Oracle Energy Corp. - Management Reports 2020

FORM 51-102F1

ORACLE ENERGY CORP. MANAGEMENT DISCUSSION & ANALYSIS For the nine months ended September 30, 2020

Introduction

This Management Discussion and Analysis (MD&A) should be read in conjunction with the unaudited condensed interim financial statements for the nine months ended September 30, 2020 and the audited annual financial statements as at and for the years ended December 31, 2019 and 2018 and accompanying notes therein. The referenced financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are expressed in Canadian dollars unless otherwise indicated. The MD&A is intended to help the reader understand the consolidated financial statements of the Company. All amounts are expressed in Canadian dollars unless otherwise indicated.

This MD&A has been prepared by reference to the MD&A disclosure requirements established under National Instrument 51-102 “Continuous Disclosure Obligations” of the Canadian Securities Administrators. Additional information regarding Oracle Energy Corp. is available through the SEDAR website at www.sedar.com and the Company’s website at www.oracleenergy.com.

Certain information in this MD&A contains or incorporates comments that constitute forwardlooking information within the meaning of applicable securities legislation. See “Caution Regarding Forward-Looking Information” below.

Date of this report

The date of this MD&A is November 3, 2020 and it contains information up to and including this date.

Company Overview

Oracle Energy Corp. (the "Company", or "Oracle") was incorporated on October 2, 1985 under the Business Corporations Act of British Columbia. The Company is in the business of acquiring, exploring, and evaluating oil and gas properties and developing these properties further or disposing of them when the evaluation is completed. The Company trades on Tier 2 of the TSX Venture Exchange ("TSX-V") under symbol OEC.

On March 2, 2020, the Company announced its letter agreement dated February 28, 2020 (the “LOI”) with Methanogenesis Corporation (“Methano”) pursuant to which the parties have agreed to complete a business combination (the “Transaction”) by way of share exchange that will have the effect of Oracle acquiring all of the issued and outstanding common shares in the capital of Methano (the “Methano Shares”).

On May 11, 2020, the Company entered into an Amended LOI 2020 with Methano pursuant to which the parties have agreed to complete a business combination (the “Transaction”) by way of share exchange that will have the effect of the Company acquiring all of the approximately 30,000,000 issued and outstanding common shares in the capital of Methano (the “Methano Shares”). The Transaction is subject to TSX Venture Exchange (the “TSXV”) approval and is intended to constitute a ”Fundamental Acquisition” in accordance with TSXV Policy.

Pursuant to the Amended LOI, Oracle will acquire Methano by way of a share exchange (the “Share Exchange”) subsequent to Oracle undergoing a 4:1 share consolidation on the basis of one post-consolidation share for each four pre-consolidation shares (the “Share Consolidation”). The Share Consolidation will result in there being 16,830,650 common shares of Oracle outstanding. There are currently 27,620,500 Methano Shares outstanding but it is anticipated that as a result of further future financings to be completed by Methano prior to completion of the Transaction that number will increase to approximately 30,000,000 common shares. Pursuant to the Amended LOI, the Transaction will see the Methano Shares consolidated to 16,830,649 common shares, one less than the number of Oracle postconsolidation shares, allowing for a Fundamental Acquisition. Following the acquisition of Methano there will be approximately 33,661,299 common shares outstanding, prior to taking into account further Oracle shares to be issued pursuant to the Financing outlined below. No finders’ fees will be payable in connection with the Transaction.

About Methanogenesis Corporation

Methano is an early stage Canadian corporation organized to combine microbiological approaches with genetics and metabolic engineering to produce genetically modified microbes “GMO’s” for the efficient and cost-effective conversion of methane CH4 to methanol CH3OH. Methano will be providing funding to a major university in California (the “University”) for research and development of the conversion process. It is anticipated that intellectual property resulting from the research and development will be owned by the university which will then provide Methano with an exclusive worldwide license to commercialize the resulting technology.

Nature of Operations and Going Concern

To date, the Company has not earned significant revenues and is considered to be in the exploration stage. During the nine months ended September 30, 2020, the Company recorded net comprehensive loss of $58,256 (2019 – loss of $187,907) and as of that date, the Company’s current liabilities exceeded its current assets by $624,318 (December 31, 2019 - $566,060). As at September 30, 2020, the Company has an accumulated deficit of $27,071,545 (December 31, 2019 - $27,013,289). The Company’s operations are primarily funded with debt or equity financing, which is dependent upon many external factors and may be difficult to raise when required. The Company does not have sufficient cash to fund current operations, amounts payable, or amounts required to complete current acquisition agreements and will require additional funding, which if not raised, may result in the delay, postponement or curtailment of some of its activities.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. It has adversely affected global workforces, economies, and financial markets, triggering an economic downturn. It is not possible at this time for the Company to predict the duration or magnitude of the adverse results of the outbreak nor its effects on the Company’s business or operations.

The Company’s condensed interim financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume the realization of assets and discharge of liabilities in the normal course of business. However, the above factors may cast significant doubt on the use of the going concern basis of accounting used in the preparation of these financial statements. These financial statements do not give effect to

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adjustments that would be necessary should the Company not be able to continue as a going concern. Such adjustments could be material.

Although the Company takes steps to verify title to the resource properties in which it acquires interests in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory and governmental requirements.

Overall Performance for the nine months ended September 30, 2020

During the nine months ended September 30, 2020, the Company continued with its due diligence on the Methano transaction. The Company is diligently working to prepare the final agreements and obtain approval from the Toronto Venture Exchange. At the request of the Company, trading in the shares of the Company has been halted pending further news.

Selected Annual Information

Following is a summary of selected audited financial information for the Company’s most recent three fiscal years.


	2019	2018	2017
Revenues	Nil	Nil	Nil
Net income (loss)	502,453	($5,233,889)	($36,802)
Income (loss) per share basic & fully diluted	$0.01	($0.13)	($0.01)
Working capital (deficiency)	($566,060)	($1,063,482)	($1,792,116)
Total assets	$25,559	$92,091	$96,206
Long term debt	Nil	Nil	Nil
Total liabilities	$576,177	$1,138,912	$1,886,698
Share capital	$21,930,458	$21,930,458	$16,977,342
Deficit	($27,013,289)	($27,515,742)	($22,281,853)

2017 to 2018 : the increased loss in 2018 is mostly due to the increased exploration and evaluation costs to explore and secure the lands and oil and gas rights in the Eagle Ford district. Additional costs were accrued for salaries and benefits, stock-based compensation, professional fees, consulting fees and travel expenses as the Company ramped up to pursue the Eagle Ford opportunity.

2018 to 2019 : the net gain in 2019 is mainly due to reduced or nil exploration and evaluation expenditures during the year, reduced consulting, professional fees, salaries and benefits, and no stock based compensation, partially offset by other income derived from the gain on disposal of the subsidiary Oracle Oil & Gas LLC of $446,005, the gain on debt settlements of $176,035,

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and the gain on the writedown of accounts payable exceeding statutory limitations of $90,712.

Discussions of Operations

For the three months ended September 30, 2020

For the three months ended September 30, 2020 the Company reported net loss and comprehensive loss $9,568 ($0.00 per share) compared to a net loss and comprehensive loss of $51,819 ($0.00 per share) in 2019. The Company did not generate any revenues from operations during the period.

Expenditures for the three months ended September 30, 2020 were substantially less than those in 2019 mainly due to decreased activity on its exploration projects and reduced salaries and benefits.

For the nine months ended September 30, 2020

For the nine months ended September 30, 2020 the Company reported net loss and comprehensive loss $58,256 ($0.00 per share) compared to a net loss and comprehensive loss of $187,907 ($0.00 per share) in 2019. The Company did not generate any revenues from operations during the period.

Expenditures for the nine months ended September 30, 2020 were substantially less than those in 2019 mainly due to decreased activity on its exploration projects, reduced consulting fees and reduced salaries and benefits.

Oil & gas properties

Italmin Project – Italy

During the year ended December 31, 2018, the Company closed an agreement with Italmin Energie SRL (“Italmin”) to acquire a 16% participating interest on an oil and gas permit situated in central south Italy and referred to as the NUSCO permit (the “Permit”).

On February 12, 2019, the Italian government signed a decree which enacted the suspension of work on oil and gas exploration permits or applications for new exploration permits in Italy whilst a review is undertaken, giving Oracle an opportunity to extend the time required to fund the drilling operations.

The period expected for review is up to 18 months from February 2019 and that the suspension will be lifted as soon as consensus is reached on the terms under which the different areas will proceed with oil and gas exploration. In the event that no consensus is reached within 24 months, the suspension will be lifted.

During the suspension period, the Ministries of Economic Development and Environment will review all areas in the Italian onshore and offshore territories as part of the Plan for Sustainable Energy Transition of Suitable Areas (PTESAI) Bill, to determine which are suitable for sustainable hydrocarbon prospecting, exploration and development activities.

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Following the assessment of areas, a decision will be taken whether to allow further exploration activity or to reduce or withdraw licenses in that area. Should agreement not be reached between the government and the regions on all onshore licenses within 24 months, the suspension will be lifted and rulings will only be issued for offshore areas.

There is no guarantee that the moratorium will be lifted or that the permit will be renewed. The Company is currently evaluating the viability of this project and the likelihood of it proceeding in a reasonable time frame.

Selected Quarterly Financial Information

The following table sets forth a comparison of the Company’s revenues and earnings on a quarterly basis for each of the eight most recently completed quarters. The financial data for the Company’s eight most recently completed quarters was prepared in accordance with IFRS. The functional currency and the reporting currency of the Company is in Canadian dollars.

For the Quarter Ended	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019
Net income (loss)	($9,568)	($23,751)	($24,937)	($690,360)
Basic and diluted income (loss) per share	($0.00)	($0.00)	($0.00)	($0.01)
Total assets	$16,332	$20,486	$19,095	$25,559

For the Quarter Ended	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019	Dec 31, 2018
Net income (loss)	($51,819)	($58,361)	($77,727)	($1,131,780)
Basic and diluted income (loss) per share	($0.00)	($0.00)	($0.00)	($0.03)
Total assets	$36,489	$49,168	$49,253	$92,091

The main factors causing significant fluctuations in net income (loss) from quarter to quarter were as follows:

Consulting fees : In Q3, 2018, additional costs for assistance with the Eagle Ford Asset acquisitions were incurred. In 2019, there were minimal consulting fees expended.
Finance costs : Cash outlay of $51,918 for agreements with various financiers in Q3, 2018 and $6,250 in Q4, 2018 to assist with locating additional funds.
Exploration and evaluation costs – In Q3, 2018, $650,000 was recorded for the cost of the Data Package for the additional lands under review and $1,313,718 in deposits were expensed. In Q4 an additional $653,037 in deposits was expensed.
Professional fees: In Q3, 2018, the Company expensed additional legal fees for the due diligence and legal requirements of the Italmin and Eagle Ford acquisitions.
Salaries, management bees and benefits : In Q3, 2018, the board approved the reinstatement of salaries and recorded $172,524 in Q3 and 210,099 in Q4, 2018. In Q1 and Q2 of 2019, salaries were accrued for one employee and one independent director with most of the fees being eliminated by Q4 2019. In Q3, 2020, the Company discontinued accruals of fees for a senior officer.
Stock-based compensation – In Q3, 2018, the board approved the grant of options valued at $694,570.

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Travel and promotion : Travel in Q3, 2018 was higher than other quarters as the Company explored the Eagle Ford opportunity.
Gain on Debt Settlement – In Q4, 2019, the Company recorded a gain of $176,035 on the settlement of debt with directors and other related parties.
Gain on Disposal of Subsidiary – In Q4, 2019, the Company recorded a gain of $446,005 on the disposal of its subsidiary Oracle Oil & Gas LLC mostly due to an agreement that the subsidiary would assume a large portion of the debt to directors, officers and other related parties.
Gain on Writedown of Accounts Payable – In Q4, 2019, the Company recorded a gain of $90,712 on the writedown of old accounts payable that had been outstanding for periods exceeding the legal statute of limitations for making a claim against the Company.

Liquidity

The table below highlights the Company’s cash flows for the nine months ended September 30, 2020,as compared to the nine months ended September 30, 2019:

For the Year Ended	September 30, 2020	September 30, 2019
Net cash provided by (used in):
• Operating activities	($32,315)	($36,544)
• Financing activities	23,000	($3,944)
• Investing activities	-	-
(Decrease) Increase in cash	($9,315)	($40,488)

As at September 30, 2020, the Company had cash of $802 ($10,117 at December 31, 2019) and a working capital deficiency excluding deposits and prepaid expenses of $624,316 ($566,060 at December 31, 2019).

Net cash used in operating activities during the nine months ended September 30, 2020 was $32,215 (2019: $36,544). Operating costs were significantly decreased for the period due to decreased activities in with the Eagle Ford opportunity.

To fund ongoing acquisition development activities and working capital requirements the Company finances its activities primarily through the issue of capital stock, debt instruments, and advances from related parties. During the nine months ended September 30, 2020, net cash generated (used) by financing activities was $23,000 (2019 – ($3,944)) from debt issuances.

The Company expects to continue raising funds to finance its growth strategy and to meet related obligations and working capital commitments. Future operations and the Company’s ability to meet its commitments depend on its ability to raise sufficient funds through share offerings, debt, or operations. Issuance of additional equity securities by the Company may result in significant dilution to the equity interests of current shareholders. If the Company is unable to obtain financing in amounts and on terms deemed acceptable, further success of the business could be adversely affected.

There were no investing activities during the nine months ended September 30, 2020 or 2019.

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Capital Resources

The Company is in the oil and gas exploration and development business and has incurred losses since its inception. To date the Company has had limited revenue and funded its operations primarily through the issuance of capital stock and advances from related parties. The Company must continue to raise additional financing to progress its strategy for the acquisition and development of oil and gas properties in Italy and North America, but currently has insufficient funds to meet expected operating and capital expenditures without raising additional capital. The Company will use its best efforts to do so, but there can be no assurances that the Company will be able to continue to secure financing in amounts and on terms deemed acceptable to continue these activities.

COVID-19 (the coronavirus) has threatened a slowdown in the global economy as well as caused volatility in the global financial markets. While the full impact of COVID-19 on the global economy is uncertain, rapid spread of COVID-19 may have an adverse effect on the Company's financing capabilities. The extent to which COVID-19 may impact the Company’s business will depend on future developments such as the geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing, business closures or business disruptions, and the effectiveness of actions taken in Canada, the United States and other countries to contain and treat the disease. Although it is not possible to reliably estimate the length or severity of these developments and their financial impact to the date of approval of these consolidated financial statements, the Company's stock price has declined in excess of 50% since year-end. Should the stock prices remain at or below currently prevailing levels for an extended period, this could have a further significant adverse impact on the Company's financial position, results of operations for future periods, and ability to raise new capital.

Additional funding will be required throughout the year.

Management of Capital

The board of directors of the Company has overall responsibility for the establishment and oversight of the Company’s risk management policies on an annual basis. The Company’s board of directors identifies and evaluates the Company’s financial risks and is charged with the responsibility of establishing controls and procedures to ensure financial risks are mitigated.

The Company’s objectives when managing capital are to pursue and complete the identification and evaluation of assets, properties, or businesses with a view to acquisition, developing, exploring, or disposing when evaluation is complete. The Company does not have any externally imposed capital requirements to which it is subject.

As at September 30, 2020, the Company had capital resources consisting of cash and cash equivalents. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or adjust the amount of cash and cash equivalents.

The Company’s investment policy is to invest excess cash in investment instruments at high credit, quality financial institutions with terms to maturity selected with regards to the expected time of expenditures from continuing operations.

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The Company’s ability to continue as a going concern is dependent upon successful completion of additional financing, continuing support of creditors and its ability to attain profitable operations.

Off-Balance Sheet Arrangements

The Company did not enter into any off-balance sheet arrangements during the nine months ended September 30, 2020 or 2019.

Related Party Transactions

Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

a) Transactions With Key Management Personnel

Salaries, management fees and other short-term benefits Legal fees	NINE MONTHS ENDED JUNE 30 2020 2019
	$ 15,000$ 23,906 18,000 21,414
	$ 33,000$ 45,320

Key management personnel are the persons responsible for planning, directing, and controlling the activities of the Company, and include both executive and non-executive directors, certain senior officers, and entities controlled by such persons. The Company considers all directors and officers of the Company to be key management personnel.

As at September 30, 2020, $147,528 (December 31, 2019 - $288,988) were owing key management personnel and the amounts were included in due to related parties. The amounts payable are non-interest bearing, are unsecured, and have no specific terms of repayment.

During 2019, the Company entered into debt release and assumption agreements with key management, other related parties, and non-related parties in the amount of $622,040. The debt settlements resulted in a gain on debt settlements of $176,035 and a debt transfer of $446,005 to a formerly owned subsidiary Oracle Oil & Gas LLP.

b) Other Related Party Transactions

As at September 30, 2020, $Nil (2019 - $2,300) were due and included in due to related parties. The amounts payable are non-interest bearing, are unsecured, and have no specific terms of repayment.

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Notes Payable

During the year ended December 31, 2019 and 2018, the Company entered into loan agreements with several directors, officers, shareholders, and other related parties. During 2019, the Company entered into debt settlement and assumption agreements with certain related parties. The outstanding loans are unsecured, bear interest at 12% per annum through September 30, 2017, and are due on demand. Effective September 30, 2017, the interest on the loans was discontinued by agreement of the lenders.

During the nine months ended September 30, 2020, the Company entered into a loan agreement with Methanogenesis Corporation (“Methano”) for net proceeds of $23,000. The outstanding loans are unsecured, due 45 days following the resumption of trading on the Toronto Venture Exchange (the “Due Date”) and bear interest at the bank prime lending rate commencing from the Due Date.

During the nine months ended September 30, 2020, the Company recorded a total of $Nil (2019 - $Nil) in interest expense on the notes. As at September 30, 2020, the total amounts owed were $73,337 (December 31, 2019 - $50,337), including interest payable of $1,398 (December 31, 2019 – $1,398).

Proposed Transactions

At the date of this report other that the reference to Methanogenesis Corporation, there are no other proposed asset or business acquisitions or dispositions for which the directors or senior management consider confirmation by the Board of Directors to proceed with the transaction to be probable.

Critical Accounting Estimates

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and may affect both the period of revision and future periods.

Elements of these financial statements subject to material estimation uncertainty include:

Fair value measurements

In the preparation of these financial statements, management has estimated the fair value of financial instruments, for which there are no active markets. The fair value estimates are based on the best available information and experience of management. Future events or changes in circumstances may materially impact these estimates used in valuing assets and liabilities at year end.

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Elements of these financial statements subject to significant judgment include:

Significant judgments about the future and other sources of estimation uncertainty that management has made at the reporting date that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

i) going concern assessment;
ii) consideration of exploration and evaluation asset impairment criteria;
iii) recovery of amounts receivable;

Changes in Accounting Policies

During the nine months ended September 30, 2020, the Company has not adopted and new standards or policies.

There are no new IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements.

Financial Instruments and Other Instruments

The carrying value of cash, accounts receivable, accounts payable and due to related parties and notes payable approximates their fair values due to the short maturity of those instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risk arising from these statements.

Financial Risk Exposure and Risk Management

The Company is exposed in varying degrees to a number of risks arising from financial instruments. Management’s close involvement in the operations allows for the identification of risks and variances from expectations. The Company does not participate in the use of financial instruments to mitigate these risks and has no designated hedging transactions. The Board approves and monitors the risk management processes. The Board’s main objectives for managing risks are to ensure liquidity, the fulfillment of obligations, the continuation of the Company’s exploration activities, and limited exposure to credit and market risks. There were no changes to the objectives or the process from the prior period.

The types of risk exposure and the way in which such exposures are managed are as follows:

a) Credit Risk

Credit risk primarily arises from the Company’s cash and cash equivalents and amounts receivable. The risk exposure is limited to their carrying amounts at the statement of financial position date. Cash and cash equivalents are held as cash deposits or invested in guaranteed investment certificates with various maturity dates. The Company does not invest in assetbacked deposits or investments and does not expect any credit losses. The Company periodically assesses the quality of its investments and is satisfied with the credit rating of the bank and the investment grade of the guaranteed investment certificates. Amounts receivable primarily consists of Goods and Services Tax (GST) credits and other receivables.

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b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company ensures there is sufficient capital to meet short-term business requirements. One of management’s goals is to maintain an optimal level of liquidity through the active management of assets, liabilities and cash flows.

The Company’s cash and cash equivalents are deposited in major banks or invested in guaranteed investment certificates, which are available on demand to fund the Company’s operating costs and other financial demands.

c) Market Risk

The significant market risks to which the Company is exposed are currency, interest rate, commodity, and equity price risks.

i) Currency Risk

The operating results and financial position of the Company are reported in Canadian dollars. As the Company is exploring opportunities in an international environment, some of the Company’s financial instruments and transactions are denominated in currencies other than the Canadian dollar. The results of the Company’s operations are subject to currency risk.

The majority of the Company’s costs are incurred in Canada and are denominated in Canadian dollars. Foreign currency transactions are booked at historical cost in Canadian dollars.

The Company has not entered into any agreements or purchased any foreign currency hedging instruments to hedge possible currency risks at this time. Management believes the foreign exchange risk derived from currency conversions is not significant, and therefore, does not hedge its foreign exchange risk.

As at September 30, 2020 and 2019, the Company is exposed to currency risk through the following monetary assets and liabilities denominated in foreign currencies:

Cash Accounts payable Due to related parties Notes payable	SEPTEMBER 30 2020 2019
	USD 64 USD 136 USD 2,254 USD 153,466 USD 16,000 USD 240,000 USD - USD 113,563

Based on the above net exposures and assuming that all other variables remain constant, a 10% change in the value of the foreign currencies against the Canadian dollar would result in an increase or decrease of $2,426 (2019 - $67,278) in income/loss from operations.

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ii) Interest Rate Risk

The Company’s policy is to invest excess cash in guaranteed investment certificates at fixed or floating rates of interest and cash equivalents are to be maintained in floating rates of interest in order to maintain liquidity, while achieving a satisfactory return for shareholders. As at September 30, 2020 and December 31, 2019, no cash was held in interest bearing deposits. Fluctuations in interest rates impact the value of cash and cash equivalents. The Company manages risk by monitoring changes in interest rates in comparison to prevailing market rates.

iii) Commodity and Equity Price Risk

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potential adverse impact on the Company’s financing abilities due to movements in individual equity prices or general movements in the stock market. The company closely monitors equity prices and the stock market to determine the appropriate course of action to be taken by the Company. The Company’s investments may consist of common or ordinary shares which are subject to fair value fluctuations.

As at September 30, 2020 and December 31, 2019, the Company had no investments subject to commodity and equity price risk.

Non-GAAP Measures

The Company has included certain non-GAAP financial measures to supplement its Consolidated Financial Statements, which are presented in accordance with IFRS, including the following:

Working capital.

The Company believes that this measure, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP financial measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Management's determination of the components of non-GAAP and additional measures are evaluated on a periodic basis influenced by new items and transactions, a review of investor uses and new regulations as applicable. Any changes to the measures are duly noted and retrospectively applied as applicable.

Working capital

The Company uses “working capital” to explain and analyze Capital Resources. Working capital is defined as current assets minus current liabilities. To be conservative, the Company deducts deposit and prepaids from working capital to illustrate its short-term liquidity position.

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Disclosure of Outstanding Share Data

As of the date of this MD&A, the Company’s authorized share capital consists of an unlimited number of common shares without par value and 5,000,000 preferred shares, par value of $5 per share (none issued.)

As at the date of this report, the Company had the following securities outstanding:

Type of Security	Number Outstanding
Common Shares	67,322,600
Stock Options	2,280,000
Warrants	2,000,000
Fully Diluted	71,602,600

Disclosure Controls and Procedures

In contrast to the certificate required under National Instruments 52-109 Certificate of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109, in particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:

i) Controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii) A process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s IFRS.

The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Risk Factors

Any investment in the securities of the Company is speculative, due to the nature of its business and its general stage of development. These risk factors could materially affect the Company’s future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company. In addition to the usual risk associated with investment in a business, investors should carefully consider the following risk factors as well as the risk factors set out in the Company’s other public disclosure.

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The Company’s business and results of operations are subject to a number of risks and uncertainties, including but not limited to the following:

the Company’s limited operating history and inability to assure profitability;
the Company’s reliance on Governments to issue drilling permits;
changes in laws, regulatory regimes and guidelines relating to the acquisition of drilling and exploration permits;
the Company’s dependence on key personnel, including directors, officers and other employees;
the Company’s reliance on the parties to its joint ventures;
the Company’s dependence on development of its joint ventures;
fluctuation in market prices for crude oil which impacts the ability to raise capital and attain profitability;
the Company will need to obtain additional debt or equity financing in the future to support ongoing operations, and there can be no assurance that such financing will be available to the Company when needed or on terms acceptable to the Company;
fluctuation of the market price of the Company’s common shares; and
the other risks identified in the Company’s other public disclosure, available under the Company’s profile on SEDAR at www.sedar.com.

Caution Regarding Forward-Looking Information

Certain information in this MD&A contains comments that constitute forward-looking information within the meaning of applicable securities legislation .

This MD&A contains "forward-looking information" within the meaning of applicable Canadian securities laws (" forward-looking information ") concerning the Company including, but not limited to, anticipated results and developments in the Company's operations in future periods, and other matters that may occur in the future.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, including, without limitation, assumptions about:

the Company’s exploration plans and timeframe for completion of such plans;
the anticipated costs and investments for development and exploration of the Company’s assets;
general economic, financial market, regulatory and political conditions in which the Company operates;
competition;
the ability of the Company to generate cash flow from operations and obtain necessary financing on acceptable terms;
government regulation of the Company’s activities and products, including in the areas of taxation and environmental protection;
the timely receipt of required regulatory approvals;

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the ability of the Company to obtain qualified staff, equipment and services in a timely and cost-efficient manner; and
the ability of the Company to conduct operations in a safe, efficient and effective manner.

Forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, events, results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, without limitation, those related to:

the industry-wide risks;
the Company’s ability to obtain financing;
the Company's dependence on key personnel;
availability of third-party contractors or equipment;
difficulties in construction or in obtaining qualified contractors to complete construction projects;
the Company’s reliance on joint venture parties and other counterparties;
the Company’s ability to manage anticipated and unanticipated costs;
the costs of construction of the Company’s projects being higher than anticipated by the Company;
the time to complete the Company’s projects being longer than anticipated by the Company;
failure of equipment to operate as anticipated;
unfavorable publicity or consumer perception of the oil and gas industry or the Company;
environmental risks;
changes in laws and regulations may increase costs of doing business and/or restrict the Company's activities and operations or plans for international and domestic expansion;
community relations;
changes in the Company’s over-all business strategy;
restrictions imposed by the TSX Venture Exchange on the Company’s business;
the Company's lack of operating revenues;
inability to obtain necessary licenses and permits, including drilling permits;
governmental regulations;

This is not an exhaustive list of the risks and factors that may cause actual results to differ materially from the Company’s forward-looking information. There may be other factors that cause actions, events, conditions, results, performance or achievements not to be as anticipated, estimated or intended. In addition to those discussed in this MD&A, please refer to the risks described in the Company's public disclosure record. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Oracle Energy Corp. (MD&A – June 30, 2020) 15