88 Energy : Annual Report to shareholders18 March 2022

ANNUAL REPORT

2021

CONTENTS

CORPORATE DIRECTORY	2
CHAIRMAN'S LETTER	3
REVIEW OF OPERATIONS	5
DIRECTORS' REPORT	14
AUDITORS' INDEPENDENCE DECLARATION	32
FINANCIAL STATEMENTS	33
DIRECTORS' DECLARATION	68
INDEPENDENT AUDITOR'S REPORT	69
ADDITIONAL INFORMATION	73

88 Energy Limited - Annual Report 2021

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CORPORATE INFORMATION

Directors

Mr Philip Byrne (Non-Executive Chairman)

Mr Ashley Gilbert (Managing Director)

Dr Stephen Staley (Non-Executive Director)

Ms Joanne Kendrick (Non-Executive Director)

Company Secretary

Ms Sarah Smith

Registered Office

Ground Floor, 516 Hay Street

Subiaco WA 6008

Australia

Telephone: [phone]

Facsimile: [phone]

Website: www.88energy.com

Postal Address

PO Box 352

Subiaco WA 6904

Australia

Share Registry

Computershare Investor Services Pty Ltd

Level 11, 172 St Georges Terrace

PERTH WA 6000

Australia

Telephone: [phone]

Facsimile: [phone]

Computershare Investor Services PLC

The Pavilions

Bridgewater Road

Bristol BS99 6ZZ

United Kingdom

Share Listings

ASX	88E
AIM	88E
OTC	EEENF

Auditors

BDO Audit (WA) Pty Ltd

Level 9, Mia Yellagonga Tower 2

5 Spring Street

Perth WA 6000

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CHAIRMAN'S LETTER

Dear Shareholders,

It is my pleasure to write to you after joining 88E in early August 2021 as Non-Executive Chairman. I was attracted to 88E as a function of the quality of both its prospects and people. At the time of writing, I am more enthused than ever with the outlook for our business.

The past year has been one of substantial achievement for 88E. Against a backdrop of persistent COVID-19 related challenges, the business has advanced its plans efficiently, significantly, and rapidly. This progress has been delivered alongside a resurgence in global energy prices, as the world increasingly recognises the significant role that hydrocarbons must continue to play in servicing transitional energy needs.

Our most significant exploration activity during 2021 was drilling the Merlin-1 exploration well on our Project Peregrine acreage. Merlin-1 was spudded in March 2021 with drilling operations completed in April 2021. Final interpretation of results was completed in August 2021 with post well evaluation successfully demonstrating the presence of light oil in the N20, N19 and N18 targets. This outcome was a highly significant one for 88E and has given us great confidence in aggressively pursuing further exploration work at Project Peregrine, including the upcoming drilling of the Merlin-2 appraisal well.

In June 2021, we announced the successful acquisition of the residual 50% working interest in Project Peregrine from Alaska Peregrine Development Company. This was an outstanding outcome in delivering us full control of, and upside from, future Project Peregrine activities, while still retaining flexibility to potentially farm-out to a partner with greater operational capability at a future point.

That same month, 88E executed an agreement to sell its Alaskan Oil and Gas Credits for US$18.7 million. This sale accelerated the timeframe of our value realisation from the Tax Credits and enabled the full repayment of our outstanding debt of US$16.1 million. With its debt free balance sheet, 88E now holds significant flexibility with respect to future funding and capital management initiatives. In September 2021, we also raised A$24 million via an equity placement to domestic and international institutional and sophisticated investors. These funds are being directed towards drilling of the Merlin-2 appraisal well and general corporate activities.

At the time of writing, 88E had recently received the Permit to Drill for the Merlin-2 appraisal well, mobilised the Arctic Fox rig to the drilling location, and excitingly, spudded the Merlin-2 well on 7 March 2022. This well is located to the east of Merlin-1, where the multiple stacked sequences within the Brookian Nanushuk Formation are expected to be of enhanced thickness and quality. We look forward to updating you regularly on the progress of Merlin-2 drilling and results.

We have also been closely monitoring activity adjacent to the northern border of our Project Icewine acreage, where the Kuparuk was reported from the Talitha-A well drilled last year by Pantheon Resources. This may have positive implications for the same formation in our Icewine acreage. Further, at the time of writing, Pantheon is undertaking flow testing activities on Talitha-A, as well as undertaking drilling and planned testing of the Theta West well.

During Q1 2021, 88E acquired the Umiat Oil Field to the immediate south of Project Peregrine. As part of the acquisition, we received the Umiat 3D seismic data. Further analysis of this data has provided a better understanding of the Peregrine reservoir geometries to the north as well as highlighting the potential for future development of an Ultra-Low Sulphur Diesel (ULSD) production facility at Umiat.

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CHAIRMAN'S LETTER

The past year has also seen evolution in the leadership of our business. I congratulate Ashley Gilbert on his elevation to the role of Managing Director and CEO. I hold Ashley in the highest esteem and believe that he is already demonstrating himself an excellent executive leader for our business. I would also like to take this opportunity to thank our previous CEO, the long-serving David Wall, for his commitment and energy to 88E. We wish David all the best in his future endeavours.

We also welcomed Joanne Kendrick to the 88E Board as Non-Executive Director and Rob Benkovic and Oli Mortensen to the roles of Chief Operating Officer and Chief Financial Officer, respectively. Thank you also to my predecessor as Chairman, Michael Evans, for his lengthy and committed service to the business.

I would like to recognise the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission, the North Slope Borough, Bureau of Land Management and other regulatory agencies that have facilitated our exploration efforts on the North Slope. Thank you also to all 88E personnel and contractors who have worked hard, in sometimes trying conditions, to deliver the successes of last year. We have a first- class team of truly committed professionals who strongly believe in the potential of our acreage and our approach to exploring it.

Finally, I would also like to thank you, our shareholders, for your ongoing support. The 88E business model has always focussed on targeting large-scale hydrocarbon deposits. The size of the prizes we are pursuing is large, and sometimes the accompanying patience required is also. I thank our shareholders for pursuing this journey with us and we look forward to further unlocking the huge potential value residing in our world-class Alaskan acreage. Stay well.

Yours faithfully,

Philip Byrne

Non-Executive Chairman

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