Pilot Energy : Quarterly Activities and Cashflow Report

Pilot Energy Ltd

ABN 86 115229 984 Level 12, 225 George Street Sydney, NSW 2000, Australia T: [phone] www.pilotenergy.com.au

Announcement to ASX

30 October 2020

SEPTEMBER 2020 QUARTERLY ACTIVITIES REPORT

& APPENDIX 5B

Corporate

With the announcement of the new corporate strategy on 13 May 2020 and the beginning of implementation of this strategy, the September Quarter has been very active with five key initiatives and transactions announced:

• On 4 September 2020, the Company announced the Mid West Wind and Solar Project feasibility study and proposed development.
• On 8 September 2020, the Company announced the acquisition of the Key Petroleum's 40% non-operated interest in WA-481-P taking the Company's interest in the permit to 100% operated interest.
• On 25 September 2020, the Company announced entering into a definitive agreement to acquire Royal Energy Pty Ltd, owner of a 50% interest in the operator of Cliff Head Oil Field and effective 21.25% interest in the Cliff Head Oil Field operation.
• On 25 September 2020, the Company announced the successful equity capital raising securing equity placement commitments of $2.5 million to institutional and sophisticated investors with completion of an initial equity placement of approximately $525,000
• On 25 September 2020, the Company also announced the intention to undertake a share purchase plan for existing shareholders on the same terms as the equity placement to institutional and sophisticated shareholders.

The execution and completion of these initial five initiatives will put the Company in a well funded position and have set a firm foundation for the Company and the implementation of the new strategy.

Mid West Wind and Solar Project

On 4 September 2020, the Company announced that it was commencing a detailed feasibility study to pursue the development of an offshore wind and onshore wind and solar power project to be located along the offshore/onshore coast of the Mid West Region of Western Australia (the "Mid West Wind and Solar Project" or the "Project"). The Company already holds a significant operating interest in offshore petroleum exploration license WA-481-P (see discussion below) along the Mid West coastal region of Western Australia. As an existing operator in the area, the Company has recognised that the offshore wind resource within the area covered by WA-481-P has been

measured to have an annual mean wind speed greater than 9 m/s at a hub height 100 meters.

Pilot considers that the Mid West Coastal region of Western Australia contains both world-class offshore and onshore wind resources and onshore solar resources. The renewable energy resource potential of the Mid West Region has been well documented by the World Bank, CSIRO, ABARE, Geoscience Australia and ARENA (see maps below).

Australian Offshore Wind Resources - Global Comparison

Meso-scale maps‑ show that Australia's greatest wind potential lies in the coastal regions of western, south western, southern and south-eastern Australia and the coastal regions with high wind resources (wind speeds above 7.5 m/s) include the coast of Western Australia south of Shark Bay to Cape Leeuwin which cover the area of WA-481-P).

Royal Energy Acquisition

On 25 September 2020, the Company announced that it has entered into a definitive share sale deed to acquire 100% of the shares of Royal Energy Pty. Ltd. (Royal Energy) for 143,939,394 Pilot shares (the Acquisition). Royal Energy is a privately owned Australian oil and gas company. The Acquisition is subject to the approval of Pilot shareholders which will be sought at an extraordinary meeting of shareholders expected to be held in early November 2020.

Royal Energy holds an indirect 21.25% interest in the Cliff Head Oil Field Joint Venture (CHJV) through 50% ownership of Triangle Energy (Operations) Pty. Ltd (TEO). TEO is the operator of the Cliff Head Joint Venture and owner of 42.5% interest in the Cliff Head Oil Field Joint Venture. Through the 50% ownership of TEO, Royal Energy holds joint operational control of the CHJV and holds 50% of the Board seats for TEO. Royal Energy's other assets also include approximately $1 million in cash and a holding of 5,208,488 shares in Vintage Energy Limited (ASX: VEN).

The Cliff Head Oil Field (Cliff Head) in located in the offshore portion of the Perth Basin about 270 kilometres north of Perth and 12 kilometres off the coast of Dongara in Western Australia. Cliff Head resides in the Production License WA-31-L which covers 72km², and the oil field covers 6km². Cliff Head is located at a water depth of 15-20 metres. Current oil production is approximately 600 bopd gross from the Cliff Head field. Oil is produced via five production wells at the offshore Cliff Head A Production Platform. The platform is connected to the onshore Arrowsmith Stabilisation Plant by twin 14km production and injection pipelines.

Cliff Head A Production Platform

The Cliff Head facilities are the only offshore and operating onshore infrastructure in the Perth Basin, and therefore, important for any development in the surrounding area. Cliff Head was the first commercial oil discovery developed in the offshore Perth Basin. The development cost of the field was A$327m with first oil production commencing in May 2006. To-date the field has produced over 14.8 million barrels and continues to produce at above originally forecast rates.

Pilot sees Royal Energy's assets and management highly as complementary to Pilot's focus on the development of the Mid West Wind & Solar Project (see PGY ASX announcement 4 September 2020) and Pilot's 100% ownership and operatorship of WA-481-P which is located immediately adjacent to and surrounds the Cliff Head Oil Field offshore production area, facilities and license. (see map below).

Capital Raising - Equity Placement

On 25 September 2020, the Company announced that in conjunction with the Royal Energy acquisition, it had received firm commitments from sophisticated and professional investor to subscribe for 75,757,576 shares at an issue price of $0.033 per share to raise $2.5 million before costs (Placement). The Company will also issue a total of 37,878,783 options (Options) on the basis of one Option for every two shares acquired in the Placement. The Placement will proceed in two tranches as follows:

• Tranche 1 raised $525,000 via the issue of 15,909,091 shares and 7,954,545 Options pursuant to the Company's existing placement capacity under ASX Listing Rules 7.1 (Tranche 1). The Tranche 1 shares settled on 30th September 2020; and
• Tranche 2 will raise $1,975,000 via the issue of 59,848,479 shares and 29,924,238 Options (Tranche 2). The issue of the Tranche 2 shares and Options and the Tranche 1 Options is subject to the approval of Pilot shareholders which will be sought at an extraordinary meeting of shareholders expected to be held in late November 2020.

Capital Raising - Share Purchase Plan

The Company also announced that it would also undertake a Share Purchase Plan (SPP) following completion if Tranche 1 of the Placement. The SPP has been offered to eligible shareholders to enable the Company to raise additional funds and provide an opportunity for shareholders to participate in the capital raising program of the Company.

Pilot will give eligible shareholders who were on the Company's share register at 7.00pm (AEST) on Thursday 23rd September 2020 and having a registered address in Australia or New Zealand an opportunity to subscribe for new fully paid ordinary shares (SPP Shares) and Options. Eligible shareholders will be entitled to acquire up to $30,000 of SPP Shares and Options on identical terms as the Placement, being $0.033 per share and one Option for every two shares acquired.

Participation in the SPP is optional by will give eligible shareholders the opportunity to increase their shareholding without paying brokerage fees or transaction costs, irrespective of the size of their shareholding. Full details of the Share Purchase Plan, including offer letters and the entitlement and acceptance form, were will be mailed to eligible shareholders on 7 October 2020 with a copy of the SPP documentation will also be lodged with the ASX. On 27 October 2020, the Company announced the extension of the closing date for the SPP to Friday, 20 November 2020.

Offshore North Perth Basin - WA-481-P (Operator, 100%)

The National Offshore Petroleum Titles Administrator (NOPTA) on behalf of the Delegates of the Commonwealth-Western Australia Offshore Petroleum Joint Authority advised Pilot on 13 August 2020 that Petroleum Exploration Permit WA-418-P had been renewed for a term of five years, after expiry of the previous six year term on 19 February 2020.

The renewal of WA-481-P comes with a 5-year work program consisting of geological and geophysical studies, 2D seismic reprocessing and 2D and 3D seismic acquisition in Permit Years 1 through 3 for a total expenditure of $5.75 million and one exploration well in Permit Year 5.

Pilot announced on 8 September 2020 that Pilot Energy Ltd (Pilot)and Key Petroleum Ltd (Key) have agreed to rationalise the ownership of WA 481-P with Pilot to acquire Key's 40% interest in Offshore Petroleum Exploration License WA-481-P. The acquisition would lead to Pilot having 100% ownership of WA-481-P. Key also agreed to relieve the Company of any continuing funding