Seram cash flow positive, upcoming drilling and strong cost control

Highlights

• Production averaged 4,008 bopd for the quarter

• Seram PSC cash flow positive with ~US$40,000 a month net

• 475,000 bbl lifting (11,875 bbl net) scheduled late July 2016

• SBA PSC drilling plans advanced to test Amanah Timur prospect

• Continuing cost reduction measures reducing administration overhead by 15%

  Lion Energy Limited ("Lion" or "Company") anticipates net returns of approximately US$40,000 per month from production entitlements at the Seram PSC. Combined with ongoing prudent cost reduction initiatives, this positions Lion well to manage cash resources with our budget including the drilling of an exciting oil prospect in SBA and allowing an active new business program.

  Average daily oil production from the Seram PSC was 4,008 bopd (95 bopd net to Lion) for the quarter, down from 4,211 bopd the previous quarter. Gross crude oil production for the quarter was 364,737 barrels (8,606 bbl net to Lion). Operating costs for the quarter equate to US$15.92 per barrel. Proceeds of US$254,776 from a crude oil lifting of 418,842 bbl completed on 29 March 2016 (Lion share 10,471 bbl) were received during the Quarter. A further lifting of 475,000 bbl is scheduled for late July 2016 (Lion share 11,875 bbl), with proceeds expected to be received late August 2016.

  In South Block A, PSC work has progressed on identifying low cost drilling options for the low risk Amanah Timur oil prospect planned to be drilled in Q4 2016. Cost of the drilling to Lion is included in the company's cash flow forecast.

  At the end of the quarter, the Company had cash of US$1.391mil, with a significant crude oil lifting entitlement (estimated at between US$350,000 to US$400,000) expected in late-August 2016.

  Lion's CEO, Kim Morrison, noted "We are seeing more positive sentiment in the sector and Lion is well placed to build on our position. Importantly, the Seram PSC is delivering positive cash flow with the cessation of development drilling and no exploration activity. Together with lower adminstration costs following further management remuneration reductions and reduction in joint venture operating costs, the company is conserving its cash reserves. On the activity front, the planned drilling of an attractive oil prospect in our South Block A PSC and good progress on our new business activities provides upside opportunity for shareholders."

  Lion at a glance

   ASX listed oil and gas E&P company focused on Indonesia, with two conventional PSC's.

   Net production of around 100bopd from the Seram PSC which also contains the Lofin gas/condensate field.

   An early mover in Indonesia's fledgling unconventional oil & gas industry.

   Leveraging synergies in conventional assets and access to both infrastructure and markets.

   Executive team and strategic investors with impressive track records for value creation in Indonesia.

  Contact

  Lion Energy Limited ABN 51 000 753 640 ASX Code: LIO

  7/295 Rokeby Road Subiaco

  WA 6008, Australia

  Post Box 512

  West Perth Business Centre WA 6872, Australia

  Tel +61 8 9211 1500 | Fax +61 8 9211 1501

  [email protected]

  www.lionenergy.com.au

  Directors & Officers

  Russell Brimage Executive Chairman Kim Morrison Chief Executive Officer Stuart B. Smith Executive Director Tom Soulsby Non-Executive Director Chris Newton Non-Executive Director Zane Lewis Company Secretary

  For more information contact

  Kim Morrison

  +61 404 490 964

  [email protected]

  Stuart Smith

  +65 9820 3889

  [email protected]

  Zane Lewis

  +61 400 007 900

  [email protected]

  Lion at a glance

• ASX listed oil and gas E&P company focused on Indonesia; two conventional PSC's.

• Net production of around 100bopd from the Seram PSC which also contains the Lofin gas/condensate field.

• An early mover in Indonesia's fledgling unconventional oil & gas industry.

• Leveraging synergies in conventional assets and access to both infrastructure and markets.

• Executive team and strategic investors with impressive track records for value creation in Indonesia.

Contact

Lion Energy Limited ABN 51 000 753 640 ASX Code: LIO

Suite 7

295 Rokeby Road

Subiaco WA 6008 Australia

Post Box 557

Subiaco WA 6904 Australia

Tel +61 8 9211 1500 | Fax +61 8 9211 1501

[email protected]

www.lionenergy.com.au

Directors & Officers

Russell Brimage Executive Chairman Kim Morrison Chief Executive Officer Stuart B. Smith Executive Director Tom Soulsby Non-Executive Director Chris Newton Non-Executive Director Zane Lewis Company Secretary

For more information contact

Kim Morrison

+61 404 490 964

[email protected]

Stuart Smith

+65 9820 3889

[email protected]

Zane Lewis

+61 400 007 900

[email protected]

Operations update (2Q-CY16)

Seram (Non-Bula) Block PSC

Lion, via its wholly owned subsidiary Lion International Investment Ltd, holds a 2.5% participating interest in the Seram (Non-Bula) Block PSC, located onshore Seram Island in eastern Indonesia. The major equity holder and operator of the joint venture is CITIC Seram Energy Ltd (51%). Other partners are KUFPEC (Indonesia) Ltd (30%) and Gulf Petroleum Investment (16.5%).

The block contains the Oseil oilfield and surrounding structures that have yielded cumulative crude oil production of 15,061,376 barrels since production started in January 2003 through to 30 June 2016.

As previously reported by Lion, in 2015 the Lofin-2 appraisal well confirmed a highly material gas discovery in the PSC and work is ongoing on development options for this resource.

The PSC expires end October 2019 and the joint venture is currently in discussions on strategy for securing a renewal of the PSC over the area.

Production and revenue

During the quarter, gross crude oil production from Oseil and surrounding oilfields was 364,737 barrels (8,606 bbl net to Lion). Daily production averaged 4,008 bopd (Lion's net working interest being 95 bopd, post government entitlement).

With the cessation of development drilling, field crude oil production peaked at just over 4,000 bopd. Natural decline will gradually reduce this rate with time.

During the quarter, a workover was completed on Oseil-28 and the service rig was mobilized late in the quarter to perform a workover on Oseil-26. Both workovers involved replacement of downhole electric submersible pumps.

Crude oil available for lifting at 30 June 2016 was

356,754 bbl following completion of the crude oil lifting on 29 March 2016 of 418,852 bbl.

Expenditures

South Block A PSC

Lion has a 35% interest in the South Block A PSC with other participants being RENCO Elang Energy Pte Ltd (51% interest and Operator) and PT Prosys Oil & Gas International (14%).

The underexplored block is centrally located in the prolific North Sumatra Basin and contains large structures with attractive gas and oil plays. The region has a strong demand, high priced gas market and a new open access pipeline connected to Medan extends through the PSC acreage.

Exploration Drilling

The joint venture has selected the Amanah Timur oil and gas prospect for the 2016 commitment well.

This will be a shallow, low-cost well testing a well defined anticline which has existing shallow oil reservoirs that produced approximately 200,000 barrels of oil in a period prior to WWII. The well will test this sequence and is also planned to test deeper reservoir within the objective late Miocene Keutapang section. It has near-term commercialisation potential with good infrastructure in close proximity. During the quarter the Operator reviewed drilling rig options with planned Q4 2016 spud timing and we expect the gross well cost to be approximately US$1million (Lion equity share US$0.35mm)

Prospective resources are shown in the table below and the prospect has a probability of success (POS2) of 46%.

1Prospective resources: the estimated quantities of petroleum that

may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

2POS: Probability of Success, the chance of encountering a flow hydrocarbons on production testing an exploration well on the prospect.

Expenditures

Further cost reductions to operating overheads were made by the Operator during the quarter including reduction of office rental and other costs by ~50% and reduced personnel costs. Cash calls paid during the quarter totalled US$26,191 net to Lion.

North Sumatra "Bohorok" Unconventional Joint Study

The unconventional joint study covering 4684km2

was awarded on 20 February 2015. The Lion joint study area is located to the south of the South Block A PSC in which Lion holds a 35% interest and is in close proximity to the first unconventional PSC in Indonesia awarded to PERTAMINA in 2013 (Sumbagut MNK PSC).

Lion holds a 55% interest and is Operator of the joint study with the partly overlapping conventional PSC holders (Bukit, New Zealand Oil and Gas and SBL) having 45% interest. The cooperation with conventional holders will allow the joint venture to capture significant synergies between conventional and unconventional exploration.

The North Sumatra Basin is one of the major onshore basins in the SE Asian region with over 25tcf of gas and over 1.3 billion barrels of oil and condensate discovered. Lion's evaluation recognises that key elements are in place for prospective unconventional (shale gas/oil and tight gas/oil) acreage.

Bohorok PSC and South Block A PSC- location map

The joint study, undertaken with Padjadjaran University in Bandung, was completed in February 2016 and highlighted the material potential within the joint study area with the key prospective intervals in Lower to Middle Miocene Belumai and Lower Baong formations. The timing of the release of the resultant PSC for tender will be dependent upon MIGAS, at which time Lion and its consortium members will have a right to match the highest offer for the block (if any).

Interest holders in the Bohorok unconventional joint study application are as follows: