Announcement PDF 14th August 2023 ASX: STX The Company Announcement Officer ASX Ltd via electronic lodgement Strike to acquire Talon • Strike to escalate the pace of development in its Perth Basin business through the earnings and cashflow accretive acquisition of Talon. • Strike and Talon have entered into a binding Scheme Implementation Deed under which Strike will acquire all the issued shares in Talon by way of a Scheme of Arrangement. On implementation of the Scheme, Talon shareholders will receive 0.4828 new Strike shares for each Talon share held. • In parallel with the Scheme, Talon will look to demerge Talon’s Mongolian asset to the benefit of Talon shareholders to potentially deliver additional value 1. • The Scheme is unanimously endorsed by the Board of Directors of Talon. • The implied offer price of A$0.212 2 for Talon’s Perth Basin business alone is a ~21% premium to Talon’s closing share price as at 11 August 2023 3, excluding any additional value that may be realised for Talon shareholders via the potential demerger of Talon’s Mongolian assets. • On a pro forma basis, Strike shareholders will own approximately 89% and Talon shareholders will own approximately 11% of all issued Strike shares upon implementation of the Scheme. • Strike has agreed to provide Talon with a A$6 million interim convertible funding facility to fund Talon’s capital requirements through the scheme process. • The acquisition will generate material corporate and operational synergies with the capacity to generate an initial annualised revenue of in excess of $82 million from the Walyering gas field alone 4. Strike Energy Limited (ASX: STX, Strike) is pleased to advise it has entered into a binding scheme implementation deed with Talon Energy Limited (ASX: TPD, Talon) (Scheme Implementation Deed) under which Strike will, subject to the satisfaction of various conditions, acquire all the issued shares in the capital of Talon by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) (Corporations Act) (Scheme). Pursuant to the Scheme, Talon shareholders will receive 0.4828 new Strike shares for each Talon share held. In addition, Talon will look to demerge it's Mongolian asset with the potential for its shareholders to retain an interest in the assets along with A$850,000 cash (less any costs incurred in connection with the demerger and certain other costs and funding provided for the Mongolian assets by Talon during the Scheme/demerger process) via a potential spin-out of those assets into a separate vehicle to be completed prior to implementation of the Scheme (Mongolian Spin-Out). The acquisition is earnings and cashflow accretive for Strike and will provide a platform in which Strike can escalate the pace of development of its highly attractive Perth Basin gas assets. Talon’s Board of Directors unanimously recommend the proposed transaction (in the absence of a superior proposal and subject to the independent expert concluding, and continuing to . 1 There is no guarantee that the Mongolian Spin-Out will be implemented or that Talon Shareholders will ultimately receive any value in respect of the Mongolian assets. 2 Based on Strike’s closing price of A$0.44 on 11 Aug 2023 3 Talon’s closing share price on 11 Aug 2023 was A$0.175 4 Refer footnote 5 for details as to revenue assumptions. strike@strikeenergy.com.au ABN 59 078 012 745 www.strikeenergy.com.au L1, 40 Kings Park Rd, West Perth WA 6005 conclude, that the proposed transaction is in the best interests of Talon shareholders), which is strategically compelling and logical for Talon shareholders. Under the proposed Scheme, and on a pro forma basis, Talon shareholders will own ~11% and Strike shareholders will own ~89% of the combined Company. Transaction Rationale The acquisition of Talon is compelling for Strike’s shareholders given the potential for strategic and financial benefits, which include: • the combined company will have the capacity to generate an initial annualised cashflow from the Walyering gas field alone in excess of A$82 million 5 • Strike will be able to remove significant costs via corporate and operational synergies through collapsing the joint venture with Talon; • Strike’s balance sheet will be further improved, with an increased ability to access debt markets and self-fund development projects along with the combined exploration portfolio; • Strike will be able to apply its Perth Basin operating and development expertise in order to exploit the combined group’s assets; and • the combined entity will have an aggregate 1,022 PJ of independently certified Perth Basin conventional gas 2P Reserves and 2C Resources (see chart below) 6. For Talon shareholders the all-scrip acquisition represents an immediate and attractive premium with an implied transaction price for the Perth Basin business of A$0.212 per Talon share, which is a ~21% premium to Talon’s closing share price as at 11 August 2023 7. In addition, there is the potential that Talon shareholders will retain an interest in the Mongolian assets via the Mongolian Spin-Out. 8 A$82 million per annum projection assumes production and sales from the Walyering Field at 33 TJ/day and 250bbl/day with as available gas sold to Santos at the ‘as available’ price under the Gas Supply Agreement with Santos, and condensate at A$104bbl (US$70bbl FX 0.67). Refer to Important Notices at the end of this release for Reserve and Resource information. 7 Refer to footnotes 2 and 3 on page 1 of this release for basis for implied offer price calculation and premium calculations. 5 6 8 There is no guarantee that the Mongolian Spin-Out will be implemented or that Talon Shareholders will ultimately receive any value in respect of the Mongolian assets. 2 Statements from Strike MD & CEO, Stuart Nicholls: “This is an earnings accretive transaction for Strike that will simplify Strike’s operations and provide a platform to remove the costs in operating and managing its existing joint venture with Talon. The combined group will have the capacity to generate initial annualised cashflows in excess of A$82 million from the Walyering gas field alone. The additional free cashflow generation will support an acceleration of Strike’s Government endorsed Perth Basin development strategy”. Refer to the Important Notices at the end of this release for Reserve and Resource information. Transaction Details Under the terms of the Scheme Implementation Deed, Talon shareholders will receive 0.4828 new Strike shares for each Talon share held. Upon implementation of the Scheme, and on a pro forma basis, Strike shareholders will own approximately 89% and Talon shareholders will own approximately 11% of all issued Strike shares. The Scheme Implementation Deed is subject to customary conditions for a transaction of this nature, including: 1. Talon shareholders approving the Scheme by the requisite majorities under the Corporations Act; 2. Approval by the Court in accordance with section 411(4)(b) of the Corporations Act; 3. An Independent Expert concluding that the scheme is in the best interests of Talon shareholders and not changing, withdrawing or qualifying that conclusion; and 4. No material adverse change or regulated events for either Strike or Talon. The Scheme Implementation Deed contains customary exclusivity provisions, including reciprocal break fees, no shop, no talk and no due diligence obligations. A copy of the Scheme Implementation Deed is annexed to this announcement with the transaction targeting completion in December 2023. The parties have agreed a budget in connection with any financial accommodation to be provided by Strike to Talon during the period from execution of the Scheme Implementation Deed until the implementation of the Scheme (Agreed Budget). In the event Talon requires any 3 additional funding outside of the Agreed Budget for certain limited purposes, Strike may either elect (in its sole discretion) to provide such additional funding to Talon, or require Talon to use any existing cash reserves that are unallocated in the Agreed Budget to satisfy its additional funding obligations. Failing such election, Talon will be at liberty to raise the required funding via debt or equity and Strike will, in that circumstance, be entitled to terminate the Scheme Implementation Deed. Mongolian Spin-Out Talon will explore opportunities for Talon shareholders to retain an interest in Talon’s Mongolian assets. It is proposed that on completion of the Mongolian Spin-out, the Mongolian assets and A$850,000 cash (net of costs incurred in connection with the demerger and certain other costs and funding provided for the Mongolian assets by Talon during the Scheme/demerger process) will be demerged to Talon shareholders. The Mongolian Spin-out is expected to be implemented by way of an in-specie distribution of shares in SpinCo to Talon shareholders. The Mongolian Spin-Out is expected to be subject to shareholder approval at a general meeting of Talon shareholders and any other necessary approvals. The Scheme is not conditional on completion of the Mongolian Spin-Out, which will occur (or not occur, as the case may be) independently of the Scheme becoming effective, and the status of the Mongolian Spin-Out will not influence the timing of the Scheme transaction. Accordingly, there is no guarantee that the Mongolian Spin-Out will be implemented or that Talon Shareholders will ultimately receive any value in respect of the Mongolian assets. Further details in relation to the potential Mongolian Spin-Out will be provided by Talon to its shareholders in due course. Talon Funding Facility As part of the transaction, Strike and Talon have entered into a binding facility agreement pursuant to which Strike has agreed to provide a A$6 million convertible financing facility to assist Talon fund its short-term working capital needs through the Scheme process. The key terms of this facility include: • A maximum of A$6,000,000 provided in advances in accordance with an agreed budget. • Establishment fee: 2% (capitalised). • Commitment fee: 3.5% on undrawn funds (capitalised). • Interest rate: BBSW plus 11% (capitalised); • Maturity date: The earlier to occur of 30 days after the date on which Talon becomes a wholly owned subsidiary of Strike; 30 days after a person other than Strike or its subsidiaries becomes entitled to hold 50% or more of the Talon shares or otherwise acquires control of Talon; 60 days after termination of the Scheme Implementation Deed; 270 days following the date of the first advance. • Conversion: Strike may by written notice on or before the relevant maturity date elect to convert the outstanding principal and capitalised amounts into fully paid ordinary Talon shares at the 5-day VWAP to 26 July 2023. • Prepayment: The facility is to be prepaid out of net petroleum proceeds received by Talon from the sale of Walyering gas and condensate. Indicative Timetable and Next Steps Talon shareholders will be asked to approve the Scheme at the scheme meeting which is expected to be held in early December 2023 (Scheme Meeting). A scheme booklet containing information relating to the Scheme, the reasons for the Talon Directors’ recommendation, the Independent Expert’s Report and details of the Scheme Meeting will be dispatched to Talon 4 shareholders in advance of the Scheme Meeting. An indicative timetable for completion of the Proposed Acquisition is set out below: • First Court hearing: end of October 2023 • Scheme meeting: early December 2023 • Second Court date: mid December 2023 • Effective date: mid December 2023 • Record date: 7.00pm (Perth time) on two business days after the Effective Date • Implementation date: end December 2023 These dates are indicative and subject to change. Strike and Talon will host a joint conference call at 8:30am WST on Monday the 14th of August. Please register your interest at the following link to receive an invitation: https://events.teams.microsoft.com/event/9f2e3e55-8bfd-41c9-b52eb8bd89d607d7@dda1f216-94f7-4d93-856f-c105a1cbe657] Strike has appointed DLA Piper as its advisor and Talon has appointed Sternship Advisers, Royal Bank of Canada and Allens as its advisors. This announcement is authorised for release by the Board of Strike Energy Limited. Company Contact Emma Alexander Investor Relations & Corporate Manager Strike Energy Limited emma.alexander@strikeenergy.com.au Media Contacts Paul Ryan Citadel-MAGNUS 0409 296 511 pryan@citadelmagnus.com Important Notices Information regarding Strike’s Reserve, Resource & Storage Estimates Unless otherwise stated, references in this announcement to: • the West Erregulla reserve and resource estimate is set out in the ASX announcement dated 27th July 2022 entitled "West Erregulla Reserves Upgraded by 41%" and in ASX announcement dated 16 December 2022 entitled "Strike to test Southwest Erregulla and Erregulla Deep Prospective Resource". Strike Energy interest is 50%; • the South Erregulla reserve and resource estimate is set out in the ASX announcement dated 18 October 2022 entitled “Independent Certification of South Erregulla Wagina Gas Discovery”. Strike Energy interest is 100%; • the Walyering reserve and resource estimate is set out in ASX announcement dated 21 July 2022 entitled "Independent Certification of Walyering Reserves". Strike Energy interest is 55%; • the Oceanhill 2C Contingent Resource is set out in ASX announcement dated 10 October 2022 entitled "Independent Certification of Ocean Hill Gas Resource". Strike Energy interest is 100%; • the Mid-West Geothermal Project inferred resource is set out in ASX announcement dated 5th May 2022 entitled "Mid West Geothermal Power Project Inferred Resource Statement"; and 5 • the South Erregulla Contingent Storage Resource Estimate is set out in ASX announcement dated 15th June 2023 entitled “South Erregulla Update’. The above announcements are available to view on Strike Energy's website at www.strikeenergy.com.au. Strike confirms it is not aware of any new information or data that materially affects the information included in the above referenced announcements relating to its Reserves and Resources and that all the material assumptions and technical parameters underpinning the estimates in those announcements continue to apply. Information regarding Talon’s Reserves and Resources: Unless otherwise stated, references in this announcement to: • the Condor Prospective Resource Estimate is set out in ASX announcement dated 17 March 2021 entitled “Maiden Best (P50) Resource of 408 Bcf at Condor”. Talon interest will be 100% upon completion of its acquisition of the Condor assets. • The L7 & EP437 Prospective Resource Estimate is set out in ASX announcement dated 27 March 2023 entitled “Preliminary prospective resource estimate complete on L7 Perth Basin permit”. Talon interest is 25%. The above announcements are available to view on Talon Energy's website at www.talonenergy.com.au. The information regarding Talon’s petroleum estimates in this announcement has been sourced using publicly available information and has not been independently verified by Strike. Strike has undertaken only limited due diligence in relation to Talon and its projects and may not be aware of all the material information, assumptions, facts and circumstances. Accordingly, Strike does not, subject to the Corporations Act, make any representation or warranty, express or implied, as to the accuracy or completeness of this information. While Strike has conducted due diligence on the proposed transaction, Talon and its projects, Strike is unable to verify the accuracy or completeness of the information provided, and there is no assurance that this due diligence was conclusive and that all material issues and risks in relation to the proposed transaction, Talon and its projects have been identified. Receipt of new, additional or updated information, assumptions or modifying factors may change Talon’s petroleum estimates and other forward-looking statements concerning Talon and its projects in this announcement. To the extent that this information is incomplete, incorrect, inaccurate or misleading, there is a risk that the profitability and future results of the operations of Strike following the transaction may differ (including in a materially adverse way) from Strike’s expectations as reflected in this document, or that additional liabilities may emerge. Future Statements Statements contained in this announcement, including but not limited to those regarding the possible or assumed future costs, projected timeframes, performance, dividends, returns, revenue, exchange rates, potential growth of Strike and the combined group, industry growth, commodity or price forecasts, or other projections and any estimated company earnings are or may be forward looking statements. Forward looking statements can generally be identified by the use of words such as ‘project’, ‘foresee’, ‘plan’, ‘expect’, ‘budget’, ‘outlook’, ‘schedule’, ‘estimate’, ‘target’, ‘guidance’ ‘aim’, ‘intend’, ‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or similar expressions. Forward looking statements including all statements in this document regarding the outcomes of preliminary and definitive feasibility studies, projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. These statements relate to future events and expectations and as such involve known and unknown risks and significant uncertainties, many of which are outside the control of Strike and the combined group. Actual results, performance, actions and developments of Strike and the combined group may differ materially from those expressed or implied by the forward-looking statements in this announcement. Such forward-looking statements speak only as of the date of this announcement. There can be no assurance that actual outcomes will not differ materially from these statements. A number of important factors could cause actual results or performance to differ materially from the forward looking statements, including the risk factors set out in Strike West Pty Ltd’s (wholly owned subsidiary of Strike) bidder’s statement dated 23 December 2022 in relation to its off-market takeover offer to acquire all of the shares in Warrego Energy Limited that Strike does not already own. Investors should consider the forward looking statements contained in this announcement in light of those disclosures. To the maximum extent permitted by law (including the ASX Listing Rules), Strike and Talon and their respective affiliates, directors, officers, employees, agents, associates and advisers disclaim any obligations or undertaking to release any 6 updates or revisions to the information in this announcement to reflect any change in expectations or assumptions; do not make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information in this announcement, or likelihood of fulfilment of any forward looking statement or any event or results expressed or implied in any forward-looking statement; and disclaim all responsibility and liability for these forward-looking statements (including, without limitation, liability for negligence). Nothing in this announcement will under any circumstances create an implication that there has been no change in the affairs of Strike or Talon since the date of this announcement. 7 Annexure – Scheme Implementation Deed 8 EXECUTION VERSION Project Lancelin Scheme Implementation Deed Strike Energy Limited Talon Energy Limited Dated 13 August 2023 DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. A list of offices and regulatory information can be found at dlapiper.com Contents PARTIES ................................................................................................................................................. 1 BACKGROUND ...................................................................................................................................... 1 AGREED TERMS ................................................................................................................................... 1 1 Interpretation .............................................................................................................................. 1 2 Scheme of Arrangement .......................................................................................................... 15 3 Conditions Precedent ............................................................................................................... 16 4 Scheme and Scheme Consideration ....................................................................................... 19 5 Transaction Steps .................................................................................................................... 23 6 Demerger ................................................................................................................................. 30 7 Board Recommendation .......................................................................................................... 33 8 Conduct of Business ................................................................................................................ 35 9 Representations, Warranties and Undertakings ...................................................................... 39 10 Releases, Insurance and Indemnification ................................................................................ 41 11 Exclusivity ................................................................................................................................ 43 12 Break Fee ................................................................................................................................. 47 13 Reverse Break Fee .................................................................................................................. 50 14 Termination .............................................................................................................................. 52 15 Announcements ....................................................................................................................... 55 16 Confidentiality ........................................................................................................................... 55 17 Payments ................................................................................................................................. 57 18 Goods and Services Tax .......................................................................................................... 58 19 Notices ..................................................................................................................................... 59 20 General..................................................................................................................................... 60 21 Governing Law and Jurisdiction ............................................................................................... 62 SIGNATURE PAGE .............................................................................................................................. 79 SCHEDULES SCHEDULE 1 TALON THRESHOLD EVENTS .................................................................................... 63 Part 1 Talon Material Adverse Change ................................................................................................. 63 Part 2 Talon Prescribed Occurrences ................................................................................................... 64 Part 3 Talon Regulated Events ............................................................................................................. 64 SCHEDULE 2 STRIKE THRESHOLD EVENTS ................................................................................... 67 Part 1 Strike Material Adverse Change ................................................................................................. 67 Part 2 Strike Prescribed Occurrences ................................................................................................... 68 Part 3 Strike Regulated Events ............................................................................................................. 68 SCHEDULE 3 TALON WARRANTIES AND UNDERTAKINGS ........................................................... 70 Part 1 Talon Warranties ........................................................................................................................ 70 Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 2 Part 2 Talon Undertakings .................................................................................................................... 72 SCHEDULE 4 STRIKE WARRANTIES AND UNDERTAKINGS .......................................................... 74 Part 1 Strike Warranties ........................................................................................................................ 74 Part 2 Strike Undertakings .................................................................................................................... 76 SCHEDULE 5 TALON AND STRIKE ISSUED CAPITAL ..................................................................... 77 Part 1 Talon Issued Capital ................................................................................................................... 77 Part 2 Strike Issued Capital................................................................................................................... 77 SCHEDULE 6 TIMETABLE................................................................................................................... 78 APPENDICES APPENDIX 1 SCHEME APPENDIX 2 DEED POLL APPENDIX 3 STRIKE ANNOUNCEMENT APPENDIX 4 TALON ANNOUNCEMENT APPENDIX 5 CONDITIONS PRECEDENT CERTIFICATE Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 3 This deed is made on 13 August 2023 Parties Strike Name ACN Address Email Attention Strike Energy Limited 078 012 745 Level 1, 40 Kings Park Road West Perth WA 6005 stuart.nicholls@strikeenergy.com.au and lucy.gauvin@strikeenergy.com.au Stuart Nicholls and Lucy Gauvin Talon Name ACN Address Email Attention Talon Energy Limited 153 229 086 1202 Hay Street West Perth WA 6005 colby.hauser@talonenergy.com.au and greg@discol.net Colby Hauser and Greg Columbus Background A The parties have proposed that Strike will acquire all of the ordinary shares in Talon by means of a scheme of arrangement under Part 5.1 of the Corporations Act between Talon and the Scheme Shareholders. B The parties have agreed to propose and, if approved, implement the scheme of arrangement of the terms of this deed. Agreed terms 1 Interpretation Definitions 1.1 In this deed the following definitions apply: Adverse Decision means an order of Court where the Court does not make any order sought by Talon under clause 5.8(m). Anti-Corruption Laws means all applicable anti-bribery and anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, the Australian Criminal Code Act 1995 (Cth), Criminal Code of Mongolia (2002), AntiCorruption Law of Mongolia (2006), laws implementing the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or the rules and regulations promulgated thereunder, or any other applicable law, rule, or regulation of similar effect in other jurisdictions. ASIC means the Australian Securities and Investments Commission. ASIC Review Booklet means the draft of the Scheme Booklet which is provided to ASIC: Scheme Implementation Deed | AUM/1228875919.18 DLA Piper | 1 (a) for approval pursuant to section 411(2) of the Corporations Act; and (b) for ASIC’s review pursuant to ASIC Regulatory Guide 60. Associate has the meaning given in section 12(2) of the Corporations Act. ASX Listing Rules means the official listing rules of ASX as modified by any waiver instrument executed by ASX that applies to Talon. ASX means ASX Limited ABN 98 008 624 691 or the Australian Securities Exchange, as the context requires. ATO means the Australian Tax Office. Authorisation means any permit, licence, consent, approval, registration, accreditation, certification or other authorisation given or issued by any Government Agency. BidCo means a wholly owned subsidiary of Strike nominated in accordance with clause 2.4. Break Fee means $1,422,228 plus GST, if applicable. Break Fee Arrangements means the amount of the Break Fee or the circumstances in which it is to be paid in accordance with clause 12. Budget means the final budget prepared in connection with any financial accommodation to be provided by Strike to the Talon Group on or after the date of this deed. Business Day means a day (other than a Saturday, Sunday or public holiday) on which banks are generally open in Perth, Australia for normal business. Cash Out Shareholder means a Scheme Shareholder (not being an Ineligible Foreign Shareholder) who, based on their holding of Scheme Shares on the date of the Scheme Booklet, would, on implementation of the Scheme, be entitled to receive less than a marketable parcel of New Strike Shares (assessed by reference to the last traded price of Strike Shares on ASX on the trading day prior to the date of the Scheme Booklet). Certificate means the certificate of conditions precedent in the form attached in Appendix 5. Claim means any claim, demand, legal proceedings