Stonehorse Energy : Quarterly Activity and Cashflow Reports

ABN: 13 086 972 429

29 April 2022

QUARTERLY ACTIVITY REPORT

FOR THE THREE MONTHS ENDING 31ST MARCH 2022.

HIGHLIGHTS

• ➢ Jewell well paid out in under six months, with over 250,000 BOE produced in the first six months, generating cumulative revenue of US$9 million (SHE 41.5%).

• ➢ The Jewell produced a total of 82,020 BOE for the quarter with Stonehorse's working interest being 33,038 BOE for Q1 2022.

• ➢ Myall Creek #2 workover completed in January with 30-day inline production testing completed thereafter.

• ➢ Interpretation of data from the Myall Creek #2 well confirmed the Tinowon C is a fracture stimulation candidate. This next phase of activity is scheduled to commence and complete in June 2022.

• ➢ Additional reservoirs intersected in the Myall Creek #2 well including the Upper Rewan and Bandana Sandstones also appear to be gas saturated.

• ➢ A$2.85m in net revenue generated from the portfolio during the quarter, increasing cash at hand to A$6.125m million.

Stonehorse Energy's Executive Director, David Deloub, commented "The six-month payback of the Jewell well is an exceptional achievement with the relatively minor decline during the quarter establishing the well as a significant cashflow generator for the Company. We look forward to the next phase of testing at Myall Creek #2, which is shaping up as an exciting future development project."

Stonehorse Energy Limited (ASX:SHE)(Stonehorse or the Company) is pleased to present the Quarterly Review of Operations to 31st March 2022

OPERATIONAL ACTIVITIES

The Jewell Well

During the quarter, the performance of the Jewell well continued to exceed pre-drill estimates, with payback of the well completed in under six months. The Jewell well produced 82,020 BOE for Q1 2022 and generated US$9 million in cumulative revenue from first sales to date (SHE 41.5% interest).

Figure 1. Jewell well cumulative production to 31 March 2022.

The Myall Creek #2 well

During the quarter, the Company announced it had commenced the workover and well intervention program planned for the Myall Creek #2 well, located in the Surat Basin in Southeast Queensland.

On 19 January 2022, Stonehorse Energy announced that the Myall Creek #2 well had been successfully perforated and re-completed the Tinowon C formation.

Figure 2. Surat Basin oil and gas province showing the location of Myall Creek in yellow.

The Tinowon C was the primary target of the work programme and initial analysis of the logging data confirmed that the zone was hydrocarbon bearing and over pressured.

Subsequent data collection using a Down-Hole-Shut-In-Tool to capture the bottom hole build up pressure has confirmed that the Tinowon C formation is a viable fracture stimulation candidate.

It is currently planned for the proposed well stimulation operations to commence and complete in June 2022.

Figure 3. Myall Creek Compression Facility, 2022.

The Myall Creek-2 programme also assessed the potential of other reservoirs intersected in the Myall Creek region. Of particular interest are the Upper Rewan and Bandana Sandstones that also appear to be gas saturated. Work is continuing on the feasibility of accessing these zones for future potential stimulation.

Figure 4. Myall Creek#2 Reservoir log, Jan 2022.

CURRENT PORTFOLIO OF OIL AND GAS WELL ASSETS

The Company currently has non-operated working interests in twelve wells, including the high impact Jewell well located Carter County, Oklahoma and the recent investment in the Myall Creek-2 well in Australia.

Well Name	Reference Number	Working Interest	County, State	Operator
Stonehorse US
Burgess	28-1	96.81%	Ellis, OK	Black Mesa Energy
Sutton	2H-52	25.00%	Hansford, TX	Strat Land Exploration
Bullard	1-18-07UWH	15.60%	Gravin, OK	Rimrock Resources
Henry Federal	1-8-5XH	2.30%	Blaine, OK	Continental Resources
Randolph	1-34-27XHM	0.21%	Blaine, OK	Continental Resources
Randolph	3-34-27XHM	0.21%	Blaine, OK	Continental Resources
Randolph	4-34-27XHM	0.21%	Blaine, OK	Continental Resources
Jewell	1-13-12SXH	41.50%	Carter, OK	Black Mesa Energy
Orion JV
Newberry	12-1	21.70%	Carter, OK	Black Mesa Energy
Mitchell	12-1	50.00%	Carter, OK	Black Mesa Energy
Thelma	1-32	50.00%	Murray, OK	Black Mesa Energy
Stonehorse Australia
Myall Creek	Myall Creek-2	25%	Surat Basin, Qld	Armour Energy

Table 1. Current Portfolio of Stonehorse and Orion JV wells.

CORPORATE ACTIVITIES

Cash

During the quarter, the Company generated A$2.85m in net revenue from oil and gas sales. The Company spent $112k on oil & gas exploration activities during the reporting period and at the end of the quarter, the Company had A$6.125m in cash at hand, an increase of $2.65m since the end of the December 2021 quarter.

Strategy and objectives

The current strategy of Stonehorse is to build a portfolio of high quality well bore assets by taking non-operated working interests in wells reflecting risk appetite and capital availability.

The success of the Jewell well provides the Company with the funding capacity to increase the quality of its investments, as evidenced by the recent Myall Creek-2 investment.