Permex Petroleum : For the year ended September 30, 2021

FORM 51-102F1

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30, 2021

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") has been prepared by the management of Permex Petroleum Corporation ("Permex" or the "Company") as of January 28, 2022, and should be read in conjunction with the audited consolidated financial statements of the Company together with the related notes thereto for the year ended September 30, 2021. The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All amounts are stated in Canadian dollars unless otherwise indicated.

Additional information related to the Company and its operations is available on SEDAR at www.sedar.comand on the Company web site at www.permexpetroleum.com.

FORWARD-LOOKING STATEMENTS

This MD&A contains certain forward‐looking information and statements. The use of any of the words "target", "plans", "anticipate", "continue", "estimate", "intends", "expect", "may", "will", "project", "should", "believe", "potential", and similar expressions are intended to identify forward-looking information. Forward-looking information is based on management's current expectations and projections about its future results. Forward-looking statements are statements that are not historical facts, and include, but are not limited to, estimates and their underlying assumptions; statements regarding the Company's plans, objectives and expectations with respect to future operations, the production of oil and gas from the Company's properties, the potential acquisition of additional properties, capital raising initiatives, the impact of industry and macroeconomic factors on the Company's operations, and market opportunities; and statements regarding future performance.

Forward-looking statements used in this MD&A are subject to various risks, uncertainties and other factors, most of which are difficult to predict and are generally beyond the control of the Company. These risks, uncertainties and other factors may include, but are not limited to, those set forth under "Risks and Uncertainties" below.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this MD&A or as of the date otherwise specifically indicated herein. Due to risks, uncertainties and other factors, including the risks, uncertainties and other factors identified above and elsewhere in this MD&A, actual events may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

COMPANY OVERVIEW

Permex was incorporated on April 24, 2017 under the laws of British Columbia, Canada. The Company is primarily engaged in the acquisition, development and production of oil and gas properties in North America. The Company focuses on acquiring producing assets at a discount to market, increasing production and cash-flow through recompletion and re-entries, secondary recovery and low risk infill drilling and development. Currently, Permex owns and operates various oil and gas properties located in Texas and New Mexico, USA. The Company also holds

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various royalty interests in 73 wells and 5 permitted wells across 3,800 acres within the Permian Basin of West Texas and southeast New Mexico.

The Company's common shares are listed on the Canadian Securities Exchange (the "CSE") under the symbol "OIL" and on the OTCQB under the symbol "OILCF".

Key activities:

• In December 2020, the Company entered into an agreement to sell its interests in ODC San Andres Unit and W.J. "A" Taylor leases for US$1,215,769.
• On February 4, 2021, the Company announced the purchase of various royalty interests in 10 producing horizontal oil and natural gas wells and one permitted well located in Upton County, Texas.
• On February 24, 2021, the Company announced the purchase of royalty interests in 15 producing horizontal oil and natural gas wells located in Atascosa and La Salle Counties, Texas.
• On March 16, 2021, the Company announced the expansion of its royalty acquisitions program by purchasing royalty interests in 5 producing horizontal oil and natural gas wells plus four permitted wells located in Lea County, New Mexico.
• On April 20, 2021, the Company announced an acquisition of additional royalty interests in 11 producing horizontal oil and gas wells located in Midland, Texas.
• On May 5, 2021, the Company announced that it has submitted an application to the Depository Trust Company ("DTC") for its shares being traded on the OTC Markets. The Company expects to be fully DTC eligible in the second half of 2021.
• On June 23, 2021, the Company announced an acquisition of additional royalty interests in 29 producing oil and gas wells located in Permian Basin of west Texas.
• On September 30, 2021, the Company, through its wholly-owned subsidiary, Permex Petroleum US Corporation, acquired 100% Working Interest and 81.75% Net Revenue Interest in the Breedlove "B" Clearfork leases located in Martin County, Texas. The purchase price is US$2,000,000 payable in 25,000,000 common shares of the company and 12,500,000 share purchase warrants. The share purchase warrants have an exercise price $0.20 per share and are exercisable until October 1, 2031.
• On October 12, 2021, the Company announced the appointment of John Perry ("J.P.") Bryan, Jr. and John James ("Jay") Lendrum, III to its Board of Directors.
• On November 4, 2021, the Company completed a non-brokered private placement of 2,647,037 units at a price of $0.27 per unit for gross proceeds of $714,700. Each unit is comprised of one common share and one half of share purchase warrant; each whole warrant entitles the holder to acquire one additional common share for a period of 24 months at an exercise price of $0.54.

Impact of Covid-19

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds at this time. The Company is closely monitoring developments and adapting its business plans accordingly.

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Given the stability and recovery in oil prices, management began bringing its previously shut in wellbores back online. Currently the Pittcock North and Mary Bullard fields are back in production with anticipated increase in production to occur in the months to come as management adds to the number of producing wellbores on each field. The Henshaw Property was also reviewed for re-entry and stimulation of its wells, with an expected production start month of September. Management anticipates a comprehensive stimulation and re-entry program on the Breedlove Clearfork wellbores next quarter.

OIL AND GAS PROPERTIES

The following table shows a summary of the Company's reserves as at September 30, 2021 and September 30, 2020 which have been derived from the independent appraisal reports prepared by MKM Engineering using standard engineering practices generally accepted by the petroleum industry and conform to those classifications defined in the Canadian Oil and Gas Evaluation Handbook ("COGEH").

	September 30,	Change	September 30,
Net After Royalties (BOE)	2021	(%)	2020
Estimated Proved Reserves	8,658,615	+82%	4,750,120
Estimated Probable Reserves	15,645,755	+223%	4,841,298
Total Proved and Probable	24,304,370	+153%	9,591,418

Breedlove "B" Clearfork Leases - Texas

The Breedlove "B" Clearfork properties situated in Martin County, Texas are over 12 contiguous sections for a total of 7,870.23 Gross and 7,741.67 Net acres, of which 98% is held by production ("HBP") in the core of the Permian Basin. There is a total of 25 vertical wells of which 12 are producers, 4 are saltwater disposal wells ("SWD") and 9 that are shut-in opportunities.

Permex holds a 100% working interest and an 81.75% net revenue interest in the Breedlove "B" Clearfork Property.

Pittcock Leases - Texas

The Pittcock Leases are situated in Stonewall County. Stonewall County is in Northwest Texas, in the central part of the North Central Plains and consist of the Pittcock North property, the Pittcock South property and the Windy Jones Property.

The Pittcock North property covers 320 acres held by production. There is currently one producing well, ten shut-in wells, two saltwater disposal wells, and a water supply well. Permex holds a 100% working interest in the Pittcock North Property, and an 81.25% net revenue interest.

The Pittcock South property covers 498 acres in four tracts. There are currently 19 shut-in wells and two saltwater disposal wells. Permex holds a 100% working interest in the lease, and a 71.90% net revenue interest.

The Windy Jones Property consists of forty acres and includes two injection wells and two suspended oil wells. The sole purpose of the Windy Jones property is to provide waterflood to the offset wells being the Pittcock wells located east boundary of the Windy Jones property. Permex holds a 100% working interest in the Windy Jones Property, and a 78.9% net revenue interest.

Mary Bullard Property - Texas

The Mary Bullard Property is located in Stonewall County, about 5 ½ miles south west of Aspermont, Texas. The asset is situated on the Eastern Shelf of the Midland Basin in the central part of the North Central Plains. The Mary

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Bullard Property covers 241 acres held by production and is productive in the Clearfork formation at a depth of approximately 3,200 feet. There is currently one producing well, four shut-in wells, and two water injection wells. Permex holds a 100% working interest in the Mary Bullard Property, and a 78.625% net revenue interest.

West Henshaw Property and Oxy Yates Property - New Mexico

The West Henshaw Property is located in Eddy County, New Mexico, 12 miles northeast of Loco Hills in the Delaware basin. Eddy County is in Southeast New Mexico. It is bounded by Chaves County to the north, Otero County to the east, Loving County, Texas to the south, and Lea County to the west. The West Henshaw Property covers 1,880 acres held by production. There are nine shut-in wells and four saltwater disposal wells. Permex holds a 100% working interest in the West Henshaw Property, and a 72% net revenue interest.

The Oxy Yates Property is located in Eddy County, approximately eight miles north of Carlsbad, New Mexico in the Delaware Basin. The Oxy Yates Property covers 680 acres held by production. There is one producing well and nine shut-in wells. The Yates formation is located at an average depth of 1,200 feet and overlies the Seven River formation and underlies the Tansill formation. Permex holds a 100% working interest in the Oxy Yates Property, and a 77% net revenue interest.

SELECTED ANNUAL INFORMATION

The following table sets out selected financial information for the Company which has been derived from the Company's audited financial statements for the fiscal years ended September 30, 2021, 2020 and 2019.

	Fiscal 2021 ($)	Fiscal 2020 ($)	Fiscal 2019 ($)
Revenues	106,891	917,724	1,606,817
Net income (loss)	(1,587,954)	(1,688,702)	(885,184)
Net loss (loss) per share - basic and
diluted	(0.04)	(0.04)	(0.02)
Total assets	10,373,598	9,332,150	10,304,918
Total non-current liabilities	2,143,540	1,231,040	3,155,623
Dividends	-	-	-

Factors That Affect the Comparability of the Annual Financial Data Disclosed Above

Net losses for the years ended September 30, 2021, 2020 and 2019 were mainly attributable to general administrative expenses (2021 - $751,138, 2020 - $674,384, 2019 - $1,246,637) and loss on impairment/sale of properties (2021 - $776,528, 2020 - $1,181,545, 2019 - $323,656). The decrease in revenue in fiscal 2021 and 2020 is due to the significant decline in oil prices in the middle of the fiscal 2020. Oil production on all the Company's properties were shut down for four months in fiscal 2020. The Company sold its interest in ODC San Andres Unit and W.J. "A" Taylor leases in October 2020. All other oil and gas wells remained shut down until May 2021. The increase in total assets in fiscal 2021 is due to the acquisition of Breedlove "B" Clearfork properties. The decrease in non-current liabilities in fiscal 2020 is due to the reclassification of decommissioning obligations related to ODC San Andres Unit and W.J. "A" Taylor leases to current liabilities held for sale. The increase in non-current liabilities in fiscal 2021 is due to the recognition of decommissioning obligations related to the newly acquired Breedlove "B" Clearfork properties.

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DISCUSSION OF OPERATIONS

During the year ended September 30, 2021, the Company reported a net loss of $1,587,954 as compared to a net loss of $1,688,702 for the year ended September 30, 2020. Revenue from oil and gas production decreased 94% to $59,109 (2020 - $917,724). The decrease is the result of the sale of ODC San Andres Unit and W.J. "A" Taylor leases in October 2020 and the complete shut down of production from July 2020 in response to the steep decline in oil price. During the last six months, the Company has been working to bring the Pittcock North, Mary Bullard and Henshaw properties back online. The Pittcock North and Mary Bullard wells generated the first oil sales in June 2021. The royalty income of $47,782 (2020 - $nil) is generated from royalty interests acquired in early 2021. The Company has acquired royalty interests in 88 wells located in Texas and New Mexico for a total investment of US$179,095.

The general administrative expenses excluding depletion and depreciation and share-based payment expenses for the ended September 30, 2021 were $627,893 (2020 - $601,464) and were generally consistent with fiscal 2020. Some of the significant expense items are summarized as follows:

• Accounting and audit of $98,634 (2020 - $89,664) include audit, accounting, and tax compliance related costs.
• Filing and transfer agent of $69,379 (2020 - $37,530) have increased from the prior period mainly due to the DTC application fee of $21,879.
• Investor relations and news dissemination of $91,387 (2020 - $61,142) relate investor communications, including maintaining and updating the website and disseminating news releases.
• Management fees of $189,628 (2020 - $193,936) relate to fees to the Company's Chief Executive Officer ("CEO"). The Company has entered into an employment contract with the CEO for a monthly base salary of US$12,500. Effective October 1, 2021, the monthly base salary has been increased to US$16,667 (US$200,000 annually).

Share-based compensation expenses of $3,633 (2020 - $5,612), a non-cash charge, are the estimated fair value of the stock options granted and vested during the period. The Company used the Black-Scholes option pricing model for the fair value calculation.

During the year ended September 30, 2021, the Company assessed an impairment loss of $776,528 on the Peavy leases and office equipment (2020 - $1,181,545 on the ODC and Taylor leases). The Company also realized a loss of $63,500 (2020 - $Nil) on forfeiture of reclamation deposit.

SUMMARY OF QUARTERLY RESULTS

The following table sets forth selected unaudited financial information for the Company's eight most recent quarters ending with the last quarter for the three month period ended September 30, 2021.

			For the Three Months Ended
		Fiscal 2021			Fiscal 2020
	Sept. 30,	Jun. 30,	Mar. 31,	Dec. 31,	Sept. 30,	Jun. 30,	Mar. 31,	Dec. 31,
	2021	2021	2021	2020	2020	2020	2020	2019
	($)	($)	($)	($)	($)	($)	($)	($)
Total revenues	59,556	43,368	-	3,967	180,286	98,339	267,932	371,167
Net income (loss)	(994,464)	(191,867)	(253,860)	(147,763)	(1,449,834)	(178,088)	(64,888)	4,108
Earnings (loss) per	(0.02)	(0.01)	(0.01)	(0.00)	(0.04)	(0.00)	(0.00)	0.00
share - basic and diluted

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