Forza Petroleum : Q3 2023 Management's Discussion & Analysis

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2023 AND 2022

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis ("MD&A") should be read in conjunction with the consolidated financial statements of Forza Petroleum Limited ("FPL" or, the "Company") and its subsidiaries for the three and nine months ended September 30, 2023 and 2022 (the "Financial Statements"), which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The date of this MD&A is November 7, 2023.

Unless otherwise noted, all amounts are in thousands of U.S. dollars.

Selected terms and abbreviations used in this MD&A are listed and described in the "Glossary and Abbreviations" section.

Readers should refer to the "Forward-Looking Information" advisory on page 15. Additional information relating to FPL, including FPL's Annual Information Form dated March 23, 2023, is on SEDAR+ at www.sedarplus.ca.

Table of Contents

Company Overview	1		Outstanding Share Data	12
Operational Highlights	1		Commitments and Contractual Obligations	12
Financial Highlights and Outlook	1		Summary of Quarterly Results	13
Business Environment	4		Transactions with Related Parties	14
Operations Review	6		New Accounting Pronouncements, Policies,	14
	and Critical Estimates
Capital Additions	6		Financial Controls	15
Financial Results	8		Forward-Looking Information	15
Liquidity and Capital Resources	11		Glossary and Abbreviations	17
Economic Sensitivities	12

Company Overview

The Company is a public company incorporated in Canada under the Canada Business Corporations Act and is the holding company for the Forza Petroleum group of companies (together, the "Group" or "Forza Petroleum"). The Group has a 65% Working Interest in and operates the Hawler License Area in the Kurdistan Region of Iraq ("KRI"), which has yielded the discovery of four oil fields, three of which have contributed to production.

Operational Highlights

• Average gross (100%) oil production of 6,500 bbl/d (working interest 4,200 bbl/d) in Q3 2023;
• Given the previously announced suspension of the Group's work program, activity continued to be limited during the third quarter of 2023;
• Notwithstanding activity being restricted, the Group continues to advance installation of a pipeline connecting the Banan field to the Hawler production facilities at the Demir Dagh field. Subject to final government permitting, commissioning of the pipeline is expected during the fourth quarter of 2023.

Financial Highlights and Outlook

Liquidity outlook

The Group expects cash on hand as of September 30, 2023, cash receipts from oil sales, and, if required, up to $20 million in funding from the Company's principal shareholder, will fund its forecasted capital expenditures and operating and administrative costs through the end of December 2024, as well as the $76.2 million in deferred purchase consideration due and payable in connection with the original acquisition of the Hawler License Area. The estimates and judgments related to this expectation are discussed in detail in Note 2b of the Financial Statements.

1	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Financial performance

The following table contains financial performance highlights for the three and nine months ended September 30, 2023 and September 30, 2022.

	Three months ended		Nine months ended
	September 30,		September 30,		September 30,		September 30,
($ thousands unless otherwise stated)	2023		2022		2023		2022
Revenue	14,416	85,073	63,498	266,199
Cash generated from operating activities	1,113	25,439	13,904	83,611
Cash generated from operating activities per
basic share ($/share)	0.00	0.04	0.02	0.14
Cash generated from operating activities per
diluted share ($/share)	0.00		0.04		0.02		0.13
(Loss) / Profit for the period	(1,556)	23,671	(134,655)	77,446
Earnings per basic and diluted share ($/share)	(0.00)		0.04		(0.22)		0.13
Average sales price ($/bbl)	30.83	79.11	45.49	84.80
Field operating costs(1) ($/bbl)	8.07	6.54	11.15	6.67
Operating expense ($/bbl)	12.42	10.06	17.16	10.27
Capital additions(2)	662		11,331		17,079		40,672

Notes:

1. Field operating costs represent Forza Petroleum's Working Interest share of gross operating costs and exclude partner share of operating costs which are being carried by Forza Petroleum.
2. Excludes non-cash changes to the decommissioning obligation.

Revenue and cash receipts

In recent years, sales of the Group's oil production had been exclusively through the KOEP. On March 25, 2023, the operator of the KOEP notified OP Hawler Kurdistan Limited, the Group's operating subsidiary in the KRI, of a shutdown of the pipeline. Accordingly, production from the Hawler License Area was substantially shut-in.

The shutdown was related to a March 2023 arbitration decision of the International Chamber of Commerce impacting exports by the KRG through the port of Ceyhan in Turkey. An initial statement from the Federal Government of Iraq ("FGI") indicated that exports of KRI crude oil through the port may resume only with the consent of the FGI.

Recent public reports indicate that, following completion of maintenance work on the Turkish leg of the KOEP, it is technically feasible to restart oil exports from the Kurdistan Region. However, it is understood that the FGI and the Republic of Turkey are seeking to settle certain open disputes between the governments before agreeing to re-open the KOEP.

During the second quarter of 2023, the Group sold oil inventory on hand to the local market. Starting in July 2023, the Group entered into three consecutive short-term contracts to sell 8,000 bbl/d to the local market (working interest: 5,200 bbl/d), which supported a partial restart of production operations. The price under these local sales agreements averaged $31/bbl and payment in advance of deliveries was received from the buyers. A further local sales contract was signed in October 2023. The sales price under this latest agreement was $32/bbl, with payment received from the buyer in advance of deliveries.

Revenue of $14.4 million was recorded for the three months ended September 30, 2023. Included in revenue is $12.1 million realized on the local sale of 391,700 bbl (WI) of crude oil (average $30.83/bbl) and $2.3 million related to the recovery of costs carried on behalf of partners. Revenue decreased by $70.7 million versus the three months ended September 30, 2022 due to a 61% decrease in realized average sales price and a 57% decrease in sales volumes. Because of local market constraints, the price for oil sold to the local market is at a significant discount to international oil prices.

Revenue of $63.5 million was recorded for the nine months ended September 30, 2023. Included in revenue is $53.2 million realized on the sale of 1,169,100 bbl (WI) of crude oil ($45.49/bbl) and $10.3 million related to the recovery of costs carried on behalf of partners. Revenue for the nine months ended September 30, 2023 decreased by $202.7 million compared to the same period in 2022. The decrease is attributable to a 46% decrease in realized sales price and a 56% decrease in sales volumes. Prior to the shutdown of the KOEP in March 2023, all sales were made via the KOEP. Following the shutdown, all sales were made to the local market.

The Group has received full payment for all oil sales made through the KOEP to the end of September 2022 and for all local sales during the nine months ended September 30, 2023.

2	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operating expense

Operating expense during the third quarter of 2023 amounted to $4.9 million ($12.42/bbl) versus $9.1 million ($10.06/bbl) during the third quarter of 2022.

Field operating costs during the third quarter of 2023 amounted to $3.2 million ($8.07/bbl) compared to $5.9 million ($6.54/bbl) during the third quarter of 2022. Field operating costs per barrel were impacted by the shutdown of the KOEP and subsequent partial shut-in of production from the Hawler License Area during the third quarter of 2023. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Field operating costs decreased for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 as a result of a decrease in facilities, diesel, security and equipment costs, combined with a 57% decrease in sales volumes.

Operating expense during the nine months ended September 30, 2023 amounted to $20.1 million ($17.16/bbl) versus $27.0 million ($10.27/bbl) during the nine months ended September 30, 2022.

Field operating costs during the nine months ended September 30, 2023 amounted to $13.0 million ($11.15/bbl) compared to $17.5 million ($6.67/bbl) during the nine months ended September 30, 2022. Field operating costs per barrel were significantly impacted by the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area during the second quarter of 2023. Operations partially re-started in July 2023. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Operating expense and field operating costs decreased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 as a result of a decrease in facilities, diesel, security and equipment costs, combined with a 56% decrease in sales volumes.

Field operating costs represent Forza Petroleum's Working Interest share of gross operating expense and exclude partner share of operating expense which are being carried by Forza Petroleum.

Cash used in / generated from operating activities

Cash generated from operating activities for the third quarter of 2023 was $1.1 million compared to cash generated from operating activities of $25.4 million during the same period in 2022. Cash generated from operating activities for the nine months ended September 30, 2023 was $13.9 million compared to $83.6 million during the same period in 2022. The decrease for both periods mainly relates to lower crude oil sales revenue payments received during the period. This negative factor has been partially offset by a decrease in royalties and cash payments relating to other current assets and trade and other payables. Royalties decrease proportionally with sales revenue. The decrease in payments relating to other current assets and trade and other payables primarily relates to decreased activity resulting from the shutdown of the KOEP and subsequent partial shut-in of production from the Hawler License Area. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Profit / Loss

Loss for the three months ended September 30, 2023 was $1.6 million compared to a profit of $23.7 million during the third quarter of 2022. The variance in profit/loss for three months ended September 30, 2023 in comparison to the same period in 2022 is primarily attributable to a $41.7 million decrease in net revenue resulting from decreased realized sales prices and lower sales volumes. This negative factor has been partially offset by i) a $7.5 million decrease in depletion recorded due to lower production volumes in the period combined with a lower depletion expense per barrel; ii) a $4.2 million decrease in operating expense as a result of decreased facilities, diesel, security and equipment costs, combined with a decrease in sales volumes; iii) no change in the fair value of the purchase consideration obligation compared to a $1.7 million non-cash charge in the prior period; iv) a $1.4 million decrease in income tax expense as a result of decreased net revenue; v) a $1.0 million decrease to the expected credit loss provision; vi) a $0.6 million increase in finance income; and vii) a $0.5 million decrease in general and administration expense.

Loss for the nine months ended September 30, 2023 was $134.7 million compared to a profit of $77.4 million during the nine months ended September 30, 2022. The variance in profit/loss for nine months ended September 30, 2023 in comparison to the same period in 2022 is primarily attributable to i) a $121.4 million impairment recorded during the nine months ended September 30, 2023 relating to the Hawler License Area; ii) a $119.7 million decrease in net revenue resulting from decreased realized sales prices and lower sales volumes; iii) a $4.8 million increase to the expected credit loss provision; and iv) a $3.2 million increase to the materials inventory provision during the nine months ended September 30, 2023 compared to a $0.1 million decrease during the same period in 2022. These negative factors have been partially offset by i) a $21.0 million decrease in depletion recorded due to lower production volumes in 2023 combined with a lower depletion expense per barrel; ii) a $6.9 million decrease in operating expense as a result of decreased facilities, diesel, security and equipment costs, combined with a decrease in sales volumes; iii) a $3.9 million decrease in income tax expense as a result of decreased net revenue; iv) a $3.2 million decrease in the non-cash charge resulting from the change in the fair value of the purchase consideration obligation; v) a $1.8 million increase in finance income; and vi) a $0.6 million decrease in general and administration expense.

3	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Most of the above variances are largely attributable to the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area during the second quarter of 2023, followed by the partial restart of operations in July 2023. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Capital additions

During the third quarter of 2023, the Group recorded capital additions of $0.7 million relating to drilling preparation activities. Investments during the period were impacted by the decision in May 2023 to suspend the Group's work program for the balance of 2023 as a result of the shutdown of the KOEP.

During the nine months ended September 30, 2023, the Group recorded capital additions of $17.1 million, including $15.7 million invested in drilling activities in the Demir Dagh and Zey Gawra fields, and in the recompletion and testing of the previously drilled Ain al Safra-1 and Ain al Safra-2 wells. Additional amounts of $1.3 million and $0.1 million were also recorded on facilities and directly attributable support costs, respectively.

Financial position

The following table contains highlights of the Group's financial position as at the dates indicated below.

($ thousands)	September 30, 2023	December 31, 2022
Total cash and cash equivalents	68,981	71,103
Working Capital	39,131	52,145
Total assets	314,461	448,180
Total long term liabilities	19,172	20,341
Total liabilities	117,910	117,443

The cash and cash equivalents balance of $69.0 million as at September 30, 2023 decreased from $71.1 million at December 31, 2022. This decrease is due to $16.0 million in cash used in investing activities, partially offset by $13.9 million in cash generated from operating activities. Two revenue payments were received during the nine months ended September 30, 2023 for prior sales through the KOEP. The Group also received payment for local oil sales completed during the period.

Working capital decreased from $52.1 million at December 31, 2022 to $39.1 million at September 30, 2023 due to i) a $6.5 million decrease in the trade and other receivables balance, primarily due to a $4.8 million increase to the expected credit loss provision; ii) a $2.1 million decrease in the cash and cash equivalents balance; iii) a $2.7 million decrease in the inventory balance, primarily due to a $3.2 million increase in the provision against inventory; iv) a $1.6 million increase in the trade and other payables balance; and v) a $0.7 million decrease in the other current assets balance.

The total assets balance decreased to $314.5 million at September 30, 2023 from $448.2 million at December 31, 2022. This change is primarily due to i) a $121.4 million impairment and $16.2 million depletion recorded during the nine months ended September 30, 2023 relating to the Hawler License Area; ii) a $6.5 million decrease in the trade and other receivables balance, primarily due to a $4.8 million increase to the expected credit loss provision; iii) a $2.1 million decrease in the cash and cash equivalents balance; iv) a $2.7 million decrease in the inventory balance, primarily due to a $3.2 million increase in the provision against inventory; and v) a $0.7 million decrease in the other current assets balance. These negative factors have been partially offset by $17.1 million of capital additions.

The $1.2 million decrease in total long term liabilities from December 31, 2022 is primarily due to a decrease in the provision recorded in respect of the decommissioning obligation.

The total liabilities balance has increased from $117.4 million at December 31, 2022 to $117.9 million at September 30, 2023. The $0.5 million increase is due to a $1.8 million increase in the fair value of the purchase consideration (see the "Liquidity and Capital Resources" section of this MD&A for further information) partially offset by i) a $1.2 million decrease in the provision recorded in respect of the decommissioning obligation; and ii) a $0.2 million decrease in the trade and other payables balance, excluding the change in the purchase consideration.

The undiscounted balance of principal and accrued interest owed under the purchase consideration obligation to the vendor of the Hawler License Area as at September 30, 2023 was $76.2 million (December 31, 2022 - $76.2 million).

Business Environment

Oil price volatility and other macroeconomic factors compound uncertainty associated with unresolved political disputes both inside the KRI and those involving both the FGI and the Government of Turkey, and their eventual impact on the Group's operations may be significant and remains unclear. There remains an ongoing risk that any degradation of the wider regional security situation could have a material adverse effect on the operating and financial performance of the Group. Political and other risk factors which are disclosed in FPL's Annual Information Form could have an adverse effect on Forza Petroleum's performance.

4	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The Group's future revenues and cash flows from operating activities are dependent on the Group's ability to produce, deliver, and receive payment for sales of crude oil. Production rates are subject to fluctuation over time and are difficult to predict.

Uncertainties related to global, social, political, and economic conditions and the resulting changes in global oil supply chains and infrastructure investment contribute to volatility in the price of crude oil. As demonstrated by the global response to the invasion of Ukraine by Russia and, more recently, events in Israel, Palestine and Lebanon, increased price volatility may have become a significant and sustained feature of the oil and gas markets. Persistent concerns regarding inflation and a heightened risk of economic recessions affecting many countries may undermine near term demand for oil and gas. Ongoing elevated levels of uncertainty regarding returns on long term investments in upstream oil and gas exploration and development continue to impact the availability and cost of capital resources.

Future oil prices, which directly impact the Group's expected cash inflows, are difficult to forecast reliably. The Group's ability to fund its ongoing operations and its planned, discretionary capital investments is consequently subject to significant uncertainty. See the "Liquidity and Capital Resources" section of this MD&A for further discussion.

The market on which oil produced from the Hawler License Area is sold significantly affects the price realized and, consequently, Forza Petroleum's cash flows. Complexities in local, regional, and international market access may impact the Group's realized oil sales prices and its ability to sell its produced oil.

From March 2016 through March 2023, all of the Group's crude oil deliveries were made to the KRG at the tie-in to the KOEP. On March 25, 2023, the operator of the Kurdistan Oil Export Pipeline notified OP Hawler Kurdistan Limited, the Group's operating subsidiary in the KRI, of a shutdown of the pipeline. The shutdown relates to a March 2023 arbitration decision of the International Chamber of Commerce impacting exports by the KRG through the port of Ceyhan in Turkey. A statement from the FGI indicated that exports from the port may resume only with the consent of the FGI.

Accordingly, and absent alternative sales channels, substantially all production from the Hawler License Area was initially shut in. Operations were partially re-started in July 2023. During the second quarter of 2023, the Group sold oil inventory on hand to the local market. Starting in July 2023, the Group entered into three consecutive short-term contracts to sell 8,000 bbl/d to the local market (working interest: 5,200 bbl/d), which supported a partial restart of production operations. The price under these local sales agreements averaged $31/bbl and payment in advance of deliveries was received from the buyers. A further local sales contract was signed in October 2023. The sales price under this latest agreement was $32/bbl, with payment received from the buyer in advance of deliveries.

Recent public reports indicate that officials from the governments involved are in talks to agree mechanisms that will apply and permit a restart of oil exports from the Kurdistan Region. These latest talks build on engagement in recent months to resolve several open issues between the KRG and the FGI, including the development of a new oil and gas law.

Management views the shutdown of the KOEP as a temporary interruption to operations, however the timing of the restart of the Group's full production capacity and oil sales for international export, and the price and payment terms applicable to such sales, is uncertain. This uncertainty casts significant doubt on the Group's ability to continue as a going concern.

Although management has not experienced and does not expect restrictions on its ability to access KOEP capacity, other than in consequence of the pipeline shutdown starting in March 2023, Forza Petroleum is not aware of official allocations of KOEP capacity and is uncertain as to the extent to which its future production will continue to able to be sold through the KOEP.

Commercial arrangements in place to sell oil produced from the Hawler License Area may be revised periodically. Effective September 1, 2022, the KRG implemented a new pricing mechanism for its crude oil purchases. Under the new pricing mechanism, the sales price payable to the Group in respect of deliveries into the KOEP for a month is equal to the average sales price realized by the KRG for the Kurdistan blend ("KBT") sold by it at Ceyhan, Turkey during that month, discounted by approximately $10/bbl for pipeline system tariffs and fees, and adjusted for differences in oil gravity and sulphur between Hawler production and KBT. For sales from September to March 2023, the new pricing mechanism resulted in an approximately $10 reduction in the Group's realized sales price versus the previous pricing mechanism.

The Group has received full payment for all oil sales made through the KOEP to the end of September 2022 and for all local sales during the nine months ended September 30, 2023.

The timing and execution of the Group's capital expenditure program may be affected by the availability of services from third party oil field contractors and the Group's ability to obtain, sustain or renew necessary government licenses and permits on a timely basis to conduct exploration and development activities.

Except for the items discussed above, together with risks disclosed in FPL's Annual Information Form dated March 23, 2023, management has not identified trends or events that are expected to have a material adverse effect on the financial performance of Forza Petroleum.

5	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operations Review

The following table summarizes production and sales data for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022 and for the nine months ended September 30, 2023 and September 30, 2022:

September 30,

2023

Three months ended						Nine months ended
					September 30	,		September		September
	June 30, 2023
				2022			30, 2023		30, 2022

Gross (100%) Production
(bbl)	594,400	55,000	1,387,000	1,799,700	4,042,100
Gross (100%) Production
per day (bbl/d)	6,500	605		15,100	6,600	14,800
Working Interest
Production (bbl)	386,400	35,800		901,600	1,169,800	2,627,400
Working Interest
Production per day
(bbl/d)	4,200	400		9,800	4,300	9,600
Working Interest sales	391,700	39,300		900,800	1,169,100	2,629,300
(bbl)
Working Interest sales
per day (bbl/d)	4,300	430		9,800	4,300	9,600

Production and sales

Gross (100%) oil production for the three months ended September 30, 2023 was 594,400 bbl representing an average rate of 6,500 bbl/d. The Group's Working Interest share of oil production during this period was 386,400 bbl representing an average rate of 4,200 bbl/d. Production and sales were restricted during the three months ended June 30, 2023 as a result of the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area. Because of a partial restart of operations in July 2023, production and sales rebounded during the three months ended September 30, 2023, but remain significantly below results from earlier periods.

Gross (100%) oil production for the nine months ended September 30, 2023 was 1,799,700 bbl representing an average rate of 6,600 bbl/d. The Group's Working Interest share of oil production during this period was 1,169,800 bbl representing an average rate of 4,300 bbl/d. Production and sales during the nine months ended September 30, 2023 decreased from the nine months ended September 30, 2022 as a result of the shutdown of the KOEP in March 2023.

The Group recognized revenue on the sale of 391,700 bbl (Working Interest) and 1,169,100 bbl (Working Interest) of oil during the three and nine months ended September 30, 2023, respectively.

Capital Additions

The following table summarizes the capital additions incurred by activity during the three and nine months ended September 30, 2023 and September 30, 2022:

	Three months ended		Nine months ended
	September 30,	September 30,		September 30,	September 30,
($ thousands)	2023	2022		2023	2022
Middle East
Drilling	524	10,162	15,655	37,480
Facilities	125	645	1,311	1,723
Studies, license, and support	13	524	113	1,469

	Sub-Total	662	11,331	17,079	40,672
	Decommissioning(1)	(2,685)	2		(1,837)	(4,957)
	Total capital additions			(2,023)			11,333			15,242			35,715

Note:

1. Non-cashchanges to the decommissioning obligation. Decommissioning expenditures are forecast to be incurred in 2038.

6	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

During the three months ended September 30, 2023, total capital additions relating to the Hawler License Area totalled $0.7 million prior to a non-cash decrease to the decommissioning obligation of $2.7 million. Capital additions for the period primarily related to drilling preparation for future wells that could not be cancelled following the shutdown of the KOEP. The non-cash decrease in the decommissioning obligation resulted from adjustments to the inflation and discount rates used to determine the carrying value of the decommissioning obligation.

During the nine months ended September 30, 2023, total capital additions relating to the Hawler License Area totalled $15.2 million. Drilling costs of $15.7 million were incurred on the Demir Dagh-15 Cretaceous well, the recompletion and testing of the Ain Al Safra-1 and -2 wells in the Jurassic and Triassic reservoirs, respectively, as well as additional drilling costs incurred in preparation for drilling future wells that could not be cancelled following the shutdown of the KOEP. Expenditure of $1.3 million on facilities and $0.1 million on studies and support were also incurred in the period. A $1.8 million non-cash decrease to the decommissioning obligation was also recorded during the nine months ended September 30, 2023, resulting from adjustments to the inflation and discount rates used to determine the carrying value of the decommissioning obligation.

Investments during the three and nine months ended September 30, 2023 were impacted by the decision in May 2023 to suspend the Group's drilling work program for the balance of 2023 as a result of the shutdown of the KOEP.

Cost Pools

The Cost Pool for the Hawler License Area, which is available for recovery through future oil sales from the License Area, as at September 30, 2023, is detailed in the table below:

						Costs
				Group	Partner	recovered to
				Working	costs carried	September 30,	Group share of
		Gross		Interest Cost	by Forza	2023 through	recoverable costs
License Area	Location	Cost Pool		Pool	Petroleum	cost oil	available(1)(2)
		($ million)		($ million)	($ million)	($ million)	($ million)
Hawler	Iraq - Kurdistan Region	1,181.1		615.0	254.6	(452.6)	417.0

Notes:

1. Cost Pool balances are subject to audit by relevant government entities.
2. Forza Petroleum share of costs available for future recovery through the sale of cost oil.
3. The difference between the Gross Cost Pool and the Group Working Interest Cost Pool is that the former includes the partners' share of total expenditure (both carried and not carried by Forza Petroleum) as well as $137 million of costs which were deducted from the Group's Working Interest Cost Pool as agreed with the Ministry of Natural Resources in connection with the change in control of the Company in July 2020.

Property, plant and equipment and intangible assets

The capital additions and decommissioning charges (credits) described in the sections above, net of depletion, depreciation and amortisation ("DD&A"), have resulted in the following movements in intangible asset and PP&E balances during the three months ended March 31, 2023, June 30, 2023 and September 30, 2023:

			Exploration and Evaluation	Total Intangible Assets
	($ thousands)		Assets
	As at January 1, 2023	51,351			51,351
	Capital additions		4,623			4,623
	Decommissioning	23			23
	As at March 31, 2023	55,997			55,997
	Reversal of previously estimated amount	(102)			(102)
	Impairment		(55,895)			(55,895)
	As at June 30, 2023 and September 30, 2023		-			-

7	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

	($ thousands)	Oil & Gas assets	Fixtures and equipment	Total PP&E
	As at January 1, 2023	247,321	14	247,335
	Capital additions	9,484	67	9,551
	Decommissioning	1,129	-	1,129
	DD&A	(10,781)	(7)	(10,788)
	As at March 31, 2023	247,153	74	247,227
	Capital additions	2,344	1	2,345
	Decommissioning	(306)	-	(306)
	DD&A	(461)	(7)	(468)
	Impairment	(65,526)	-	(65,526)
	As at June 30, 2023	183,204	68	183,272
	Capital additions	662	-	662
	Decommissioning	(2,685)	-	(2,685)
	DD&A	(4,905)	(7)	(4,912)
	As at September 30, 2023	176,276	61	176,337

Financial Results

Revenue

The following table summarizes Forza Petroleum's revenue for the three months and nine months ended September 30, 2023 and 2022. All oil sold during each of the below periods was produced at the Hawler License Area.

	Three months ended September 30		Nine months ended September 30
($ thousands)	2023	2022		2023	2022
Oil Sales	12,075	71,260	53,118	222,976
Recovery of Carried Costs	2,341	13,813	10,310	43,223
Revenue	14,416	85,073	63,498	266,199

Revenue of $14.4 million was recorded for the three months ended September 30, 2023. Included in revenue is $12.1 million ($30.83/bbl) realized on the sale of 391,700 bbl (WI) of crude oil and $2.3 million related to the recovery of costs carried on behalf of partners. Revenue from oil sales decreased by $59.2 million compared to the same period in the previous year due to a 61% decrease in realized average sales price and a 57% decrease in sales volumes. Revenue was also impacted by a $11.5 million decrease in recovery of carried costs.

The Group recognized revenue on the sale of 1,169,100 bbl (Working Interest) of oil during the nine months ended September 30, 2023, compared to revenue on the sale of 2,629,300 bbl (Working Interest) of oil during the same period in the previous year. Revenue of $63.5 million during the nine months ended September 30, 2023 decreased by $202.7 million compared to the nine months ended September 30, 2022. The decrease in revenue from oil sales is attributable to a 46% decrease in realized sales price combined with a 56% decrease in sales volumes.

Sales volumes are determined by the timing of deliveries into the customer's export pipeline or to local buyers, and are not directly correlated with production volumes. As at September 30, 2023, the Group's Working Interest share of oil inventory amounted to 9,300 bbl.

Substantially all production from the Hawler License Area was shut in in late March 2023 following the announcement of the shutdown of the KOEP. Operations were partially re-started in July 2023. See the "Revenue and cash receipts" section of this MD&A for more information.

Crude oil sale prices

During the period from March 2016 to March 2023, the Group sold crude oil to the KRG's Ministry of Natural Resources at Forza Petroleum's tie-in into the KOEP. The realized prices on sales through the pipeline were historically referenced to the monthly average Dated Brent crude oil prices, discounted by approximately $10/bbl for pipeline system tariffs and fees, and adjusted for differences in oil gravity and sulphur from standard Brent specifications.

During the first quarter of 2022, the KRG applied updated pipeline tariff charges for sales through the KOEP. Net revenue for the first quarter of 2022 included a $1.2 million one-time charge related to the retroactive application of this tariff change for the year ended December 31, 2021.

Effective September 1, 2022, the KRG implemented a new pricing mechanism for crude oil purchases. Under the new pricing mechanism, the sales price payable to the Group in respect of deliveries into the KOEP for a month is equal to the average market price realized by the KRG for the Kurdistan blend (KBT) sold at Ceyhan, Turkey during that month, discounted by approximately $10/bbl for pipeline system tariffs and fees, and adjusted for differences in oil gravity and sulphur between

8	Q3 2023 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Hawler production and KBT. For sales in September 2022, the new pricing mechanism resulted in an approximately $10 reduction in the Group's realized sales price versus the previous pricing mechanism.

During the second and third quarter of 2023, the Group sold oil inventory on hand to the local market. The price under these local sales agreements averaged $31/bbl and required payment in advance from buyers.

The following table indicates average Dated Brent crude oil prices and the Group's realized crude oil sales prices for each quarter ended on the dates indicated below:

	2023			2022		c	2021
Sept 30	June 30	Mar 31	Dec 31	Sept 30	June 30	Mar 31		Dec 31

Brent average price ($/bbl)	86.75	78.21	81.17	88.87	100.84	113.93	102.23	79.76
KBT average price ($/bbl)	N/A	N/A	67.44	69.93	N/A	N/A	N/A	N/A
Local sales average price ($/bbl)	30.83	28.28	N/A	N/A	N/A	N/A	N/A	N/A
Realized sales price ($/bbl)	30.83	28.28	54.19	59.09	79.11	94.28	81.07	63.37

Royalties

The following table summarizes royalty expense during the three and nine months ended September 30, 2023 and September 30, 2022:

	Three months ended September 30		Nine months ended September	30
($ thousands)	2023	2022		2023	2022
Royalties	5,903	34,832	25,945	108,970

All remittances to governments that are directly attributable to the sale of oil during the reporting period, including the government share of Profit Oil but excluding income taxes, are reported as royalties. Royalties decreased by $28.9 million and $83.0 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the previous year. The variances in royalties from period to period are attributable to the same factors as those applicable to revenues from oil sales as discussed above.

Operating expense

	Three months ended September 30		Nine months ended September 30
($ thousands)	2023	2022		2023	2022
Field operating costs(1)	3,162	5,888	13,040	17,549
Partner's share of operating costs
carried by Forza Petroleum	1,703	3,170	7,021	9,449
Operating expense	4,865	9,058		20,061	26,998
Sales(2) (bbl)	391,700	900,800	1,169,100	2,629,300
Field operating costs(1) ($/bbl)	8.07	6.54	11.15	6.67
Operating expense ($/bbl)	12.42	10.06	17.16	10.27

Notes:

1. Field operating costs represent Forza Petroleum's Working Interest share of gross production costs and exclude partner share of production costs which are being carried by Forza Petroleum.
2. Forza Petroleum's Working Interest share.

Operating expense of $4.9 million in the three months ended September 30, 2023 decreased by $4.2 million compared to the same period in the previous year. Operating expense for the nine months ended September 30, 2023 decreased by $6.9 million compared to the nine months ended September 30, 2022.The decrease in operating expenses for both periods is a result of a decrease in facilities, diesel, security and equipment costs, which were substantially impacted by the shutdown of the KOEP in late March 2023, resulting in the shut-in of substantially all production from the Hawler License Area. Operations partially re-started in July 2023. Operating costs per barrel increased during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to a 56% decrease in sales volumes partially offset by a 26% decrease in costs.

9	Q3 2023 MD&A