Galilee Energy : Issue of Options Prospectus

GALILEE ENERGY LIMITED

ACN 064 957 419

Prospectus

For the offer of one (1) Attaching Option for every one (1) Share issued to Participants pursuant to the SPP, for nil consideration (Offer).

This Prospectus has also been prepared to facilitate the on-sale of:

• (a) 36,922,568 Attaching Options issued to participants in the Placement; and

• (b) 1,375,000 Attaching Options issued to the Participating Directors pursuant to the Director Placement,

for the purpose of section 708A(11) of the Corporations Act.

IMPORTANT NOTICE

This document is important and should be read in its entirety. If after reading this Prospectus you have any questions about the Attaching Options being offered pursuant to this Prospectus or any other matter, then you should consult your stockbroker, accountant or other professional adviser.

The Attaching Options offered in accordance with this Prospectus should be considered as a speculative investment.

Important Notices

This Prospectus is dated 26 April 2022 and was lodged with ASIC on that date. ASIC and its officers take no responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates.

No person is authorised to give information or to make any representation in connection with this Prospectus, which is not contained in the Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with this Prospectus.

It is important that investors read this Prospectus in its entirety and seek professional advice where necessary. The Attaching Options the subject of this Prospectus should be considered speculative.

This Prospectus is a transaction specific prospectus for an offer of options to acquire continuously quoted securities (as defined in the Corporations Act) and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In making the representations contained in this Prospectus, regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and that certain matters can reasonably be expected to be known to investors and professional advisers whom they may consult.

No exposure period applies to the offer of Attaching Options under this Prospectus by operation of ASIC Corporations (Exposure Period) Instrument 2016/74.

No Attaching Options will be issued pursuant to this Prospectus after the date that is 13 months after the date of this Prospectus.

Electronic prospectus

Participants can obtain a copy of this Prospectus from the Company website athttps://galilee-energy.com.au/.The electronic version of this Prospectus on the Company website will not include an Acceptance Form. Participants will only be entitled to subscribe for Attaching Options pursuant to the Offer in accordance with the instructions in the personalised Acceptance Form which accompanies a paper copy of this Prospectus. Applicants will only be entitled tosubscribe for Attaching Options in accordance with the instructions in the Acceptance Form accompanying a paper copy of this Prospectus that is provided to them by the Company.

Financial forecasts

The Directors have considered the matters set out in ASIC Regulatory Guide 170 and do not believe that they have a reasonable basis to forecast future earnings on the basis that the operations of the Company are inherently uncertain. Accordingly, any forecast or projection would contain such a broad range of potential outcomes and possibilities that it is not possible to prepare a reliable best estimate forecast or projection.

Target Market Determination

In accordance with the design and distribution obligations under the Corporations Act, the Company has determined the target market for the offer of Attaching Options issued under this Prospectus. The Company will only distribute this Prospectus to those investors who fall within the target market determination (TMD) as set out on the Company's website(https://galilee-energy.com.au/). By accepting the Offer, you warrant that you have read and understood the TMD and that you fall within the target market set out in the TMD.

Privacy

If you complete an Acceptance Form, you will be providing personal information to the Company (directly or via the Company's Share Registry). The Company collects, holds and will use that information to assess your Acceptance, service your needs as a holder of Attaching Options and facilitate the distribution of payments and corporate communications to you as a Shareholder.

The information may also be used and disclosed to persons inspecting the Company's register, bidders for your Shares in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Company's Share Registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company or its Share Registry if you wish to do so at the relevant contact numbers set out in this Prospectus.

Capitalised terms

Capitalised terms used in this Prospectus have the same meaning as those given in the Glossarycontained in section 10 on page 28 of this Prospectus.

1.	Contents
1.	Contents	3
2.	Timetable	3
3.	Chairman's Letter	4
4.	Investment Overview	5
5.	Risks	8
6.	Acceptance of Offer	15
7.	Rights and liabilities of Attaching Options	17
8.	Rights and liabilities of underlying Shares	19
9.	Additional information	21
10.	Glossary	28
11.	Corporate Directory	30
2.	Timetable

Appendix 3B lodged with ASX	26 April 2022
Prospectus lodged with ASX and ASIC	26 April 2022
Offer Opens	26 April 2022
Closing Date for applications pursuant to the Offer	27 May 2022
Issue date (if not issued earlier)	2 June 2022
Holding statements dispatched to Applicants pursuant to the Offer	9 June 2022

Subject to the ASX Listing Rules and the Corporations Act, the Directors reserve the right to vary these dates.

3.

Chairman's Letter

Dear Participant,

On 24 February 2022, the Company announced a successful capital raising, comprising:

(a) a private placement to sophisticated and institutional investors, raising approximately $11.8 million at an issue price of $0.32 per Share (Placement);

• (b) a private placement to Directors to raise a further A$440,000, on the same terms as the Placement, which was conditional on Shareholder approval being obtained on 13 April 2022 (Director Placement); and

• (c) a share purchase plan (SPP) offering eligible Shareholders the opportunity to acquire up to $30,000 worth of Shares at an issue price of $0.32 per Share, to raise a further $3 million,

for the purpose of the Company undertaking a five (5) well drilling programme at the Company's flagship Glenaras Gas Project, for general working capital and for costs of the SPP, Director Placement and Placement.

The Company also announced that, subject to obtaining Shareholder approval, Participants in the SPP would be entitled to acquire one (1) Attaching Option for every one (1) Share issued to them pursuant to the SPP, for nil consideration (Offer).

The Attaching Options have an exercise price of $0.48 per Attaching Option and are exercisable at any time prior to 5:00pm AEST on 4 September 2023.

Applicants for Attaching Options pursuant to this Prospectus should be aware that there are various risks associated with an investment in Attaching Options and the Company, including those risks briefly summarised in section 5 of this Prospectus. Accordingly, any potential investors should consult with their professional advisers before deciding whether to apply for any Attaching Options pursuant to this Prospectus.

The Board thanks all Shareholders for their continuing support for the Company and recommends the Offer.

Yours sincerely,

Raymond Shorrocks Chairman

Galilee Energy Limited

• 4. Investment Overview

• 4.1 The Offer

  By this Prospectus the Company offers Participants in the SPP the opportunity to subscribe for one (1) Attaching Option for every one (1) Share issued to the Participant pursuant to the SPP, for nil consideration (Offer).

  Only Participants in the SPP may apply for Attaching Options and must do so no later than 5:00pm (AEST) on the Closing Date.

  No funds will be raised from the issue of Attaching Options pursuant to this Prospectus as they are being issued for nil consideration.

  Further details regarding the rights and liabilities attaching to the Attaching Options are contained in section 7 of this Prospectus. All of the Shares issued upon exercise of the Attaching Options offered in accordance with this Prospectus will rank equally with the existing Shares on issue as at the date of issue. Further details regarding the rights and liabilities attaching to the Shares are contained in section 8 of this Prospectus.

  There is no minimum subscription amount in respect of the Offer.

• 4.2 No rights trading

  The right to subscribe for Attaching Options pursuant to this Prospectus are non-renounceable, which means that you cannot sell or transfer all or part of your Attaching Option entitlement.

• 4.3 Key Risks

  There are various risk factors associated with an investment in Attaching Options and the Company. Some, but not all, of these risks are summarised in section 5 of this Prospectus. These risks, and others not specifically referred to in section 5, have the potential to materially affect the financial performance of the Company and the value of the Attaching Options offered pursuant to this Prospectus.

  Accordingly, potential investors should consider that an investment in the Company is speculative and should consult with their professional advisers before deciding whether to apply for any Attaching Options pursuant to this Prospectus.

  Three of the key risks that Participants should be aware of are summarised briefly below:

(a)Gas flow rates

The rate at which gas flows from the Company's wells will be a key determinant of its future profitability and success.

One of the primary challenges faced by the Company in achieving a commercially viable gas flow rate from the Glenaras Gas Project has, to date, been the inability to reduce the reservoir pressure within the coal to the 'critical desorption' point (the point at which gas is released from the coal). It is believed that this has been due to a fault within the Betts Creek Beds which provides a path of communication between the coal beds and the interbedded water saturated sandstones and areas of high porosity/ permeability coal.

While the proposed 5 well programme is intended to reduce the reservoir pressure and, hopefully, result in gas desorption and, in turn, commercially viable gas flow rates, there is no certainty that this drilling will be successful in achieving this outcome. If this does