Talon Energy : March 2022 Quarterly Activity and Cash Flow Reports

ASX Announcement 29 April 2022

ASX: TPD

Quarterly Activity Report

for the Period Ending

31 March 2022

•  Flow testing of the Walyering-5 well commenced at Talon's 45% owned Walyering Convention Gas Project located in the Perth Basin, with initial flow rates exceeding expectations

•  Second Well confirmed for the Walyering gas field with drilling commenced

•  Maiden drilling campaign commences at the Gurvantes XXXV CSG Project, with the first drill hole, Snow Leopard-1, intersecting gassy coal seams

•  Experienced energy sector executive, Colby Hauser, appointed Talon's new Managing Director/CEO

Talon Energy Ltd ("Talon" or "Company") is pleased to provide its Quarterly Activity Report for the quarter ending 31 March 2022.

Talon's Managing Director, Colby Hauser, commented: "The March Quarter has been a period of exciting exploration and appraisal activities, with work at the Walyering and Gurvantes XXXV projects accelerating during the period. Activities currently underway at both projects are expected to result in an upgrade to the Company's Resource categorisation at these projects, with the Company also expecting to book its Maiden Gas Reserve at the Walyering Project in the Perth Basin given the successful flow testing of Walyering-5 currently underway.

The Joint Venture's confidence at Walyering has resulted in both Talon and Strike Energy agreeing to drill a second well, Walyering-6, at the Project which commenced drilling in April."

PERTH BASIN, WESTERN AUSTRALIA

EP447: Walyering Convention Gas Project (45%), Strike Energy Limited (STX) (55%)

Subsequent to the gas discovery in December of last year by the

Walyering-5 well, reservoir appraisal work continued duing the March Quarter to prove up commercial quantities of gas as Talon, and its Joint Venture Partner at Walyering, Strike Energy Limited, undertook key field appraisal and development activities in order to progress the Project to commercial production as soon as possible.

Following preparatory work undertaken over the March Quarter, the Joint Venture is currently flow testing the intersected 4 reservoirs with the aim of determining both the commerciality of these reservoirs and upgrading of the Project's existing Prospective Resource to the Contingent category, and further, allow Talon to book its Maiden Gas Reserve. RISC Advisory has been engaged to undertake an independent assessment of the Walyering Gas Field's Reserves and Resource inventory.

Flow test results to date have been excellent and have exceeded expectations. The interim test results are set out in Table 1 below and are subject to adjustment once bottom hole gauges are retrieved at the end of the full testing program.

Figure 1 - flaring gas at surface on during D Sand testing

Table 1: Interim Walerying-5 flow test results

Reservoir	Interval Top TVDss (- m)	Average Porosity (%)	Perf interval (m)	Estimated Reservoir Pressure (psi)	Instantan- eous Peak Rate (mmscfd)	Stabilised Rate (mmscfd)	Choke Setting	FWHP (psi)	Length of Test (hrs)
D Sand	3,212	13.9	18	4,655	13	10	48/64	813	>24
C Sand	3,154	16.4	10	4,850	32	27	48/64	2083	>24
B Sand	3,045	14.5	23	n/a	33	Yet to be finalised
A Sand	2,969	17.3	Yet to be tested

To date, flow test rates are indicative of good hydrocarbon saturation and reservoir quality. Gas quality is excellent with minimal impurities, with light oil quality liquids (34-45 API) and condensate gas ratio of ~4-6bbls/mmscf.

Walyering-6

As part of its strategy to commercialise the Walyering gas field the Joint Venture partners have commenced drilling a second well, Walyering-6, on EP447, north of the successful Walyering-5 well utilising Ensign 970, the same rig which drilled the Walyering-5 well.

The well is currently drilling ahead, with a planned total depth of 3,054m MD and is expected to intersect the A and D sands as seen in the Walyering-5 well.

Development Activities

The Walyering gas field is located proximate to the existing Parmelia Gas Pipeline (PGP), which transmits gas from the Perth Basin to a range of end users. Preliminary gas sampling results to date indicate that gas from the intersected reservoirs is within specifications for the Parmelia Gas Pipeline and is therefore expected to require minimal processing before entering the pipeline.

The Walyering Project presents a low capital and fast to market development opportunity for the Joint Venture

due to the following factors:

Figure 2 - Proposed location of Walyering-6 and pipeline tie in

• 1. Proximity to the PGP which links the Walyering to WA's industrial gas market

• 2. Gas composition within PGP specification

• 3. Reservoir pressure measured (D Sands) at 5x operating pressure of PGP

• 4. Analysed gas samples indicate very low impurities (H2S, Nitrogen & CO2)

• 5. Location of gas field on freehold farming land

In addition to its proximity to the PGP, the simple profile of the Walyering gas accumulation is expected to result in low capital expenditure required for downstream infrastructure between the wellhead and PGP tie in. The Joint Venture has awarded the front-end engineering and detailed design contract for the facilities at Walyering to Momentum Engineering. These facilities will be designed for up to 30mmscf/d, which the Operator, Strike, estimates may produce up to 36TJ/d (up to 16.2TJ/d net to Talon) and have liquids storage and offloading capacity for up to 1,400bbls.

Condor (option to acquire 100%)

The Condor Structure has been mapped by Talon as the Perth Basin's largest, untested wet gas structure within conventional Jurassic reservoirs.

During 2021, Talon completed an Airborne Electromagnetic, Transient Pulse (AEM-PTP) survey over the Condor Structure on SPA-0081, and which extends into EP494 in the Perth Basin, and owned by the Macallum Group Limited

(MGL). The Company will use the data acquired during the AEM-PTP survey to better delineate the Condor Structure, and to help plan the next stage of exploration work for the Prospect. The acquisition of the AEM-PTP survey satisfied the work program requirement for SPA-0081, and provides Talon with an option to convert, in due course, to a longer tenure Exploration Permit, with Talon continuing to work alongside MGL in this regard. Over the March Quarter, Talon and MGL progressed with planning for an initial Geochem survey over the Condor area, which would be the precursor for a broader seismic acquisition program.

Table 3: Condor Structure Resource estimate

Condor Structure Un-risked Prospective Resource

Talon - 100%

Low (P90)	Best (P50)	High(P10)
Permit	Condensate	Gas	Condensate	Gas	Condensate	Gas
(MMbbl)	(Bcf)	(MMbbl)	(Bcf)	(MMbbl)	(Bcf)
EP494	9.5	202	20.2	408	39	710

Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. For more information on the above Prospective Resources, refer to ASX announcement dated 17 March 2021. Talon confirms that it is not aware of any new information or data that materially effects the information contained in that Announcement and that all material assumptions and technical parameters underpinning the estimates contained in that Announcement have not materially changed.

The success of the recently drilled Walyering-5 well at the Walyering Gas Project on EP447 is expected to have positive implications for Condor, with both plays targeting conventional Jurassic age reservoirs. In Talon's view, the success at Walyering-5 has resulted in a material upgrade to the Resource potential of Condor. Of significance for Condor, the reservoirs could be up to 1,500m shallower than at Walyering with the beneficial effect being both improved reservoir quality and reduced drilling and completion costs. Condor's moderate drill costs, expected low CO2 and proximity to key transport and pipeline infrastructure, mean that it is ideally placed for commercial development in the event of exploration success.

EP 495 - Ocean Hill (First Right of Refusal)

In addition to Walyering and Condor, Talon also has a Right of First Refusal over an interest in EP495 (currently owned by Strike Energy Ltd, Talon's JV Partner at Walyering), which contains the Ocean Hill conventional Jurassic gas discovery.

Ocean Hill is located approximately 250km north of Perth in the Onshore Perth Basin, in proximity to existing gas transmission pipelines, with a compressor station within 6.5kms from Ocean Hill.

The Cattamarra Coal Measures source rocks have been interpreted to be in the oil and gas bearing window in the Dandaragan Trough. The source rocks have been interpreted as having generated their hydrocarbons during the early Cretaceous period after the disposition of the Yarragadee Formation.

Ocean Hill-1, the only well on EP495, was drilled in 1991 to a total depth of 3,838m. Ocean Hill currently has an existing gross 2C Contingent Resource of 360Bcf (Gas) and 1.18mmbls (Condensate)1.

Talon and Strike are currently in negotiations regarding a

transaction for Talon to farm into EP495. Should a farm-in arrangement be reached, Talon envisages that expenditures on Ocean Hill have the potential to line up with initial cash flows from the Walyering gas field.

Figure 3. EP495 Ocean Hill

GURVANTES XXXV CSG PROJECT - MONGOLIA (Farming In to a 33% interest)

Talon is party to a Farm-in Agreement with Telmen Resource LLC (Telmen) (a wholly owned subsidiary of ASX listed TMK Energy Limited (TMK) to acquire a 33% Participating Interest in the Gurvantes XXXV Production Sharing Agreement (PSA).

The Gurvantes XXXV covers a significant area of 8,400km2 and is situated in what is considered one of the most prospective coal seam gas basins globally. Gurvantes XXXV is situated less than 20km from the Chinese-Mongolian

1. Refer TPD ASX Announcement dated 24 July 2020 entitled 'Perth Basin Resource Numbers' for more information on the Ocean Hill Contingent

Resource. Other than the success seen a the Walyering-5 well, Talon confirms that it is not aware of any new information or data that materially affects the information included in that announcement and that all the material assumptions and technical parameters underpinning the estimates have not materially changed and continue to apply

border and close to the extensive Northern China gas transmission and distribution network. It is also proximate to several large-scale mining operations with high energy needs. Gurvantes is therefore ideally placed for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements.

During the March Quarter approval of the

Region	Un-risked Prospective Resource (TCF)	Risked Prospective Resource (TCF)
1U (Low)	2U (Best)	3U (High)	1U (Low)	2U (Best)	3U (High)
Prospect Area	1.30	2.02	3.38	1.17	1.82	3.04
Lead Area	6.89	17.94	38.24	1.95	4.14	8.21
Total	8.19	19.96	41.62	3.12	5.96	11.25

Region	Un-risked Prospective Resource (TCF)	Risked Prospective Resource (TCF)
1U (Low)	2U (Best)	3U (High)	1U (Low)	2U (Best)	3U (High)
Prospect Area	0.43	0.66	1.12	0.39	0.60	1.00
Lead Area	2.28	5.92	12.62	0.64	1.37	2.71
Total	2.71	6.58	13.74	1.03	1.97	3.71

Environmental Impact Assessment by the Mongolian Ministry of Nature, Environment and Tourism facilitated the commencement of drilling activities at Gurvantes XXXV.

The Project's maiden drilling campaign consists of 4 fully tested core holes to be drilled in the western section of the Gurvantes XXXV project area (refer Figure 4.)

Drilling commenced on the first of four coreholes to be drilled in the initial program, 'Snow Leopard-1', on the 15th of March with a target depth of approximately 650 metres. The drill hole will be cored, and the intercepted coal seams will undergo gas desorption and gas adsorption

testing to analyse gas content, saturation, and composition.

Figure 4: Gurvantes XXXV proposed drill hold locations

Downhole geophysical surveys and drill stem tests at selected intervals are also planned for the drill hole in order to acquire additional data on the coal seam thickness and characteristics, including permeability. Post the March Quarter, on 11 April 2022, TMK announced that Snow Leopard-1 had intersected 44 metres of gassy coal seam between the depths of 406m to 461m. Preliminary gas desorption results indicate high gas content and gas saturation.

A further three core holes, spaced approximately 3.5km apart, are scheduled to be drilled and tested over a 3-4 month period. With these drill holes continuing to target the highly prospective coal seams identified from existing exploration data and coal mining activities. Data gathered from the core acquired during the drilling program is aimed at upgrading the existing Prospective Resource estimate for Gurvantes XXXV, details of which are set out in the table below.

Gurvantes XXXV Coal Seam Gas Project

Gross (100%) Prospective Gas Resources (TCF)

Gas volumes are expressed in the table above are in trillion cubic feet (TCF) at standard temperature and pressure basis.

Talon's net (33%) Prospective Gas Resources (TCF)* interest

Gas volumes are expressed in the table above are in trillion cubic feet (TCF) at standard temperature and pressure basis.

*Subject to completion of Farmout and transfer of 33% participating interest in Gurvantes XXXV to Talon

Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. For more information on the above Prospective Resources, refer to ASX announcement dated 18 August 2021. Talon confirms that it is not aware of any new information or data that materially effects the information contained in that Announcement and that all material assumptions and technical parameters underpinning the estimates contained in that Announcement have not materially changed.

These preliminary results indicated that the upper coal seam, the shallower of two target zones, had a high gas content, in the order of 7.5m3/t to 12.5m3/t on an as received basis. With visual structural logging of the drill core indicating that the coal seam had a well-developed cleat system (natural fracture network), being a positive indicator of higher permeability of the host formation.

UK North Sea Portfolio

On 11 February 2022 Talon announced that following an internal review of its operations the board had made a decision to exit its portfolio of UK North Sea exploration in order to focus on its more advanced projects located in the Perth Basin and Mongolia.

Project	Location	Tenement/ Blocks	Status	Beneficial Interest
Walyering	Perth Basin	EP447	Granted	45%
Bluestring/White Bear	North Sea	20/2a	Granted	100%1
Subject to earn-in conditions
Gurvantes XXXV	Mongolia	Farming-In	0%2
Condor	Perth Basin	Blocks 7977, 8049 and 8121(within EP494)/SPA-0081	Acquisition subject to satisfaction of various conditions precedent	0%3
Ocean Hill	Perth Basin	EP495	Granted	FROR4

Section	Description	$A'000
1.2	Expenditure for exploration & evaluation, production, staff and administrative corporate costs	1,978
6.1 & 6.2	Payments made to related parties and their associates including Directors fees and corporate costs.	100

Post March Quarter, Talon entered into a deal with Finder Exploration Holdings Limited (Finder) for the assignment, subject to required regulatory approvals, of a 100% interest in Licence P2527, which contains the White Bear Prospect. Under the terms of the transaction with Finder, Talon will be entitled to receive 12.5% of gross income received by Finder in relation to P2527 (for example, any cash received for farmout or divestment) which converts to a royalty of 3% of Finder's net share of produced petroleum during the production phase.

Corporate

During the March Quarter, with the board's decision to exit it UK portfolio of assets, UK based director, Stephen Jenkins, stepped down from the board on 23 February 2022.

On 3 March 2022, experienced energy sector executive, Mr Colby Hauser, was appointed Managing Director and CEO of Talon. Mr Hauser was previously General Manager, Commercial at Strike Energy Limited, Talon's Joint Venture partner at the Walyering Gas Project located on EP 447 in the Perth Basin.

During the March Quarter Talon received $930,400 of funding from the exercise of options, with 1,250,000 unexercised options lapsing on 28th of February 2022.

Cash and cash equivalents at the end of the March 2022 quarter was $3.57M.

Tenement Holdings

In accordance with Listing Rule 5.4.3 Talon provides the following information in relation to its oil and gas tenements:

Oil and Gas tenements held at the end of the quarter:

• 1. Talon entered into an agreement with Finder whereby Talon will assign to Finder a 100% interest in 20/2a subject to required regulatory approvals.

• 2. Talon executed a binding agreement dated 30 January 2021 with Telmen to earn a 33% interest in the Gurvantes XXXV Production Sharing Agreement. At the end of the reporting quarter no interested, other than the contractual earn-in right, had been earned by Talon.

• 3. In January 2021 Talon entered into a non-binding agreement for the option to acquire 100% of blocks 7977, 8049 and 8121 located within EP494, and SPA-0081 from Macallum Group Limited. This transaction is subject to a number of Conditions Precedent, at Talon's discretion, which had not been satisfied at the end of the Quarter.

• 4. As part of the Walyering farm-in agreement executed with Strike Resources Limited, Talon also has a first right of refusal over EP495.

During the March Quarter Talon relinquished the following UK North Sea tenements, 12/26a, 12/27a, 19/5a, 28/8a. No additional tenements were acquired or relinquished during the Quarter.

In accordance with Sections 1.2, 6.1 & 6.2 of the December 2021 Quarter Appendix 5B, Talon provides the following information:

--Ends--

This Announcement has been authorised for release by the board of directors.