Talon Energy : Annual Report to shareholders

CORPORATE DIRECTORY

DIRECTORS

AUDITORS

Douglas Jendry Non-Executive Chairman

BDO Audit (WA) Pty Ltd

Colby Hauser

Level 9, Mia Yellagonga Tower 2, 5 Spring Street,

Managing Director/CEO

Perth WA 6000

Telephone: [phone]

Matthew Worner Executive Director

David Casey Non-Executive Director

SHARE REGISTRY

Computershare Investor Services Pty Ltd

Level 11, 172 St Georges Terrace

COMPANY SECRETARY David Lim

Perth WA 6000

Lauren Nelson

Australian Telephone: [phone] International Telephone: [phone]www.computershare.com.au

PRINCIPAL PLACE OF BUSINESS AND REGISTERED OFFICE

1202 Hay Street

STOCK EXCHANGE LISTING Australian Securities Exchange

West Perth WA 6005

ASX Code: TPD

Telephone: [phone]

SOLICITORS Steinepreis Paganin

WEBSITEwww.talonenergy.com.au

Level 4, The Read Buildings 16 Milligan Street

Perth WA 6000

CONTENTS

Chairman's Letter 2

Review of Operations 4

Directors' Report 12

Auditor's Independence Declaration 28

Consolidated Statement of Profit or Loss

and Other Comprehensive Income 29

Consolidated Statement of Financial Position 30

Consolidated Statement of Changes in Equity 31

Consolidated Statement of Cash Flows 32

Notes to the Consolidated Financial Statements 33

Directors' Declaration 59

Independent Auditor's Report 60

Shareholder Information 65

Glossary 67

TALON ENERGY LTD WAS

FORMERLY KNOWN AS TALON PETROLEUM LTD

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Dear Shareholder,

The coming year is set to be a pivotal one for Talon as it continues to build on the significant achievements made to date at the Walyering and Gurvantes XXXV projects during 2021.

Throughout last year Talon continued to build on the momentum generated in 2020, which culminated in the successful drilling of the Company's maiden Perth Basin well at the Walyering Gas Project located within EP447 in the Onshore Perth Basin, in which Talon holds a 45% participating interest. The Walyering-5 appraisal well intersected 4 gas charged sands, exceeding pre-drilling expectations, and at the time of writing, Talon's Partner and Operator in the EP447 Joint Venture, Strike Energy Ltd, is preparing to commence flow testing of Walyering-5 to determine the commerciality of the intersected reservoirs, and in a broader sense, the Walyering gas field. Upon positive flow testing, the Joint Venture will look to drill and test the Walyering-6 appraisal well and upgrade the Walyering Resource, as well as advance studies to determine how best to move forward with commercialising the Walyering Gas Project. The project is located in close proximity to the Parmelia Gas Pipeline linking the Onshore Perth Basin to WA's growing industrial gas market.

In addition to the drilling success at Walyering, significant achievements were made during the year at the Gurvantes XXXV Coal Seam Gas Project in Mongolia in which Talon can earn a 33% interest. Key approvals were granted to the Project's Operator, Telmen Resource LLC, including the signing of a Production Sharing Agreement with the Mongolian Government, the grant of a 10-year Exploration Licence and the approval of the Project's Environmental Assessment Study in early 2022, which have paved the way for exploration field work to begin at Gurvantes XXXV. The initial program which consists of 4 fully tested core holes scheduled in the maiden drilling program commenced mid-March with the spudding of the first drill hole, with results from this hole expected in June 2022. The results of this program will be used to assess the coal seam gas potential of the coal resources in the project area. There are several commercialisation options within the emerging Mongolian gas market and the exploration license is adjacent to the one of the world's largest and fastest growing gas markets, in China.

Throughout 2021 Talon continued to pursue its farm out strategy for its UK North Sea licenses. Unfortunately, due to the impact of COVID-19 and the associated downturn in exploration activity in the

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region it proved difficult to get sufficient traction to warrant continued participation in the area. With the Company's increasing focus on its Perth Basin portfolio and the Gurvantes XXXV Project, the Company made the decision to exit it portfolio of UK North Sea licenses.

As a result of the board's decision to withdraw from its UK portfolio, Stephen Jenkins, a highly experienced UK based oil and gas executive retired from the board of Talon in February 2022. On behalf of the board of directors I would like to thank Stephen for his valuable contribution to the Company during his tenure.

In March this year the Company was pleased to appoint Colby Hauser as Talon's new Managing Director and CEO. Colby brings a wealth of experience to the board, having extensive experience in the energy sector and in particular the Perth Basin, and we are delighted to welcome him at this exciting time in the Company's development. Colby replaces David Casey who has transitioned to a non-executive director role with the Company.

I would like to thank shareholders for their continued support over the past year, with 2022 set to be a period of high activity and progress across Talon's portfolio with much to look forward to over the course of the year.

Douglas Jendry Non-Executive Chairman

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