Quarterly Report for the Period Ended 31 December 2015

Highlights

Byron secured a multi-well farm out deal with Otto Energy Limited ("Otto") on Gulf of Mexico ("GOM") properties; Otto has committed to drill the SM 6

#2 well with an option to drill SM 71 #1 well, with drilling of SM 6 #2 well expected to commence in February 2016;

Byron announced a $A4.5 million equity placement to provide sufficient funding for Byron's share of SM 6 #2 and SM 71 #1 wells and a Share Purchase Plan enabling shareholders to participate on the same terms as placees;

Byron also announced a proposal for a debt to equity conversion, eliminating the cash call on the Company to repay the existing loans ($A700,000 and

$US612,500) due on 1 July 2016;

On December 31 2015, the Bureau of Safety and

Environmental Enforcement ("BSEE") granted Byron an extension of the SM 6 lease from December 28, 2015 through December 31, 2016 subject to a commitment to continue to progress development of SM 6;

Byron acquired an onshore/marshland lease from private landowners over approximately 2,400 contiguous acres (9.7 square kilometres) along the southern Louisiana Gulf Coast inboard of Byron's existing shallow water leases. This lease acquisition represents a significant addition to Byron's expanding position in the highly productive transitional zone comprising the northernmost shallow waters of the Federal Gulf Of Mexico Shelf, Louisiana State Waters, and onshore coastal Louisiana.

Byron progressed the necessary approvals for drilling of SM 6 #2 and SM 71 #1 wells.

Directors

Doug Battersby (Non-Executive Chairman) Maynard Smith (Chief Executive Officer) Prent Kallenberger (Chief Operating Officer) Charles Sands (Non-Executive Director) Paul Young (Non-Executive Director) William Sack (Executive Director)

Company Secretary and Chief Financial Officer

Nick Filipovic

Contact Details

Level 4, 480 Collins Street

Melbourne Vic 3000

Telephone: +61 3 8610 6583

Email: [email protected] Web:www.byronenergy.com.au

Level 4 480 Collins Street Melbourne VIC 3000 T: 03 8610 6583 F: 03 8610 6334 E: [email protected] W: byronenergy.com.au

ABN 88 113 436 141

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Corporate

Funding

Placement

On 30 December 2015, Byron Energy Limited ("Byron"or the"Company") (ASX:BYE) announced that commitments have been received to raise $A4.5 million through a placement ("Placement") of 29.9 million new shares.

The Placement consists of 29,928,333 fully paid new ordinary shares to be issued at A$0.15 per share to raise

$A4.5 million (before issue costs). The Placement shares comprise:-

an unconditional placement of 23,866,666 shares to raise approximately $A3.6 million (to be completed in January 2016) utilising the Company's existing Listing Rule 7.1 placement capacity, and

a conditional placement of 6,061,667 shares ("Conditional Placement") to raise approximately $A0.9 million comprising subscriptions from Byron directors (and their associates).

The Conditional Placement is subject to shareholder approval at an Extraordinary General Meeting ("EGM") of Byron's shareholders, expected to be held on 15 February 2016 and will therefore not use up any of the Company's existing Listing Rule 7.1 placement capacity.

Share Purchase Plan

The Company also announced a Share Purchase Plan ("SPP") to raise up to $A2.5 million. The SPP will allow shareholders who, at the record date of 7pm (Sydney time) on 29 December 2015, have a registered address in Australia or New Zealand, the opportunity to subscribe for a maximum of $A15,000 worth of ordinary shares in the Company at a subscription price of A$0.15 per share (being the issue price of the Placement). The SPP opened on 12 January 2016 and is scheduled to close on 29 January 2016, unless extended.

Conversion of Loans to Equity

Byron currently has outstanding loans of $A700,000 ("AUD Loans") and $US612,500 ("USD Loans") repayable on 1 July 2016. The loans are unsecured bearing interest at 10% per annum.

The AUD Loans are from entities associated with Doug Battersby ($A500,000) and Maynard Smith ($A200,000), both directors of the Company. Of the USD Loans, $US250,000 is from Charles Sands and $US37,500 from an entity associated with Prent Kallenberger, also both directors of the Company. The balance of the USD Loans of

$US325,000 is from several US based shareholders ("US Shareholder Lenders").

The Company requested and Messrs Battersby, Smith, Sands and Kallenberger agreed, that their existing loans to the Company be converted to shares in the Company, subject to shareholder approval. The conversion, subject to shareholder approval, will be at A$0.15 per share, the same price as the issue price under the Placement. The Company has convened a general meeting of shareholders on 15 February 2016 to seek shareholder approval for the conversion of the loans to equity, under ASX Listing Rule 10.11. Assuming shareholders approve the proposal, which would reduce the cash call on the Company on 1 July 2016 by approximately $US0.8 million, the debt to equity conversion will result in the issue of approximately 7.3 million new shares to interests associated with Messrs Battersby, Smith, Sands and Kallenberger, based on an issue price of A$0.15 per share and AUD/USD exchange rate of $A1=$US0.72.

The proposed conversion of debt to equity by these directors is in addition to the cash subscriptions proposed to be made by those directors under the Placement.

Level 4 480 Collins Street Melbourne VIC 3000 T: 03 8610 6583 F: 03 8610 6334 E: [email protected] W: byronenergy.com.au

ABN 88 113 436 141

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Corporate (Cont.)

The US Shareholder Lenders have also agreed to convert their loans to the Company of $US325,000 into shares in the Company, also at A$0.15 per share, to be completed at the same time as the conversion by Directors. This will result in an the issue of approximately 3.0 million new shares to the US Shareholder Lenders, based on an issue price of A$0.15 per share and AUD/USD exchange rate of $A1=$US0.72.

Issue of new Options

On 4 December 2015 Byron announced the proposed issue of 1.7 million unlisted options to Mr William ("Bill") Sack, Executive Director of the Company, exercisable at an exercise price of $A0.25 per Share on or after issue at any time on or before 30 September 2018, subject to shareholder approval, which will be sought at a general meeting of shareholders on 15 February 2016.

On 4 December 2015 Byron also announced the proposed issue of 250,000 unlisted options in the Company, to Mr Peter Love, an adviser to the Company, exercisable at an exercise price of $A0.25 per Share on or after issue at any time on or before 30 September 2018. The issue to Mr Love was completed on 11 December 2015.

Issued capital

As at 31 December 2015, Byron's issued capital comprised:-

Projects Update

Multi-well Farm Out Deal with Otto on GOM Properties

On 11 December 2015, Byron announced a multi-well farm out deal with Otto Energy Ltd. ("Otto") on certain Gulf Of Mexico properties, summarised as follows:-

Byron has entered into a multi-well staged farm-out agreement with Otto Energy Ltd. (ASX: OEL) that potentially injects $US 17.3 million in capital into three of Byron's existing projects.

This transaction accelerates Byron's drilling program in the GOM by partnering with a well-capitalised company and reduces Byron's capital requirements while Byron retains operatorship and leverages its GOM expertise.

Otto will earn a 50% working interest in Byron's SM 6 lease by paying a disproportionate 66.67% share of drilling costs of the SM 6 #2 well, plus reimbursing a portion of Byron's past costs. Otto will then have an option to earn a 50% working interest in Byron's SM 70/71 leases by paying a disproportionate 66.67% share of drilling costs of the SM 71 #1 well and reimbursing a portion of Byron's SM 70/71 past costs.

Ottowillalsohaveanoptiontoearna 45% workinginterestin Byron's Bivouac Peakleasesbypayingadisproportionate share of drilling costs of the first well on the leases and reimbursing a portion of Byron's past costs.

Byron will utilise a Hercules jack up rig , as previously announced, to drill one well at SM 6, followed by an optional well at SM 71 beginning in the March 2016 quarter.

Byron has also taken steps to place the SM 6 lease on a path to production by executing a Production Handling Agreement with the offset operator, Fieldwood Energy LLC, and has applied for the necessary approvals with BOEM to modify the existing SM 6 caisson with the goal of establishing initial production by end 2016/early 2017.

For further details refer to the ASX release of 11 December 2015.

Level 4 480 Collins Street Melbourne VIC 3000 T: 03 8610 6583 F: 03 8610 6334 E: [email protected] W: byronenergy.com.au

ABN 88 113 436 141

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Salt Dome Projects

At 31 December 2015, Byron holds acreage over four salt domes in the shallow waters of the GOM, comprising South Marsh Island 6, Eugene Island 63/76, South Marsh Island 70/71 and Grand Isle 63/72/73.

South Marsh Island Block 6

South Marsh Island Block 6 ("SM 6") is located offshore Louisiana, in the shallow waters of the GOM, 216km southwest of New Orleans in approximately 65 feet (20 metres) of water. Byron owns a 100% working interest and an 81.25% net revenue interest in the block.

SM 6 covers a portion of a salt dome that has previously produced 18.6 million barrels of oil and 37.1 bcf of gas from this block commencing in 1962. There is currently no production from SM 6.

As previously reported the SM 6 #1 BP 02 well:-

encountered two hydrocarbon bearing sands with combined net pay of 82 feet (25 metres) in the F40 Sand and several thin hydrocarbon bearing sands with combined net pay of 17 feet (5 metres) in the F30 Sand,

was cased and suspended inside a caisson in July 2014, and

was completed for future production in July 2015; the Hercules 205 drilling rig was used to re-enter the well and perforated the lower of the two hydrocarbon bearing sand lobes in the F40 Sand.

During the December quarter Byron filed a Development Operations Coordination Document ("DOCD") with the Bureau of Ocean Energy Management ("BOEM"). The DOCD is structured, to allow Byron to modify the existing SM 6 caisson and lay a flow line to the SM 10 "A" platform where hydrocarbons will be separated and transported to market for sale. Along with that DOCD application, Byron requested a Suspension of Production ("SOP") from the Bureau of Safety and Environmental Enforcement ("BSEE") for the SM 6 lease that will extend the lease term in order to give Byron time to design, install and hook up these new facilities. A key component of this process is a Production Handling Agreement between Byron and the offset operator at SM 10, Fieldwood Energy LLC ("Fieldwood").

On December 31 2015 BSEE granted Byron an SOP for SM 6 from December 28, 2015 through December 31, 2016, based on an activity schedule submitted by Byron. In accordance with the activity schedule, Byron will first conduct a Right of Way pipeline pre-lay survey in January 2016. The pipeline, when completed, would link SM 6 wells with the nearby Fieldwood operated host platform at SM 10, on the offset lease.

During the December quarter, Byron filed the Application for Permit to Drill ("APD") in relation to the SM 6 # 2 well. The APD is in the final stages of review by BSEE with final approval expected in late January 2016 in time to utilize the Hercules jack-up rig when it is released from its current obligation.

South Marsh Island 70/71 Salt Dome Project

South Marsh Island Blocks 70/71 ("SM 70/71") covers a portion of a large piercement salt dome which has previously produced 75 million barrels of oil from sands above 7,500 feet true vertical depth with production commencing in 1963. There is no current production from SM 70/71.

As previously reported the analysis of full wave inversion of 3D seismic data was completed and confirmed the hydrocarbon prospectivity in both J sand and D5 target sands. Mapping has detailed D5 analog production and stratigraphic components on the dome. Interpretation work is ongoing to optimise future drilling locations.

Level 4 480 Collins Street Melbourne VIC 3000 T: 03 8610 6583 F: 03 8610 6334 E: [email protected] W: byronenergy.com.au

ABN 88 113 436 141

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