TMK Energy Limited announced that it has signed a drilling contract with the Mongolian operating subsidiary of the Major Drilling Group for TMK's maiden Pilot Well Program. Drilling operations are scheduled to commence in April, with the critical path items well underway being the preparation of the drilling locations, site works and purchase of long lead items (which are currently in transit to site). The Pilot Well Program will include the drilling of three production wells in proximity to the location of the successful Snow Leopard-02 (SL-02) exploration well.

The results from SL-02 have been integrated into modelling work undertaken by SLB (previously named Schlumberger) which has shown positive indications on both early gas breakthrough and production rates. This modelling work is currently being analysed in detail but is highly encouraging and provides a high degree of confidence to the Company that the upcoming Pilot Well Program will be successful in delivering a "proof of concept" and a gas flow to surface at what are modelled to be relatively high production rates when compared to CSG wells globally. The Pilot Well Program is expected to take approximately eight weeks to complete the drilling of the three production wells and installation of pumps.

The production wells will then be tied into the surface facilities, which includes metering skids, a flare stack and water disposal facilities, and then placed on pump to commence the process of pressure drawdown prior to gas breakout. Once commissioned, the pilot wells will be operated for approximately six months in order to understand the water and gas production profiles. Work is underway to determine if there is an economical and environmentally sensible way to utilise the gas produced to surface during the early stages of the production test rather than flaring the gas.

Uses could include generating power for the Gurvantes Project or generating power for the local coal mining operations (displacing diesel fired power generation). Following the election of Talon Energy Limited (Talon) to proceed with Stage 2 of the farm-in agreement in December 2022, the Pilot Well Program will be primarily funded by Talon. The total cost of the Pilot Well Program is expected to be approximately USD 3.5 million, of which the first USD 3.15 million is paid by Talon and the balance is split 67/33 according to TMK and Talon's interest in the project.

Accordingly, TMK's share of the cost of the Pilot Well Program is estimated to be approximately USD 235,000.