Forza Petroleum : Q2 2023 Management's Discussion & Analysis

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis ("MD&A") should be read in conjunction with the consolidated financial statements of Forza Petroleum Limited ("FPL" or, the "Company") and its subsidiaries for the three and six months ended June 30, 2023 and 2022 (the "Financial Statements"), which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The date of this MD&A is July 25, 2023.

Unless otherwise noted, all amounts are in thousands of U.S. dollars.

Selected terms and abbreviations used in this MD&A are listed and described in the "Glossary and Abbreviations" section.

Readers should refer to the "Forward-Looking Information" advisory on page 15. Additional information relating to FPL, including FPL's Annual Information Form dated March 23, 2023, is on SEDAR at www.sedar.com.

Table of Contents

Company Overview

The Company is a public company incorporated in Canada under the Canada Business Corporations Act and is the holding company for the Forza Petroleum group of companies (together, the "Group" or "Forza Petroleum"). The Group has a 65% Working Interest in and operates the Hawler License Area in the Kurdistan Region of Iraq ("KRI"), which has yielded the discovery of four oil fields, three of which have contributed to production.

Operational Highlights

• Average gross (100%) oil production of 605 bbl/d (working interest 400 bbl/d) in Q2 2023, exclusively from the Banan- 4 well in the Banan West fault block which was being produced at a restricted rate rather than shut-in to minimize risk of damage to well facilities.
• Given the previously announced suspension of the Group's work program for the balance of 2023, activity was limited during the second quarter of 2023.
• Installation of a pipeline connecting the Banan field to the Hawler production facilities at the Demir Dagh field is nearing completion with commissioning expected during the third quarter of 2023.
• The Group's work program for the balance of 2023 remains suspended pending reopening of the Kurdistan Oil Export Pipeline ("KOEP") and clarity regarding collection of overdue payments for oil sales and the terms applicable for future oil sales.

Financial Highlights and Outlook

Liquidity outlook

The Group expects cash on hand as of June 30, 2023, cash receipts from oil sales, and, if required, up to $15 million in funding from the Company's principal shareholder, will fund its forecasted capital expenditures and operating and administrative costs through the end of September 2024 and the $76.2 million in deferred purchase consideration due and payable in connection with the original acquisition of the Hawler License Area. The estimates and judgments related to the Going Concern assumption are discussed in detail in Note 2b of the Financial Statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Financial performance

The following table contains financial performance highlights for the three and six months ended June 30, 2023 and June 30, 2022.

Notes:

1. Field operating costs represent Forza Petroleum's Working Interest share of gross operating costs and exclude partner share of operating costs which are being carried by Forza Petroleum.
2. Excludes non-cash changes to the decommissioning obligation.

Revenue and cash receipts

In recent years, sales of the Group's oil production had been exclusively through the KOEP. On March 25, 2023, the operator of the KOEP notified OP Hawler Kurdistan Limited, the Group's operating subsidiary in the KRI, of a shutdown of the pipeline. Accordingly, production from the Hawler License Area was substantially shut-in.

The shutdown relates to a March 2023 arbitration decision of the International Chamber of Commerce impacting exports by the KRG through the port of Ceyhan in Turkey. An initial statement from the Federal Government of Iraq ("FGI") indicated that exports of Iraqi crude oil through the port may resume only with the consent of the FGI.

More recent public reports indicate that officials from the KRG and the FGI have agreed to mechanisms that will apply and permit a restart of oil exports from the Kurdistan Region with the consent of the FGI pending the development of a federal oil and gas law. Discussions between the FGI and the Republic of Turkey are underway to re-open the KOEP.

During the second quarter of 2023, the Group sold oil inventory on hand to the local market, resulting in revenue of $1.3 million. Included in revenue is $1.1 million realized on the sale of 39,300 bbl (WI) of crude oil (average $28.28/bbl) and $0.2 million related to the recovery of costs carried on behalf of partners. Revenue from sales decreased by $97.4 million versus the three months ended June 30, 2022 due to a 70% decrease in realized average sales price and a 96% decrease in sales volumes. Because of local market dynamics, the price for oil sold to the local market is at a significant discount to international oil prices.

Revenue of $49.1 million was recorded for the six months ended June 30, 2023. Included in revenue is $41.1 million realized on the sale of 777,400 bbl (WI) of crude oil ($52.88/bbl) and $8.0 million related to the recovery of costs carried on behalf of partners. Revenue for the six months ended June 30, 2023 decreased by $132.0 million compared to the same period in 2022. The decrease is attributable to a 40% decrease in realized sales price and a 55% decrease in sales volumes.

Prior to the shutdown of the KOEP in March 2023, all sales during the three months ended March 31, 2023 were made via the KOEP.

The Group has received full payment for all oil sales made through the KOEP to the end of September 2022 and for all local sales during the three months ended June 30, 2023.

Operating expense

Operating expense during the second quarter of 2023 amounted to $6.7 million ($170.87/bbl) versus $9.3 million ($10.54/bbl) during the second quarter of 2022.

Field operating costs during the second quarter of 2023 amounted to $4.4 million ($111.07/bbl) compared to $6.0 million ($6.85/bbl) during the second quarter of 2022. Field operating costs per barrel were significantly impacted by the shutdown

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

of the KOEP and subsequent substantial shut-in of production from the Hawler License Area. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Field operating costs decreased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as a result of a decrease in facilities, diesel, security and equipment costs.

Operating expense during the six months ended June 30, 2023 amounted to $15.2 million ($19.55/bbl) versus $17.9 million ($10.38/bbl) during the six months ended June 30, 2022.

Field operating costs during the six months ended June 30, 2023 amounted to $9.9 million ($12.71/bbl) compared to $11.7 million ($6.75/bbl) during the six months ended June 30, 2022. Field operating costs per barrel were significantly impacted by the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Field operating costs decreased for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as a result of a decrease in facilities, diesel, security and equipment costs.

Field operating costs represent Forza Petroleum's Working Interest share of gross operating costs and exclude partner share of operating costs which are being carried by Forza Petroleum.

Cash used in / generated from operating activities

Cash used in operating activities for the second quarter of 2023 was $5.8 million compared to cash generated from operating activities of $45.6 million during the same period in 2022. Cash generated from operating activities for the six months ended June 30, 2023 was $12.8 million compared to $58.2 million during the same period in 2022. The decrease for both periods mainly relates to lower crude oil sales revenue payments received during the period. This negative factor has been partially offset by a decrease in royalties and cash payments relating to inventory, other current assets and trade and other payables. Royalties decrease proportionally with sales revenue. The decrease in payments relating to inventory, other current assets and trade and other payables primarily relates to decreased activity resulting from the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Profit / Loss

Loss for the three months ended June 30, 2023 was $131.3 million compared to a profit of $31.5 million during the second quarter of 2022. The variance in profit/loss for three months ended June 30, 2023 in comparison to the same period in 2022 is primarily attributable to i) a $121.4 million impairment recorded during the three months ended June 30, 2023 relating to the Hawler License Area; ii) a $57.5 million decrease in net revenue resulting from decreased realized sales price and lower sales volumes, which contribute to decreased recovery of carried costs; and iii) a $1.9 million increased to the expected credit loss provision. These negative factors have been partially offset by i) an $11.8 million decrease in depletion recorded due to lower production volumes in 2023 combined with a lower depletion expense per barrel; ii) a $2.5 million decrease in operating expense as a result of decreased facilities, diesel, security and equipment costs; iii) a $1.7 million decrease in the non-cash charge resulting from the change in the fair value of the purchase consideration obligation; and iv) a $1.8 million decrease in income tax expense as a result of decreased net revenue.

Loss for the six months ended June 30, 2023 was $133.1 million compared to a profit of $53.8 million during the six months ended June 30, 2022. The variance in profit/loss for six months ended June 30, 2023 in comparison to the same period in 2022 is primarily attributable to i) a $121.4 million impairment recorded during the six months ended June 30, 2023 relating to the Hawler License Area; ii) a $77.9 million decrease in net revenue resulting from decreased realized sales price and lower sales volumes, which contribute to decreased recovery of carried costs; iii) a $5.8 million increase to the expected credit loss provision; and iv) a $3.4 million increase to the materials inventory provision during the six months ended June 30, 2023 compared to a $0.4 million increase during the same period in 2022. These negative factors have been partially offset by i) a $13.6 million decrease in depletion recorded due to lower production volumes in 2023 combined with a lower depletion expense per barrel; ii) a $2.7 million decrease in operating expense as a result of decreased facilities, diesel, security and equipment costs; iii) a $1.5 million decrease in the non-cash charge resulting from the change in the fair value of the purchase consideration obligation; and iv) a $2.5 million decrease in income tax expense as a result of decreased net revenue.

All variances noted above are largely attributable to the shutdown of the KOEP and subsequent substantial shut-in of production from the Hawler License Area. Refer to the "Revenue and cash receipts" section of this MD&A for further information.

Capital additions

During the second quarter of 2023, the Group recorded capital additions of $2.2 million, including $2.0 million invested in drilling preparation activities. Additional amounts of $0.2 million and $0.1 million were also recorded on facilities and directly attributable support costs, respectively. Investments during the period were impacted by the decision to suspend the Group's work program for the balance of 2023 as a result of the shutdown of the KOEP.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

During the six months ended June 30, 2023, the Group recorded capital additions of $16.7 million, including $15.0 million invested in drilling activities in the Demir Dagh and Zey Gawra fields, and in the recompletion and testing of the previously drilled Ain al Safra-1 and -2 wells. Additional amounts of $1.2 million and $0.3 million were also recorded on facilities and directly attributable support costs, respectively.

Financial position

The following table contains highlights of the Group's financial position as at the dates indicated below.

The cash and cash equivalents balance of $71.2 million as at June 30, 2023 increased from $71.1 million at December 31, 2022. This increase is due to $12.8 million in cash generated from operating activities partially offset by $12.7 million in cash used in investing activities. Two revenue payments were received during the six months ended June 30, 2023 for prior sales through the KOEP. The Group also received payment for local oil sales completed during the period.

Working capital decreased from $52.1 million at December 31, 2022 to $36.1 million at June 30, 2023 due to i) a $7.6 million decrease in the trade and other receivables balance, primarily due to a $5.8 million increase to the expected credit loss provision; ii) a $5.3 million increase in the trade and other payables balance; iii) a $2.2 million decrease in the inventory balance, primarily due to a $3.4 million increase in the provision against inventory; and iv) a $1.1 million decrease in the other current assets balance. These factors were partially offset by a $0.1 million increase in the cash and cash equivalents balance.

The total assets balance decreased to $322.0 million at June 30, 2023 from $448.2 million at December 31, 2022. This change is primarily due to i) a $121.4 million impairment recorded during the three months ended June 30, 2023 relating to the Hawler License Area; ii) a $7.6 million decrease in the trade and other receivables balance, partly due to a $5.8 million increase to the expected credit loss provision; iii) a $2.2 million decrease in the inventory balance, primarily due to a $3.4 million increase in the provision against inventory; and iv) a $1.1 million decrease in the other current assets balance. These negative factors have been partially offset by i) $16.4 million of capital additions; and ii) a $0.1 million increase in the cash and cash equivalents balance.

The $1.4 million increase in total long term liabilities from December 31, 2022 is primarily due to an increase in the decommissioning obligation.

The total liabilities balance has increased from $117.4 million at December 31, 2022 to $124.1 million at June 30, 2023. The $6.7 million increase is due to i) a $1.8 million increase in the fair value of the purchase consideration (see the "Liquidity and Capital Resources" section of this MD&A for further information); ii) a $3.5 million increase in the trade and other payables balance excluding the change in the purchase consideration; and iii) a $1.2 million increase in the decommissioning obligation.

The undiscounted balance of principal and accrued interest owed under the purchase consideration obligation to the vendor of the Hawler License Area as at June 30, 2023 was $76.2 million (December 31, 2022 - $76.2 million).

Business Environment

Following various destabilizing geopolitical events impacting the KRI over several years, relative political stability over the last three years has supported conditions where the Group has been able to advance its activities in the KRI. However, oil price volatility and other macroeconomic factors compound uncertainty associated with unresolved political disputes, and their eventual impact on the Group's operations may be significant and remains unclear. There remains an ongoing risk that any degradation of the regional security situation could have a material adverse effect on the operating and financial performance of the Group. Political and other risk factors which are disclosed in FPL's Annual Information Form could have an adverse effect on Forza Petroleum's performance.

The Group's future revenues and cash flows from operating activities are dependent on the Group's ability to produce, deliver, and receive payment for sales of crude oil. Production rates are subject to fluctuation over time and are difficult to predict.

Uncertainties related to global, social, political, and economic conditions and the resulting changes in global oil supply chains and infrastructure investment contribute to volatility in the price of crude oil. As demonstrated by the global response to the invasion of Ukraine by Russia, increased price volatility may become a more significant and sustained feature of the oil and gas markets. Recent concerns regarding inflation and a heightened risk of economic recessions affecting many countries may undermine near term demand for oil and gas. Ongoing elevated levels of uncertainty regarding returns on long term