Warrego Energy : Quarterly Report and Appendix 5B

ASX/MEDIA RELEASE

21 April 2021

WARREGO ENERGY LIMITED (ASX: WGO)

ACTIVITY REPORT FOR THE QUARTER ENDED 31 MARCH 2021

HIGHLIGHTS

Corporate and Financial

• Consolidated cash at 31 March 2021 was $23,977,000. The Company is sufficiently funded for the WE-4 and WE-5 wells as per the joint venture agreed budget.
• Warrego is in advanced discussions with a number of domestic and international banks to secure a project finance facility of up to $75 million to fund its 50% share of the Phase 1 development of the West Erregulla field. It is expected that a banking "club" will be formed by the end of May 2021.

EP469 West Erregulla Field Appraisal

• WE-4spudded in January 2021 and encountered formations on prognosis. Drilling performance improved substantially on a time and cost basis compared to WE-2 and WE-3.
• The top of the high-quality section of the primary target, the Kingia Porous Sandstone, was intersected at 4,971m MDRT. A 45m core was obtained from the Kingia, with gas shows observed during coring operations.
• Material results from WE-4 include a thicker 155m Kingia interval, reservoir pressure of 6,821 psia at 4,898m MDRT, and a deepening of the lowest known gas increasing the areal extent of the West Erregulla field.
• WE-4reached TD at 5,069m MDRT in April and, after successful logging and coring operations across both the Kingia and High Cliff sandstones, the well has been cased and completed for future production. The rig is now being moved to the WE-5 site.
• A full well testing program will be undertaken at WE-4 in early May to test well deliverability and productivity.

EP469 West Erregulla Field Development

• The Australian Gas Infrastructure Group ('AGIG') is nearing finalisation of a supplemental FEED study to address the revised 80 TJ/d gas plant scope and the Joint Venture ('JV') is in advanced negotiations with AGIG for the provision of gas processing services utilising the proposed gas processing facility.
• The JV partners are nearing finalisation of FEED for the gathering system and upstream gathering compound which will transport gas from the West Erregulla wells to the AGIG gas processing plant.
• The JV will integrate the results of the WE-4 well into its reservoir modelling for the West Erregulla Field and will undertake an updated independent reserves assessment.

STP-EPA-0127 Northern Perth Basin exploration

• Warrego, as Operator, is preparing a conventional work program for the exploration phase. Proposed exploration activities will target multiple similar conventional Permian sequences to those encountered at West Erregulla and Waitsia, as well as investigating the full potential of deeper and older hydrocarbon prospectivity.

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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

WE-3 Well Operations

The WE-3 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. Given that this over-pressured gas had the potential to exceed the design limits of the well the Joint Venture considered that additional well engineering, materials procurement and equipment would be required in order to safely drill ahead. The Joint Venture therefore decided to suspend the WE-3 well and move the rig to WE-4.

The Joint Venture is currently undertaking further technical analysis on WE-3 to assess re-entry options for this well.

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WE-4 Well Operations

Drilling operations commenced at WE-4 on 24 January 2021. Drilling progressed efficiently and on budget. The secondary targets of the Dongara and Wagina sandstones were encountered on prognosis and wireline logging undertaken over the combined Dongara and Wagina intervals revealed lower overall permeability than the analogous WE-2 well. Whilst Warrego's preliminary view is that these secondary reservoirs are 'tight' as was the case with the WE-2 well, the Joint Venture is continuing to review the data.

Drilling operations continued through to the Primary Target of the Permian Kingia Porous Sandstone which was intersected at 4,871m MDRT with gas shows throughout the entire sandstone interval of 155m. Coring of a target 45m interval of the Kingia Sandstone was then completed with gas shows observed during coring operations.

Subsequent to quarter end after drilling through the Kingia Sandstone, the Bit Basher Shale and the High Cliff Sandstone, the well reached TD at 5,069m MDRT in the Holmwood Shale. Logging, coring and casing operations in both the Kingia and the High Cliff were successfully completed.

The overall results of the well are promising given the down dip location of the WE-4 well on the West Erregulla structure. Reservoir pressure in the Kingia was recorded at approximately 6,821 psia at 4,898m MDRT. These pressure results lie on the same gas gradient as the results of the WE-2 well indicating connectivity within the field. This is interpreted to have deepened the lowest known gas for the Kingia and extends the areal extent of the West Erregulla field.

The High Cliff Sandstone appears to be thinner than what was observed at WE-2 although this is offset by the overall extension of the field. Coring of an 18m interval over the High Cliff Sandstone was undertaken with initial results expected later in April.

The WE-4 well drilling performance was significantly improved in both time and cost over the drilling performance of each of WE-2 and WE-3. Following the completion of drilling operations at WE-4, the rig will move to WE-5 whilst a well testing program is completed at WE-4.

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

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West Erregulla Field Development

Warrego is continuing to progress a joint venture aligned 80 TJ/d development of the West Erregulla Field with a Final Investment Decision expected in 2021.

Warrego is in advanced discussions with a number of domestic and international banks to secure a project financing facility of up to $75 million to provide funding for its 50% share of the Phase 1 development of the West Erregulla field. Warrego's financing is to be underpinned by the substantial 155 PJ long term gas contract Warrego secured with Alcoa in 2020 and it is expected that a banking "club" will be formed by 30 May 2021.

AGIG is the preferred proponent to build, own and operate the facility and the FEED study for the revised 80 TJ/day gas plant is expected to be completed by AGIG in April 2021. Negotiations with AGIG to agree terms for the construction of the gas plant and for associated gas processing services are nearing completion.

Work on Joint Venture funded upstream infrastructure is also progressing and the Joint Venture is nearing finalisation of FEED for the gathering system and upstream gathering compound which will transport gas from the West Erregulla Field to the AGIG gas processing plant.

Warrego's gas sale to Alcoa will utilise almost 70% of the processing capacity of the gas plant. This production quantity is far in excess of Warrego's 50% participating interest share and necessitated the Joint Venture putting gas balancing arrangements in place to enable Warrego to overlift significantly to meet its sales commitments to Alcoa. The gas balancing arrangements will also enable Warrego's joint venture partner to overlift in the short period prior to Warrego's foundation GSA commencing in January 2024. The Joint Venture is also continuing to pursue smaller gas sale opportunities for the residual volumes available for the Phase 1 development.

The Joint Venture will also integrate the results of the WE-4 well into its reservoir modelling for the West Erregulla Field and will undertake an updated independent reserves assessment.

STP-EPA-0127 (100%, Operator) North Perth Basin

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

Native Title negotiations and Permit Grant progressing

At 2.2 million acres (8,700 km2), EPA-0127 is the largest exploration permit located onshore Western Australia. The permit area is 130 km north of the Waitsia and West Erregulla fields and is in the Coolcalalaya Sub-basin.Pre-permit grant technical assessment undertaken this quarter has been encouraging regarding preliminary identification of geological features favourable for potential hydrocarbon capture.

Figure 3. STP-EPA-0127 location in relation to EP469 and neighbouring fields.

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Figure 4. STP-EPA-0127 Basin Structure and large potential traps include Permian sequences similar to those encountered at West Erregulla and Waitsia.

A draft conventional work program for stakeholder engagement, environmental and heritage assessment and exploration activity is being developed for approval by DMIRS. The work program addresses technical studies and operational activities for a six-year exploration phase. The proposed exploration activities are planned to target similar conventional Permian sequences to those encountered at West Erregulla and Waitsia, as well as investigating the full potential of deeper and older hydrocarbon prospectivity. Stakeholder, environmental and heritage requirements are also being assessed and incorporated into the forward work program. Negotiations with Native Title groups are productively progressing as the final step before the exploration permit can be issued by DMIRS.

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 7 May 2015.

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