Elk Petroleum Ltd Corporate directory 30 June 2015

Information on directors

The names and details of the directors of Elk Petroleum Ltd in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Neale Taylor Non-Executive Director and Chairman

Dr. Taylor has extensive technical, operating and commercial experience in oil and gas exploration and production with Esso Australia, Nexus Energy, and Cambrian Oil & Gas Plc. He is a former non-executive director of Terra Gas Trader, former non- executive chairman of Tap Oil, a former managing director of Cambrian Oil & Gas Plc and director of various subsidiaries of Xtract Energy Plc. He is a member of the Society of Petroleum Engineers and a Fellow of the Australian Institute of Company Directors.

Special responsibilities: Member of the audit committee, risk committee and remuneration committee. Other current directorships: None

Former directorships (last 3 years): Tap Oil Limited

Bradley Lingo (appointed 1 August 2015) Managing Director and Chief Executive Officer

Mr. Lingo is an experienced international resource & energy executive with a proven track record of successfully of building companies in the upstream and midstream oil & gas energy sectors. Mr. Lingo held previous roles in business development, new ventures, mergers and acquisitions and corporate finance with Tenneco Energy and El Paso Corporation in the US and Australia, and Senior Vice President and Head of Oil & Gas at the Commonwealth Bank of Australia. More recently Mr. Lingo was Managing Director and CEO of Drillsearch Energy Limited, where he oversaw more than an eight-fold increase in share price and market cap over a period of six years, helping build that company into one of Australia's leading onshore oil and gas producers. Mr. Lingo's skills include leadership, ability to build market confidence, financial and technical skills, organisation building, business development and funding capability, and entrepreneurship. His experience also includes equity and debt capital raising, project and transaction financing and structuring to achieve attractive financial, tax, accounting and legal treatment for complex commercial, project and financing transactions, similar to Elk's current needs.

Special responsibilities: None. Other current directorships: None

Former directorships (last 3 years): Drillsearch Energy Limited, Mont Dór Petroleum Limited, Ambassador Energy Limited, Acer Energy Limited

Matt Healy Non-Executive Director

Mr. Healy currently holds a management position at one of Australia's foremost property development and infrastructure groups, is an active investor in the resources sector and has over 15 years of experience working in management and operational roles primarily working on project development of large and complex assets. Mr. Healy has a degree in construction engineering and holds a post-graduate MBA (Exec) from the Australian Graduate School of Management in Sydney. Mr. Healy is an associate of Elk's major shareholder.

Special responsibilities: Member of the audit committee and chair of the remuneration committee. Other current directorships: None

Former directorships (last 3 years): None

Russell Krause (appointed 13 March 2015) Non-Executive Director

Mr. Krause has over 25 years' experience in Stockbroking and Investment Management with a primary focus on the resources sector. He has held a number of Directorships and Senior Management positions with a number of Australia's leading firms, including firms with US oil and gas assets. For the past ten years he has worked on a number of North American oil and gas projects in relation to Capital Raising and Corporate Advisory.

Special responsibilities: Member of the remuneration committee, risk committee and chair of the audit committee. Other current directorships: Carbine Tungsten Limited, Red Sky Energy Limited, Austex Oil Limited

Former directorships (last 3 years): None

Timothy Hargreaves (appointed 12 May 2015) Non-Executive Director

Mr. Hargreaves has over 35 years' experience in technical and managerial roles in the petroleum and mining sectors in Asia and the Middle East for major companies including BHP, Fletcher Challenge and Union Texas Petroleum as well as startups and small to mid-sized independents. He has led successful exploration and commercialisation campaigns in Pakistan and Egypt, which were dependent upon technical and commercial innovation in complex regulatory environments. Since 2009 he has been Research Director of Resources for Republic Investment Management, manager of a Singapore-based investment fund, which is a major investor in ELK and the major participant in the Convertible Secured Loan Facility for funds recently raised by the Company and, until recently, he was a Director of The Environmental Group Limited (ASX : EGL).

Special responsibilities: Chair of the risk committee. Other current directorships: None

Former directorships (last 3 years): The Environmental Group Limited

Executives

The names and details of the company's Chief Executive Officer and Company Secretaries of Elk Petroleum in office during the financial year and until the date of this report are as follows. Secretaries were in office for this entire period unless otherwise stated.

J. Scott Hornafius - Ph.D. President of Elk's subsidiaries in Denver, US

Dr. Hornafius has 32 years of exploration, technical, management, and funding experience in the oil and gas industry including 16 years with Mobil in the US, PNG and UK before founding MegaEnergy in 2000. As President of MegaEnergy, he was responsible for joint ventures involving play identification, land acquisitions, drilling and development programs and major funding programs and developed a 100,000 acre position over the Marcellus shale gas play in the Appalachian Basin which was ultimately divested for over $100 million. He is a founding Director of Canning Petroleum Pty Ltd, which now holds very large onshore permit areas in WA.

David Franks B.Ec, CA, F Fin, JP Joint Company Secretary

Mr. Franks is a Chartered Accountant, Fellow of the Financial Services Institute of Australia, Justice of the Peace, Registered Tax Agent and holds a Bachelor of Economics (Finance and Accounting) from Macquarie University.

With over 20 years in finance and accounting, initially qualifying with PricewaterhouseCoopers (formerly Price Waterhouse) in their Business Services and Corporate Finance Divisions, Mr. Franks has been CFO, Company secretary and/or Director for numerous ASX listed and unlisted public and private companies, in a range of industries covering energy retailing, transport, financial services, mineral exploration, technology, automotive, software development and healthcare.

Andrew Bursill - B. Agr. Ec, CA Joint Company Secretary

Mr. Bursill holds a Bachelor of Agricultural Economics from the University of Sydney and is a Chartered Accountant, qualifying with PricewaterhouseCoopers (formerly Price W aterhouse).

Since commencing his career as an outsourced CFO and company secretary in 1998, Mr. Bursill has been CFO, company secretary and/or director for numerous ASX listed, unlisted public and private companies, in a range of industries covering mineral exploration, oil and gas exploration, biotechnology, technology, medical devices, retail, venture capital and wine manufacture and distribution.

The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'group' or 'consolidated entity') consisting of Elk Petroleum Limited (referred to hereafter as Elk, the 'company' or 'parent entity') and the entities it controlled for the year ended 30 June 2015.

Principal activities

Elk Petroleum Limited was established to generate significant shareholder value by focusing on the commercial redevelopment and production of oil from existing accumulations through the application of proven improved oil recovery (IOR) and enhanced oil recovery (EOR) techniques. This goal may be supplemented by the company undertaking complimentary pre-enhanced oil recovery projects under suitable conditions to boost the overall value of the company.

The principal activities of the consolidated entity during the course of the 2014-2015 financial year consisted of the (1) redevelopment of the Grieve Oil Field in the Wind River Basin in south central Wyoming, USA, as a CO2 EOR project,

1. evaluation for redevelopment of the Singleton Oil Field in the Denver-Julesburg Basin in western Nebraska, USA,

2. production of oil from the Ash Creek Oil Field (until its sale on 23 September 2014), and (4) identification and screening of other new improved or enhanced oil recovery acquisition opportunities.

   
   

   Corporate Activities

   
   

   Elk Petroleum Limited is a company limited by shares and is incorporated and domiciled in Australia. Elk has prepared a consolidated financial report incorporating the subsidiaries that it controlled during the financial year, being wholly- owned Elk Petroleum Inc. (EPI), a company incorporated in Wyoming, USA, and its fully owned subsidiaries Natrona Pipeline LLC, Elk Operating Company LLC, Grieve Pipeline LLC and North Grieve Pipeline LLC.

   
   

   Elk successfully completed an A$850,000 capital raising in July 2014, through an underwritten share purchase plan. The capital raising involved the issue of 7,083,334 shares at $0.12 per share and one option for every one share. The options have an exercise price of $0.25 and may be exercised on or before 22 July 2017.

   
   

   The company also issued the following outstanding options as part of previous capital raising programs:

   
   

   • 5,000,000 options under the terms of the January 2014 $1.25 million borrowing noted in 2014 Annual Financial Report; the options have an exercise price of $0.25 and may be exercised on or before 28 October 2015;

     
     

   • 8,466,666 options under the terms of the April 2014 capital raising noted in 2014 Annual Financial Report; the options have an exercise price of $0.25 and may be exercised on or before 22 July 2017; and

     
     

   • 7,000,000 options under the terms of the April 2014 capital raising noted in 2014 Annual Financial Report and July 2014 share purchase plan to brokers and underwriters; the options have an exercise price of $0.25 and may be exercised on or before 22 July 2017.

     
     

     The company announced on 22 December 2014 that it had entered into a Merger Implementation Deed with Metgasco Limited ('Metgasco' or 'MEL') for the acquisition of all of the ordinary shares and listed options in Elk through a Scheme of Arrangement offering to Elk shareholders shares & equivalent options in Metgasco as consideration. Under the terms of the Merger Implementation Deed, completion of the Scheme of Arrangement was subject to the satisfaction of a number of conditions including, but not limited to a Material Adverse Condition associated with material movements in the oil price.

     
     

     As part of the transitional arrangements under the Merger Implementation Deed, Metgasco also agreed to provide Elk with up to a $2.5 million convertible loan facility to assist with the company's immediate funding requirements pending completion of the Scheme of Arrangement. This loan was convertible to ordinary shares in Elk at Metgasco's election based on the Volume Weighted Price of the ordinary shares for the 20 day period up to the conversion date subject to a cap of $0.047 per Elk share. Under the terms of the Merger Implementation Deed, in the event that the Merger Implementation Deed was terminated, the amount outstanding under the convertible loan would become due and payable within 30-days from termination if Metgasco did not otherwise elect to convert the loan into Elk shares. Following extension of this loan, the company used proceeds from the convertible loan to repay the January 2014 $1.25 million short-term loan facility.

     On 16 March 2015, Metgasco advised the company that due to the decline in oil prices that it would not be proceeding with the proposed Scheme of Arrangement and as such exercised its right under the Merger Implementation Deed to terminate the agreement and not to proceed with the proposed Scheme of Arrangement. Upon this termination, the outstanding convertible loan facility of approximately $1.75 million became repayable within 30 days.

     
     

     To enable the company to repay the Metgasco convertible loan, on 16 April 2015 Elk secured new funding arrangements providing $3.6 million under a secured convertible note facility. Part of the convertible note proceeds were used to repay the Metgasco convertible loan facility. The key terms of the convertible loan facility are:

     
     

   • Term: 12 months with right to convert outstanding monies to Elk shares within the Term,

     
     

   • Interest rate: 12.5% pa with most interest expected to be accrued for payment at end of term or converted to Elk shares. Interest to be capitalised monthly, which, in that case, would increase the effective interest rate,

     
     

   • Conversion price: 3.8 cents,

     
     

   • Other terms and conditions are typical of a loan of this nature and include granting of security, penalty interest rates, and the need for shareholder and other approvals, as required, and

     
     

   • 4,739,470 Elk shares issued on 16 April 2015 and 12 May 2015 as a fee for arranging these new loan funds.

     
     

     Mr. Robert Cook and Mr. Barry Cook ceased to be Directors on 21 November 2014. Mr. Anthony Strasser resigned as a director on 13 March 2015.

     
     

     Mr. Russell Krause was appointed as non-executive director on 13 March 2015. A brief profile of Mr. Krause is contained elsewhere in this report.

     
     

     Mr. Timothy Hargreaves was appointed as non-executive director on 12 May 2015. A brief profile of Mr. Hargreaves is contained elsewhere in this report.

     
     

     Subsequent to the reporting period, on 1 August 2015, Mr. Bradley Lingo was appointed as Managing Director and Chief Executive Officer. A brief profile of Mr. Lingo is contained elsewhere in this report.

     
     

     Dividends

     There were no dividends paid, recommended or declared during the current or previous financial year.

     
     

     Review of Operations

     
     

     During the 2014-2015 financial year, the company focused on three principal operations - the development of the Grieve CO2 EOR project, the early stage evaluation of the Singleton Oil Field as a prospective CO2 EOR field redevelopment project and the conduct of an asset sales process, which resulted in the sale of the Ash Creek Oil Field producing asset and chemical EOR project.

     
     

     Grieve CO2 EOR Project

     
     

     As previously announced, in 2011, Elk entered into a joint venture (JV) agreement with Denbury Resources for the redevelopment of the Grieve Oil Field as a CO2 EOR project. Under the joint venture arrangements, Denbury acquired a 65% working interest in and operatorship of the Grieve CO2 EOR project (or Grieve project) with the company retaining a 35% non-operated working interest in the project. Under these arrangements it was anticipated that the Grieve CO2 EOR project would commence production operations by early 2014. Progress has been deferred for a number of previously reported reasons.

     
     

     Under the joint venture agreements, Denbury is to provide Elk with a US$10.0 million carry and debt funding of US$12.0 million for its share of the joint venture Grieve Oil Field redevelopment costs. Denbury also agreed to fund certain other development expenditures associated with the Grieve Field CO2 EOR project on sole funding basis and to provide these facilities to the joint venture under an operating lease cost basis.

     
     

     
     

     Field Development Activities - During the 2014-2015 financial year, the company and its joint venture partner and operator of the project continued development work at the Grieve CO2 EOR project. This work involved the injection of significant volumes of carbon dioxide (CO2) and water into the field. Injection is expected to increase the reservoir pressure to the required level at which the CO2 becomes miscible with the oil and displaces oil to the producing wells. CO2 injection commenced in March 2013 and has continued at increasing rates throughout the reporting period, reaching an average rate of 45.7 million cubic feet per day in July 2015. Water injection continued throughout the reporting period at an average rate of 14,150 barrels per day.

     
     

     The operator has run pressure surveys on a quarterly basis since injection began and established that field re- pressuring is occurring in line with forecasts based on the rates and volumes of CO2 and water injected. At the time of this report, re-pressuring of the Grieve oil reservoir is progressing in line with expectations. The operator has recently advised Elk that first oil production is expected to commence in March 2017. This timing is the result of the schedule for completion and commissioning of the major oil processing and CO2 recompression facilities.

     
     

     During 2014-2015 financial year, the following Grieve CO2 EOR project redevelopment activities and works have been undertaken:

     
     

     • Construction of an electrical substation in the Grieve Field and a three-mile 230-kV power line to the substation*;

       
       

     • Injection of 5.6 BCF of CO2 taking total CO2 injection volumes to a total of 17.25 BCF

       
       

     • Injection of 5.5 million bbls of water into the Grieve Field taking the total water injection volumes to 9.5 million bbls of water;

       
       

     • Procurement of major long-lead plant, equipment and instrumentation for the construction of the central production facilities, including compression equipment for the CO2 recompression facilities;*

       
       

     • Construction of the pouring of the concrete pads at the central production facilities site for the CO2 recompression facilities;* and

       
       

     • Continuing well work-over activities.

* Costs for these facilities were funded 100% by Denbury and will be leased to the JV. They are not part of the JV funding arrangements between Elk and Denbury and Elk is not required to contribute to the capital costs associated with these facilities.

Project Expenditures - At the end of 30 June 2015, a total of approximately US$62 million in gross joint venture expenditures has been invested in the Grieve project. Although the amount of expenditure to the joint account is currently being disputed, Elk expects that these funds were fully expended by the date of this financial report.

During 2014-2015 financial year, JV expenditure on the Grieve project as reported by Denbury was US$15.975 million, of which US$5.591 million was attributable to Elk's 35% working interest. The majority of these expenditures were for CO2 purchases and water injection. Elk's share of expenditures on CO2 purchases, water injection costs and operation of the field was funded from the pre-agreed loan from Denbury to Elk per their Participation and Development Agreement. At the end of the financial year, the Denbury loan had reached the limit of US$12,000,000 (A$15,676,030 at the forex rate of US$0.7655 per A$1.00 on June 30). The loan and accrued interest is to be repaid from Elk's share of initial oil production.

Capital expenditures for the first half of 2015 were substantially below what was originally forecast by the operator. These expenditure were lower due to Denbury's company-wide spending reductions related to the fall in oil price in late CY2014 and early CY2015. As previously reported by Elk at the November 2014 Annual General Meeting, this overall reduction in capital expenditures by Denbury impacted the Grieve project schedule during the 2014-2015 financial year.

Reserves & Resources - In December 2014, Elk engaged Pressler Petroleum Consultants, Inc., an independent petroleum engineering firm located in Montgomery, Texas, to prepare an updated reserve report for Elk Petroleum for

2

the Grieve CO EOR project1. Elk requested Pressler to provide updated reserve estimates for 2P and 3P Reserves cases as well as any Contingent Resources for the project. Pressler provided Reserves and Resources estimates that are compliant with the SPE-PRMS2rules and which also meet the latest ASX/JORC rules.

The Reserve and Contingent Resource scenarios provided by Pressler are described below:

2P - Gross Reserves of 12.0 million barrels, which is the historical estimate reported by Denbury for Grieve as published in Investor Relations materials. This estimate of 2P reserves assumes the operator's current plan to purchase 60 BCF of CO2 for the project, and that 18% of an assumed original-oil-in-place (OOIP) of 68 million barrels of oil will be recovered. The 18% is reflective of a close analogue in the same geological environment as Grieve.

3P - Gross Reserves of 16.1 million barrels, which assumes a recovery of nearly 24% of the OOIP, which is considered possible due to the better quality of the Grieve reservoir versus the 2P analogue, but this estimate is still based on purchasing only 60 BCF of CO2 for the project.

3C - Gross Contingent Resources of 16.3 million barrels, which again assumes a recovery factor of 24% of OOIP, but assumes an increased amount of CO2 will be injected into the reservoir early in the life of the flood, with a total of 100 BCF of CO2 purchased for the project, resulting in an acceleration of the oil production and improved project economics. This case is contingent upon the operator utilizing more than the 60 BCF assumed for the 2P and 3P cases; this scenario is therefore classified as a 'contingent resource' case.

Under the SPE-PRMS guidelines, reserves are booked at the end of the year based on the average price of oil for the year, which in 2014 was US$94.99 for the West Texas Intermediate (WTI) benchmark. The resulting estimates for 2P, 3P & 3C Forecast Net Revenue (FNR)3values were US$41.1 million, $US90.1 million, and US$100.9 million, respectively, and as reported in the ASX release dated 29 January 2015. These values are expressed on a net Elk

basis equal to 28.72% reflecting adjustment of Elk's 35% working interest for the approximate 18% net royalty interests held by third parties, including state and federal royalties.

Joint Venture Dispute & Sale Process - Elk's wholly owned US subsidiary, Elk Petroleum, Inc., filed a civil lawsuit in the Wyoming Federal Court on 15 May 2015 against Denbury Onshore, LLC (DOLC), a wholly-owned subsidiary of Denbury Resources, Inc., the ultimate publicly listed parent company. The lawsuit asserted several breaches of the agreements between Elk Petroleum, Inc. and DOLC, including the Participation and Development Agreement (PDA) signed on 6 May 2011 that provides for the development and operation of the Grieve CO2 EOR project near Casper in Wyoming, USA, as reported in the 18 May 2015 ASX release. DOLC is both a joint venture participant in and operator of the Grieve project. On 15 July 2015 Elk reached an agreement with DOLC to dismiss the lawsuit and to pursue alternative commercial arrangements.

In the agreement to dismiss the lawsuit, DOLC and Elk Petroleum, Inc. (the 'Parties') agreed to attempt good faith negotiations for the sale of all of DOLC's interest in the Grieve project. The Parties agreed to a negotiation period that extends from the date of the agreement until 1 November 2015, or until viable and productive negotiations cease. Until the negotiation period has ended, DOLC may not institute proceedings for breach of the PDA and related agreements ('Grieve Agreements'), foreclosure under the Grieve Agreements, or for any cause of action or remedy related to the Grieve Agreements or transactions contemplated thereby, and Elk may not refile the lawsuit against DOLC, or commence litigation concerning the same matters set forth in its lawsuit against DOLC.

DOLC agreed to meet with third parties and consultants involved in the potential sale of its interests and present technical overviews of the Grieve CO2 EOR Project during the period August 1 to September 30, 2015. DOLC will continue to increase the reservoir pressure in the Grieve Unit by the injection of water and/or CO2 during the negotiation period. Elk and Denbury agreed to a suspension of the requirement to pay any JV costs during the negotiation period for the sale of Denbury's interest in the Grieve project, as described in the ASX announcement dated 16 July 2015.

1 See ASX announcement released on 29 January 2015

2 Society of Petroleum Engineers - Petroleum Resources Management System

3 Forecast Net Revenue (FNR) is equivalent to Net Present Value (PV); the FNRs are based on a 10% discount rate

The sale of DOLC's interest in the Grieve project could occur in one of three ways: (1) Elk arranges a buyout of DOLC's interest in the Grieve CO2 EOR Project with third party financing, and becomes the operator of the project, (2) DOLC sells its interest to a third party that becomes the new operator of the Grieve CO2 EOR Project, and Elk Petroleum retains its non-operated interest in the Grieve project with a new joint interest agreement and financing arrangement, or

1. DOLC and Elk both sell their interest in the Grieve CO2 EOR Project to a third party. Elk is seeking interested parties to explore each of these three potential transactions. Any sale will need to be mutually agreeable to both parties.

   
   

   Grieve Oil Pipeline - Elk currently holds a 100% interest in the pipeline through its subsidiary Grieve Pipeline, LLC. The pipeline runs from the Grieve CO2 EOR project approximately 32 miles to points of sale in Casper, Wyoming. The pipeline will be used to transport Elk's share of oil production from the Grieve CO2 EOR project. Elk expects Denbury will also use this pipeline to transport Denbury's share of Grieve oil to Casper but Denbury has yet to enter a transportation agreement with Elk. Expenditures on the Grieve oil pipeline were US$30,289 during the reporting period for maintenance costs. During the period, Elk pursued a number of efforts to monetize the pipeline and is seriously considering one of these offers at the time of this report (see Asset Sales Process below).

   
   

   Singleton Unit CO2 EOR Project

   
   

   Elk owns a 100% working interest in and operates the Singleton Unit, which contains the Singleton Oil Field. The company considers the Singleton Oil Field a potentially suitable CO2 EOR project. Elk acquired a 100% working interest in the Singleton Unit in Nebraska and became the operator of the unit effective 1 May 2014. The Singleton Unit was acquired as the basis for a future CO2 EOR project for Elk to implement after the Grieve CO2 EOR project generates free operating cash flow, or sooner if alternative funding can be arranged for the project. A contract for the CO2 supply was secured at the end of 2013 with Bridgeport Ethanol LLC for the start of CO2 purchases at the end of 2016.

   
   

   Field Development Activities - Water injection continued at Elk's 100% owned Singleton Unit in Nebraska. This work was part of the company's plan to commence a CO2 EOR project at this oil field as well as establish early oil production while development planning proceeds.

   
   

   During the reporting period, Elk re-entered the Singleton Unit 5 well, in order to condition the well for fracture stimulation. A casing corrosion problem was discovered when pulling the casing, which made the well unsuitable for a re-completion, and the well was plugged and abandoned. Early testing indicated the well bore in Singleton Unit 5 was 100% full of oil with no water; this oil occurrence was very encouraging in that a section of tighter sand not previously produced in any material way could hold substantial upside potential for future oil recovery from conventional development with fracture stimulation.

   
   

   Project Expenditures - Expenditures for the Singleton Unit working interest expenses through the end of the fiscal year were US$71,490 and the cost of the CO2 contract, lease option on a 5-acre parcel adjacent to the Bridgeport Ethanol plant, CO2 pipeline right-of-way acquisition costs and CO2 pre-purchases totaled US$107,755 during the fiscal year. The initial screening of the Singleton Unit indicates that the property is an excellent candidate for a CO2 flood, and is capable of producing 2 to 4 million barrels of oil as a CO2 project.

   
   

   Reserves & Resources - Elk has estimated 2C resources of 3 million bls which is in the middle of the above reference range. The 3C resource estimate is 4 million bls.

   Asset Sales Process

   
   

   In June 2014, the company announced a sale process for all or part of its Wyoming assets. The following summaries of the results of the sale process are an excerpt from a selection of Elk's ASX releases regarding the sale process.

   
   

   Ash Creek Sale - The company came to the view that the sale of the Ash Creek project should be undertaken as the planned chemical flood was not aligned with the Elk's focus on developing CO2 EOR projects. On 23 September 2014, the company concluded the sale of the Ash Creek Oil Field. The final sale price was US$1,700,000 (A$1,807,479) net of disposal costs. Elk has applied US$587,286 of the sales proceeds to pay off loans with First Interstate Bank of Wyoming that were secured by the Ash Creek Oil Field and the Grieve CO2 EOR project. Elk has no further indebtedness to First Interstate Bank after paying off these loans. Elk incurred in the prior 2013-2014 financial statements a book impairment of US$1,928,945 as result of this then impending sale completion.

   
   

   Grieve CO2 EOR project - At the formal closing of the Asset Sales bid period in August 2014, the company received

   several serious offers for its 35% working interest in the Grieve CO2 EOR project and Elk's Grieve Oil Pipeline. Initial offers were below Elk's expectations and counter offers were made to a number of parties. Following further discussions and considerations, these negotiations were terminated by September 2014 for reasons that ranged from not being able to close the value gap or, where this appeared possible, the bidder came to a view it would not be able to gain a subsequent increase in project working interest after the purchase from Elk and/or increased influence on the JV operations. The company therefore decided at that time to retain its interest in the Grieve CO2 EOR project, as announced in the September 2014 quarterly report and the 15 September 2014 ASX release.

   
   

   Grieve Oil Pipeline - The company received a firm offer on 18 August 2014 for the Grieve Oil Pipeline after the initial bid deadline of 1 August 2014. Elk signed a Letter of Intent (LOI) to sell the Grieve Oil Pipeline on 22 December 2014. A proposed Asset Purchase Agreement was received from the buyer on 24 July 2015. This pipeline offer involves an up-front payment and a series of performance payments through 2019. The total value of the potential payments is US$5.5 million of which about half would be received up-front. The offer is conditional upon the buyer entering a transportation agreement whereby the new pipeline owner would transport Elk's share of Grieve oil for a tariff that the parties have settled. The company is seriously considering acceptance of this offer, conditional upon a successful completion of an Asset Purchase Agreement.

   
   

   Other Matters

   
   

   Dispute with Crow Tribe - In March 2014, Elk filed a Complaint seeking Declaratory Relief in a Montana permit dispute with the Crow Tribe. This matter, after being pursued through a number of judicial bodies established to deal with such matters through the Bureau of Indian Affairs will now be heard at Elk's request by a US District Court in Montana. The Crow Tribe filed an Answer and Counterclaim to Elk's Complaint for Declaratory Relief in February 2015 and Elk's attorney has responded to this Counterclaim. Elk believes it is highly unlikely the Court will address this matter in 2015 and it could take considerably longer before it hears Elk's complaint and request for relief from the Crow Tribe's claim, which Elk rejects. This matter and Elk's rejection of this claim has been noted in Elk's accounts over a number of years.

   
   

   Review of Financial Performance

   
   

   For the 2014-2015 financial year, the group incurred a loss of $3,645,970 after providing for income tax (2014:

   $7,346,965).

   
   

   For reference, in 2014, a major share of that year's loss was attributable to non-recurring and one-off charges in relation Ash Creek and the sale of this asset. These Ash Creek charges included an increased annual amortisation and depreciation charge over the fiscal year ($973,352), and a large impairment at year-end due to the sale of the property ($2,060,178) since the sale value was less than Elk's carrying value for Ash Creek. Neither of these charges occurred in the accounts for 2014/15. In addition, the foreign currency transaction for the year was a net gain of exchange rates of $892,763 (2014: loss of $219,301).

   
   

   The other cost movements contributing to the 2014-15 result included:

   
   

   • An increase of $153,057 in professional and corporate services, due to increased costs relating to the proposed Metgasco merger and the new convertible note facility executed in April 2015;

     
     

   • A decrease of $241,070 (or 41% from 2014) in administrative costs;

     
     

   • Decreased costs of $435,557 for director and employee costs, primarily due to removal of executive director expenses from 2014 reflecting the costs of Robert Cook and Neale Taylor acting as executives in the US on a temporary basis and a transition overlap with the incoming American executives;

     
     

   • Increased finance and interest charges of $145,180 through a full year and increase in borrowings from January 2014;

     
     

   • Reductions in other expenses, including lower share based payment expenses and retired lease costs.

Revenue was very low since Ash Creek development work was suspended in 2014 and then sold on 23 September 2014. Revenue from Ash Creek was not sufficient to cover the direct operating costs, overheads and other expenses attributable to the property through to the sale settlement date, with the operating loss for Ash Creek being $232,812.

Total development expenditures for the period was $200,337 (2014: A$390,927). The 2014 expenditures related to

work for the Singleton Unit acquisition and the Bridgeport Ethanol pipeline easements. Cash at the end of the period was $1,567,344 (2014: $403,258).

Rights issue proposed to be issued after 30 June 2015 for FY 2015 year

In 2014, shareholders re-approved for a further three years, the EIR & NEDA Plans. The company intends shortly to grant 3,400,000 performance rights and 150,000 retention rights to employees and advisers. In addition the company notes that it plans to allot 300,000 performance rights and 150,000 retention rights to the current non-executive directors, subject to shareholder approval at the 2015 Annual General Meeting for rights to be granted to new directors Mr. Krause and Mr. Hargreaves. All of these rights will be effective from 1 July 2015 and will be assessed over criteria in line with the EIR & NEDA Plans. Further details will be provided in due course.

The current total number of currently outstanding rights issued over the last three years (2012 - 2014) under these plans (including the proposed allotment to Employees, Consultants and Directors noted above) is 11,151,425. This total percentage is within both the 6% guideline cap established by the company to apply over a three year period and the regulatory maximum cap of 5% which allows for certain exemptions of separately approved grants to Directors, consultants and officers. In deciding on the level of 2015 grants, the total level of grants under the policy meet the company's annual guideline cap of granting in any given year no more than the equivalent of 2% of the total number of issued shares. Meeting the 2% cap required a materially scaled down 2015 allocation of rights to that which would be determined under the plan rules normally.

The proposed performance rights to be granted in 2015 will have differing performance hurdles and fall into three equal tranches: increases in enterprise value will be used as the performance hurdles for tranches one and two, which will be measured over 1 and 2 years respectively, and an Absolute Shareholder Total Return (ATSR), or essentially increase in share price, hurdle for tranche three. In relation to the share price hurdle, the performance at the end of three years will determine increasing levels of rights to be converted to shares; this share price hurdle is unchanged from those previously published and requires approximately a 100% increase in share price over 3 years for the maximum possible 100% vesting. The benchmark price for rights to be granted in 2015 will be $0.0844, which is the 20 day volume weighted share price up to and including the 30 August 2015, rather than 30 June 2015 which produced a significantly lower price hurdle and below prices at the time the grants were assessed. Full details of the enterprise value hurdles will be provided in due course upon finalisation of the proposed allotments.

In addition, it is noted that the 2015 Annual General Meeting will also consider approval of the allotment of securities to Mr. Lingo, further to his executive employment agreement as announced previously. These allotments are outside those referenced in the above paragraphs; Mr. Lingo will not receive any rights under the existing EIR Plan as proposed above.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the consolidated entity during the financial year that have not been referenced in the preceding or following commentary.

Business strategy

Elk Petroleum's business is to create shareholder value through the redevelopment of existing oil fields through the application of well-established and proven secondary or improved oil recovery (IOR) and tertiary or enhanced oil recovery (EOR) techniques to further extend commercial production from these existing oil accumulations.

To date, Elk's principal activity has been the redevelopment of the Grieve Oil Field as a CO2 EOR project. Elk is also evaluating the development of industrial sources of CO2 to provide the basis for the company to pursue CO2 EOR projects in well-established, maturing oil basins that are currently near the end of the primary and secondary recovery stages. The primary focus of these activities has been the evaluation of the Singleton Unit redevelopment utilizing industrial CO2 sourced from CO2 emissions generated from the production of corn ethanol.

The company may also engage in additional primary oil production activities in advance of undertaking IOR or EOR field redevelopment projects. Similarly the company may also seek to undertake gas exploration, appraisal and

development activities to procure natural sources of CO2 to compliment the company's CO2 EOR development activities.

Prospects for future financial years

Elk's new Managing Director and CEO brings a new set of relationships and experiences that Elk looks to utilize in revising its business strategy and to create substantial shareholder value as Australia's only oil and gas company focused on enhanced oil recovery. The main drivers of the company's future financial performance are:

• The company's ability to successfully complete the Grieve Oil Field redevelopment as a CO2 EOR project;

  
  

• The timing of first oil production at the Grieve CO2 EOR project and the levels of early oil production;

  
  

• The company's ability to secure flexible, alternative financial arrangements for the funding of its share of development costs for the Grieve CO2 EOR project than are currently in place under the Grieve Joint Venture;

  
  

• The company's ability to generate significant operational free cash flow from the commencement of first oil production from the Grieve CO2 EOR project;

  
  

• The company's ability to resolve outstanding joint venture disputes with Denbury as the operator of the Grieve CO2 EOR project.

  
  

  Currently, the company believes that the best opportunity to achieve some or all of these above outcomes and generate superior future financial performance is through the company's ability to acquire all or part of Denbury's 65% working interest in the Grieve CO2 EOR Project and resume operatorship of the project and deliver first oil production in or before the first quarter of CY2017.

  
  

  Material business risks

  
  

  The main risks that the company faces that may have a material impact on its current or future financial or operational performance include but are not necessarily limited to:

  
  

• The timing of first oil production and early oil production levels from the Grieve CO2 EOR project;

  
  

• The ultimate recoverable oil achieved from the Grieve CO2 EOR project;

  
  

• The volume and rate of CO2 and water injection at the Grieve CO2 EOR project required before and after first oil production is achieved;

  
  

• The ultimate cost of CO2 needed for the Grieve CO2 EOR project;

  
  

• The ultimate oil sales price of oil achieved for production from the Grieve CO2 EOR project;

  
  

• The ability of the company to resolve outstanding disputes with the operator of the Grieve CO2 EOR project;

  
  

• The commercial viability of the Singleton Unit in Nebraska developed as either a conventional oil field or a CO2 EOR project; or

  
  

• The company's ability to secure appropriate funding for the business strategy set out above.

Other than as referred to in this report, further information as to likely developments in the operations of the consolidated entity and expected results of those operations would, in the opinion of the Directors, be speculative and prejudicial to the interests of the consolidated entity and its shareholders.