Steady production and improving cash flow from Seram PSC

Highlights

• Production steady at approx. 4200 bopd, up 4% on previous quarter

• Seram PSC turning cash flow positive with suspension of development drilling

• Unconventional joint studies completed

  Lion Energy Limited ("Lion" or "Company") continues to have solid production from the Seram PSC and successfully completed our two unconventional joint studies in North and Central Sumatra. In our South Block A PSC cost reduction measures are being implemented and discussions are ongoing on the commitment well timing with the regulator.

  Average daily oil production from the Seram PSC increased 4% to 4211bopd (99bopd net to Lion) for the quarter, from 4042bopd the previous quarter, driven by successful drilling and completion of the past five development wells (Oseil- 21, 26, 27, 28 and 22). Gross crude oil production for the quarter was 383,186 barrels (9041bbl net to Lion). Operating cost for the quarter equate to US$15.27 per barrel. Proceeds of US$295,833 from a crude oil lifting of 425,123bbl completed on 22 December 2015 (Lion share 10,628bbl) were received during the Quarter. A further lifting of 418,842 was completed on 29 March 2016 (Lion share 10,471bbl) at a price of US$24.33/bbl. Proceeds of approximately $250,000 are expected to be received early May 2016.

  On the unconventional joint studies, the final meeting with the regulator was held on February 19th for both the "Bohorok Deep" and "Bengkalis" areas. Final reports were well received and the joint studies are now formally completed. The Government is reviewing options for including the joint studies in future unconventional gazettal rounds later in 2016 or 2017; at which point the Joint Study participant have the right to match the highest bid.

  In South Block A PSC cost reduction have been achived including lower office costs and the joint venture is working with the Indonesian regulator to ensure the most attractive well is drilled to satisfy the drilling commitment in the block. Lion has also updated our assessment of the South Block A PSC prospective resources which confirms the highly material potential of the top ranked prospects.

  At the end of the quarter the Company had cash of US$1.75mil (A$2.28mil).

  Reporting on the quarter Lion's CEO, Kim Morrison, noted "Lion continues make prudent progress on our key assets in the tough industry conditions. With suspension of development drilling activities, the Seram PSC is cash flow positive based on quarter end oil price and we are now working on the strategy for extending the PSC to allow the world-class Lofin gas/condensate field to be developed. The completion of two of unconventional joint studies is an important milestone and Lion continues to work on securing new opportunities."

  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, 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

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 (1Q-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 14,696,639 barrels since production started in January 2003 through to 31 December 2015.

As previously reported by Lion, in 2015 the Lofin-2

Seram (Non Bula) Block PSC - location map

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 383,186 barrels (9041bbl net to Lion). Daily production averaged 4211bopd (Lion's net working interest being 99bopd, post government entitlement).

The steady uptrend in production during 2015 has continued into 2016 with a positive result from the development well drilling at Oseil-22 (which came on line in January 2016), lifting field daily production above 4100bopd at quarter end.

During the quarter, workovers were performed on Oseil-2ST2 and Oseil-12. In addition, Oseil-1ST and Oseil-T1 were shut-in as they require workovers that cannot be justified at current oil prices.

Seram (Non Bula) Block - daily production per calendar month (bopd)

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

Jul-10

Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15

Nov-15

0

Crude oil available for lifting at 31 March 2016 was

zero following completion of the crude oil lifting on 29 March 2016 of 418,842bbl.

Expenditures

Oseil Oil Field

Phase 3 Development

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. 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 now been drilled.

During the quarter to joint venture determined not to proceed, at the present time, with the remaining four planned Phase 3 POFD wells due to the current

Oseil field overview

low oil price environment. This decision has a

positive impact on cash flow with the PSC being cash flow positive based on oil prices at quarter end.

The recently completed Oseil-22 development well was the sixth well in the POFD.

Oseil-22 Development Well

The Oseil-22 well was directionally drilled to target the Manusela fractured carbonate in the central eastern part of the faulted 4-way dip closure of the Oseil-2 up-thrown fault block

The well spudded on 18 November 2015 and the rig was released, post quarter end, on 12 January 2016. Excluding mobilization and rig up time, the well was drilled, completed and tested in 55 days, 31 days less than the well program projection.

Oseil-22 reached TD of 2332m MD (1864m TVD) in the Manusela limestone objective on 7 January 2015 and was completed with an ESP. Quarter end production from Oseil-22 was approximately 195 bopd (with no water) on a 12/64" choke with 578 psi flowing well head pressure.

The well was drilled approximately US$2.5mil under the budget projection of US$9.75mil and continues the efficiency drive by the operator that has resulted in drilling costs over the past six wells of the Phase 3 program being significantly below projections.

Oseil-2 field

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%).

South Block A PSC - location map

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 reviewed options for exploration drilling during the quarter with high ranked prospects being Amanah Timur and Jerneh. Discussions are ongoing with the Indonesian regulator to ensure the joint venture remains in good standing with respect to work program obligations and drilling the most commercially attractive well.

Portfolio Review

A summary prospective resources (Lion equity share) of the top 6 prospects in South Block A PSC is shown below.

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

Cash calls paid during the quarter totalled $16,913 net to Lion.