to 2014.



Share based compensation represents non-cash
G&A expense associated with Advantage’s stock option plan and restricted and performance award plan that are designed
to provide for long-term compensation to service providers and to align the interests of service providers with that of shareholders.
During the 2015 year, Advantage granted 1.0 million stock options and 0.3 million performance awards. As at December 31, 2015,
a total of 4.0 million stock options and 0.7 million performance awards are unexercised which represents 2.7% of Advantage’s
total outstanding common shares.



Depreciation Expense





|                            |  | Three months ended |        |  |      |   |        | Year ended  |  |  |      |   
|--------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ---- | --
|                            |  | December 31        |        |  |      |   |        | December 31 |  |  |      |   
|                            |  | 2015               |        |  | 2014 |   |        | % change    |  |  | 2015 |   
|Depreciation expense ($000) |  | $                  | 23,247 |  |      | $ | 21,329 |             |  |  | 9    | % 
|per mcfe                    |  | $                  | 1.63   |  |      | $ | 1.73   |             |  |  | (6   | )%



Depreciation of natural gas and liquids properties
is provided on the units-of–production method based on total proved and probable reserves, including future development costs,
on a component basis. The rate of depreciation expense per mcfe was lower as total costs, including future development costs, as
a proportion of total proved and probable reserves declined due to the continued efficiency of reserve additions. Depreciation
expense was higher in 2015 due to the continued production increase at Glacier.



Advantage Oil & Gas Ltd. - 8







Finance Expense



|                             |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|---------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                             |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|                             |  | 2015               |       |  | 2014 |   |       | % change    |  |  | 2015 |   
|Finance expense              |  |                    |       |  |      |   |       |             |  |  |      |   
|Cash expense ($000)          |  | $                  | 2,965 |  |      | $ | 2,502 |             |  |  | 19   | % 
|per mcfe                     |  | $                  | 0.21  |  |      | $ | 0.20  |             |  |  | 5    | % 
|Accretion expense ($000)     |  | $                  | 286   |  |      | $ | 1,124 |             |  |  | (75  | )%
|per mcfe                     |  | $                  | 0.02  |  |      | $ | 0.09  |             |  |  | (78  | )%
|Total finance expense ($000) |  | $                  | 3,251 |  |      | $ | 3,626 |             |  |  | (10  | )%
|per mcfe                     |  | $                  | 0.23  |  |      | $ | 0.29  |             |  |  | (21  | )%



Cash finance expense was higher for the three
months ended December 31, 2015, as compared to the same period of 2014, due to higher average bank debt as per our development
plan. The Corporation’s interest rates on bank indebtedness, that are primarily based on short term bankers’ acceptance
rates plus a stamping fee, also slightly increased in the current quarter due to the higher total debt to Earnings before Interest,
Taxes, Depreciation and Amortization (“EBITDA”) ratio as calculated pursuant to our Credit Facilities.



Accretion expense represents non-cash charges
that increase the carrying value of convertible debentures and decommissioning liability as a result of the passage of time. Since
our remaining convertible debentures matured on January 30, 2015, accretion expense for 2015 was lower than 2014.



Other Income (Expense)



|                                               |  | Three months ended |     |   |      |   |       | Year ended  |  |  |      |   
|---------------------------------------------- |  | ------------------ | --- | - | ---- | - | ----- | ----------- |  |  | ---- | --
|                                               |  | December 31        |     |   |      |   |       | December 31 |  |  |      |   
|($000)                                         |  | 2015               |     |   | 2014 |   |       | % change    |  |  | 2015 |   
|Interest income - Questfire Debenture          |  | $                  | -   |   |      | $ | -     |             |  |  | -    | % 
|Accretion income - Questfire Debenture         |  |                    | -   |   |      |   | -     |             |  |  | -    | % 
|Loss on disposition - Questfire Debenture      |  |                    | -   |   |      |   | -     |             |  |  | -    | % 
|Gain on disposition - Questfire Class B Shares |  |                    | -   |   |      |   | -     |             |  |  | -    | % 
|Gain (loss) on sale of asssets                 |  |                    | -   |   |      |   | -     |             |  |  | -    | % 
|Miscellaneous income (expense)                 |  |                    | (75 | ) |      |   | 3,039 |             |  |  | (102 | )%
|                                               |  | $                  | (75 | ) |      | $ | 3,039 |             |  |  | (102 | )%



Advantage recognized interest and accretion
income earned on the Questfire Debenture from April 2013 up to the first quarter of 2014, the time during which we owned the debenture.
During the first quarter of 2014, Advantage accepted a proposal from Questfire to redeem the Questfire Debenture for an aggregate
purchase price of $13.6 million and Advantage recognized a loss of $13.8 million. During the same period, Advantage also accepted
a Questfire offer to purchase by way of issuer bid, all of the Class B Shares, and recognized a net gain of $0.2 million.



Advantage Oil & Gas Ltd. - 9







Taxes



Deferred income taxes arise from differences
between the accounting and tax bases of our assets and liabilities. For the year ended December 31, 2015, the Corporation recognized
a deferred income tax expense of $7.8 million as a result of the $29.1 million income before taxes from continuing operations and
a $1.6 million deferred income tax expense for the Alberta corporate tax rate increase from 10% to 12% enacted by the provincial
government in June 2015. As at December 31, 2015, the Corporation had a deferred income tax liability balance of $41.1 million.



Estimated tax pools at December 31, 2015, are
as follows:





|                                                              |  | ($ millions) |      
|------------------------------------------------------------- |  | ------------ | -----
|                                                              |  |              |      
|Canadian Development Expenses                                 |  | $            | 194  
|Canadian Exploration Expenses                                 |  |              | 66   
|Canadian Oil and Gas Property Expenses                        |  |              | 4    
|Non-capital losses                                            |  |              | 736  
|Undepreciated Capital Cost                                    |  |              | 206  
|Capital losses                                                |  |              | 158  
|Scientific Research and Experimental Development Expenditures |  |              | 33   
|Other                                                         |  |              | 8    
|                                                              |  | $            | 1,405



Net Income and Comprehensive Income from Continuing Operations



|                                                                      |  | Three months ended |        |  |      |   |        | Year ended  |  |  |      |   
|--------------------------------------------------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ---- | --
|                                                                      |  | December 31        |        |  |      |   |        | December 31 |  |  |      |   
|                                                                      |  | 2015               |        |  | 2014 |   |        | % change    |  |  | 2015 |   
|Net income and comprehensive income from continuing operations ($000) |  | $                  | 12,408 |  |      | $ | 53,682 |             |  |  | (77  | )%
|per share - basic                                                     |  | $                  | 0.08   |  |      | $ | 0.32   |             |  |  | (75  | )%
|per share - diluted                                                   |  | $                  | 0.07   |  |      | $ | 0.32   |             |  |  | (78  | )%



Advantage’s net income from continuing
operations has decreased from 2014 due to the significant decline in natural gas prices partially offset by increased production
and gains on derivatives.



Contractual Obligations and Commitments



The Corporation has contractual obligations
in the normal course of operations including purchases of assets and services, operating agreements, transportation commitments,
sales contracts and bank indebtedness. These obligations are of a recurring and consistent nature and impact cash flow in an ongoing
manner. The following table is a summary of the Corporation’s remaining contractual obligations and commitments. Advantage
has no guarantees or off-balance sheet arrangements other than as disclosed.





|                                 |  | Payments due by period |      
|-------------------------------- |  | ---------------------- | -----
|($ millions)                     |  | Total                  |      
|Building leases                  |  | $                      | 4.1  
|Pipeline/transportation          |  |                        | 168.1
|Bank indebtedness(1) - principal |  |                        | 286.5
|- interest                       |  |                        | 16.4 
|Total contractual obligations    |  | $                      | 475.1



| | (1) | As at December 31, 2015, the Corporation’s bank indebtedness was governed by a credit facility
agreement with a syndicate of financial institutions. Under the terms of the agreement, the facility is reviewed annually, with
the next review scheduled in June 2016. The facility is revolving and extendible at each annual review for a further 364 day period
at the option of the syndicate. If not extended, the credit facility is converted at that time into a one-year term facility, with
the principal payable at the end of such one-year term. Management fully expects that the facility will be extended at each annual
review.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Advantage Oil & Gas Ltd. - 10







Liquidity and Capital Resources



The following table is a summary of the Corporation’s
capitalization structure:



|($000, except as otherwise indicated)  |  | December 31, 2015 |            
|-------------------------------------- |  | ----------------- | -----------
|Bank indebtedness (non-current)        |  | $                 | 286,519    
|Working capital deficit(1)             |  |                   | 7,196      
|Total debt(3)                          |  | $                 | 293,715    
|Shares outstanding                     |  |                   | 170,827,158
|Shares closing market price ($/share)  |  | $                 | 7.03       
|Market capitalization(2)               |  | $                 | 1,200,915  
|                                       |  |                   |            
|Total capitalization                   |  | $                 | 1,494,630  
|                                       |  |                   |            
|Total debt to funds from operations(4) |  |                   | 2.4        



| | (1) | Working capital deficit is a non-GAAP measure that includes trade and other receivables, prepaid expenses and deposits, and
trade and other accrued liabilities.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Market capitalization is a non-GAAP measure calculated
by multiplying shares outstanding by the closing market share price on the applicable date.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Total debt is a non-GAAP measure that includes bank indebtedness and working capital deficit.
| | --- | ---------------------------------------------------------------------------------------------

| | (4) | Total debt to funds from operations is calculated by dividing total debt by funds from operations for the previous four quarters.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



Advantage monitors its capital structure and
makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business
and industry in general. The capital structure of the Corporation is composed of working capital deficit, bank indebtedness, and
share capital. Advantage may manage its capital structure by issuing new common shares, repurchasing outstanding common shares,
obtaining additional financing through bank indebtedness, refinancing current debt, issuing other financial or equity-based instruments,
declaring a dividend, or adjusting capital spending. The capital structure is reviewed by Management and the Board of Directors
on an ongoing basis.



Management of
the Corporation’s capital structure is facilitated through its financial and operational forecasting processes. Selected
forecast information is frequently provided to the Board of Directors. This continual financial assessment process further enables
the Corporation to mitigate risks. The Corporation continues to satisfy all liabilities and commitments as they come due. At December
31, 2015, the Corporation had $163.5 million available on its $450 million borrowing base Credit Facility. The
only financial covenant is a requirement for the Corporation to maintain a minimum cash flow to interest expense ratio of 3.5:1,
calculated as funds from operations divided by cash finance expense for the prior four quarters. The cash flow to interest expense
ratio was 11.9:1 at December 31, 2015 and 16.0:1 at December 31, 2014. On December 16, 2015, the Corporation announced its 2016
budget and guidance as approved by the Board of Directors. The Corporation's 2016 capital program of $120 million is expected to
generate surplus cash flow, enhance financial flexibility and continue growth in 2017. Based on an average 2016 natural gas price
of AECO $2.50/mcf including Advantage's hedging positions, annual cash flow is estimated to be approximately $160 million with
year-end total debt to funds from operations of approximately 1.6 times. Based on an average 2016 natural gas price of AECO $2.00/mcf
and Advantage's current hedge positions, annual cash flow is estimated to be approximately $143 million with year-end total debt
to funds from operations of approximately 1.9 times. Advantage will continue to closely monitor the commodity price environment
through 2016 and adjust future growth plans as necessary to maintain balance sheet strength and preserve the long term value of
its Glacier Montney asset.



Shareholders’ Equity and Convertible
Debentures



As at December 31, 2015, Advantage had 170.8
million common shares outstanding. During the year ended December 31, 2015, Advantage issued 0.8 million common shares to service
providers in exchange for the exercise of 2.1 million stock options. As at December 31, 2015, a total of 4.0 million stock options
and 0.7 million performance awards are unexercised which represents 2.7% of Advantage’s total outstanding common shares.
As at March 3, 2016, Advantage had 170.8 million common shares outstanding.



The Corporation had $86.2 million of 5.00%
convertible debentures outstanding at December 31, 2014 that were convertible to 10.0 million common shares based on the applicable
conversion price. The convertible debentures matured on January 30, 2015 and were settled with cash from the Credit Facilities.



Advantage Oil & Gas Ltd. - 11







Bank Indebtedness, Credit Facilities and
Other Obligations



At December 31, 2015, Advantage had bank indebtedness
outstanding of $286.5 million, an increase of $176.5 million since December 31, 2014. The increase in bank indebtedness was consistent
with our 2015 budget including $165 million of capital expenditure activity and the $86.2 million settlement of the convertible
debentures that matured on January 30, 2015. Advantage’s credit facilities borrowing base is $450 million and is collateralized
by a $1 billion floating charge demand debenture covering all assets of the Corporation (the “Credit Facilities”).
The borrowing base for the Credit Facilities is determined by the banking syndicate through a thorough evaluation of our reserve
estimates based upon their own commodity price expectations. Revisions or changes in the reserve estimates and commodity prices
can have either a positive or a negative impact on the borrowing base. Advantage’s Credit Facilities were reconfirmed in
October 2015 as part of the banking syndicates’ normal semi-annual re-determination. The next annual review is scheduled
to occur in June 2016. There can be no assurance that the Credit Facilities will be renewed at the current borrowing base level
at that time.



Advantage had a working capital deficit of
$7.2 million as at December 31, 2015, a significant decrease from December 31, 2014 due to the relatively high level of capital
expenditure activity that was underway at that time. Our working capital includes items expected for normal operations such as
trade receivables, prepaid expenses, deposits, and trade payables and accruals. Working capital varies primarily due to the timing
of such items, the current level of business activity including our capital expenditure program, commodity price volatility, and
seasonal fluctuations. Our working capital is normally in a deficit position due to our capital development activities. We do not
anticipate any problems in satisfying the working capital deficit and meeting future obligations as they become due as they can
be satisfied with funds from operations and our available Credit Facilities.



Capital Expenditures



|                                                  |  | Three months ended |        |  | Year ended  |  
|------------------------------------------------- |  | ------------------ | ------ |  | ----------- | -
|                                                  |  | December 31        |        |  | December 31 |  
|($000)                                            |  | 2015               |        |  | 2014        |  
|Drilling, completions and workovers               |  | $                  | 16,915 |  |             | $
|Well equipping and facilities                     |  |                    | 10,289 |  |             |  
|Other                                             |  |                    | 400    |  |             |  
|Expenditures on property, plant and equipment     |  |                    | 27,604 |  |             |  
|Expenditures on exploration and evaluation assets |  |                    | -      |  |             |  
|Net capital expenditures(1)                       |  | $                  | 27,604 |  |             | $



(1) Net capital expenditures excludes changes in non-cash working
capital and change in decommissioning liability.



Advantage invested $163.8 million on property,
plant and equipment at Glacier for the year ended December 31, 2015 with $27.6 million invested in the current quarter.



During the year a significant portion of our
capital expenditures were directed to our 100% owned Glacier gas plant expansion project and expansion of our sales pipeline infrastructure.
In total $75 million (45% of net capital expenditures) was spent on infrastructure projects with $65 million directed towards our
plant expansion to increase processing capacity to 250mmcf/d and $10 million directed towards our sales pipeline. Both the Glacier
gas plant and the sales pipeline were built to have spare capacity to meet future production growth in 2016 and 2017. In addition,
the plant is capable of processing varying amounts of dry and liquids rich gas production to accommodate future development of
our significant Montney land holdings at Glacier.



In 2015 Advantage drilled 16 Montney gas wells
and 1 service well. Due to strong well performance and a substantial inventory of available production, only 5 Montney horizontal
wells were drilled and rig released during the fourth quarter. Advantage’s Upper, Middle and Lower Montney wells are continuing
to demonstrate strong production performance and less wells have been required to maintain production than expected. Advantage’s
current standing well inventory consisted of 37 total wells of which 23 are completed and 14 remain uncompleted, which Management
believes will provide sufficient productive capacity to attain our 2016 annual production target without drilling any additional
wells.



In 2015, Advantage acquired 6 additional sections
of Lower Doig/Montney land rights in the greater Glacier area. Advantage now holds a total of 138 net sections (88,840 net acres)
of either Lower Doig or Montney rights.



Advantage Oil & Gas Ltd. - 12







Sources and Uses of Funds



The following table summarizes the various
funding requirements during the years ended December 31, 2015 and 2014 and the sources of funding to meet those requirements:



|                                                  |  | Year ended  |        
|------------------------------------------------- |  | ----------- | -------
|                                                  |  | December 31 |        
|($000)                                            |  | 2015        |        
|Sources of funds                                  |  |             |        
|Increase in bank indebtedness                     |  | $           | 177,197
|Funds from operations                             |  |             | 123,630
|Disposition of Longview investment                |  |             | -      
|Disposition of Questfire investments              |  |             | -      
|Change in non-cash working capital and other      |  |             | -      
|Dividends received from Longview                  |  |             | -      
|                                                  |  | $           | 300,827
|Uses of funds                                     |  |             |        
|Expenditures on property, plant and equipment     |  | $           | 163,791
|Maturity of convertible debenture                 |  |             | 86,240 
|Change in non-cash working capital and other      |  |             | 48,342 
|Expenditures on exploration and evaluation assets |  |             | 1,192  
|Expenditures on decommissioning liability         |  |             | 1,262  
|Decrease in bank indebtedness                     |  |             | -      
|                                                  |  | $           | 300,827



Bank indebtedness increased as planned during
the year ended December 31, 2015 to fund capital expenditures and the maturity of our convertible debentures on January 30, 2015.
In 2016, we anticipate our expenditures on property, plant and equipment to be primarily funded with funds from operations (see
“Liquidity and Capital Resources”). We monitor the debt level to ensure an optimal mix of financing and cost of capital
that will provide a maximum return to our shareholders.



FINANCIAL AND OPERATING REVIEW – DISCONTINUED
OPERATIONS



The following financial and operating highlights
for Longview to February 28, 2014 have been presented to provide additional information with respect to the Longview segment prior
to disposition.





|                                                                    |  | Year ended  |  
|------------------------------------------------------------------- |  | ----------- | -
|                                                                    |  | December 31 |  
|                                                                    |  | 2015        |  
|Production (boe/d)                                                  |  |             | -
|Funds from operations ($000)                                        |  | $           | -
|Net capital expenditures ($000)                                     |  | $           | -
|Net loss and comprehensive loss from discontinued operations ($000) |  | $           | -
|per share - basic and diluted                                       |  | $           | -



| | (1) | Represents the financial and operating results for the
Longview segment for the 59 days from January 1, 2014 to February 28, 2014.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



Advantage Oil & Gas Ltd. - 13







Annual Financial Information



The following is a summary of selected financial information of
the Corporation for the years indicated.



|                                           |  | Year ended    |           |  | Year ended    |   |           | Year ended    | 
|------------------------------------------ |  | ------------- | --------- |  | ------------- | - | --------- | ------------- | 
|                                           |  | Dec. 31, 2015 |           |  | Dec. 31, 2014 |   |           | Dec. 31, 2013 | 
|                                           |  |               |           |  |               |   |           |               | 
|Continuing Operations - Advantage          |  |               |           |  |               |   |           |               | 
|Total sales (before royalties) ($000)      |  | $             | 132,311   |  |               | $ | 215,653   |               | 
|Net income (loss) ($000)                   |  | $             | 21,378    |  |               | $ | 74,597    |               | 
|per share - basic                          |  | $             | 0.13      |  |               | $ | 0.44      |               | 
|per share - diluted                        |  | $             | 0.12      |  |               | $ | 0.44      |               | 
|Total assets ($000)                        |  | $             | 1,517,443 |  |               | $ | 1,454,767 |               | 
|Long term financial liabilities ($000) (1) |  | $             | 286,519   |  |               | $ | 110,482   |               | 
|                                           |  |               |           |  |               |   |           |               | 
|Discontinued Operations - Longview         |  |               |           |  |               |   |           |               | 
|Total sales (before royalties) ($000)      |  | $             | -         |  |               | $ | 24,715    |               | 
|Net income (loss) ($000)                   |  | $             | -         |  |               | $ | (58,894   | )             | 
|per share - basic and diluted              |  | $             | -         |  |               | $ | (0.35     | )             | 
|Total assets ($000)                        |  | $             | -         |  |               | $ | -         |               | 
|Long term financial liabilities ($000) (1) |  | $             | -         |  |               | $ | -         |               | 



(1) Long term financial liabilities exclude derivative
liability, decommissioning liability and deferred income tax liability.



Advantage Oil & Gas Ltd. - 14







Quarterly Performance





|                                       |  | 2015 |         |  | 2014 |  
|-------------------------------------- |  | ---- | ------- |  | ---- | -
|($000, except as otherwise
 indicated) |  | Q4   |         |  | Q3   |  
|                                       |  |      |         |  |      |  
|Continuing Operations - Advantage      |  |      |         |  |      |  
|Daily production                       |  |      |         |  |      |  
|Natural gas (mcf/d)                    |  |      | 154,241 |  |      |  
|Liquids (bbls/d)                       |  |      | 179     |  |      |  
|Total (mcfe/d)                         |  |      | 155,315 |  |      |  
|Average prices                         |  |      |         |  |      |  
|Natural gas ($/mcf)                    |  |      |         |  |      |  
|Excluding hedging                      |  | $    | 2.34    |  |      | $
|Including hedging                      |  | $    | 2.96    |  |      | $
|AECO daily                             |  | $    | 2.46    |  |      | $
|AECO monthly                           |  | $    | 2.65    |  |      | $
|Liquids ($/bbl)                        |  |      |         |  |      |  
|Including hedging                      |  | $    | 43.24   |  |      | $
|Edmonton Light ($/bbl)                 |  | $    | 51.99   |  |      | $
|Total sales including realized hedging |  | $    | 42,654  |  |      | $
|Net income (loss)                      |  | $    | 12,408  |  |      | $
|per share - basic                      |  | $    | 0.08    |  |      | $
|per share - diluted                    |  | $    | 0.07    |  |      | $
|Funds from operations                  |  | $    | 31,656  |  |      | $
|                                       |  |      |         |  |      |  
|Discontinued Operations - Longview     |  |      |         |  |      |  
|Total sales including realized hedging |  | $    | -       |  |      | $
|Net income (loss)                      |  | $    | -       |  |      | $
|per share - basic and diluted (1)      |  | $    | -       |  |      | $
|Funds from operations                  |  | $    | -       |  |      | $







(1)Per share amounts based on weighted average basic
and diluted shares outstanding of Advantage Oil & Gas Ltd.



The table above highlights the Corporation’s
performance for the fourth quarter of 2015 and also for the preceding seven quarters for both continuing and discontinued operations.
Successful execution of our 2013 capital development program at Glacier resulted in additional production growth in early 2014
as we reached our target of 135 mmcfe/d in March 2014. The 135 mmcfe/d production level was maintained as we drilled the required
well inventory and completed the first phase of commissioning operations at our expanded Glacier plant in July 2015 at which time
production capability reached 183 mmcfe/d. The Corporation’s production for the second half of 2015 was negatively impacted
by TCPL unplanned firm and interruptible service restrictions in addition to Advantage’s planned outages required to install
new equipment for the Glacier gas plant expansion.



Sales and funds from operations that increased
dramatically in 2014 attributable to improved natural gas prices and production growth has decreased in 2015 with the decline in
natural gas prices. Although Advantage has generally reported net income, we have reported a net loss during quarters of particularly
weak natural gas prices. In the first quarter of 2014, Advantage recognized a $13.8 million loss on redemption of the Questfire
Debenture and a $58.8 million loss on disposition of the Longview operating segment as the net proceeds received by Advantage were
less than the carrying value of the net assets. As a pure Montney producer, Advantage now has a much simpler capitalization structure
and a strong balance sheet to continue its multi-year development plan. Advantage’s production growth at Glacier and industry
leading low cost structure has generally resulted in strong sales including realized hedging, net income and funds from operations
despite the challenging low natural gas prices.



Advantage Oil & Gas Ltd. - 15







Critical Accounting Estimates



The preparation of financial statements in
accordance with IFRS requires Management to make certain judgments and estimates. Changes in these judgments and estimates could
have a material impact on the Corporation’s financial results and financial condition.



Management relies on the estimate of reserves
as prepared by the Corporation’s independent qualified reserves evaluator. The process of estimating reserves is critical
to several accounting estimates. The process of estimating reserves is complex and requires significant judgments and decisions
based on available geological, geophysical, engineering and economic data. These estimates may change substantially as additional
data from ongoing development and production activities becomes available and as economic conditions impact natural gas and liquids
prices, operating expense, royalty burden changes, and future development costs. Reserve estimates impact net income and comprehensive
income through depreciation and impairment of natural gas and liquids properties. The reserve estimates are also used to assess
the borrowing base for the Corporation’s Credit Facilities. Revision or changes in the reserve estimates can have either
a positive or a negative impact on asset values, net income, comprehensive income and the borrowing base of the Corporation.



Management’s process of determining the
provision for deferred income taxes and the provision for decommissioning liability costs and related accretion expense are based
on estimates. These estimates are significant and can include proved and probable reserves, future production rates, future commodity
prices, future costs, future interest rates, future tax rates and other relevant assumptions. Revisions or changes in any of these
estimates can have either a positive or a negative impact on asset and liability values, net income and comprehensive income.



In accordance with IFRS, derivative assets
and liabilities are recorded at their fair values at the reporting date, with gains and losses recognized directly into comprehensive
income in the same period. The fair value of derivatives outstanding is an estimate based on pricing models, estimates, assumptions
and market data available at that time. As such, the recognized amounts are non-cash items and the actual gains or losses realized
on eventual cash settlement can vary materially due to subsequent fluctuations in commodity prices as compared to the valuation
assumptions.



Changes in Accounting Policies



There have been no changes in accounting policies
during the year ended December 31, 2015.



Accounting Pronouncements not yet Adopted



Standards issued but not yet effective up to
the date of issuance of the Corporation’s financial statements are evaluated as to whether we expect changes to our financial
reporting when they become effective. As at March 3, 2016, we are evaluating standards issued but not effective and we do not anticipate
there to be material changes to our current financial reporting when they become effective.



Evaluation of Disclosure Controls and Procedures



Advantage’s Chief Executive Officer and
Chief Financial Officer have designed disclosure controls and procedures (“DC&P”), or caused it to be designed
under their supervision, to provide reasonable assurance that material information relating to the Corporation is made known to
them by others, particularly during the period in which the annual filings are being prepared, and information required to be disclosed
by the Corporation in its annual filings, interim filings or other reports filed or submitted by it under securities legislation
is recorded, processed, summarized and reported within the time periods specified in securities legislation.



Management of Advantage, including our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Corporation’s DC&P as at December
31, 2015. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the DC&P are
effective as of the end of the year, in all material respects.



Advantage Oil & Gas Ltd. - 16







Evaluation of Internal Controls over Financial
Reporting



Advantage’s Chief Executive Officer and
Chief Financial Officer are responsible for establishing and maintaining internal control over financial reporting (“ICFR”).
They have as at the financial year end December 31, 2015, designed ICFR, or caused it to be designed under their supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS. The control framework Advantage’s officers used to design the Corporation’s ICFR
is the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations.



Management of Advantage, including our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Corporation’s ICFR as at December 31,
2015. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the ICFR are effective
as of the end of the year, in all material respects.



Advantage’s Chief Executive Officer and
Chief Financial Officer are required to disclose any change in the ICFR that occurred during our most recent interim period that
has materially affected, or is reasonably likely to materially affect, the Corporation’s ICFR. No material changes in the
ICFR were identified during the interim period ended December 31, 2015 that have materially affected, or are reasonably likely
to materially affect, our ICFR.



It should be noted that while the Chief Executive
Officer and Chief Financial Officer believe that the Corporation’s design of DC&P and ICFR provide a reasonable level
of assurance that they are effective, they do not expect that the control system will prevent all errors and fraud. A control system,
no matter how well conceived or operated, does not provide absolute, but rather is designed to provide reasonable assurance that
the objective of the control system is met. The Corporation’s ICFR may not prevent or detect all misstatements because of
inherent limitations. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the Corporation’s
policies and procedures.



Corporate Governance



The Corporation’s corporate governance
practices can be found in the Management Information Circular.



As a foreign private issuer listed on the New
York Stock Exchange (the "NYSE"), Advantage is not required to comply with most of the NYSE rules and listing standards
and instead may comply with domestic Canadian requirements. Advantage is, however, required to comply with the following NYSE Rules:
(i) Advantage must have an audit committee that satisfies the requirements of Rule 10A-3 under the United States Securities Exchange
Act of 1934, as amended; (ii) the Chief Executive Officer must promptly notify the NYSE in writing after an executive officer becomes
aware of any non-compliance with the applicable NYSE Rules; (iii) Advantage must submit an executed section 303A annual written
affirmation to the NYSE, as well as a Section 303A interim affirmation each time certain changes occurs to the audit committee;
and (iv) Advantage must annually provide a brief description of any significant differences between its corporate governance practices
and those followed by U.S. domestic issuers under NYSE listing standards. Advantage has reviewed the NYSE listing standards followed
by U.S. domestic issuers listed on the NYSE and confirms that its corporate governance practices do not differ significantly from
such standards.



Additional Information



Additional information relating to Advantage
can be found on SEDAR at www.sedar.com and the Corporation’s website at www.advantageog.com. Such other information
includes the annual information form, the management information circular, press releases, material change reports, material contracts
and agreements, and other financial reports. The annual information form will be of particular interest for current and potential
shareholders as it discusses a variety of subject matter including the nature of the business, description of our operations, general
and recent business developments, risk factors, reserves data and other oil and gas information.



March 3, 2016



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