Galilee Energy : June 2021 Quarterly Report & Appendix 5B 29 July 2021

ASX/MEDIA ANNOUNCEMENT

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June 2021 Quarterly Report & Appendix 5B

29 July 2021

Highlights

• Pump enhancement programme (PEP) completed during the period with record gas rates recorded.
• Operations have achieved critical desorption in the central part of the pilot, with the focus now on bringing pressure down similarly over a wider area of the pilot.
• Management team bolstered during the period with two ex-Shell executives, experienced in large scale CSG appraisal and development.
• Galilee received a refundable R&D Tax offset of $2.8 million for the 2019/20 financial year.
• Federal government have committed funding for appraisal activities in the Galilee Basin as part of the nation's gas-led economic recovery.
• Strong balance sheet with current cash position of $18.2 million as at 30 June 2021, with no debt.

"Galilee completed what has been a busy quarter of activity safely and with minimal disruption. During the quarter we reached a significant milestone with the inner area of the central pilot now below critical desorption and producing increasing gas, along with progressive pressure depletion in the outer vertical wells.

"The depletion in the outer wells demonstrates excellent lateral connectivity in the reservoir across the entire permit. This augurs well for full field project economics and provides context for the additional amount of time taken thus far to reduce the pressure in the pilot area.

"These significant breakthroughs as well as the strengthening of our management team, have us positioned on a clear pathway forward to achieving commercial gas production and becoming a significant provider of gas supply for the east coast domestic market", Dr King said.

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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 help address AEMO's forecast eastern Australian domestic market gas shortfall expected from around 2023. 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.

Critical desorption commences in Pilot area

Recent workover activities provided an opportunity to gather reservoir pressure information in the centre of the multi well pilot (Pilot). The middle lateral well G14 was recently shut-in to gather this pressure information and measured a reservoir pressure of circa 550 psi, which is the first direct pressure measurement in the area below the anticipated critical desorption pressure of ~600 psi.

The pressure data (Figure 2) demonstrates that following the recent pump enhancement programme (PEP), the middle lateral well (G14) is now below anticipated desorption pressure, and the other laterals are trending strongly towards this pressure. This reinforces the expectation that the critical desorption pressure is close to being achieved over the entire central Pilot area.

Additionally, the reservoir pressure at the perimeter well G19 is in the mid 700's psi, a depletion of several hundred psi over the last few months. This trend is as per expectations based on modelling, and augurs well for achieving the requisite pressure depletion over the coming weeks and months.

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Figure 2 - Glenaras pressure history.

The technical objective of the Pilot is to remove water from the coal sequence in order to reduce the pressure in the coals. This depressurisation allows the gas stored in solid solution on the coal grains to be released and flow through the coal seams and into the wells.

The current gas rate is a reflection of only relatively small amounts of coal immediately around the well bores being below the estimated critical desorption. Gas rates will continue to increase as this "pressure sink" expands inside the Pilot area and more coal is exposed to pressure below the critical desorption level.

Figure 3 shows a cross section of the pressure sink across the Pilot area. The current pressure in G14 of 550 psi, confirms that the pressure sink in the centre of the Pilot continues to deepen as the Pilot is further de-watered. The schematic also shows the breadth of the pressure sink based on pressure measurements in the surrounding lateral wells. These data points confirm that the lateral and vertical wells are successfully combining to collectively depressurise the coal sequence, validating the strategy to expand the lateral Pilot with the six additional vertical wells completed across the full Betts Creek coal sequence. These additional wells have materially increased the rate and volume of water removal and accelerated pressure depletion over a larger area.

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Figure 3 - Glenaras pressure sink development profile.

Figure 4 is an aerial representation of the pressure sink based on both measured and model derived pressure data. It confirms there is a concentrated reduction in the Pilot area as well as depletion in the regional Glenaras 8 and Rodney Creek 8 wells.

The depletion in these outer wells demonstrates excellent lateral connectivity in the reservoir across a large part of the permit. This augurs well for full field project economics and provides context for the additional amount of time taken thus far to reduce the pressure in the Pilot area and the large amount of de-watering required.

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Figure 4 - Glenaras pressure sink areal development.

In particular, the recent confirmation of pressure depletion at Glenaras 8 (approximately 7km away from the Pilot) in the Betts Creek coals (Figure 4) has confirmed that the coal seams are considerably more productive than originally anticipated.

This greater productivity has two significantly positive implications for the Glenaras Gas Project: as well as providing a basis for a larger ultimate reserves target, the more widespread pressure depletion is expected to lead to improved project economics based on fewer wells required to drain the productive coal area.

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