NAMIBIA: Grand Gulf Energy Executes Option Agreement for a 70% working interest in Block 2312

Grand Gulf Energy Limited (Grand Gulf or the Company) has announce that it has entered into a binding Option Agreement (Agreement), providing Grand Gulf with an exclusive option to acquire 100% of Wrangel Pty Ltd (Wrangel).

Wrangel is an applicant for a 70% working interest (WI) in a Petroleum Exploration Licence (PEL) over Block 2312 in the Walvis Basin, offshore Namibia. The application is in partnership with
Namibian-based oil and gas company TSE Oil and Gas (Pty) Ltd (TSE) (20% WI) and the state-owned
National Petroleum Corporation of Namibia (NAMCOR) (10% WI).

Under the terms of the agreement, consideration is only payable upon the successful granting of the PEL, offering Grand Gulf a low-cost entry into one of the world’s most prospective frontier basins. Offshore Namibia has seen a series of recent significant oil discoveries resulting in over 11 billion barrels of oil discovered to date with global oil and gas super-majors such as Shell, Chevron, TotalEnergies and GALP all active in the area, with 7 wells scheduled to be drilled in calendar 2025.

The groundbreaking Graff-1 oil well drilled offshore Namibia by Shell in 2022 catapulted Namibia to
the forefront of global oil exploration.

Grand Gulf’s entry into Block 2312 offers material exposure to this emerging petroleum province.

Block 2312 – Offshore Namibia
In 2016, previous operator AIM-listed Chariot Limited, completed a 3D seismic survey covering approx 2,600km², targeting leads identified from approximately 1,700km of 2D seismic data acquired in 2015.
This modern dataset was processed alongside 3,500km² of legacy 3D seismic data, using depth migration and inversion techniques calibrated to the nearby Wingat-1 and Murombe-1 wells.

The integrated 6,100km² 3D seismic dataset enabled Chariot to map multiple dip-closed structural prospects, targeting Upper Cretaceous deepwater turbidite reservoirs — the same high-quality
reservoir intervals encountered in the Murombe-1 well. These prospects are interpreted to have
received hydrocarbon charge from Aptian-aged marine source rocks, which have been confirmed as
excellent quality in both Wingat-1 and Murombe-1.

Wingat-1, drilled by HRT Participações em Petróleo S.A. in 2013, identified two well-developed source
rocks (rich in organic carbon within the oil-generating window) and several thin-bedded-sandy
reservoirs saturated with oil (see Figure 1). Oil samples indicated the presence of light oil (38 to 42 API), with minimal contamination. No water-bearing zones were identified in the drilled section.
An independent audit by Netherland Sewell and Associates Inc. (NSAI) — a globally recognised authority in petroleum resource evaluation — estimated the gross mean prospective resources associated with these prospects, as of 5 June 2017, for Chariot Limited.

Table 1 – NSAI prospective oil resource estimate based on 3D seismic data for prospects B, V and W as of 5 June 2017; Chariot Limited release dated 5 July 2017 and April 2020 Presentation.

Block 2312 covers an area of 16,800km2 in water depths ranging from 1,400m to 2,000m and lies to the south of the Murombe-1 and Wingat-1 wells, which were instrumental in establishing the prospectivity of offshore Namibia. There is a total of approximately 6,100 km2 of 3D seismic in the north of the block and 4,700 line kilometres of 2D seismic with an average line spacing of 8-10km.

Figure 2 – Established oil prospects on maturity map of Aptian source rock. Indicates the potential charge of Block 2312 prospects from inboard oil kitchen and outboard oil kitchen sources

The only well drilled in Block 2312 tested Prospect S, encountering high-quality reservoirs with clear seismic signatures (Figure 3). The well, drilled in 2018 at a cost of only US$16 million, is located on the edge of an area of mature Aptian source rocks, however the dominant hydrocarbon migration direction has been established as northeasterly (where maturity will likely improve) suggesting the absence of a migration pathway from the source rock to the reservoir at Prospect S.

Data collected from the Prospect S well has significantly upgraded exploration targets to the northeast, such as Prospect B, along with targets which have access to the outboard oil kitchen such as Prospects W and V.
Grand Gulf has undertaken a comprehensive technical review of all available data which has confirmed the prospectivity of Block 2312. Technical work going forward will include a focused re-evaluation of the seismic characteristics of the Prospect S reservoir and nearby features, aimed at assessing the ability of seismic attributes to reliably predict hydrocarbon presence across the block’s most prospective targets.

Figure 3 – Seismic traverse and individual prospect detail from Block 2312 (Chariot Limited, April 2020 Presentation)

Grand Gulf has appointed Havoc Services Pty Ltd (Havoc), a subsidiary of Havoc Partners LLP, as its
corporate and technical advisor to assist in the assessment of the Block 2312 opportunity. Havoc will
also support the Company in the identification and evaluation of additional frontier basin
opportunities globally.

Transaction Terms
Grand Gulf has entered into an Option Agreement to acquire 100% of Wrangel. Wrangel is an applicant
for a 70% working interest (WI) in a Petroleum Exploration Licence (PEL) over Block 2312 in the Walvis
Basin, offshore Namibia in partnership with Namibian-based oil and gas company TSE Oil and Gas (Pty)
Ltd (20% WI) (TSE) and the state-owned National Petroleum Corporation of Namibia (NAMCOR) (10%WI).

Wrangel has executed a binding Term Sheet with TSE, which grants Wrangel a 70% interest in the PEL — subject to the successful grant of the PEL — through the payment of agreed fees and reimbursement of certain past costs (the Project Option).
The Namibian Ministry of Mines and Energy (MME) has confirmed the receipt and registration of the Wrangel PEL application. Grand Gulf notes that the Wrangel PEL application is yet to be evaluated and
there is no guarantee that the application will be successful.

Grand Gulf Option to Acquire Wrangel
The material terms of the Option Agreement are set out below:

• Option: GGE has an exclusive option to acquire 100% of Wrangel (Wrangel Option). Exercise
  of the Wrangel Option is conditional on the successful award of a PEL on Block 2312 and will
  expire on the earlier of:
  o 30 days after the successful award of a PEL on Block 2312; and
  o 11 April 2026.
• Wrangel Option Fee: The Company has agreed to pay the following by way of an option fee
  for the grant of the Wrangel Option:o reimbursement of an option fee of US$115,000 to TSE by Wrangel for the Project
• Option (paid); and
• o US$100,000 in cash or GGE shares (at GGE’s election) to TSE (or its nominee)*.
• On exercise of the Wrangel Option, the Company will own 100% of Wrangel and will be
  required to fund the exercise of the Project Option, should GGE elect for Wrangel to exercise
  the Project Option.
• Wrangel Exercise Price: On exercise of the Wrangel Option, the Company will pay the
  following consideration to Wrangel shareholders:
  o A$150,000 in cash; and
  o 250,000,000 GGE shares**.
  The Wrangel Option agreement otherwise contains terms and conditions which are considered
  customary, including representations and warranties.
  The above payments under the Wrangel Option are summarised in the table below:

Upon exercise of the Project Option, approximately US$175,000 will be payable directly to Namibian
government agencies for Licence Fees (including the federal government’s Petroleum Training and
Education Fund (PETROFUND)).
Also, following exercise of the Project Option, subject to entry into a consulting agreement on terms
acceptable to the parties, TSE will be paid a monthly retainer of US$7,500 per month, with a further
day rate of US$1,000 per day for any work done above 5 days in any given month (with prior approval
from the Grand Gulf Board).
The initial term for the consultancy agreement will be 12 months, with an option to extend by mutual
consent thereafter. The agreement will contain usual termination rights for the non-defaulting party
in the event of a breach. After the initial 12 month term, either party will have the right to terminate
without cause on one months’ notice.