Tamar Petroleum Ltd. Annual Report 2018 Table of Contents Chapter A Description of the Company's Business Chapter B Board of Directors Report for the year ended December 31, 2018 Chapter C Financial Statements as of December 31, 2018 Chapter D Additional Details regarding the Company Chapter E Annual Report on Effectiveness of Internal Control over Financial Reporting and Disclosure Tamar Petroleum Ltd. Chapter A Description of the Company's Business A-1 This report is a translation of Tamar Petroleum Ltd.'s Hebrew-language Description of the Company's Business, and is prepared solely for convenience purposes. Please note that the Hebrew version constitutes the binding version, and in the event of any discrepancy, the Hebrew version shall prevail. Chapter A – Description of the Company's Business 1. Description of the General Development of the Company’s Business1 1.1 Tamar Petroleum Ltd. (the "Company") was incorporated on November 4, 2015 as a private company limited by shares under the Companies Law, 5759-1999 (the "Companies Law"). The Company’s name was changed to its current name on May 21, 2017. 1.2 Pursuant to Israeli Government Resolution No. 476 from August 16, 2015 (which was readopted by the Government with certain changes on May 22, 2016) regarding "a framework for the increase of the natural gas quantity produced from the ‘Tamar’ natural gas field and the rapid development of the natural gas fields ‘Leviathan’, ‘Karish’ and ‘Tanin’ and other natural gas fields" (the "Framework" or the "Gas Framework"), the Company entered into an agreement with Delek Drilling LP ("Delek Drilling") on July 2, 2017 (the "Sale Agreement with Delek Drilling"), whereby the Company acquired from Delek Drilling on July 20, 2017, retroactively effective from July 1, 2017, a 9.25% working interest (out of 100%) in the I/12 "Tamar" and I/13 "Dalit" leases (the "Tamar and Dalit Leases"), subject to the existing obligations of payment of overriding royalties to related parties and to third parties (the "Royalties" and the "Royalty Holders", respectively) as well as the proportionate share (9.25%) of the rights and obligations under the Joint Operating Agreement, the agreements for the sale of gas from the Tamar Lease, the agreement for the use of the Yam Tethys Project facilities, the shares of Tamar 10 Inch Ltd, the operating permit for the Tamar Platform, and the permits for export from Tamar (the "Rights Acquired from Delek Drilling"), for the consideration of USD 845 million in cash (of which USD 650 million was funded by the Company's initial public offering of bonds (Series A) and the remaining USD 195 million by the Company's initial public offering of ordinary shares of NIS 0.1 par value each ("Ordinary Shares") and the allotment of 19,900,000 ordinary shares of the Company to Delek Drilling. Under an irrevocable letter of waiver provided by Delek Drilling to the Company, which took effect upon completion of the issuance of the shares, Delek Drilling unilaterally waived all the 1 For definitions of some of the professional terms included in this chapter, see the Professional Terms Annex at the end of this chapter. A-2 voting rights attached to all of the shares held by it, except in respect of shares in an amount equal to up to 12% of the Company's issued and paid up share capital (the "Excess Shares")2. For details regarding the Gas Framework see Section 7.16.1 below. For further details regarding the Sale Agreement with Delek Drilling see Section 7.17.1 below. 1.3 Until the acquisition date of the Rights Acquired from Delek Drilling, the Company was inactive, and wholly owned and controlled by Delek Drilling. 1.4 The Company's Series A Bonds started trading on the Tel Aviv Stock Exchange Ltd. (the "TASE") on July 10, 2017, and the Company became a reporting company, within its meaning in the Securities Law, 5728-1968 (the "Securities Law"). The Company's Ordinary Shares started trading on the TASE on July 24, 2017, and the Company became a publicly traded company within its meaning in the Companies Law. 1.5 Pursuant to the Gas Framework, the Company entered into an agreement with Noble Energy Mediterranean Ltd. ("Noble") on January 29, 2018, whereby the Company acquired from Noble on March 14, 2018, retroactively effective from January 1, 2018, a 7.5% working interest (out of 100%) in the Tamar and Dalit Leases and a pro rata share (7.5%) of the rights and obligations under the Joint Operating Agreement, the agreements for the sale of gas from the Tamar Lease, the agreement for the use of the Yam Tethys Project facilities, the shares of Tamar 10 Inch Ltd., the operating permit for the Tamar Platform, and permits for export from Tamar (the "Rights Acquired from Noble"), for the consideration of USD 475 million in cash (funded by a first issuance of Bonds (Series B)) and a private placement of 38,495,576 ordinary shares of the Company to Noble (accounting for 43.5% of the Company's issued share capital) (hereinafter: the "Sale Agreement with Noble"). Prior to the said private placement date, Noble provided the Company with an irrevocable letter of waiver, whereby it waives all the voting rights attached to all the shares allotted to it3. It should be noted that the Rights Acquired from Noble are identical to the Rights Acquired from Delek Drilling as stated in Section 1.2 above, except for the commitment to pay overriding royalties to interested parties and third parties that applies to the Rights Acquired from Delek Drilling, as set out in Section 7.19 below, but does not apply to the Rights Acquired from Noble. On October 2, 2018 and October 3, 2018, Noble sold all the shares allotted to it under the Sale Agreement with Noble. Following the sale of said shares, the voting rights attached to them came into full 2 For the avoidance of doubt, all of the capital rights attached to the shares held by Delek Drilling shall remain in full force and effect, including the right to receive dividends, bonus shares, rights, and the right to receive surplus assets upon the Company’s dissolution. In addition, Delek Drilling has undertaken to sell the Excess Shares first (which after being sold, will confer on the purchaser all of the rights attached thereto, including voting and equity rights as aforesaid), and it has also undertaken that as long as it has not sold the Excess Shares it will not purchase additional shares of the Company. 3 The letter of waiver signed by Noble is essentially similar to the one signed by Delek Drilling. A-3 force again. For further details regarding the Sale Agreement with Noble, see Section 7.17.2 below. 2. Operating Segment 2.1 In accordance with the Company's articles of association (the "Articles"), the Company shall only carry out operations of exploration, development, production and transport to the target markets with respect to the Tamar and Dalit Leases. It should be noted that the amendment of said provision is subject to approval by a general meeting of the Company’s shareholders to be adopted by special resolution.4,5 Accordingly, the Company's sole operating segment on the date of the report is operations of exploration, development, production and transport to the target markets with respect to the Tamar and Dalit Leases (the "operating segment"). 2.2 The Company is engaged in the sale of natural gas produced from the Tamar reservoir within the area of the Tamar Lease ("Tamar Project") to various customers, and primarily to the Israel Electric Corporation Ltd. ("IEC"), industrial customers, private electricity producers and natural gas marketing firms. The Company is also engaged in selling condensate produced from the Tamar Project to the Paz Ashdod Refinery ("PAR"), and in promoting the expansion of the production system of the Tamar Project. 2.3 In view of the limited demand for natural gas in the domestic market, and in light of the significant volume of resources found off the shores of the State of Israel, the Company, besides supplying the demand for natural gas in the domestic market, is working to supply some of the reserves for export to neighboring countries of Israel, as specified in Sections 7.4.2 and 7.4.5 below. Regarding restrictions on gas exports, see Section 7.16.1(c)(2) below. 4 A special resolution is a resolution passed by a 75% majority of those present and entitled to vote in the vote. This notwithstanding, during the period up to the end of five years from the date of the initial public offering of the Company's shares or up to the date at which Delek Drilling's stake in the Company's shares drops below 5% of the Company's issued and paid up share capital, whichever the earlier, amendment of this section shall require approval of the General Meeting of the Company's shareholders by a 95% majority of the Company's shareholders, unless the amendment of the section concerns the engagement in oil or gas exploration, development or production under a petroleum right or preliminary permit with a priority right to obtain a license, within the meaning of these terms in the Petroleum Law, 5712-1952, which is to be explicitly defined under the section on the Company's goals in the Articles of Association, in which case the amendment will require the approval of the General Meeting of the Company's shareholders by special resolution. 5 In addition, it should be noted that in accordance with the Deed of Trust for Series A Bonds (as published in the Company's Immediate Report from July 5, 2017, Ref.