Tamaska Oil and Gas : Acquisition Of Strategic Mongolian Coal Seam Gas Project

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ACQUISITION OF STRATEGIC MONGOLIAN COAL SEAM GAS PROJECT

• Binding Term Sheet executed to acquire 100% of Telmen Energy Limited (Telmen)
• Telmen currently holds a 100% interest in the Gurvantes XXXV Coal Seam Gas (CSG) Project located in the South Gobi Basin in Mongolia
• Gurvantes XXXV CSG Project covers 8,400 km2 in what is considered one of the most prospective underexplored basins for CSG globally
• Independent Prospective Resource (2U) of 5.96 TCF* independently assessed by Netherland, Sewell & Associates, Inc. (NSAI)
• Gurvantes XXXV CSG Project is located less than 20 km from the Chinese-Mongolian border and close to the extensive Northern China gas transmission and distribution network
• Initial exploration program has commenced and is fully funded by Talon Energy Ltd (ASX:TPD), with the initial high impact, low cost drilling program expected to commence in Q1 2022
• TPD spending US$4.65m under a two-stage farmin to earn a 33% Working Interest in the Gurvantes XXXV CSG Project
• TMK has received commitments to raise A$1.96 million (before costs) through the issue of 245 million shares and is expected to have approximately A$3.8 million cash on completion of the transaction
• The proposed acquisition is subject to completion of due diligence and TMK shareholder approval
• The proposed Telmen acquisition is an exciting addition to TMK's 20% working interest in the Napoleon Prospect, which is located in the Dampier Basin of the North-West Shelf and has a mean gross unrisked prospective resource for the main target of 1.53 TCF of gas and 66 million barrels of condensate* (see the ERCE independent resources estimate in Appendix 4)

*Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

Tamaska Oil and Gas Ltd (ASX:TMK) (TMK or the Company) is pleased to announce that is has executed a binding Terms Sheet to acquire Telmen Energy Limited (Telmen) for consideration of 1.6 billion fully paid ordinary shares in TMK and 1.6 billion performance shares in TMK converting into fully paid ordinary shares upon successfully achieving certain performance targets and milestones detailed below (Acquisition).

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ASX Release

Telmen is an unlisted Australian public company which owns 100% of Telmen Resource LLC, a Mongolian incorporated entity, which in turn holds a 100% interest (subject to the Talon Farmout Agreement detailed below) in the Gurvantes XXXV CSG Project located in the South Gobi Basin of Mongolia. Telmen is led by an Australian and Mongolian team which together bring the expertise and experience to explore and develop the Gurvantes XXXV CSG Project.

Planning and preparations are well advanced for an upcoming multi well exploration drilling program, expected to commence in Q1 2022.

Background Information on the Gurvantes XXXV CSG Project

The Gurvantes XXXV CSG Project covers a significant area of 8,400 km2 and is located in what is considered one of the most prospective basins for CSG globally. Within the Project area, multiple very thick, high quality coal seams outcrop at the surface and extend along an east-west strike for approximately 150km. Within the Project area there are six active coal mining operation, twenty-six coal mining leases and numerous coal exploration licenses with a significant amount of exploration for coal having been completed. Preliminary exploration for CSG was initially completed in 2004-2005 and CSG test work characterised the coal as containing high gas quantities of ~10 m3/t with very high methane concentration of >95% CH4.

The Gurvantes XXXV CSG Project area is situated less than 20 km from the Chinese-Mongolian border and close to the extensive Northern China gas transmission and distribution network. Notably, it is the closest of Mongolia's CSG projects to China's West-East Gas Pipeline. Likewise, it is proximate to several large-scale mining operations with high energy needs. As such, the Gurvantes XXXV CSG Project is ideally situated for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements.

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ASX Release

Telmen's interest is held by its wholly owned subsidiary, Telmen Resource LLC, via a Production Sharing Agreement (PSA). On 21 January 2019, Telmen Resource LLC entered into a Petroleum Prospecting Agreement for three years on the Tenement with the Mineral Resources and Petroleum Authority (MRPAM), the main government organization in charge of minerals and petroleum related matters. On completion of the work program undertaken for the Petroleum Prospecting Agreement in September 2020, Telmen Resource LLC submitted the prosecting work report which was approved and accepted by MRPAM and a request to proceed to the award of a PSA was lodged. The PSA was subsequently awarded in July 2021.

Subsequent to the award of the PSA in July 2021, Telmen submitted its request for an exploration license which was awarded in September 2021. This exploration license has a duration of 10 years and can be extended for a further 5 years in certain circumstances. The final approval required prior to commencing field operations is the approval of an Environmental Impact Assessment which is well advanced and expected to be received in early 2022.

Telmen expects to commence a high impact drilling program at the Gurvantes XXXV CSG Project in mid Q1 2022. The first phase of the exploration program will include the drilling of at least 4 fully tested cored holes where important data will be gathered to confirm coal thickness, gas contents, gas composition and permeability. The drilling program is expected to allow for the estimation of Contingent Resources and allow for the design of a pilot well program. The current plan for the second phase of the exploration program is to undertake a pilot well program, which is expected to commence on completion of the initial drilling program.

Talon Energy Farmout Agreement

The exploration program is majority funded via a farmout agreement with ASX-listed Talon Energy Limited (ASX:TPD) (Talon) which requires Talon to spend US$4.65 million to earn a 33% Working Interest in the PSA via a two-stage farmin (Farmout Agreement). Telmen will remain as the Operator under the terms of the Farmout Agreement.

The Farmout Agreement requires Talon to fund 100% of the costs of an agreed budget for an initial work program including the drilling of at least four core holes up to an amount of US$1.5 million. At the conclusion of the initial work program, Talon shall have 90 days during which it may elect to either terminate the Farmout Agreement or elect to enter the second stage of the agreement by spending 100% of the costs of a secondary work program up to an amount of US$3.15 million. Talon will be assigned its Working Interest in the Gurvantes XXXV CSG Project only after it has made the election to proceed with the secondary work program. Following completion of the first and second stage of the exploration program, Telmen will be required to contribute 67% of the costs towards any subsequent work programs and will retain a 67% Working Interest in the PSA, with Talon having the remaining 33% Working Interest.

Independent Prospective Resource Assessment

The Gurvantes XXXV CSG Project is highly prospective for coal seam gas (CSG) and a maiden independent prospective resource assessment was completed in August 2021 by NSAI and delivered a risked 2U (best case) resource of 5.96 TCF (see table over page).

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Gurvantes XXXV CSG Project - Gross (100%) Prospective Gas Resources (TCF)*

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

*Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

**Totals of unrisked prospective resources beyond the prospect and lead levels are not reflective of volumes that can be expected to be recovered and are therefore not shown in the NSAI report.

The prospective resources shown in the table above have been estimated by NSAI using probabilistic methods and are dependent on a CSG discovery being made. If a discovery is made and development is undertaken, the probability that the recoverable volumes will equal or exceed the unrisked estimated amounts is 90 percent for the low estimate, 50 percent for the best estimate, and 10 percent for the high estimate.

The above table represents 100% of the Gurvantes XXXV CSG Project which is Telmen's current Working Interest. However, as disclosed above, Telmen has entered into a Farmout Agreement with Talon that will entitle Talon to a 33% Working Interest in the Gurvantes XXXV CSG Project if, after completion of the initial work program, Talon elects to proceed to the second stage work program. During the initial work program, Telmen retains 100% Working Interest and will continue to report prospective resources on a 100% basis. If Talon elects to enter the second stage work program, then Talon will earn a 33% Working Interest and accordingly Telmen's Working Interest thereafter will reduce to 67%.

Additionally, the above table represents Telmen's current Working Interest in the Gurvantes XXXV CSG Project and PSA of 100% before any Government share. As royalties are not payable in kind in Mongolia, no netting- out adjustment has been made. The Gurvantes XXXV PSA has terms that determine Government share in various ways. At this stage of the asset life, it's not possible to determine the level of Government take given significant uncertainty over possible gas prices, development and operating costs, and production rates. Telmen therefore currently considers it more appropriate to report Prospective Resources on a Working Interest basis until there is more certainty with respect to the many variables that affect the overall Government share in the production from the Gurvantes XXXV CSG Project.

The detailed methodology used by NSAI for calculating the prospective resources is included in Appendix 1.

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Competent Persons Statement

The information in this report that relates to Prospective Resource information for the Gurvantes XXXV CSG Project was performed by NSAI on behalf of Telmen and Talon.

The resources included in the report have been prepared using definitions and guidelines consistent with the 2007 Society of Petroleum Engineers/World Petroleum Council/American Association of Petroleum Geologists (AAPG)/Society of Petroleum Evaluation Engineers 2018 Petroleum Resources Management System (PRMS). The resources information included in this report are based on, and fairly represents, information and supporting documentation compiled by Mr. John Hattner, an employee of NSAI. Mr Hattner is a Qualified Petroleum Reserves and Resources Evaluator (QPRRE) and is qualified in accordance with the requirements of ASX Listing Rule 5.41 and consents to the inclusion of the information in this report of the matters based on this information in the form and context in which it appears.

Acquisition of Telmen

TMK will acquire Telmen through the issue of 1.6 billion shares and 1.6 billion performance shares to be issued to Telmen shareholders on a pro-rata basis to their shareholding in Telmen. The performance shares will consist of three tranches, each with certain performance hurdles to be met, as outlined in Appendix 2.

In addition, TMK has agreed to issue 200 million performance rights to the management and certain board members of Telmen. These performance rights will also consist of three tranches and will have the same performance hurdles as outlined in Appendix 2.

The issue of all the consideration securities is subject to receiving TMK's shareholders' approval.

The four majority shareholders of Telmen, which represent approximately 70% of the ownership of Telmen, will be subject to voluntary escrow of their shareholding in TMK shares and performance shares at completion of the transaction (Voluntary Escrow Shares) as follows:

• 100% of the Voluntary Escrow Shares for the period commencing on completion and ending at 5.00pm (WST) on the date that is 6 months from completion (Escrow Date 1);
• 87.5% of the Voluntary Escrow Shares for the period commencing on Escrow Date 1 and ending at 5.00pm (WST) on the date that is 3 months from Escrow Date 1 (Escrow Date 2); and
• 75% of the Voluntary Escrow Shares for the period commencing on Escrow Date 2 and ending at 5.00pm (WST) on the date that is 3 months from Escrow Date 2.

The largest of the majority shareholders, Mr. Tsetsen Zantav, owns approximately 50% of Telmen and following the completion of the proposed Acquisition, will hold approximately 28% of the fully paid shares in TMK. In the event that all of the Performance Shares vest and that no further dilution occurs through additional capital raisings in the interim, Mr Zantav will could hold up to approximately 35% of the fully paid shares in TMK.

As a result of Mr Zantav obtaining a relevant interest in excess of 20% in TMK, shareholder approval will be sought for the issue of the consideration securities to Mr Zantav under section 611 item 7 of the Corporations Act, and the shareholder approval documentation will include an independent expert's report commenting on the proposed Acquisition.