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energy

Financial Report 2015

For the period 1July 2014 to 31 December 2015.

Lion Energy Limited

ABN 51000 753 640

CORPORATE DIRECTORY

This financial report covers both Lion Energy Limited as an individual entity and the consolidated entity comprising Lion Energy Limited and its subsidiaries. The Group's presentation currency is United States Dollars (US$). The functional currency of Lion Energy and all other controlled entities of Lion Energy Limited is United States Dollars (US$). A description of the Group's operations and of its principal activities is included in the review of operations and activities in the directors' report. The directors' report is not part of the financial report.

The directors of Lion Energy Limited A.C.N. 000 753 640 ("Parent Entity" or "Company" or "Lion") present their report including the consolidated financial report of the Company and its controlled entities ("Consolidated Entity") for the 18 month period ended 31 December 2015. The Company is a listed public company limited by shares, incorporated and domiciled in Australia.

As announced on 4 June 2015 Lion Energy Limited had to change its financial year to 1 January 2015 to 31 December 2015 to be in line with its majority shareholder Risco Energy Pte Ltd as required by the Singapore Companies Act.

DIRECTORS

The names of the directors of the Company in office at any time during or since the financial period and up to the date of this financial report are as follows. Directors were in office for the entire period unless otherwise stated.

Russell Brimage William (Kim) Morrison Stuart B. Smith Thomas Soulsby Christopher Newton

PRINCIPAL ACTIVITIES

The principal activities of the Company during the period were oil & gas exploration, development and production and investment in the oil & gas industry.

There were no significant changes in the nature of the principal activities during the financial period.

OPERATING RESULTS

The operating and comprehensive loss for the Consolidated Entity, after income tax amounted to

$835,963 (2014: $1,113,449) for the 18 month period ended 31 December 2015.

DIVIDENDS

No dividends have been paid or declared since the start of the financial period by the Company.

The directors have recommended that no dividend be paid by the Company in respect of the period ended 31 December 2015.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS AND REVIEW OF OPERATIONS

The following significant changes in the state of affairs of the Consolidated Entity occurred during the financial period:

SHAREHOLDING CHANGES

On 16 and 18 July 2014 respectively, Tower Energy Indonesia Ltd (Tower) and Risco Energy Unconventional Pte Ltd (REU) announced that Tower had transferred 7,842,215 shares to REU pursuant to a Deed of Settlement. As a result, Tower's interest in the company was reduced from 14.36% to 6.11% and REU's beneficial interest increased from 47.03% to 55.28% as at the date of the transfer.

UNMARKETABLE PARCEL SALE FACILITY

On 21 July 2014 the Company announced that it had instituted the sale of ordinary shares for holders of unmarketable parcels of the Company's shares. The ASX Listing Rules define an unmarketable parcel as those with a market value of less than $500. As at 7.00pm (AEST) on 16 July 2014 (Record Date), an unmarketable parcel of shares was any shareholding of 2777 ordinary shares or less, based on the closing price of $0.18 on the Record Date (Closing Price), representing 589,512 ordinary shares, held by 1574 shareholders at that date ("Minority Members").

As at 7pm (AEST) on 4 September 2014 (Retention Date), The Company received retention requests from 193 shareholders representing 91,715 shares. The shares from the remaining 1,371 shareholders with unmarketable parcels totalling 490,263 shares will be sold by Lion in due course at the 30 day VWAP price of 19.88 cents per share, for a total $97,464.28. Funds will distributed to the 1,371 shareholders with unmarketable parcels who did not elect to retain their shares.

SHARE BASED COMPENSATION

On 19 August 2014, Lion announced that it had issued 214,096 ordinary shares to members of the advisory panel per the terms of their engagement, and also to some key consultants under separate agreements.

On 25 February 2015, Lion announced that it had issued 795,769 ordinary shares to staff, consultants and director Stuart Smith.

On 15 October 2015, Lion announced that it had issued 158,135 ordinary shares to members of the advisory panel per the terms of their engagement, and also to some key consultants under separate agreements.

Apart from conserving cash, Lion believes that including a share component builds a greater level of alignment with shareholders than usually seen with advisors/consultants.

PRODUCTION PERFORMANCE

The company has been able to grow its production significantly over the past 18 months in the Seram (Non--Bula) PSC, where Lion holds a 2.5% interest. During the reporting period from 1 July 2014 to 31 December 2015 from the Oseil oilfield and surrounding structures was 1,768,651 bbl of crude oil at an average daily rate of 3230 barrels of oil per day "bopd" (81 bopd net to Lion). This compares to an average daily rate of 2,589 bopd (64.7 bopd net to Lion) for 1 July 2013 to 30 June 2014 reporting period.

During the reporting period the Seram joint venture secured all external approvals for a third phase of development drilling on the Oseil Field (referred to by the regulators as a Plan of Further Development or POFD), with up to 10 wells within the Oseil-2 field area. The Phase 3 POFD was formally approved by the Indonesian regulatory body, SKK Migas, on 5 May 2015. Six of the ten wells approved have already been drilled as at December 31 2015. During the reporting period the Seram joint venture successfully drilled the Oseil-27, Oseil-28 and Oseil-22 development wells.