Exhibit
99.3



CONSOLIDATED MANAGEMENT’S DISCUSSION
& ANALYSIS



The following Management’s Discussion
and Analysis (“MD&A”), dated as of March 25, 2015, 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, 2014 and should be read in conjunction
with the December 31, 2014 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, expected average production levels until July 2015 and anticipated increase
to production levels in July, 2015; 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; effect of commodity price
risk management activities on the Corporation, including cash flows and sales; 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; projected royalty rates, including
the estimated royalty rate for the life of a Glacier Montney horizontal well; expected timing of rig release, service and receipt
of regulatory approvals for Advantage's water disposal well and the effect of such water disposal well on water handling capacity
at Glacier and third party costs; terms of the Corporation's equity compensation plans; estimated tax pools at December 31, 2014;
terms of the Corporation's credit facilities, including timing of next review of the credit facilities; the Corporation's expectations
regarding extension of Advantage's credit facilities at each annual review, effect of revisions or changes in reserve estimates
and commodity prices on the borrowing base, and limitations on the utilization of hedging contracts; future commitments and contractual
obligations; the Corporation's strategy for managing its capital structure, including the use of equity and debt financing arrangements,
adjusting capital spending, disposing of assets and the use of 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; effect of the Corporation's continual financial assessment processes on the Corporation's ability to mitigate risks; the
Corporation's plans to fund the majority of its capital expenditures for the year ended December 31, 2015 from funds from operations;
the Corporation's forecasted debt to trailing funds from operations ratio; the Corporation's ability to satisfy all liabilities
and commitments, including a working capital deficit, and meet future obligations as they become due; Advantage's expectation that
its current inventory of wells can maintain production at the levels disclosed herein through to completion of the Corporation's
plant expansion at Glacier; anticipated timing of completion of the Corporation's plant expansion at Glacier; targeted level of
production from Advantage's Phase VII program and the anticipated timing of achievement thereof; the Corporation's intentions to
monitor debt levels to ensure an optimal mix of financing and cost of capital to provide a return to the Corporation's shareholders;
Advantage's focus on development of the natural gas resource play at Glacier, including the anticipated timing of completion of
the various phases of Advantage's development program at Glacier and expected timing of well completions; 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.











These forward-looking statements involve
substantial known and unknown risks and uncertainties, many of which are beyond our control, including, but not limited to, changes
in general economic, market and business conditions; stock market volatility; changes to legislation and regulations and how they
are interpreted and enforced; changes to investment eligibility or investment criteria; 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; 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; failure to extend the 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: conditions in general economic and financial markets; effects of regulation by governmental agencies; receipt of required
regulatory approvals; current commodity prices and 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 at a price of $4.45 per share 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)                                                        |  | 2014               |        |   | 2013 |   |         | % change    |  |  | 2014 |   
|Cash provided by operating activities - continuing operations |  | $                  | 48,218 |   |      | $ | 42,488  |             |  |  | 13   | % 
|Expenditures on decommissioning liability                     |  |                    | 367    |   |      |   | 1,152   |             |  |  | (68  | )%
|Changes in non-cash working capital                           |  |                    | (6,901 | ) |      |   | (16,644 | )           |  |  | (59  | )%
|Finance expense(1)                                            |  |                    | (2,502 | ) |      |   | (3,174  | )           |  |  | (21  | )%
|Funds from operations - continuing operations                 |  | $                  | 39,182 |   |      | $ | 23,822  |             |  |  | 64   | % 
|Funds from operations - discontinued operations               |  |                    | -      |   |      |   | 13,740  |             |  |  | (100 | )%
|Funds from operations                                         |  | $                  | 39,182 |   |      | $ | 37,562  |             |  |  | 4    | % 



(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 |  
|                                         |  | 2014               |        |   | 2013        |  
|                                         |  | ($000)             |        |   | per mcfe    |  
|Natural gas and liquids sales            |  | $                  | 47,186 |   |             | $
|Realized gains (losses) on derivatives   |  |                    | (777   | ) |             |  
|Royalties                                |  |                    | (2,209 | ) |             |  
|Operating expense                        |  |                    | (4,184 | ) |             |  
|Operating  income and operating netbacks |  |                    | 40,016 |   |             |  
|General and administrative (1)           |  |                    | (1,371 | ) |             |  
|Finance expense(2)                       |  |                    | (2,502 | ) |             |  
|Other income(3)                          |  |                    | 3,039  |   |             |  
|Funds from operations and cash netbacks  |  | $                  | 39,182 |   |             | $
|Per basic weighted average share         |  | $                  | 0.23   |   |             |  



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

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

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



For the three months ended December 31,
2014, Advantage realized a 64% increase in funds from operations to $39.2 million and a 34% increase in cash netbacks to $3.18
per mcfe, as compared to the fourth quarter of 2013. Funds from operations for the year ended December 31, 2014, increased 92%
to $164.0 million and cash netbacks increased 72% to $3.43 per mcfe, as compared to the same period of 2013. On a per share basis,
funds from operations increased 64% and 90% to $0.23 and $0.97 for the three months and year ended December 31, 2014, respectively.
The increased funds from operations and cash netbacks were driven by Glacier production growth, higher natural gas prices and a
lower total cash cost structure. Glacier production during the three months and year ended December 31, 2014 was 23% and 25% higher
than the same periods of 2013, as we continue to execute on our multi-year development plan. AECO daily prices during the three
months and year ended December 31, 2014 was 2% and 41% higher than the same periods of 2013. We have also achieved an industry
leading low cost structure whereby total cash costs for the year ended December 31, 2014, including royalties, operating expense,
general and administrative expense, and finance expense have been reduced by 36% to $0.89 per mcfe as compared to 2013. 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.



Advantage has disposed of substantially
all non-core assets to focus on continued development of its core Glacier Montney natural gas asset. Net cash proceeds received
from all disposition transactions were used to reduce outstanding bank indebtedness. The disposition transactions have had a pervasive
impact on the financial and operating results and financial position of Advantage such that historical financial and operating
performance may not be indicative of actual future performance.



Advantage Oil & Gas Ltd. - 4







Natural Gas and Liquids Sales and Hedging



|                                       |  | Three months ended |        |   |      |   |        | Year ended  |  |  |      |   
|-------------------------------------- |  | ------------------ | ------ | - | ---- | - | ------ | ----------- |  |  | ---- | --
|                                       |  | December 31        |        |   |      |   |        | December 31 |  |  |      |   
|($000)                                 |  | 2014               |        |   | 2013 |   |        | % change    |  |  | 2014 |   
|Natural gas sales                      |  | $                  | 46,446 |   |      | $ | 31,984 |             |  |  | 45   | % 
|Realized gains (losses) on derivatives |  |                    | (777   | ) |      |   | 1,758  |             |  |  | (144 | )%
|Natural gas sales including hedging    |  |                    | 45,669 |   |      |   | 33,742 |             |  |  | 35   | % 
|Liquids sales                          |  |                    | 740    |   |      |   | 562    |             |  |  | 32   | % 
|Realized gain on derivative            |  |                    | -      |   |      |   | -      |             |  |  | -    | % 
|Liquids sales including hedging        |  |                    | 740    |   |      |   | 562    |             |  |  | 32   | % 
|Total(1)                               |  | $                  | 46,409 |   |      | $ | 34,304 |             |  |  | 35   | % 



(1) Total excludes unrealized derivative gains and losses.



Total sales excluding hedging for the three
months ended December 31, 2014 was $47.2 million, an increase of $14.6 million or 45%, and for the year ended December 31, 2014
was $215.7 million, an increase of $75.6 million or 54%, when compared to the same periods of 2013. The increase in sales has been
attributable to improved natural gas prices and higher natural gas production.



Production



|                    |  | Three months ended |         |   |      |  |         | Year ended  |  |  |      |  
|------------------- |  | ------------------ | ------- | - | ---- |  | ------- | ----------- |  |  | ---- | -
|                    |  | December 31        |         |   |      |  |         | December 31 |  |  |      |  
|                    |  | 2014               |         |   | 2013 |  |         | % change    |  |  | 2014 |  
|Natural gas (mcf/d) |  |                    | 133,433 |   |      |  | 108,260 |             |  |  | 23   | %
|Liquids (bbls/d)    |  |                    | 113     |   |      |  | 79      |             |  |  | 43   | %
|Total   - mcfe/d    |  |                    | 134,111 |   |      |  | 108,734 |             |  |  | 23   | %
|- boe/d             |  |                    | 22,352  |   |      |  | 18,122  |             |  |  | 23   | %
|Natural gas (%)     |  |                    | 99      | % |      |  | 100     | %           |  |  |      |  
|Liquids (%)         |  |                    | 1       | % |      |  | -       | %           |  |  |      |  



Production for the fourth quarter of 2014
increased 23% as compared to the fourth quarter of 2013. Glacier production increased 25% during the year ended December 31, 2014
as compared to 2013 but was partially offset by non-core conventional asset sales of approximately 12 mmcfe/d which closed in April
2013. We expect production to average approximately 130 mmcfe/d to 135 mmcfe/d until July 2015 when production is scheduled to
increase to 183 mmcfe/d according to our 2015 Guidance and Development Plan Update news release, issued February 17, 2015.



Advantage Oil & Gas Ltd. - 5







Commodity Prices and Marketing



|                                       |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|-------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                                       |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|                                       |  | 2014               |       |  | 2013 |   |       | % change    |  |  | 2014 |   
|Average Realized Pricing               |  |                    |       |  |      |   |       |             |  |  |      |   
|Natural gas, excluding hedging ($/mcf) |  | $                  | 3.78  |  |      | $ | 3.21  |             |  |  | 18   | % 
|Natural gas, including hedging ($/mcf) |  | $                  | 3.72  |  |      | $ | 3.39  |             |  |  | 10   | % 
|Liquids, including hedging ($/bbl)     |  | $                  | 71.35 |  |      | $ | 77.01 |             |  |  | (7   | )%
|                                       |  |                    |       |  |      |   |       |             |  |  |      |   
|Benchmark Prices                       |  |                    |       |  |      |   |       |             |  |  |      |   
|AECO daily ($/mcf)                     |  | $                  | 3.61  |  |      | $ | 3.52  |             |  |  | 2    | % 
|NYMEX ($US/mmbtu)                      |  | $                  | 3.95  |  |      | $ | 3.63  |             |  |  | 9    | % 
|Edmonton Light ($/bbl)                 |  | $                  | 75.54 |  |      | $ | 86.88 |             |  |  | (13  | )%



Advantage’s current production from
Glacier is approximately 99% natural gas. Realized natural gas prices, excluding hedging, increased significantly as compared to
2013, corresponding to the increase in AECO prices. Natural gas prices remained low throughout much of 2013 due to a stronger supply
to demand situation. Prices improved dramatically during early 2014 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. During the second half of 2014, natural gas
prices decreased due to the continued strength of U.S. storage injections caused by record supply levels and reduced demand from
a moderate 2014 summer followed by a mild 2014/2015 winter. Advantage has hedged approximately 57% of forecast production, net
of royalties, for calendar 2015 at an average natural gas price of $3.86/mcf to support our Glacier development plan.



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 derivatives for the purpose of hedging and has
mitigated commodity price risk by entering natural gas hedging contracts to March 31, 2017 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           |  | Hedged              |  | Average Price
|Period             |  | Production Hedged |  | (net of royalties)  |  | AECO ($Cdn.) 
|Q1 2015 to Q4 2015 |  | 82.9 mmcf/d       |  | 57%                 |  | $3.86/mcf    
|Q1 2016 to Q4 2016 |  | 84.1 mmcf/d       |  | 46%                 |  | $3.69/mcf    
|Q1 2017            |  | 80.6 mmcf/d       |  | 42%                 |  | $3.65/mcf    



A summary of realized and unrealized hedging
gains and losses for the three months and year ended December 31, 2014 and 2013 are as follows:



|                                         |  | Three months ended |        |   |      |   |         | Year ended  |  |  |      |   
|---------------------------------------- |  | ------------------ | ------ | - | ---- | - | ------- | ----------- |  |  | ---- | --
|                                         |  | December 31        |        |   |      |   |         | December 31 |  |  |      |   
|($000)                                   |  | 2014               |        |   | 2013 |   |         | % change    |  |  | 2014 |   
|Realized gains (losses) on derivatives   |  | $                  | (777   | ) |      | $ | 1,758   |             |  |  | (144 | )%
|Unrealized gains (losses) on derivatives |  |                    | 55,243 |   |      |   | (11,472 | )           |  |  | (582 | )%
|Total gains (losses) on derivatives      |  | $                  | 54,466 |   |      | $ | (9,714  | )           |  |  | (661 | )%



For the three months and year ended December
31, 2014, we realized derivative losses as a result of	 higher natural gas prices as compared to our average hedge prices. For
the year ended December 31, 2014, $47.8 million was recognized in income as an unrealized derivative gain (December 31, 2013 –
$6.0 million unrealized derivative loss), being the increase in fair value to a net derivative asset of $46.6 million at December
31, 2014 as compared to a net derivative liability at December 31, 2013. The fair value of the net derivative asset is the estimated
value to settle the 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 from January 1, 2015 to March 31, 2017 corresponding
to when the Corporation will recognize sales from production.



Advantage Oil & Gas Ltd. - 6







Royalties



|                                                           |  | Three months ended |       |   |      |   |       | Year ended  |  |  |      |  
|---------------------------------------------------------- |  | ------------------ | ----- | - | ---- | - | ----- | ----------- |  |  | ---- | -
|                                                           |  | December 31        |       |   |      |   |       | December 31 |  |  |      |  
|                                                           |  | 2014               |       |   | 2013 |   |       | % change    |  |  | 2014 |  
|Royalties ($000)                                           |  | $                  | 2,209 |   |      | $ | 1,523 |             |  |  | 45   | %
|per mcfe                                                   |  | $                  | 0.18  |   |      | $ | 0.15  |             |  |  | 20   | %
|Royalty Rate (percentage of natural gas and liquids sales) |  |                    | 4.7   | % |      |   | 4.7   | %           |  |  | -    | %



Advantage pays royalties to the owners
of mineral rights from which we have leases. The Corporation currently has mineral leases with provincial governments, individuals
and other companies. Our average corporate royalty rates are impacted by well depths, well production rates, commodity prices,
and gas cost allowance. The expected royalty rate for the life of a Glacier Upper and Lower Montney horizontal well is approximately
5% before gas cost allowance due to industry provincial incentive programs. Total royalties paid during the three months and year
ended December 31, 2014 are higher than 2013 due to stronger natural gas prices and increased natural gas production while the
overall royalty rate has decreased slightly.



Operating Expense



|                         |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |  
|------------------------ |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | -
|                         |  | December 31        |       |  |      |   |       | December 31 |  |  |      |  
|                         |  | 2014               |       |  | 2013 |   |       | % change    |  |  | 2014 |  
|Operating expense ($000) |  | $                  | 4,184 |  |      | $ | 2,772 |             |  |  | 51   | %
|per mcfe                 |  | $                  | 0.34  |  |      | $ | 0.28  |             |  |  | 21   | %



For the year ended December 31, 2014, operating
expense was $0.32/mcfe, a decrease of 33% as compared to 2013. Operating costs have decreased with the disposition of higher cost
non-core assets and due to the increased production from our 100% owned Glacier gas plant. Operating expense per mcfe for the fourth
quarter of 2014 was $0.34/mcfe due to higher third party water disposal and trucking costs resulting from the flowback of additional
water from well completions.



General and Administrative Expense



|                                                |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|----------------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                                                |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|                                                |  | 2014               |       |  | 2013 |   |       | % change    |  |  | 2014 |   
|General and administrative expense              |  |                    |       |  |      |   |       |             |  |  |      |   
|Cash expense ($000)                             |  | $                  | 1,371 |  |      | $ | 3,932 |             |  |  | (65  | )%
|per mcfe                                        |  | $                  | 0.11  |  |      | $ | 0.39  |             |  |  | (72  | )%
|Share based compensation ($000)                 |  | $                  | 577   |  |      | $ | 656   |             |  |  | (12  | )%
|per mcfe                                        |  | $                  | 0.05  |  |      | $ | 0.07  |             |  |  | (29  | )%
|Total general and administrative expense ($000) |  | $                  | 1,948 |  |      | $ | 4,588 |             |  |  | (58  | )%
|per mcfe                                        |  | $                  | 0.16  |  |      | $ | 0.46  |             |  |  | (65  | )%
|Employees at December 31                        |  |                    |       |  |      |   |       |             |  |  |      |   



Cash general and administrative (“G&A”)
expense has decreased as significant cost efficiencies were realized with the non-core asset dispositions and termination of the
Technical Services Agreement with Longview on February 1, 2014 whereby Advantage had previously provided the necessary personnel
and technical services to manage Longview's business. Cash G&A in 2013 included one-time costs including retention and staff
rationalization associated with the asset dispositions and costs incurred during Advantage’s strategic alternatives review
process that commenced in early 2013 and was concluded on February 4, 2014.



Advantage Oil & Gas Ltd. - 7







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. Share based compensation for the three months and year ended December
31, 2014 has decreased as a result of staff rationalization. As at December 31, 2014, a total of 5.1 million stock options and
0.4 million performance awards are unexercised which represents only 3.3% of the 10% of Advantage’s total outstanding common
shares which are eligible to be granted to service providers.



Depreciation Expense



|                            |  | Three months ended |        |  |      |   |        | Year ended  |  |  |      |   
|--------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ---- | --
|                            |  | December 31        |        |  |      |   |        | December 31 |  |  |      |   
|                            |  | 2014               |        |  | 2013 |   |        | % change    |  |  | 2014 |   
|Depreciation expense ($000) |  | $                  | 21,329 |  |      | $ | 17,958 |             |  |  | 19   | % 
|per mcfe                    |  | $                  | 1.73   |  |      | $ | 1.80   |             |  |  | (4   | )%



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. Depreciation expense was higher during 2014 due to the continued increase in production at Glacier.
The rate of depreciation expense recognized at Glacier decreased in 2014 as total costs, including future development costs, as
a proportion of total proved and probable reserves declined due to the continued efficiency of production additions. Depreciation
expense per mcfe was modestly lower during the year ended December 31, 2013 as Advantage ceased depreciation of assets held for
sale for the period of January 1, 2013 to April 30, 2013.



Finance Expense



|                             |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|---------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                             |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|                             |  | 2014               |       |  | 2013 |   |       | % change    |  |  | 2014 |   
|Finance expense              |  |                    |       |  |      |   |       |             |  |  |      |   
|Cash expense ($000)          |  | $                  | 2,502 |  |      | $ | 3,174 |             |  |  | (21  | )%
|per mcfe                     |  | $                  | 0.20  |  |      | $ | 0.32  |             |  |  | (38  | )%
|Accretion expense ($000)     |  | $                  | 1,124 |  |      | $ | 1,123 |             |  |  | -    | % 
|per mcfe                     |  | $                  | 0.09  |  |      | $ | 0.11  |             |  |  | (18  | )%
|Total finance expense ($000) |  | $                  | 3,626 |  |      | $ | 4,297 |             |  |  | (16  | )%
|per mcfe                     |  | $                  | 0.29  |  |      | $ | 0.43  |             |  |  | (33  | )%
|                             |  |                    |       |  |      |   |       |             |  |  |      |   
|Bank indebtedness ($000)     |  |                    |       |  |      |   |       |             |  |  |      |   



Cash finance expense from interest on bank
indebtedness and the convertible debenture have decreased compared to 2013, due to the lower average bank indebtedness. Our bank
indebtedness outstanding as at December 31, 2014 was $110.0 million, a decrease of $43.7 million from December 31, 2013. The Corporation’s
interest rates on bank indebtedness have decreased due to the lower debt to cash flow ratios as calculated pursuant to our Credit
Facilities and are primarily based on short term bankers’ acceptance rates plus a stamping fee.



Accretion expense represents non-cash charges
that increase the carrying value of the convertible debenture and decommissioning liability as a result of the passage of time.
The convertible debenture outstanding at December 31, 2014 matured on January 30, 2015, and was settled from the Credit Facilities.
Accretion expense for the year ended December 31, 2014 is lower than 2013 as the decommissioning liability decreased in April 2013
with the closing of non-core asset sales.



Advantage Oil & Gas Ltd. - 8







Other Income (Expense)



|                                                  |  | Three months ended |       |  |      |   |       | Year ended  |  |  |      |   
|------------------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ----------- |  |  | ---- | --
|                                                  |  | December 31        |       |  |      |   |       | December 31 |  |  |      |   
|($000)                                            |  | 2014               |       |  | 2013 |   |       | % change    |  |  | 2014 |   
|Interest income - Questfire Debenture             |  | $                  | -     |  |      | $ | 492   |             |  |  | (100 | )%
|Accretion income - Questfire Debenture            |  |                    | -     |  |      |   | 569   |             |  |  | (100 | )%
|Loss on disposition - Questfire Debenture         |  |                    | -     |  |      |   | -     |             |  |  | -    | % 
|Unrealized gain (loss) - Questfire Class B Shares |  |                    | -     |  |      |   | (750  | )           |  |  | (100 | )%
|Gain (loss) on sale of assets                     |  |                    | -     |  |      |   | 505   |             |  |  | (100 | )%
|Miscellaneous income                              |  |                    | 3,039 |  |      |   | 427   |             |  |  | 612  | % 
|                                                  |  | $                  | 3,039 |  |      | $ | 1,243 |             |  |  | 144  | % 



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 representing the difference from the carrying
value. Advantage also accepted a Questfire offer to purchase by way of issuer bid, all of the Class B Shares at a price of $2.60
per share. Advantage received $3.9 million in the second quarter of 2014 for the Class B Shares and recognized a net gain of $0.2
million. Advantage recognized a loss of $1.5 million in the second quarter related to the finalization of the gain and loss calculations
attributable to non-core asset dispositions that closed in 2013. During the fourth quarter of 2014, Advantage settled a dispute
with a former joint venture partner related to properties which Advantage had disposed. The effect of this settlement resulted
in net funds received by Advantage of $3.0 million.



Taxes



Deferred income taxes arise from differences
between the accounting and tax bases of our assets and liabilities. For the year ended December 31, 2014, the Corporation recognized
a deferred income tax expense of $30.4 million as a result of the $105.0 million income before taxes from continuing operations.
As at December 31, 2014, the Corporation had a deferred income tax liability balance of $33.4 million.



Estimated tax pools at December 31, 2014,
are as follows:



|                                       |  | ($ millions) |      
|-------------------------------------- |  | ------------ | -----
|                                       |  |              |      
|Canadian Development Expenses          |  | $            | 219  
|Canadian Exploration Expenses          |  |              | 66   
|Canadian Oil and Gas Property Expenses |  |              | 3    
|Non-capital losses                     |  |              | 734  
|Capital losses                         |  |              | 158  
|Undepreciated Capital Cost             |  |              | 169  
|Other                                  |  |              | 10   
|                                       |  | $            | 1,359



Advantage Oil & Gas Ltd. - 9









Net Income (Loss) and Comprehensive
Income (Loss) from Continuing Operations



|                                                                                    |  | Three months ended |        |  |      |   |        | Year ended  |  |  |      |   
|----------------------------------------------------------------------------------- |  | ------------------ | ------ |  | ---- | - | ------ | ----------- |  |  | ---- | --
|                                                                                    |  | December 31        |        |  |      |   |        | December 31 |  |  |      |   
|                                                                                    |  | 2014               |        |  | 2013 |   |        | % change    |  |  | 2014 |   
|Net income (loss) and comprehensive income (loss) from continuing operations ($000) |  | $                  | 53,682 |  |      | $ | (6,273 | )           |  |  | (956 | )%
|per share - basic and diluted                                                       |  | $                  | 0.32   |  |      | $ | (0.04  | )           |  |  | (900 | )%



Advantage’s net income from continuing
operations for 2014 has increased significantly as compared to 2013 primarily due to higher funds from operations attributable
to increased Glacier production, stronger natural gas prices and a lower cost structure. All reporting periods were affected by
derivative gains and losses from our ongoing commodity price risk management activities. For the year ended December 31, 2014,
Advantage has recognized total gains on derivatives of $35.2 million as compared to a $3.2 million total loss on derivatives for
the same period of 2013. One-time non-cash losses of approximately $15.2 million were recognized on disposition of Questfire investments
and non-core properties in the first half of 2014.



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, bank indebtedness and convertible debentures. 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                        |  | $                      | 5.2  
|Pipeline/transportation                |  |                        | 119.5
|Bank indebtedness(1)       - principal |  |                        | 110.3
|- interest                             |  |                        | 10.1 
|Convertible debenture (2)  - principal |  |                        | 86.3 
|- interest                             |  |                        | 2.1  
|Total contractual obligations          |  | $                      | 333.5



| | (1) | As at December 31, 2014, 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 2015. 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.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | As at December 31, 2014, Advantage had an $86.2 million convertible debenture outstanding that
was convertible to common shares based on an established conversion price. The convertible debenture matured on January 30, 2015,
and was settled from the Credit Facilities.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, 2014 |            
|---------------------------------------------- |  | ----------------- | -----------
|Bank indebtedness (non-current)                |  | $                 | 109,970    
|Working capital deficit(1)                     |  |                   | 57,264     
|Net debt                                       |  |                   | 167,234    
|Convertible debenture maturity value (current) |  |                   | 86,250     
|Total debt                                     |  | $                 | 253,484    
|Shares outstanding                             |  |                   | 170,067,650
|Shares closing market price ($/share)          |  | $                 | 5.56       
|Market capitalization(2)                       |  | $                 | 945,576    
|                                               |  |                   |            
|Total capitalization                           |  | $                 | 1,199,060  
|                                               |  |                   |            
|Total debt to funds from operations(3)         |  |                   | 1.5        



| | (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, working capital deficit and the convertible debenture maturity
value. Total debt to funds from operations is calculated by dividing total debt by funds from operations.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, convertible
debentures and share capital. Advantage may manage its capital structure by issuing new common shares, repurchasing outstanding
common shares, obtaining additional financing either through bank indebtedness or convertible debenture issuances, refinancing
current debt, issuing other financial or equity-based instruments, declaring a dividend, adjusting capital spending, or disposing
of assets. 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 and has $290 million available on our $400
million credit facility at December 31, 2014. For the year ended December 31, 2015, we will be funding our capital expenditures
from funds from operations and our Credit Facilities, and have estimated that our total debt to trailing funds from operations
ratio will be approximately 2.1 based on a $2.50/GJ natural gas price. We will continue to be very cognizant of maintaining financial
flexibility in the current environment.



Shareholders’ Equity and Convertible
Debentures



As at December 31, 2014, Advantage had
170.1 million common shares outstanding. During 2014, Advantage issued 1.7 million common shares to service providers in exchange
for the exercise of 7.4 million stock options including 5.0 million stock options that vested during 2013 but could not be exercised
due to trading blackout restrictions imposed by the previous strategic review process that was terminated on February 4, 2014.
Additionally, 4.3 million stock options were forfeited/cancelled in 2014 due to staff rationalization associated with the asset
dispositions. For the year ended December 31, 2014, 3.8 million stock options and 0.4 million performance awards were granted to
service providers with a vesting term of three years. As at December 31, 2014, a total of 5.1 million stock options and 0.4 million
performance awards are unexercised which represents only 3.3% of the 10% of Advantage’s total outstanding common shares which
are eligible to be granted to service providers. As at March 25, 2015, Advantage had 170.3 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 (December 31, 2013 - $86.2 million outstanding and convertible to 10.0 million common shares). The convertible
debentures matured on January 30, 2015 and was settled from the Credit Facilities.



Advantage Oil & Gas Ltd. - 11







Bank Indebtedness, Credit Facilities
and Other Obligations



At December 31, 2014, Advantage had bank
indebtedness outstanding of $110.0 million. Bank indebtedness has decreased $43.7 million since December 31, 2013 due to net proceeds
received from the disposition of investments in Longview and Questfire, and strong funds from operations. Advantage’s credit
facilities borrowing base is $400 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. The
next annual review is scheduled to occur in June 2015. 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 deficiency
of $57.3 million as at December 31, 2014, an increase from the prior quarter due to the relatively high level of capital expenditure
activity underway at December 31, 2014. Our working capital includes items expected for normal operations such as trade receivables,
prepaids, 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 continuing 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)                                            |  | 2014               |        |  | 2013        |  
|Drilling, completions and workovers               |  | $                  | 66,144 |  |             | $
|Well equipping and facilities                     |  |                    | 20,292 |  |             |  
|Land and seismic                                  |  |                    | -      |  |             |  
|Expenditures on property, plant and equipment     |  |                    | 86,436 |  |             |  
|Expenditures on exploration and evaluation assets |  |                    | 650    |  |             |  
|Proceeds from property dispositions(1)            |  |                    | -      |  |             |  
|Net capital expenditures(2)                       |  | $                  | 87,086 |  |             | $



(1) Proceeds from property dispositons represents the net cash
proceeds and excludes all other forms of consideration.

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



Advantage invested $233.5 million on property,
plant and equipment at Glacier for the year ended December 31, 2014. We ramped up our capital development program at Glacier in
the third quarter of 2013 resulting in additional production during the first quarter of 2014, and we reached our target of 135
mmcfe/d in March 2014. We have since maintained production between 130 mmcfe/d and 135 mmcfe/d. Enhanced well performance and lower
production declines from wells drilled have exceeded expectations. The last well from our most recent capital program is now not
anticipated to be required to be placed on production until July 2015.



Our most recent capital program consisted
of drilling 33 new Montney wells, and was designed to grow production at Glacier to 183 mmcfe/d including 900 bbls/d of natural
gas liquids by July 2015. Drilling commenced in March 2014 with one rig drilling through spring breakup and then increasing to
three drilling rigs in July 2014. All 33 Montney wells have now been drilled and rig released and 22 of the 33 wells have been
completed and will be available to increase production to our target volume of 183 mmcfe/d in July 2015 and hold production at
that level until the first quarter of 2016. The remaining 11 wells will be completed and brought on production as required in 2016.
First quarter 2015 activity, which consisted of drilling 10 wells and completing 6 wells is included as part of the Corporation’s
2015 capital budget.



Advantage’s 100% owned Glacier gas
plant is currently being expanded with commissioning expected in July 2015. Processing capacity is being expanded to 250 mmcf/d
including 70 mmcf/d of spare capacity to meet future production growth in 2016 and 2017. Additionally, the plant will be capable
of processing varying amounts of dry and liquids rich gas production with the installation of natural gas liquids extraction and
condensate stabilization equipment.



In 2014 Advantage acquired 9 additional
sections of land with Lower Doig/Montney rights in the greater Glacier area. Advantage now holds a total of 129 sections (82,560
acres) of either Lower Doig or Montney rights.



Firm service transportation commitments have been secured to
coincide with Advantage’s 2016 production target of 205 mmcfe/d.



Advantage Oil & Gas Ltd. - 12







Sources and Uses of Funds



The following table summarizes the various
funding requirements during the years ended December 31, 2014 and 2013 and the sources of funding to meet those requirements:



|                                                  |  | Year ended  |        
|------------------------------------------------- |  | ----------- | -------
|                                                  |  | December 31 |        
|($000)                                            |  | 2014        |        
|Sources of funds                                  |  |             |        
|Funds from operations                             |  | $           | 164,010
|Disposition of Longview investment                |  |             | 90,153 
|Disposition of Questfire investments              |  |             | 17,500 
|Change in non-cash working capital and other      |  |             | 7,830  
|Dividends received from Longview                  |  |             | 1,692  
|Property dispositions                             |  |             | -      
|                                                  |  | $           | 281,185
|Uses of funds                                     |  |             |        
|Expenditures on property, plant and equipment     |  | $           | 233,464
|Decrease in bank indebtedness                     |  |             | 44,038 
|Expenditures on exploration and evaluation assets |  |             | 3,237  
|Expenditures on decommissioning liability         |  |             | 446    
|                                                  |  | $           | 281,185



The increased funds from operations combined
with proceeds from the disposition of investments in Longview and Questfire were used to fund capital expenditures and repay a
significant portion of bank indebtedness. Bank indebtedness has been significantly reduced and 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 |        
|                                                                                      |  | 2014(1)     |        
|Production (boe/d)                                                                    |  |             | 5,622  
|Funds from operations ($000)                                                          |  | $           | 9,693  
|Net capital expenditures ($000)                                                       |  | $           | 19,092 
|Net income (loss) and comprehensive income (loss) from discontinued operations ($000) |  | $           | (58,894
|per share - basic and diluted                                                         |  | $           | (0.35  



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



Financial and operating results from Longview
for 2014 are significantly impacted, particularly the reduction in funds from operations, as it only represents 59 days due to
the disposition of Longview on February 28, 2014 as opposed to the 365 days for the year ended December 31, 2013. Advantage has
recognized a consolidated net loss of $58.9 million from the Longview segment during the first quarter of 2014 due to a $58.8 million
loss on disposition as the net proceeds received by Advantage were less than the carrying value of the net assets.



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, 2014 |           |   | Dec. 31, 2013 |   |           | Dec. 31, 2012 | 
|                                           |  |               |           |   |               |   |           |               | 
|Continuing Operations - Advantage          |  |               |           |   |               |   |           |               | 
|Total sales (before royalties) ($000)      |  | $             | 215,653   |   |               | $ | 140,090   |               | 
|Net income (loss) ($000)                   |  | $             | 74,597    |   |               | $ | (8,297    | )             | 
|per share - basic and diluted              |  | $             | 0.44      |   |               | $ | (0.05     | )             | 
|Total assets ($000)                        |  | $             | 1,454,767 |   |               | $ | 1,309,543 |               | 
|Long term financial liabilities ($000) (1) |  | $             | 110,482   |   |               | $ | 236,151   |               | 
|                                           |  |               |           |   |               |   |           |               | 
|Discontinued Operations - Longview         |  |               |           |   |               |   |           |               | 
|Total sales (before royalties) ($000)      |  | $             | 24,715    |   |               | $ | 149,652   |               | 
|Net income (loss) ($000)                   |  | $             | (58,894   | ) |               | $ | 4,915     |               | 
|per share - basic and diluted              |  | $             | (0.35     | ) |               | $ | 0.03      |               | 
|Total assets ($000)                        |  | $             | -         |   |               | $ | 455,701   |               | 
|Long term financial liabilities ($000) (1) |  | $             | -         |   |               | $ | 117,642   |               | 



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



Advantage Oil & Gas Ltd. - 14







Quarterly Performance



|                                          |  | 2014 |         |  | 2013 |  
|----------------------------------------- |  | ---- | ------- |  | ---- | -
|($000,
    except as otherwise indicated) |  | Q4   |         |  | Q3   |  
|                                          |  |      |         |  |      |  
|Continuing Operations
    - Advantage     |  |      |         |  |      |  
|Daily production                          |  |      |         |  |      |  
|Natural gas (mcf/d)                       |  |      | 133,433 |  |      |  
|Liquids (bbls/d)                          |  |      | 113     |  |      |  
|Total (mcfe/d)                            |  |      | 134,111 |  |      |  
|Average prices                            |  |      |         |  |      |  
|Natural gas ($/mcf)                       |  |      |         |  |      |  
|Excluding hedging                         |  | $    | 3.78    |  |      | $
|Including hedging                         |  | $    | 3.72    |  |      | $
|AECO daily                                |  | $    | 3.61    |  |      | $
|Liquids ($/bbl)                           |  |      |         |  |      |  
|Including hedging                         |  | $    | 71.35   |  |      | $
|Edmonton Light ($/bbl)                    |  | $    | 75.54   |  |      | $
|Total sales including realized hedging    |  | $    | 46,409  |  |      | $
|Net income (loss)                         |  | $    | 53,682  |  |      | $
|per share - basic and diluted             |  | $    | 0.32    |  |      | $
|Funds from operations                     |  | $    | 39,182  |  |      | $
|                                          |  |      |         |  |      |  
|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 2014 and also for the preceding seven quarters for both continuing and discontinued operations.
Production during the first quarter of 2013 reflects the last full interim period in which Advantage owned non-core assets. As
of April 30, 2013, the sale of these non-core assets was completed and Advantage was transformed into a pure play Montney producer
with a single focus on development of our Glacier, Alberta area. Accordingly, production was lower from the second to fourth quarters
of 2013. We ramped up our capital development program at Glacier in the third quarter of 2013 resulting in additional production
during the first quarter of 2014, and we reached our target of 135 mmcfe/d in March 2014. Currently, Advantage has an inventory
of 33 wells drilled from our most recent capital program. We have in excess of 185 mmcf/d of first month productivity from 22 completed
wells and a number of older wells which are currently shut-in due to plant capacity constraints. These standing wells will be utilized
to increase production to 183 mmcfe/d in July 2015 and are capable of sustaining production to early 2016. The remaining 11 wells
drilled from our 2014 program will be completed and brought on production as required in 2016.



During the third quarter of 2013, sales
and funds from operations decreased due to significant reductions in AECO prices that impacted the entire Alberta natural gas industry.
Sales and funds from operations increased dramatically in 2014 primarily attributable to improved natural gas prices and production
growth. In 2013, Advantage has reported net losses primarily driven by 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 has resulted in increased total sales including realized hedging, net income
and funds from operations from the second quarter of 2014 to the fourth quarter of 2014.



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, the provision for decommissioning liability costs and related accretion expense and the
fair values initially assigned to the convertible debentures liability and equity components 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, 2014.



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 25, 2015, we do not expect any of the standards issued but not effective
to result in 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, 2014. 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, 2014, 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, 2014. 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, 2014 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) 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) 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
under 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 25, 2015



Advantage Oil & Gas Ltd. - 17