Winchester Energy : Oil production to rise sharply as new projects come online

onlyDate: 18 July 2022

ASX Code: WEL

Capital Structure

Shares: 1,010,219,792

Current Share Price: 1.2c

Market Cap: $12M

Debt: Nil

useDir ctors Doug Holland Technical Director/Chief Operating Officer

James Allchurch

Non-Executive Director

Larry Liu

Non-Executive Director

personalTony Peng

Non-Executive Director

Lloyd Flint

Company Secretary

Co tact Details

Australia

Level 1

10 Outram Street We t Perth WA 6005 Au tralia

PO Box 641

W st Perth WA 6872

Australia

Tel: [phone]

Fax: [phone]

USA

4900 Woodway, Ste. 780 Houston, TX 77056

ForTel: [phone]

winchesterenergyltd.com

Oil production to rise sharply as

new projects come online

• Contributions from newly acquired Varn Oil Field and Group Prospect forecast to lift production by between 44% (base) and 100% (high) by end CY20221
• Significant additional exploration upside (discovery) exists at both projects above and beyond the oil production forecasts
• Consistent news flow over next three months with four shallow workovers, one deep-entry recompletion and the drilling of three new wells planned for Group Prospect
• Gross revenue of AUD$1.67M for April and May 2022 (Winchester market capitalisation approx. $11m)

Winchester Energy Limited (ASX: WEL) (Winchester or the Company) is pleased to provide an operations update and oil production forecast for its projects located in Taylor and Nolan Counties, Texas.

Figure 1: Winchester GrossOil Production Forecast - Base Case and High Case (excludes gas production)1

1 See 'Forecast Explanation' on page 7

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Winchester is delivering on its strategy to build sustainable high-margin oil and gas production over the coming months and years. In 2H 2022 the Winchester team will oversee a busy schedule of field activity and increasing production across Winchester's portfolio.

All of Winchester's existing and forecast production is derived from conventional reservoirs which can be immediately brought online to deliver oil and gas sales at decade-high oil prices. Production forecasts on a project basis using conservative base case projections are provided in Figure 2.

Figure 2: Winchester NetOil Production Forecast by Project - Base Case (excludes gas production)1

The Group Prospect and Varn Oil Field acquisitions are expected to add significantly to Winchester's production volumes in Nolan County in the near and medium term. Crucially, both Varn and the Group Prospect include several historically oil-rich 'bonus' formations that represent significant additional upside and can be tested for minimal additional cost.

In particular, the Group Prospect provides access to all the oil-bearing formations prevalent in the area, including the Strawn and Cisco Sands. Winchester will test several prospective zones which will be highly informative as to identifying one or more 'plays' that may have significant potential across the Group Prospect and the adjoining Whiteside Prospect (Winchester 100% WI).

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In addition, Winchester continues to leverage its large seismic database and regional experience to review and assess further low-risk opportunities in the region that can add barrels of oil at low cost.

Figure 3: Location of WEL assets in Nolan and Taylor Counties, Texas

Existing Oil Production - Nolan County, Texas

Existing oil and gas production at Winchester's Nolan County operations continue to generate significant revenue for the Company capitalizing on soaring global oil prices. Nolan County producing wells are provided in Table 1, with production and revenue for April and May 2022 provided below.

Production and Revenue - April/May 2022

Gross revenue from Winchester's Nolan County operations for the months of April and May 2022 was US$1,134,992 (AUD$1.67M2) for the production and sale of 11,583 barrels of oil equivalent (boe3) for the two months.

Net of royalties and severance tax, Winchester's net revenue for April and May 2022 was approximately US$815,182 (AUD$1.2M2). The average sale price of oil in April and May 2022 was US$105.21 and US$110.48 per barrel respectively.

Winchester notes that April/May 2022 production figures were negatively impacted due to the Company's best producing well, White Hat 2106, being offline for a period due to maintenance. White Hat 2106 is now back to optimal production.

1. Using exchange rate 1 AUD = 0.68 USD
2. boe (barrels of oil equivalent) - gas quantities are converted to boe using 6,000 cubic feet of gas to one barrel of oil. Conversion ratio is based on energy equivalency and does not represent value equivalency. Rounded to the nearest boe.

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Table 1: Producing wells at Nolan County operations

Well ID	Drilled	Formation	Oil Field	WEL WI	Status
White Hat 2002	Apr 2017	Strawn	Mustang	50%	Producing
White Hat 2003	Mar 2019	Strawn	Mustang	75%	Producing
White Hat 2005	Aug 2019	Strawn	Mustang	75%	Producing
White Hat 3902	Dec 2019	Ellenburger	-	100%	Producing
White Hat 2006	Jan 2020	Strawn	Mustang	75%	Producing
Arledge 1602	Jul 2019	Cisco Sands	Lightning	100%	Producing
McLeod 1703	Dec 2019	Cisco Sands	Lightning	100%	Producing
Bast 1	1985	Strawn	Bast	92%	Producing
Bast 2	1985	Strawn	Bast	94%	Producing
Bast A-1	1985	Strawn	Bast	93%	Producing
McLeod 1705	June 2021	Strawn	-	100%	Producing
White Hat 2106	July 2021	Ellenburger	-	100%	Producing

Group Oil Prospect (75% WI)

On 29 June 2022, Winchester announced it had farmed-in to the Group Prospect in Nolan County, Texas.

With a modest upfront cost of US$411,400, the farm-in provides Winchester with an entry into an oil play contiguous to its existing land holding and will deliver an immediate incremental increase in the Company's oil production for minimal operational outlay.

The Group Prospect work programme commenced 29 June 2022 and will provide consistent news flow as four shallow workovers at existing well bores, one deep-entry recompletion and the drilling of three new low-risk wells are to be completed within the next three months.

On top of the farm-in work commitments shown in Table 2, Winchester can conduct further workovers and drill additional wells across the Group Prospect on a 75% (Winchester) / 25% (Westex) 'heads up' basis. This represents significant upside optionality for Winchester should the project out-perform expectations.

Table 2: Winchester work commitments under the Group Prospect farm-in

	Activity			Commencement Date			Approx Cost			Westex Back-in after
							Payout*
	Workover 1		Commenced		US$75,000	50%
	Workover 2		10 days after completion of		US$75,000	50%
		Workover 1
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Workover 3	10 days after completion of	US$250,000	50%
(deep test)	Workover 2
Workover 4	10 days after completion of	US$75,000	50%
Workover 3
Workover 5	10 days after completion of	US$75,000	50%
Workover 4
New well 1	19 August 2022	US$600,000	25%
New well 2	14 days after completion of	US$600,000	25%
New well 1
New well 3	14 days after completion of	US$600,000	25%
New well 2
Additional workovers	To be determined by	To be	No back-in. Heads up at
WI of 75% Winchester /
or new wells	Winchester	determined
25% Westex

• Westex to assume stipulated percentage of working interest (WI) revenue (back-in)afterWinchester recovers 100% of individual workover/new well cost from revenue (payout)

Varn Oil Field (100% WI)

IAfter several months of detailed planning and permitting, operations have accelerated significantly at Winchester's Varn Oil Field (2P Reserves of over 994,000 barrels of oil (plus gas))4, located 18 miles to the east of Winchester's existing producing assets in Nolan County, Texas. The waterflood operation is now fully permitted with 75% of above-ground infrastructure (roads, flow lines and facilities) now in place.

Winchester is the operator at Varn, which is a waterflood field operation comprising 11 wells (six oil and gas producers and five water injectors). The majority of these wells are planned for the central area where the Upper and Lower Fry Sand overlap while the rest of the wells capture oil from the more widespread Upper Fry Sand. Drilling equipment is expected to be mobilizing this month with drilling to commence in early August.

4 See ASX Release dated 3 December 2021

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