Galilee Energy : March 2019 Quarterly Report & Appendix 5B 8 April 2019

ASX/MEDIA ANNOUNCEMENT

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March 2019 Quarterly Report & Appendix 5B

8 April 2019

Highlights

❖All civil works complete for upcoming drilling programme;

❖Easternwell Rig 103 due to mobilise this week;

❖Drilling on track to commence early next week;

❖MOU signed and work underway with Clarke Energy to assess feasibility of gas to power project at Glenaras;

❖Strong balance sheet with a 31 March cash position of $17.2 million with no debt.

Galilee Energy Limited (ASX:GLL) ("Galilee") is pleased to provide an update on the upcoming drilling operations at its 100% owned and operated Glenaras multi-lateral pilot programme ("Pilot") located in the Galilee Basin permit ATP 2019.

All civil works for the drilling operations are complete, comprising construction of well lease pads and access roads for the programme. Galilee has awarded all civil contracts to local suppliers who have successfully and safely delivered high quality work on previous projects. All long lead items have been ordered and all contracts awarded.

Easternwell Rig 103 has completed its current drilling programme with another operator and is mobilising to Longreach this week with drilling to commence early next week. Significant wet weather in the area following ex-tropical cyclone Trevor has resulted in the minor delays.

The Pilot drilling programme as depicted in Figure 1 is scheduled to take approximately six weeks and the aim is for the new lateral wells to be on production by mid July 2019 following the necessary completion and tie-in operations. Once the Pilot is fully operational, the well configuration will provide shielding to the central well from the large drainage area which the previous two lateral wells were draining, and it is expected that three months of production drawdown will be required in order for material gas production rates to be observed.

Importantly, the two existing wells Glenaras 10L and 12L will only require to be shut in to facilitate drilling operations and will recommence full drawdown as soon as drilling operations are complete. The expected cost of this additional three-well lateral programme including drilling, completion and tie-in is approximately $8 million, which is well within the company's strong current cash position.

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"Whilst the wet weather has pushed the schedule back two weeks, there will be no additional cost to Galilee as a result of this delay. We are ready to go and our strategy of converting Resources to Reserves and ultimately bringing material volumes of gas into the east coast market remains unchanged." Managing Director Peter Lansom stated.

Figure 1 - Proposed Drilling Programme

Glenaras Gas Project (ATP 2019) - GLL 100%

The Glenaras Gas Project ("Project") is strategically located in central Queensland's Galilee Basin. The Permit covers an area of approximately 4000 km2 and is 100% owned and operated by Galilee (Figure 2).

The Project has one of the largest contingent gas Resources with the potential to supply the eastern Australian market which AEMO forecasts will need supply from contingent Resources from the early 2020's. An independently derived and certified Contingent Resource within the Betts Creek coals, with a 1C of 308 PJ, a 2C of 2,508 PJ and a 3C of 5,314 PJ. The Company's primary focus is on converting these contingent Resources to Reserves.

Figure 2 - Glenaras Gas Project

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Prior to being shut in for the forthcoming drilling programme, the existing Glenaras 10L and 12L pilot wells have continued to perform strongly, consistent with draining within a high quality, bounded coal seam with no evidence of material contribution from adjacent sandstones. Metered gas rates, measured via orifice plate meters at each well separator, have remained relatively stable at previously reported rates whilst water was continuing production at excellent rates of approximately 3,000 BWPD (barrels of water per day) in aggregate and still declining gradually.

Evidence of pressure communication between each of the existing lateral wells suggests they are accessing a significant drainage area which augurs well for economic gas recovery once the coal seam depressurises below the critical desorption pressure.

A successful Pilot achieving commercial gas rates has the potential to book 500 PJ+ of Proved and Probable Reserves. The Pilot will be on production for an extended period to de-water and lower the pressure in the surrounding coal to achieve gas flow.

Clarke Energy MOU

Galilee has entered into a Memorandum of Understanding (MOU) with Clarke Energy to assess the potential for a staged installation of a gas fuelled power station at the Glenaras Gas Project. This would enable commercialisation of the initial ramp gas from the Glenaras pilot prior to progressing towards FID on a potential Jemena pipeline for the full field development.

The MOU provides a framework of co-operation between the parties to investigate the feasibility and, upon agreement between both parties, negotiate the commercial terms of an agreement under which Clarke Energy would install gas fired electricity generation to connect Galilee's initial Glenaras ramp gas production to the grid. In addition, this would also provide flexibility to contribute to local power requirements.

This would provide Galilee with a further option to monetise its initial, Phase 1 gas in addition to the existing Barcaldine option as well as others under consideration. If Galilee proceeds with a project such as this then multiple benefits would be realized, including early cashflow, proof of concept for its 1st phase development which will be necessary prior to FID on the Jemena pipeline for the broader field development, important environmental advantages through the beneficial use of pilot production gas and flexibility to ultimately send power to and draw power from the grid.

Connection studies have commenced, and preliminary concept design of the power station is underway. The basis of design for the power station is modular and expandable such that as gas rates increase, additional generation units can then be added to increase the station output.

This is proven technology with a strong industry track record of CSG developments such as these, including Daandine Power Station and Wilga Park Power Station, examples of Clarke Energy's power stations are shown in Figure 3.

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Figure 3 - Clarke Energy Power Stations

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Jemena

Jemena continues to advance the planning of its Galilee Gas Pipeline which would run from the Glenaras Gas Project to Jemena's Queensland Gas Pipeline. Ongoing engagement with landholders and findings from initial constructability and ecological surveys has enabled Jemena to be well advanced in its route development.

Jemena is currently undertaking further in-field, targeted ecological surveys in anticipation of progressing preliminary environmental approvals in mid-2019.

Figure 4 - Proposed Pipeline Route

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