Talon Energy : June 2022 Quarterly Activity and Cash Flow Report

ASX Announcement

29 July 2022

ASX: TPD

Quarterly Activity Report

for the Period Ending

30 June 2022

only	• Flow testing of the Perth Basin Walyering-5 well completed during the June
Quarter
	• Walyering-6 drilled to 3,551m intersecting gas in the Cadda Sandstone and
	Cattamarra Coal formations, with flow testing completed mid-July.
	• RISC Advisory issues Walyering Gasfield Reserve certification post quarter end.
	• Drilling at the Gurvantes XXXV CSG Project continued over the Quarter, with
	drilling of the Snow Leopard-1 and 2 complete, and Snow Leopard-3 commenced
	mid-June

useTalon's Managing Director, Colby Hauser, commented: "The June Quarter has been a period of exciting exploration and appraisal activities, with work at the Walyering and Gurvantes XXXV Projects continuing during the period.

Talon Energy Ltd ("Talon" or "Company") is pleased to provide its Quarterly Activity Report for the quarter ending 30 June 2022.

Activities undertaken at Gurvantes XXXV are aimed at proving up Resources by the end of 2022, with the work at

Walyering culminating with the Company's Maiden Reserve being booked in late July. The achievement of this milestone at Walyering in such a short period of time has allowed the Company to be in the enviable position of potentially being in production in Q1 2023, a little over 12 months since the first well was drilled at Walyering in December last year."

personal
		Reservoir	Interval	Average	Perf	Reservoir	Peak	Stabilised	Choke	FWHP	Length of	Est.
			Top	Porosity	interval	Pressure	Rate	Rate	Setting	(psi)	Test (hrs)	connected
			TVDss	(%)	(m)	(Est. psi)	(MMscfd)	(MMscfd)	(")			resource
			(-m)									(PJ)1
	A Sand	2,969	17.3	16	4,388	59	52	64/64	2557	>24	31
	B Sand	3,045	14.5	32	4552	32	28	48/64	2175	>24	24
	C Sand	3,154	16.4	10	4,850	32	27	48/64	2083	>24
	D Sand	3,212	13.9	18	4,655	13	10	48/64	813	>24	5
For
	Comingled Flow	-	15.4	76	-	75	67	72/64	2,634	~3	60

PERTH BASIN, WESTERN AUSTRALIA

EP447: Walyering Conventional Gas Project (45%), Strike Energy Limited (STX) (55% and Operator)

During the June Quarter field work continued at the Walyering Project located in the on-shore Perth Basin, with flow testing of the Walyering-5 well completed in the April 2022. And the Joint Venture's 2nd well, Walyering-6, spudded in late April, and reached a final depth of 3,551m in mid-May, intersecting a number of gas accumulations in the Cadda Formation sandstones, and the deeper Cattamarra Sand.

Work undertaken since the discovery at Walyering-5 in December 2021 has been focused on proving up sufficent Gas Reserves to support development of the Walyering Gasfield.

Flow testing of the four Jurassic aged wet-gas charged reserviors encountered in the Walyering-5 well yielded positive r sults for the Project, with the both the peak flow rate of 75MMscf/d, and stabilised co-mingled flow rate of 67MMscf/d exceeding initial expectations (refer below).

1. Estimated connected volume in place have been calculated based on Strike Energy Limited reservoir engineering analysis of well test data and does not constitute a Resource estimate for the purposes of the Petroleum Resources Management System 2018, BCF to PJ energy conversion factor of 1.2x was used based on the sweetness and negligible impurity of the Walyering gas stream. (refer Strike Energy Limited's ASX Announcement dated 16 May 2022 and titled "Walyering appraisal, Discovery & Testing Results")

Based on the success of the Walyering-5 Appraisel well, drillin gof the Project's second well, Walyering-6 commenced in April, intersecting 4 sandstone formations in the Cattamarra Coal measures, and 1 in the secondary objective, the Cadda Formation sandstones, with Walyering-6 flow tested in mid-July 2022, achieving a peak flow rate of 35 MMscf/d.1.

onlyuseImage 1. Drilling of Walyering-6 (with Parmelia pipeline compressor station top left-hand corner)

The drilling and flow testing operations of the Walyering-5 and 6 wells culminated in the certification of Talon's Maiden Gas and Condensate Reserves at the Walyering conventional gas project in mid-July by independent advisory firm, RISC Advisory. Further information on the Walyering Reserve Estimate can be found in Talon's ASX Announcement on 21 July 2022 titled "Walyering Gasfield Independent Reserves Certification".

personalThe certification of the Gas and Condensate Reserves at Walyering has greatly enhanced the potential for the development of the Walyering Gas Project.

Development Activities

The Walyering Gasfield is located approximately 140km North of Perth Western Australia, and proximate to the Parmelia Gas Pipeline (PGP) and the Dampier to Bunbury Natural Gas Pipeline (DBNGP), both of which transport gas

fr m the Perth Basin to a number of domestic users within Western Australia. Preliminary gas sample results to date

indicate that gas from the intersected reservoirs is well within relevant pipeline specifications and is therefore expected to require minimal processing.

Due to the Walyering Project's onshore location and proximity to the PGP, the Project presents a low CapEx, and fast to market development opportunity for the Joint Venture. With the Joint Venture Operator currently forecasting development costs (CapEx) of approximately $14.4M (including contingency) for the production facilities, pipeline connection and well completion costs for both wells (~$3.2M). As announced in April 2022 by the Joint Venture Operator, Strike Energy Limited, the front-end engineering and design contract for the facilities at Walyering was awarded to Momentum Engineering, with the proposed facility is expected to process approximately of 30 - 33MMscf/d, and include condensate storage and offloading capacity for up to 1,400bbls.

The relatively low CapEx for the Project is possible due to the following factors:

1.	Proximity to the PGP which connects the Perth Basin to WA's industrial gas market
2.	Location of gasfield on cleared freehold farming land
For	Gas composition within pipeline specification (gas samples indicate very low impurities (H2S, Nitrogen & CO2))
3.
4.	Offsite module fabrication of portion of the proposed processing facility
5.	No requirement for field compression at start-up

The Joint Venture Partners are currently reviewing the economics of the Walyering Project and expect to be in position to make a decision on its development imminently.

Condor (option to acquire 100%)

The Condor Structure (Condor) is located within EP494, a petroleum exploration permit currently held by Macallum Group Limited (Macallum), and situated on shore in the Perth Basin, Western Australia. In March 2021 Talon entered into an agreement with Macallum giving Talon an option to acquire blocks 7977, 8049 and 8121 located within EP494 and SP 34 AO (previously SP-0081) (Condor Tenure), subject to a number of conditions precedent.

The success of the recent drilling at the Walyering Gas Project on nearby EP447, which resulted in the independent certification of Talon's Maiden Perth Basin Gas Reserve in July 2022, is expected to have positive implications for Condor, with both plays targeting conventional Jurassic age reservoirs. In Talon's view, the success at the nearby

1. Refer Strike Energy Ltd (ASX:STX) ASX announcement dated 16 May 2022, titled "Walyering Appraisal, Discovery & Testing Results"

Figure 2: Gurvantes XXXV proposed drill hold locations

Walyering Project has resulted in a material upgrade to the Resource potential of Condor, with reservoirs at Condor expected to be significantly shallower than those encountered at Walyering, which has the potential to result in improved reservoir quality, and reduced drilling and completion costs for any future discovery. Condor's moderate well costs, expected low CO2 levels and proximity to key transport and pipeline infrastructure, mean that it is ideally placed for commercial development in the event of exploration success.

Based on the exploration success seen at Talon's 45% owned Walyering Gasfield, the Company has given notice to Macallum that it wishes to be assigned the Condor Tenure, with both parties currently working towards the satisfaction of the outstanding conditions precedent required to facilitate the eventual transfer of ownership of the Condor Tenure to Talon.

Condor has been mapped by Talon as the Perth Basin's largest, untested wet gas structure within conventional Jurassic reservoirs, which currently has a Prospective Resource per the table 1 below.

Table 1: Condor Structure Resource estimate

only

Condor Structure Un-risked Prospective Resource

Talon - 100%

Permit

Low (P90)

Best (P50)

High(P10)

Condensate

Gas

Condensate

Gas

Condensate

Gas

(MMbbl)

(Bcf)

(MMbbl)

(Bcf)

(MMbbl)

(Bcf)

use

EP494

9.5

202

20.2

408

39

710

Ca tionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. For more information on the above Prospective Resources, refer to ASX announcement dated 17 March 2021. Talon confirms that it is not aware of any new information or data, other than the recently independently certified Reserves and Resources at the Walyering Gasfield, that materially effects the information

personalcontained in that Announcement, and that all material assumptions and technical parameters underpinning the estimates contained in that Announcement have not materially changed.

EP 495 - Ocean Hill (Limited First Right of Refusal)

As previously reported, under the terms of the Farm-in Agreement between Talon and Strike Energy, with respect to EP477 (Walyering), Talon was granted a first right of refusal should Strike wish to seek farm-in partners for its EP495 petroleum permit (containing the Ocean Hill conventional Jurassic gas discovery). During the reporting period, the parties continued their discussions regarding an opportunity for Talon to farm-in to an interest in EP495, however those discussions have ceased as the parties were unable to agree on commercial terms.

As a result, Strike continues to retain its interest in EP495, and Talon retains a first right of refusal should Strike seek to conclude a farm-in transaction with a third party on terms more favourable than those recently discussed with Talon.

GURVANTES XXXV CSG PROJECT - MONGOLIA (Farming In to a 33% interest)

Talon is party to a Farm-in Agreement with Telmen Resource LLC (Telmen) (a wholly owned subsidiary of ASX listed TMK Energy Limited (TMK) to acquire a 33% Participating Interest in the Gurvantes XXXV Production Sharing Agreement (PSA). The Gurvantes

ForXXXV exploration licence covers a significant area of 8,400km2 and is situated in what is c nsidered one of the most prospective coal seam gas basins globally. Gurvantes XXXV is situated less than 20km from the Chinese- Mongolian border and close to the extensive Northern China gas transmission and distribution network. It is also proximate to several large-scale mining operations with high energy needs. Gurvantes is therefore ideally placed for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements.

Gurvantes XXXV Coal Seam Gas Project

Gross (100%) Prospective Gas Resources (TCF)

During the June Quarter drilling of the first two core holes at the Gurvantes XXXV Project, Snow Leopard-1 and 2, was completed. Snow Leopard-1 and Snow Leopard-2 form part of Talon's Stage 1, four-hole farm in obligations under the Gurvantes Farm-In Agreement.

Drilling of Snow Leopard-1 commenced on the 15th of March and was completed in early May, intersecting 60 metres

of gassy coal, with preliminary desorption analysis indicating gas content in the range of 7.5m3/t - 12.5m3/t on an as
only	(averaging ~3%)2.
received basis, high Methane levels averaging ~96%, and low CO2

The second core hole, Snow Leopard-2 commenced drilling in mid-May, and intersected 2 coal seams, with the first 70 metres of gassy coal intercepted at a depth of 167 metres down hole, and a further coal seam measuring 21 metres, i tersected at 457 metres down hole3.

Downhole geophysical surveys and permeability testing were undertaken on both holes, which included Drill Stem Testing and Injection Fall off Testing.

Talon is currently awaiting confirmation from TMK that its initial farm in funding obligation of US$1.5M has been spent on the Stage 1 Work Program at Gurvantes XXXV, which will activate a contractual right for Talon to request that Telmen assign it a 33% interest in the Gurvantes XXXV Production Sharing Agreement, as well as commit Talon to a further sole funding obligation for ~US$3.15M of exploration expenditure at Gurvantes XXXV.

		Region		Un-risked Prospective Resource (TCF)		Risked Prospective Resource (TCF)
use	1U (Low)	2U (Best)	3U (High)		1U (Low)		2U (Best)		3U (High)
		Prospect Area	1.30	2.02	3.38		1.17		1.82		3.04
		Lead Area	6.89	17.94	38.24		1.95		4.14		8.21
		Total	8.19	19.96	41.62		3.12		5.96		11.25

Gas volumes are expressed in the table above are in trillion cubic feet (TCF) at standard temperature and pressure basis.

Talon's net (33%) Prospective Gas Resources (TCF) interest*

Region	Un-risked Prospective Resource (TCF)		Risked Prospective Resource (TCF)
	1U (Low)	2U (Best)	3U (High)		1U (Low)		2U (Best)	3U (High)
Prospect Area	0.43	0.66	1.12		0.39		0.60	1.00
Lead Area	2.28	5.92	12.62		0.64		1.37	2.71
Total	2.71	6.58	13.74		1.03		1.97	3.71

personal	Gas volumes are expressed in the table above are in trillion cubic feet (TCF) at standard temperature and pressure basis.
*Subject to completion of Farmout and transfer of 33% participating interest in Gurvantes XXXV to Talon

Cautionary Statement: The estimated quantities of petroleum that may potentially be recovered by the application of future development projects elate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. For more information on the above Prospective Resources, refer to ASX announcement dated 18 August 2021. Talon confirms that it is not aware of any new information or data that materially effects the information contained in that Announcement and that all material assumptions and technical parameters underpinning the estimates contained in that Announcement have not materially changed.

UK North Sea Portfolio

In April, Talon executed a Sale and Purchase Agreement with Finder Energy UK Limited (Finder) for the sale, subject to required regulatory approvals, of a 100% interest in Licence P2527, which contains the White Bear Prospect. Under Forthe terms of the transaction with Finder, Talon will be entitled to receive 12.5% of gross income received by Finder in relation to P2527 (for example, any cash received for farmout or divestment) which converts to a royalty of 3% of

Finder's net share of produced petroleum during the production phase.

At the end of the June Quarter the transfer of P2527 had not been completed with the transfer awaiting approval by the UK regulator, which is expected shortly. Talon has no holding costs or obligations in respect of P2527.

Corporate

Cash and cash equivalents at the end of the June 2022 quarter were $10.1M.

During the June quarter the Company successfully completed an $11.0M Placement (before costs) and a undertook a $2.529M Share Purchase Plan (before costs) to help fund the Company's ongoing exploration activities.

In May, the Company held its Annual General Meeting. All Resolutions put to the meeting were carried with the overwhelming support of shareholders. This included a Resolution to consolidate Talon's securities on issue, including its listed fully paid ordinary shares, with the securities consolidation due to be completed on 29 July 2022.

1. Refer TMK Energy Ltd (ASX:TMK) Announcement dated 10 May 2022, "Drilling and Testing Completed Snow Leopard-1"
2. Refer TMK Energy Ltd Announcement dated 8 June 2022, "91 Metres of Gassy Coal in Snow Leopard-2"

On 30 June 2022, Mr Matt Worner, a director of the Company transitioned from his role as an Executive Director to a Non-executive Director role.

Tenement Holdings

In accordance with Listing Rule 5.4.3 Talon provides the following information in relation to its oil and gas tenements:

Oil and Gas tenements held at the end of the quarter:

	Project	Location	Tenement/ Blocks	Status	Beneficial
					Interest
	Walyering	Perth Basin	EP447	Granted	45%
	Bluestring/White Bear	North Sea	20/2a	Granted	100%1
		Subject to earn-in conditions
	Gurvantes XXXV	Mongolia		Farming-In	0%2
only
	Condor	Perth Basin	Blocks 7977, 8049	Acquisition subject to	0%3
			and 8121(within	satisfaction of various
			EP494)/SPA-0081	conditions precedent
	Ocean Hill	Perth Basin	EP495	Granted	FROR4
	1. Talon entered into an agreement with Finder whereby Talon will sell to Finder a 100% interest in 20/2a, with the transfer subject to regulatory
use
	approval.

2. Talon executed a binding agreement dated 30 January 2021 with Telmen to earn a 33% interest in the Gurvantes XXXV Production Sharing Agreement. At the end of the reporting quarter no interested, other than the contractual earn-in right, had been earned by Talon.

3. In January 2021 Talon entered into a non-binding agreement for the option to acquire 100% of blocks 7977, 8049 and 8121 located within EP494, and SPA-0081 from Macallum Group Limited. This transaction is subject to a number of Conditions Precedent, which had not been satisfied at the end of the Quarter.

4. As part of the Walyering farm-in agreement executed with Strike Energy Limited, Talon also has a limited right of refusal right over EP495.

No tenements were acquired or sold during the June 2022 quarter.

In accordance with Sections 1.2, 6.1 & 6.2 of the June 2022 Quarter Appendix 5B, Talon provides the following information:

	Section		Description		$A'000
	1.2		Expenditure for exploration & evaluation, production, staff and administrative
		corporate costs		5,245
	6.1 & 6.2		Payments made to related parties and their associates including Directors fees and
		corporate costs.		135
				--Ends--
	This Announcement has been authorised for release by the board of directors.
	For further information, please contact:
	Talon Energy Ltd	Talon Energy Ltd
personal		David Lim
	Colby Hauser
	Managing Director and CEO	Company Secretary
[phone]		[phone]
	[e-mail]	[e-mail]
For