Westmount Energy : 2021-12-31 Interim Report

Westmount Energy Limited

Interim Report

For the six months ended

31 December 2021

COMPANY INFORMATION

DirectorsSecretary and Registered OfficeNominated Advisor and Broker

Legal Advisers

G Walsh (Chairman) D R King

T P O'Gorman D Corcoran

Stonehage Fleming Corporate Services Limited No 2, The Forum, Grenville Street

St Helier

Jersey JE1 4HH Channel Islands

Cenkos Securities Plc 6-8, Tokenhouse Yard London EC2R 7AS

Maples and Calder (Jersey) LLP Sir Walter Raleigh House 48 -50, Esplanade

St Helier

Jersey JE2 3QB Channel Islands

Forsters LLP 31 Hill Street London W1J 5LS

Auditor

Moore Stephens Audit & Assurance (Jersey) Limited 1 Waverley Place

Union Street

St Helier Jersey JE4 8SG Channel Islands

Bankers

The Royal Bank of Scotland International Limited 71, Bath Street

St Helier Jersey JE2 8PJ Channel Islands

Registrar

Link Market Services (Jersey) Limited 12, Castle Street

St Helier

Jersey JE2 3RT Channel Islands

Custodian

Canaccord Genuity Wealth Management 41 Lothbury

London EC2R 7AE

CHAIRMAN'S REVIEW

2021 Highlights

• • Groundwork continues for the next drilling campaigns on the Kaieteur and Canje blocks via detailed analysis and integration of sub-surface data acquired in the 2020-2021 drilling campaign and the reassessment of play and prospect risks

• • Environmental permitting process is ongoing at the Guyanese EPA with respect to potential new drilling programs on the Canje and Kaieteur blocks from 2022

• • High quality reservoirs identified in first drilling campaign on Kaieteur and Canje blocks - but no standalone commercial discoveries to date

• • Tanager-1 Discovery contains gross 65.3 MMbbls (42.7 MMbbls Net to Kaieteur Block) contingent resources (2C, unrisked)2 in high quality Maastrichtian reservoir - but is non-commercial as a standalone development

• • Cash balance of £1.1M at 31st December 2021; no debt

• • Sector consolidation manoeuvres - proposed 'all paper' acquisition of JHI Associates Inc. by Eco (Atlantic) Oil & Gas Ltd.

Although the COVID-19 pandemic continued to ebb and flow throughout the second half of 2021 a rapid global economic recovery was underway by year end, sparking tightening supply chains, increased inflationary pressures and rising interest rates. Within the oil sector these forces translated into robust demand, struggling supply even within the OPEC+ disciplinary framework and dwindling stockpiles. With the booming demand for oil and gas, accentuated in part by poor regional performance of some renewable sources of energy, outpacing supply, prices continued to surge with Brent settling above USD$91/bbl by the end of January 2022.

All of this prior to the emergence of geopolitical turmoil sparked by the Russian invasion of Ukraine on the 24 February 2022, with increased volatility and oil price rises accelerating thereafter, briefly touching USD$140/bbl for Brent in early March. Oil prices continue to rally on the back of coordinated sanctions imposed by western governments and businesses, including an outright ban on Russian energy imports by the US administration, a phasing out of Russian oil imports by the UK before year end and ongoing discussions within the EU where some members risk considerable economic pain if such a ban is agreed.

During the second half of the year Guyana has continued its journey towards becoming a significant oil producing nation with rapidly progressing offshore developments, including the expected installation of at least six Floating Production Storage and Offloading (FPSO) units on the Stabroek Block by 2027 (with a production capacity of more than 1 million BOPD) and the potential for up to 10 FPSOs based upon the current discovered resource inventory of in excess of 10 billion barrels of oil equivalent.1,2 Three of these FPSOs are already operating or are under construction - with the Liza Phase 1 (Destiny FPSO) expected to reach a production rate of 140,000 BOPD during 2022 (20,000 BOPD above nameplate capacity), Liza Phase 2 (Unity FPSO) on stream since February 2022 with ramp-up to its full production capacity of 220,000 BOPD expected later in the year and with a third field development, Payara (Prosperity FPSO), also with 220,000 BOPD capacity, on track for start-

CHAIRMAN'S REVIEW (CONTINUED)

up in 2024. In addition, the Stabroek consortium has submitted a fourth development plan for government and regulatory review, with respect to the Yellowtail discoveries, targeting a gross production capacity of 250,000 BOPD and first oil in 2025. A number of follow-on developments are also envisaged, including a fifth project centred on the Uaru discovery1, subject to government approvals and project sanctioning.

In parallel with the development of the already discovered resource offshore Guyana, the multi-billion barrels undiscovered upside in the basin continues to attract aggressive exploration investment, driven by large prospects, low breakeven costs, low carbon emissions and the energy transition dynamics. In October 2021, on the back of a string of exploration successes, estimates of gross discovered resources on the Stabroek Block were revised upwards to approximately 10 billion barrels of oil equivalent. The preceding exploration drilling 'purple patch' included discoveries at Redtail-1, Yellowtail-2, Uaru-2, Mako-2, Longtail-3, Turbot-2, Whiptail-1, Whiptail-2, Pinktail-1 and Cataback-1 bringing the total number of reported significant discoveries to date on the Stabroek Block to twenty-one. This successful run has continued into the new year with two further discoveries (Fangtooth-1 and Lau Lau-1) announced in early January 2022.2 The positive outcome at Fangtooth-1 is of particular significance as this was the first well dedicated to a deep exploration target in the Stabroek area, with the results indicating the potential for commercial exploitation of the deeper plays and offering encouragement for the drilling of deep targets elsewhere in the basin, including on the Kaieteur and Canje Blocks. Furthermore, a follow-up well, Tarpon-1, has been spudded on Stabroek circa 100 kms to the northwest of the Liza Field targeting Lower Campanian clastics and a deeper Jurassic carbonate play. This is one of 12 exploration and appraisal wells scheduled for drilling on the Stabroek Block in 20222 - signalling continued aggressive evaluation of the multi-billion barrels exploration potential in the basin within fixed prospecting licence timeframes.

Separately, in January 2022, the Joint Venture of CGX Energy Inc. and Frontera Energy Corporation reported the Kawa-1 discovery located in the north of the Corentyne Block. This well was spudded in a water depth of 355 metres and drilled to a Total Depth of 6,578 metres. Wireline logging indicates that the well encountered 61m of net hydrocarbon bearing reservoirs within Maastrichtian, Campanian, Santonian and Coniacian intervals. Reservoir fluids are uncertain as MDT fluid samples were not obtained from the well, though the presence of liquid hydrocarbons has been interpreted in the Santonian reservoir, from other analyses.3 Kawa-1 was plugged and abandoned and the commercial potential of the discovery has yet to be determined. The Joint Venture is planning to follow-up with the Wei-1 exploration well, in the second half of 2022, targeting stacked Campanian and Santonian channel sandstone reservoirs.

In the Surinamese sector, the Total/Apache consortium has increased the number of discoveries on Block 58 from four to five with the announcement of the Krabdagu-1 discovery in February 20224. Prior stacked reservoir discoveries on Block 58 reported generally light oil and gas-condensate pay in shallower Campanian reservoirs overlying light oil pay in deeper Santonian reservoirs - pointing towards some potential challenges around valorization of large associated gas volumes. The Krabdagu-1 well encountered 90 metres of net oil pay in good quality Maastrichtian and Campanian reservoirs and is currently undergoing flow testing. Total, as operator, continues to focus on appraisal of the shallower Maastrichtian-Campanian

CHAIRMAN'S REVIEW (CONTINUED)

reservoirs with a view to progression towards FID for the initial standalone oil development on Block 58. Results at Sapakara South-1 appraisal well, drilled 4 kms east of the Sapakara-1 discovery well, were announced in November 2021 - confirming the presence of 30m net high-quality black oil in Maastrichtian-Campanian sandstones which flowed 4,800 BOPD during a restricted flow test, with analysis indicating a connected in-place resource of more than 400 MMbbls in a single reservoir. However, disappointing Maastrichtian-Campanian appraisal outcomes were reported during the period on the eastern side of Kwaskwasi and at Keskesi South-1.4 In addition, during November 2021, the Total/Apache consortium reported a non-commercial discovery at the Bonboni-1 exploration well in the north of Block 58. This well encountered high quality water bearing reservoirs in the primary Maastrichtian-Campanian targets though a single Maastrichtian sandstone contained 16m of net oil pay with an estimated 25oAPI oil gravity.

Exploration drilling results continue to support the presence of multiple plays, quality reservoirs and the potential for stacked-pay drilling opportunities within the basin. Although the Upper Cretaceous Maastrichtian-Campanian Liza play dominates in terms of number of discoveries and discovered volumes to date the deeper Santonian pools on Block 58, in conjunction with the deeper hydrocarbons reported at Liza-3, Tripletail-1, Yellowtail-2, Uaru-2, Turbot-2, Longtail-3, Hassa-1 and Fangtooth-1 on the Strabroek Block, together with the hydrocarbon shows reported at Sapote-1 on the Canje Block, and the logged net pay in the Santonian-Coniacian intervals at Kawa-1 on the Corentyne Block, all suggest an extensive emerging deeper play fairway within the basin. Additional deep drilling with multiple targets is scheduled for 2022 at Beebei Potaro-1 (Repsol, Kanuku Block), at Wei-1 (CGX Energy Inc., Corentyne Block), at Rasper-1 (Apache, Block 53) and at Zanderij-1 (Shell, Block 42) where the operator is targeting the Santonian and deeper intervals.

It is against this backdrop that the hydrocarbon plays and prospect inventories on the Kaieteur and Canje blocks are being reassessed - by integrating the analysis of the extensive core and fluid samples collected during the 2020-2021 drilling campaigns, by updating the regional petroleum system models and by high grading prospects for the next phase of drilling.

Kaieteur Block

The first well on the Kaieteur block, Tanager-1, remains the deepest well drilled in the Guyana-Suriname Basin to date. It was spudded on the 11 August 2020, using the Stena Carron drillship. The well was drilled in a water depth of 2,900 metres and reached a total depth of 7,633 metres circa mid-November 2021. Evaluation of LWD, wireline logging and sampling data confirmed 16 metres of net oil pay (20oAPI oil) in high-quality sandstone reservoirs of Maastrichtian age. Although high quality reservoirs were also encountered at the deeper Santonian and Turonian intervals, initial interpretation of the reservoir fluids was reported to be equivocal, requiring further analysis - results of which have yet to be disclosed. Post well analysis and integration of the data collected continues with a view to highgrading the next drilling target on the Kaieteur block.

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