Galilee Energy : December 2020 Quarterly Report & Appendix 5B 28 January 2021

ASX/MEDIA ANNOUNCEMENT

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December 2020 Quarterly Report & Appendix 5B

28 January 2021

Highlights

Operational

• Each of the five new vertical wells and the existing observation well have been commissioned safely, on schedule and within budget.
• Excellent water rates in excess of 9,800 BWPD (barrels of water per day) in aggregate from the new vertical wells, with total Pilot water production of 14,600 BWPD.
• Direct communication continuing between the six new vertical wells and the five existing lateral wells with gas rates steady at previous reported rates.
• Significant progress made implementing the Glenaras water management strategy with the first sorghum crop cut for hay production last week.

Commercial

• Heads of Agreement signed with Sunshot Energy providing an additional option to commercialise pilot gas production at Glenaras.
• Potential Commercial Areas (PCAs) formally awarded by the Queensland Government, securing the entire booked Contingent Resource for the Glenaras Gas Project.
• Gas commercialisation discussions progressing with several parties.

Financial

• Successful completion of $15 million Placement to new and existing institutional and sophisticated investors.
• Strong balance sheet with current cash position of $23.8 million at 31 December 2020.

ASX/MEDIA ANNOUNCEMENT

Glenaras Gas Project (ATP 2019) - GLL 100%

Galilee Energy Limited (ASX:GLL) ("Galilee") is pleased to provide an update on the Glenaras Gas Project in the Galilee Basin in Queensland (Figure 1).

The Glenaras Gas Project ("Project") is located in ATP 2019, which is 100% owned and operated by Galilee. The Permit covers an area of approximately 3,200 km2.

The Project has one of the largest contingent gas resources on the east coast and is strongly positioned to supply the AEMO's forecast eastern Australian domestic market gas shortfall in the early 2020's. The Project's independently derived and certified Contingent Resource* within the Betts Creek coals are 1C of 308 PJ, 2C of 2,508 PJ and 3C of 5,314 PJ, which represents sufficient gas supply to fulfil 25% of eastern Australian domestic market needs for over 30 years (3C Contingent Resource at 650 PJ/year).

Figure 1 - Glenaras Gas Project.

Glenaras Pilot Enhancement Programme

Following on from the results of the Glenaras 17A observation well and the Schlumberger reservoir simulation study, an additional five new vertical wells were drilled safely, on time and within budget. The objective of these additional wells was to enhance the reservoir pressure drawdown to accelerate the onset of gas production.

Each of the five new vertical wells and the existing observation well (Figure 2) at the Pilot are now on continuous production and the total water rate from the full Pilot is 14,600 BWPD.

Water rates from the lateral wells have declined a further 20% since the first of the new wells was commissioned and this production decline is a clear indication of pressure depletion in the central area of the Pilot. The water rates from the additional six wells are exceeding the estimated rates from the recent Schlumberger reservoir modelling which augurs well for achieving the Pilot's intended objective of accelerating the depressurisation process and achieving commercial gas flow rates.

The gas rate at the Pilot remains steady at the previous reported rates. However, we are expecting an increase in this rate in the coming weeks/months as we lower the reservoir pressure within the Pilot area below the critical desorption pressure. We will keep the market informed.

Despite the high rainfall experienced in the region over the past month, all necessary action has been taken to ensure continuity of operations with no interruption to Pilot production experienced to date.

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Figure 2 - New vertical well locations and existing G17A observation well.

Glenaras Water Management Project

Significant progress has been made with the Glenaras irrigation trial, with the centre pivot irrigation system (Figure 3) now fully operational and utilizing produced water with no treatment required due to the high quality of the water.

The forage sorghum crop was planted in mid-October with the first crop having been cut for hay production in the past week (Figure 5). This is aimed at providing significant assistance to landholders for livestock management and importantly provides proof of concept of a scalable, low-cost solution for produced water at the Project.

Site construction of the 2 ML/d reverse osmosis water treatment plant is complete and commissioning of the plant has commenced. This treated water will be available for utilisation in the managed aquifer recharge project which was recently approved by Queensland Department of Environment and Science.

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Figure 3 - Centre pivot irrigation system.

Figure 4 - Aerial view of Glenaras Water Management Project.

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