An exothermic reaction is one which is accompanied by the release of heat energy.
In the given situation, hydrogen and oxygen combine to form water along with the generation of heat.
2H2 + O2 → 2H2O + heat
Based on the law of conservation of energy: 'energy can be neither created nor destroyed". This implies that whatever energy is released must have been present in the reactants. Therefore, the reactants must be in a higher energy level than products.
If the reaction shown below is exothermic, the energy level of the reactants is higher than products.
