Warrego Energy : Quarterly Report and Appendix 5B

ASX/MEDIA RELEASE

25 January 2021

WARREGO ENERGY LIMITED (ASX: WGO)

ACTIVITY REPORT FOR THE QUARTER ENDED 31 DECEMBER 2020

HIGHLIGHTS

Health, Safety and Environment

• There were no safety or environmental incidents recorded during the quarter

West Erregulla Field Appraisal

• The WE-3 appraisal well, located in the northern area of the field, experienced a series of early-stage operational issues and delays which were successfully resolved.
• Whilst drilling through the upper section of the Carynginia shale, significantly over pressured gas was encountered which could have tested the design limits of the well.
• WE-3was suspended in early January 2021 to allow time for further analysis and engineering and to procure the necessary materials and equipment to return later in the current drilling campaign and resume drilling to the target reservoirs.
• To maximise efficiencies, the drilling rig has been moved to the WE-4 location.

West Erregulla Field Development

• Warrego and JV partner Strike Energy Limited (Strike) executed a binding Heads of Agreement (HOA) in October 2020 to jointly develop the West Erregulla gas field.
• Warrego's large scale, 155 PJ long-term gas sales agreement with Alcoa underpinned the development case and Phase 1 plant capacity was upsized to 80 TJ/d.
• AGIG confirmed as the preferred proponent to build, own and operate the processing facility and a supplemental FEED study is underway to address the revised 80 TJ/d scope.
• Field development plan agreed and WE-5 added to the current drilling program
• Gas balancing arrangements in place to align both JV partners with respect to the different volumes and commencement dates of their foundation gas sales agreements.
• The JV will continue to pursue gas sale opportunities for the remaining small volume still available in the Phase 1 development (further gas sales are not needed for Phase 1 FID).
• JV partners are currently pursuing project financing for the construction of Phase 1 on a co- ordinated basis and are in discussion with a number of domestic and international banks.

Corporate & Financial

• Warrego successfully completed a capital raising at A$0.21 per share, via a two-tranche placement and a SPP, that raised A$32.8 million.
• Consolidated cash at 31 December 2020 was $33,664,000. The company is funded for the WE-4 and WE-5 wells as per the joint venture agreed budget.
• At year end, Warrego's institutional shareholding had increased to 11.5%. The stakes of the Company's founders, Duncan MacNiven and Dennis Donald, have been diluted from 39.8% to 30.3%, substantially improving liquidity.
• Mr Jani Surjan, Perth-based Group Financial Controller, was appointed as Chief Financial Officer effective 1 December 2020.

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WESTERN AUSTRALIA

EP469 (50%) West Erregulla Gas Fields

Exploration Permit located onshore North Perth Basin, Western Australia, targeting conventional gas reservoirs

Figure 1. EP469 location in the context of neighbouring permits and fields including Waitsia and Beharra Springs.

West Erregulla Field Appraisal Campaign Update

During the quarter, the Operator progressed appraisal drilling operations at WE-3. As a result of bottom hole assembly losses and fishing operations, subsequent side-tracking operations and an issue with a slip and sealing assembly, the WE-3 well experienced significant delays early in the program. Warrego's Perth based team worked closely with the Operator to improve operational performance.

The well encountered geological formations on prognosis and consistent hydrocarbon shows were observed throughout the Dongara and upper Wagina sandstones as expected. Whilst drilling through the upper section of the Carynginia shale over pressured gas was encountered.

The unexpected presence of the Carynginia over-pressures had the potential to exceed the design limits of the well. In order to safely drill ahead to the target reservoirs, the Joint Venture considered that additional well engineering, materials procurement and equipment would be required. The Joint Venture therefore decided to temporarily suspend WE-3 and move the rig to the already prepared site at WE-4 whilst the necessary processes are completed in order to re-enter and subsequently resume drilling WE-3 during the current campaign. The joint venture has yet to decide the sequencing of drilling WE-5 and the WE-3 completion post WE-4.

The presence of gas in the Dongara, Wagina and Carynginia is a positive result and the Joint Venture continues to consider the implications of the geological data acquired at WE-3.

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Figure 2. EP469 location of the already completed WE-2 well and the WE-3,WE-4 and WE-5 appraisal wells.

West Erregulla Field Development

Warrego and Strike executed a binding HoA in October 2020 to ensure both parties are aligned on the development of the West Erregulla gas field. The HoA provides an agreed pathway for the development of West Erregulla including:

• Gas processing and the necessary plant capacity for Phase 1;
• Gas balancing and gas sales arrangements to align the interests of both Joint Venture partners with respect to the difference in total contracted volumes and contract commencement dates for each Joint Venturers' foundation gas sales agreement; and
• A Phase 1 capacity of 80 TJ/d delivered to the Dampier to Bunbury Natural Gas Pipeline (DBNGP).
• Agreement to proceed to Phase 2 development subject to market and feasibility study results.

The Australian Gas Infrastructure Group (AGIG) remains the preferred proponent to build, own and operate the facility and is expected to complete a supplementary FEED study for an 80 TJ/d plant during Q1 CY2021. During the quarter, the JV made significant progress on the agreements for the construction of the gas plant and associated gas processing agreement. Work on the requirements for JV funded infrastructure also progressed.

The Joint Venture partners plan to seek financing for the construction of the Phase 1 development on a co-ordinated basis with the expectation of generating superior financing outcomes by following this process.

The Joint Venture is now targeting FID within H1 CY2021 subject to the drilling, testing and evaluation of the WE-4 and possibly the WE-3 or WE-5 appraisal wells depending on the well sequence. The target date for first gas sales from West Erregulla is now expected in H2 CY2022. Although additional gas sales are not required to support FID, the Joint Venture continues to market the remaining gas and capacity to optimise the development.

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Production Licence

Work in preparation for conversion of EP469 to a Production Licence (PL) progressed and Warrego and Strike have agreed to lodge the Production Licence application once FID is taken for the development of the field.

STP-EPA-0127 (100%, Operator)

A 2.2 million acre permit application located onshore Coolcalalaya Perth Basin, Western Australia, targeting conventional gas reservoirs

Native Title negotiations progressing

Discussions with Native Title groups are ongoing. Conclusion of Native Title negotiations are the final step before the Exploration Permit can be issued by DMIRS.

At 2.2 million acres (8,700 km2), this will be the largest exploration permit located onshore Western Australia.

The permit area is 130 km north of Waitsia and West Erregulla and while very under-explored at this stage, is targeting similar conventional Permian sequences to those encountered at West Erregulla and Waitsia, as well as having potential deeper Devonian prospectivity.

CADIZ REGION, SPAIN

TESORILLO PROJECT (85% ownership of Operator and permits)

Targeting conventional sandstone gas reservoirs in 94,000 acres in Southern Spain. Tesorillo is estimated to contain 830 BCF gross unrisked prospective resources on a best estimate basis1.

Operations

During the quarter, Warrego's UK team continued to work with various government agencies to progress drilling approvals and permitting. There are no financial or drilling commitments attached to the permit.

1. The Contingent and Prospective Resource estimates for the Tesorillo asset referred to were first released to the ASX by the Company on

1. May 2015.

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