Annual Report

for the Year Ended 30 June 2015

Eden Energy Ltd

& Controlled Entities

ABN 58 109 200 900

CONTENTS

Highlights 3

Corporate Directory 4

Review of Operations 5

Directors' Report 8

Auditors' Independence Declaration 13

Consolidated Statement of Profit or Loss and Other Comprehensive Income 14

Consolidated Statement of Financial Position 15

Consolidated Statement of Changes in Equity 16

Consolidated Statement of Cash Flows 17

Notes to the Financial Statements 18

Directors' Declaration 33

Independent Auditor's Report 34

Additional Information for Listed Public Companies 36

HIGHLIGHTS DURING THE 2014-2015 FINANCIAL YEAR

EdenCreteTM /Carbon Nanotubes/ Carbon Nanofibres/ Hydrogen

• Eden completed its first three commercial projects with Metro Mix, a Denver based concrete company, using its EdenCreteTM concrete admixture in projects in Colorado.

• Various US trials of EdenCrete500 enriched concrete delivered improvements of up to:

  • 48% Increase in Tensile Strength in Concrete

  • 29% Increase in Compressive Strength in Concrete

  • 55% Reduction (Improvement) in Permeability in Concrete

  • 48% Reduction (Improvement) in the rate of Abrasion in Concrete

• A second US concrete company (a large national company) trialled EdenCreteTM in Colorado and indicated it intended to undertake further trials before perhaps moving to commercial projects.

• Initial discussions with the Department of Transport in the State of Georgia resulted in the preliminary steps being initiated for laboratory and field trials of EdenCreteTM to be undertaken in conjunction with the Georgia DOT. These trials took place in August 2015.

• Short term US production scale-up commenced at Eden Innovation's Colorado based facility, to attempt to satisfy the anticipated future increase in demand for EdenCreteTM.

• Large scale US production scale-up design commenced and assessment of possible site selection and financing options commenced.

• Eden has incorporated EdenCreteTM Industries Inc., a wholly owned US subsidiary, to be the vehicle to undertake the production and marketing of EdenCreteTM in the US.

• An Australian Research Council linkage research grant of A$300,000 into use of carbon nanotubes in concrete was awarded jointly to Eden and Monash University. This will be transferred to Deakin University, where Dr Frank Collins, the primary investigator has been appointed Professor of Infrastructure Materials at its Institute for Frontier Materials.

• The CNT enriched polymer and plastics project with the University of Queensland ('UQ') commenced during the year.

  
  

  Optiblend™ Dual Fuel

• Sales in the USA during the year of 45 units having an aggregate value of US$1,619,000 (A$1,944,000).

• Following a dramatic slump during the year due to the drop in oil prices and great slow-down in US shale oil and gas exploration, an increased level of market interest in Optiblend™ dual fuel systems in both USA and India started to emerge late in the year. It is hoped that this will translate into increased sales into the next year.

  
  

  UK Gas Assets

• The conditional Eden and UKOG formal merger agreement was terminated by Eden's UK joint venture partner following the failure of all the conditions to be satisfied. Since the end of the year negotiations in relation to the possible sale of Eden's UK gas assets have continued.

  
  

  Corporate

• Eden completed a non-renounceable pro-rata rights issue and after shortfall placements raised a total of A$1.98 million.

CORPORATE DIRECTORY

REVIEW OF OPERATIONS NANO-CARBON, HYDROGEN and HYTHANE™

Pyrolysis Project (Eden 100%)

Market progress- EdenCreteTM

During the year, Eden continued its efforts to develop suitable large scale commercial markets for its nano-carbon products. In particular, Eden continued to focus on developing commercial applications of EdenCreteTM, the Company's award-winning, carbon-enriched concrete additive technology that adds super strength and performance

to concrete but with very little extra weight.

CNT Enriched Concrete and Cement Projects

First Three Commercial EdenCreteTM Projects

Eden completed its first three commercial projects using EdenCreteTM concrete in Denver, Colorado, using concrete supplied by Metro Mix, a Colorado based concrete company with which Eden has been collaborating on the US trials for EdenCreteTM. The projects involved the construction of an aggregate bin, concrete retaining walls, steps and entrance area, and a path.

All three commercial projects in Colorado using EdenCreteTM, confirmed the high quality and workability of the EdenCreteTM concrete.

US Field of EdenCrete500

The first US projects using EdenCreteTM, were all undertaken with Metro Laboratory conducting tests on the concrete that was used in the trials.

The 56 day results from these laboratory tests produced encouraging results.

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After adjusting for the additional water introduced into the mix with the addition of the EdenCreteTM compared with 56 day old control cylinders of the same mix and age but which had no added EdenCreteTM the 56 day old concrete cylinders to which EdenCreteTM was added during production achieved the following improvements:

• 48% Increase in Tensile Strength after 56 days

• 29% Increase in Compressive Strength after 56 days

• 55% Reduction (Improvement) in Permeability after 56 days

These normalised results were obtained from 56 day old concrete made using a moderate strength concrete mix. Results obtained at 28 days and 56 days are the data used in defining most concrete performance standards.

Other US Trials of EdenCreteTM

In another laboratory test, an average 48% reduction (improvement) in the rate of wear from abrasion in concrete enriched with EdenCreteTM (compared with a control mix without the added EdenCreteTM) was achieved. This trial

was conducted in accordance with US concrete standards testing procedures and simulated an accelerated rate of wear due to abrasion.

This result is particularly encouraging in relation to the possible application of EdenCreteTM in concrete to be used in building and repairing concrete highways and bridges, as a reduced rate of wear from abrasion is considered likely to translate into longer life surfaces and may well result in lower overall costs over the life of the highway or bridge surface. If these results are repeated, they could be of great relevance to the trials conducted by the Georgia Department of Transport (see below).

A second US concrete company (a large national company) that trialled EdenCreteTM in Colorado indicated it intended to undertake further trials before perhaps moving to commercial projects.Consequentially, all companies that have now trialed EdenCreteTM (both in the US and in Australia), together with Eden itself, have all experienced encouraging increases of compressive and/or flexural or tensile strength, or reductions in permeability and/or the rate

of wear due to abrasion in laboratory trials.

Other concrete companies in the US, have also expressed interest in trialing EdenCreteTM.

Preliminary investigation into the suitability and possible commercial application of EdenCreteTM in pre-fabricated concrete products has also commenced and will be further explored. Subsequent to the end of the year, the first commercial sale of EdenCreteTM for these purposes was achieved.

State of Georgia Department of Transport

Initial discussions with the Department of Transport (DOT) in the State of Georgia also took place during the year and resulted in both laboratory and field trials of EdenCreteTM being undertaken in conjunction with the Georgia DOT in August 2015. In addition to many concrete highways and other concrete infrastructure, Georgia has in excess of

15,000 concrete bridges (ranging from small to large) and a recent audit indicated that over 4,000 were not suitable for repair and need to be replaced over the next 20 years, at an estimated annual cost of in excess of $300 million.

Successfully completing the field and laboratory trials is the prerequisite to being added to the approved product list of DOT. Of relevance, it may be possible for the approval by one State's DOT to be easily adopted by the DOT in another State.

Establishment of Large, Commercial Scale US EdenCreteTM Production Capacity

Discussions with various interested parties and relevant authorities commenced during the year, initially focusing on Georgia and related to both the possible location and financing in the US of Eden's first proposed large scale EdenCreteTM production facility. A final decision on the chosen location and method of financing is anticipated this

calendar year.

Large Scale US Production Scale-Up Design Commences

A specialist engineering group commenced work on the preliminary design work on a reactor capable of producing up to a targeted 250 tonnes of carbon nanotubes (CNT) per annum, which would be sufficient to produce enough

EdenCreteTM to supply approximately 1% of the annual US Interstate Highways' concrete demand (based on figures published in 2005 by the US Geological Survey). The anticipated time to design and build this reactor is likely to be between 15-18 months. A further expansion of production capability of CNT to up to 1,000 tonnes per annum is also being planned over the following two years. The size of these reactors may change as possible economies of scale and other relevant issues emerge during the design phase of this project.

Short Term US Production Scale-Up Underway

Steps were also commenced to increase the short term CNT production capacity at Eden Innovation's Colorado based facility, with a view to expanding this capacity as required to attempt to satisfy the targeted increase in demand for EdenCreteTM until the large scale facility comes on line.

New US Subsidiary Company Established

Eden incorporated a new, wholly owned US subsidiary named EdenCrete Industries Inc. that will be used as the vehicle to undertake the production and marketing of EdenCreteTM in the US.

CNT Enriched Polymers and Plastics Project in Australia

The CNT enriched polymer and plastics project with the University of Queensland ('UQ') which is partly funded by an ARC grant, commenced during the year. This project is aiming to develop reinforced polymer composites for potential automotive and aerospace applications.

UQ was awarded a $255,000 grant by the Australian Research Council in 2014 to partially fund this three year project. This collaboration project follows earlier preliminary encouraging results from the addition of Eden's carbon nanotubes into polypropylene.

CNT Enriched Polymers and Plastics Project in India

An Indian company undertook preliminary trials using Eden's nanotubes in polymer coatings, polymer composites, anti-corrosive coatings and antifouling coatings with encouraging results. Follow-up discussions regarding a possible collaboration were scheduled, but at the date of this report have not yet resulted in any agreement being reached.

Background

Eden has developed an efficient, commercially competitive pyrolysis process to produce carbon nanotube (CNT) and carbon nano-fibres. Eden remains optimistic that it will develop suitable markets for the nano-carbon products that it can produce. Eden currently has established production capabilities at its subsidiary in Colorado that enable it to produce up to 40 tonnes of nano-carbon per year from a feedstock of natural gas (methane).

Additionally, the only other major by-product from Eden's pyrolysis process is hydrogen, the real cost of which will be dependent upon the value of the carbon produced. The quantity of hydrogen produced will be 25% (by weight) of the quantity of carbon produced.

This hydrogen can be used either re-mixed with natural gas to create Hythane™ to fuel the pyrolysis reactor, generate electricity or captured and fed into the various hydrogen/Hythane™ applications that Eden has been developing, to try and accelerate the commercial rollout of these hydrogen applications based on the relatively low cost hydrogen. The current cost of hydrogen is one of the major limiting factors holding back a broader rollout of hydrogen and Hythane™. Encouragingly, the hydrogen produced using the Eden pyrolysis process will generate only a relatively very small amount of greenhouse gas as a by-product compared with most other currently available methods of hydrogen production, and in consequence it is projected that the hydrogen is likely to be both commercially competitive and environmentally preferable. However, as the quantity of CNT currently required is relatively small, in the early stages at least it is most likely that the hydrogen by-product will be used as fuel in the CNT production process thereby reducing both the CNT production costs and the CNT production Greenhouse Gas footprint.

REVIEW OF OPERATIONS OPTIBLEND™ DUAL FUEL SYSTEM (EDEN 100%)

US OptiBlend™ Progress

Eden Innovations (formerly Hythane Company), the wholly owned US subsidiary of Eden, sold 45 OptiBlendTM dual fuel system units totalling US$1,600,000 (A$1,947,000) during the year.

A significant fall in the price of oil during the year led to a severe decline in US OptiBlend™ sales. If and when global oil prices rise, a growth of sales of OptiBlend™ into the US oil and gas exploration and production markets is anticipated. It is also hoped that the oil and gas markets will be supplemented by demand from prime power markets such as agriculture (for uses such as powering irrigation pumps) and industrial plants, with additional requirements in backup power for hospitals and data centres. Additionally, expansion in suitable overseas markets is also anticipated in due course, particularly in India.

During the latter part of the year, a modest increased level of market interest in Optiblend™ dual fuel systems in both USA and India started to emerge. It is hoped this will translate into increased sales in the coming year.

Eden Innovations is continuing to work on trying to establish a number of partnerships to increase its bi/dual fuel offerings. These proposed partnerships include work with various OEMs to become their default supplier and/or supplier of private labelled OptiBlend™ technology.

India Optiblend™ Progress

During the year, Eden Energy India received no new orders for Optiblend™ systems in India, but tendered on a reasonably substantial opportunity to supply dual fuel to the emerging Indian shale gas exploration market. However, an increased level of interest, particularly from an emerging Indian shale gas exploration industry, is emerging and is hoped will translate into sales in the coming year.

Optiblend™ Background

Eden has developed an efficient dual fuel system that is capable of operating on diesel engines and displacing up to 70% of the diesel fuel with natural gas. If Hythane™ fuel (hydrogen enriched natural gas) is used in place of natural gas, the displacement of diesel fuel could be as high as 80%. The use of the natural gas will greatly reduce greenhouse gas emissions and, in places where natural gas is cheaper than diesel, will also reduce fuel costs. It has significant market potential particularly in the diesel powered generator set ('genset') market.

As a result of the increase in shale gas recovery in USA, the lower priced natural gas has resulted in a large market in USA for the conversion of these diesel engines to operate on a dual-fuel system of both natural gas and diesel is anticipated. Depending upon the size of the engine and the number of hours per day that it operates, payback times for the conversions are mostly a lot less than 12 months, so the cost is minimal compared to the replacement cost of a natural gas generator.

Hythane™ Fuel Projects

Indian Hythane Bus Demonstration Projects

No progress was made during the year on any of the potential Indian Hythane™ projects. Whilst Eden remains hopeful that these projects may ultimately proceed, particularly if in the longer term, Eden can utilise low cost hydrogen produced as a by-product from its pyrolysis project to produce carbon nanotubes, at present these projects are looking unlikely to occur.

UK GAS PROJECT

The formal conditional merger agreement with its existing UK gas and petroleum Joint Venture partners was terminated during the year. However, ongoing discussions with our UK JV partner related to a possible merger or sale on some basis or other are continuing in difficult market conditions.

The UK Gas Assets

The UK Gas Assets, held by Eden's wholly owned UK subsidiary, comprise Eden's 50% joint venture interests in 9 Petroleum and Development Licences (PEDLs) in England and South Wales. It is possible that some of these licences may be relinquished in light of the current difficult operating conditions and the political uncertainty that may arise if the UK Government devolves power over Welsh PEDLs to the Welsh Authority as foreshadowed.

CORPORATE

Rights issue

Eden completed a non-renounceable pro-rata rights issue and after shortfall placements raised a total of A$1.98 million.

REMUNERATION REPORT (AUDITED)

This report details the nature and amount of remuneration for each director of Eden Energy Limited, and for the executives receiving the highest remuneration.

Remuneration policy

The remuneration policy of Eden Energy Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated Group's financial results. The board of Eden Energy Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated group, as well as create goal congruence between directors, executives and shareholders.

The board's policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is as follows:

• All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and options.

Executives are also entitled to participate in the employee share and option arrangements.

The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9.5%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to directors and executives is valued at the cost to the Company and expensed. Shares issued to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology. The Group does not have a policy on directors hedging their shares.

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the consolidated group. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the Company and are able to participate in the employee option plan.

Performance-based remuneration

No performance based remuneration was paid during the year.

Key Management Personnel Remuneration Policy

The Board's policy for determining the nature and amount of remuneration of management for the Group is as follows:

The remuneration structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued to date of retirement. Any options not exercised before or on the date of termination lapse.

Key Management Personnel Remuneration

ment Benefits

Term Benefits

Benefit s

Related

Salary and Fees

Cash profit share

Non- cash benefit

Super- annuation

Other Other Equity Options

2015

$ $ $ $ $ $ $ $ %

Gregory H Solomon 172,500 - - 16,387 - - - - 188,887 -

Douglas H Solomon 36,000 - - 3,420 - - - - 39,420 - Guy T Le Page 36,000 - - 3,420 - - - - 39,420 -

Richard J Beresford 36,000 - - 3,420 - - - - 39,420 - Roger W Marmaro 347,808 - 27,602 14,976 - - - - 390,386 -

Aaron P Gates (a) - - - - - - - - -

628,308 - 27,602 41,623 - - - - 697,533 -

DIRECTORS' REPORT

Key Management Personnel Remuneration continued

ment Benefits

Term Benefits

Benefits

Related

Salary and Fees

Cash profit share

Non- cash benefit

Super- annuation

Other Other Equity Options

$ $ $ $ $ $ $ $ %

1. This officer is provided by Princebrook Pty Ltd (a company in which Mr Gregory H Solomon and Mr Douglas H Solomon have an interest) under the Management services Agreement with the Company. During the year the Company paid $194,670 (2014: $194,670) to Princebrook Pty Ltd for management services.

2. The appointment of Roger Marmaro, the President of Eden Innovations in the USA, may be terminated by giving not less than two months' written notice.

The Options expiring on 20 November 2015 are all held, pursuant to the Company's Employee Share Option Plan, by overseas employees or directors of subsidiaries of the Company. No person entitled to exercise the option has any right by virtue of the option to participate in any share issue of any other body corporate.