Cloudbreak Acquires a 3.25% Overriding Royalty Interest on the Masten Unit Energy Project

Source: 5/31/2022, Location: North America

Cloudbreak Discovery PLC has entered into an agreement with G2 Energy Corp. whereby Cloudbreak will provide a portion of the acquisition financing for the Masten Unit Energy Project (the "Project"), located in Cochran County Texas, to G2 in exchange for a 3.25% Overriding Royalty Interest ("ORI") in the Project, in addition to other considerations.

G2 has developed a comprehensive, economic programme of well recompletion and drilling to rapidly grow both oil and natural gas production from the Project. The programme consists of waterfloods and workovers of existing wells as well as new offset wellbores and lateral drilling which G2 plans to initiate on financial close.

Key Terms of the Transaction
• Cloudbreak will provide G2 with a USD $2 million debenture on a two-year term in exchange for a 3.25% ORI in the Project, in addition to other considerations
• G2 will pay 12% per annum interest to Cloudbreak, calculated and paid quarterly in cash or shares at the discretion of Cloudbreak on the USD $2 million debenture
• G2 will grant Cloudbreak;
o 6,500,000 Warrants with a $0.30 strike price with a two-year term from financial close. The Warrants are subject to an acceleration clause;
o Second position lien on the Project;
o An area of interest providing Cloudbreak with a 1% ORI on any project acquired within a two-mile radius of the Masten Unit lease boundary; and
o An area of influence giving Cloudbreak the right of first refusal to finance additional acquisitions within five miles of the Project boundary and apply its existing 3.25% ORI to that project in addition to terms settled on as part of an acquisition.

Kyler Hardy, President and CEO of Cloudbreak , commented, "This first royalty acquisition highlights the beginning of a great working relationship between Cloudbreak and G2. We are excited to be working with G2 and look forward to additional regional acquisitions, showcasing how our project generator model can be transitioned to the energy royalty sector.

"Through this and similar transactions in the future, we see an opportunity to create significant shareholder value by growing Cloudbreak's cash-flow though structured deals and portfolio royalty acquisitions in the natural resources sector."

About the Masten Unit Energy Project
The Masten Unit Energy Project is a 3,194 net acre producing unit, 100% held by production, located in the giant, billion-barrel Levelland Field in Cochran County, Texas. The Levelland field is situated in the Permian Basin and the producing formation is the San Andres, with an average depth in the area of 1,500 metres.

G2 has a 100% Working Interest and 81% Net Revenue Interest in the Project. Current production is 80 barrels of oil per day and 130 thousand cubic feet of gas per day from 18 active wells. All-in operating costs are USD $15.49 per barrel of oil equivalent, including production tax. The field has Proven reserves of 542 thousand barrels of oil equivalent ("MBOE") with a PV10 of USD $6.2 million and Probable Reserves of 700 MBOE with a PV10 of USD $6.4 million (Reserve commodity price assumptions: NYMEX and HH Strip March 2022).

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Qualified Person
Mr. Rory Kutluoglu P. Geo., Chief Operation Officer of the Company, is the Qualified Person ("QP") under NI 43-101 for the technical information in this news release, has verified the data disclosed and approves the technical contents contained in this news release.

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