10 December 2015

Manager of Company Announcements ASX Limited

Level 6, 20 Bridge Street

SYDNEY NSW 2000

By E-Lodgement

NEW ACQUISITION SETS OTTO FOR ACTIVE HIGH IMPACT MULTI-WELL DRILLING IN 2016

HIGHLIGHTS:

• Otto secures staged farm-in for interests in a multi-asset portfolio onshore Louisiana and offshore Gulf of Mexico, United States, a prolific conventional oil and gas region

• Entry into 2 shallow water offshore leases and 1 onshore lease with potential for 3 high-impact, low cost/high chance of success wells in 2016

• Drilling to commence in Q1 2016 with rig under contract for first well. 2 contingent wells, first in Q1 2016, second in 2H 2016

• Joint Venture partner Byron Energy (Operator) is a proven Gulf of Mexico operator with a track record of success in the Gulf of Mexico region

• Acquisition sets path for Otto to return to production during 2017 in assets which are robust even when viewed against the current backdrop of low oil prices

OTTO AT A GLANCE

• ASX-listed oil and gas company with a strategy to grow an integrated petroleum business through high impact exploration

• Focused on conventional oil plays in proven petroleum provinces

• Formerly Operator of the producing Galoc oil field in the Philippines

  
  

  COMPANY OFFICERS

  John Jetter Chairman Matthew Allen MD & CEO Ian Macliver Director

  Ian Boserio Director

  Craig Hasson CFO

  Neil Hackett Company Secretary

  • Otto's pipeline of activity increased with 6+ wells to be drilled across the Otto portfolio in the coming 18 months; all of which can be funded from Otto's strong cash position (circa US$34 million)

Otto Energy Ltd (ASX: OEL) ('Otto' or the 'Company') is pleased to announce that it has entered into an agreement with Byron Energy Limited (ASX:BYE) ('Byron') for the staged farm-in for participating interests in to up to 3 lease areas held by Byron in the Louisiana Gulf of Mexico area (see Transaction Terms below).

The transaction with Byron will provide Otto with exposure to a portfolio of low cost, high chance of success, conventional oil and gas opportunities located both onshore and offshore US in a prolific oil and gas province surrounded by existing infrastructure.

Otto's Managing Director, Matthew Allen said: 'We are very pleased to have entered into this transaction with Byron Energy. The assets represent a low cost, high chance of success entry point into the offshore Gulf of Mexico as well as onshore Louisiana. Otto has taken the opportunity to grow its portfolio in the US post its entry into the Alaskan North Slope earlier in 2015, as it views the shallow water Gulf of Mexico as providing exposure to assets which remain robust even when viewed against the current backdrop of low oil prices. The extensive seismic dataset which exists over these blocks provides a strong base for the upcoming drilling program which the Company expects to commence in Q1 2016.

32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801

[email protected] ASX Code: OEL ABN: 56 107 555 046

The first well offshore Gulf Coast Louisiana will commence in Q1 2016 with Otto having the opportunity to participate in 2 further wells during the course of 2016. If successful, these wells will be completed for production, with first oil expected in 2017. With drilling in Tanzania later in 2016 and Alaska in the 2016/17 drilling season, the coming 18 months will see an unprecedented level of activity for Otto, all of which can be funded from existing cash reserves of circa US$34 million.'

Overview of New US Assets

The leases the subject of the transaction are located in the shallow waters of the Outer Continental Shelf (OCS) of the Gulf of Mexico (2 leases - SMI-6 and SMI-70/71) and onshore (1 lease - Bivouac Peak), Louisiana. The leases are characterised as follows:

• Shallow water depths of around 10m to 60m, allowing for low cost drilling operations

• Existing discoveries and historical production

• Drilling targets up-dip from, and in the same highly productive reservoirs, as known production

Location Map of Assets

The OCS region of the Gulf of Mexico has a history of high exploration drilling success rates and is a prolific oil and gas production area with yearly production in the hundreds of millions of barrels. The extensive infrastructure in the area allows for low cost, efficient operations and therefore in the success case, short development timeframes and pay-back periods.

The shallow water offshore lease areas the subject of the transaction have benefitted from the application of cutting edge reverse time migration seismic reprocessing to allow more accurate seismic imaging of reservoir potential in and around salt domes. The application of these techniques has been pivotal in unlocking sub-salt exploration potential of basins in Brazil and the deep-water Gulf of Mexico. Drilling,

32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801

[email protected] ASX Code: OEL ABN: 56 107 555 046

which will commence with the first well in early 2016, will focus on what are now clearly delineated untapped reservoir intervals located up-dip from historical production.

South Marsh Island 6 (SMI-6) - drilling Q1 2016

Lying in a water depth of 65 feet, the SMI-6 lease has had a total production of 18. MMbbl and 36 Bcf of gas. Drilling by Byron in 2015 saw the SMI-6 #1 BP02 well completed for production in the sand interval around 100m above the primary target interval - this drilling intersected 100 feet of net pay sands. Drilling of the SMI-6 #2 well will earn Otto the rights to the following net revenue interests:

• Oil Mbbl (1P-2P-3P)- (567 - 1,495 - 2,167) and a prospective oil resource of 3,603 Mbbl; and

• Gas Mscf (1P-2P-3P)- (5,619 - 8,639 - 6, 667) and a prospective resource of Gas 59,198 Mscf.

Proposed drilling location

Overview of SMI-6 and existing infrastructure. Short production tie-back to SM 10 A

Drilling is planned for Q1 2016 with Otto participating in order to earn a 50% participating interest (equal to a 40.625% revenue interest) in the block. A rig has been contracted by Byron for this drilling. The success case outcome will see Otto book reserves during the course of 2016, with planned production development by way of low-cost tie-in to nearby infrastructure (see SM 10 A on above map) planned to be completed in or around the middle of 2017. The estimated well cost for the drilling in SMI-6 is US$8 million. Otto will pay 66.67% of these costs (US$5.3 million). Any costs above this amount in respect of the SMI-6 well and all future expenditure on the license will be in accordance with Otto and Byron's participating interest (Otto 50%).

32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801

[email protected] ASX Code: OEL ABN: 56 107 555 046

South Marsh Island 70/71 (SMI-71) - planned drilling Q1 2016

Post the drilling in SMI-6, Otto has the option to earn a 50% participating interest in SMI-70/71 through the drilling of one well. SMI-70/71 lies to the south of SMI-6 in a water depth of 131 feet and combined production from the blocks totals 5.9mmbo and 16Bcf of gas

Drilling of the well will earn Otto the rights to the following net revenue interests:

Oil Mbbl (1P-2P-3P)- (249 - 343 - 520) and a prospective resource of Oil 2,277 Mbbl Gas Mscf (1P-2P-3P)- (135 - 186 - 323) and a prospective resource of Gas 1,680 Mscf

SMI-71 - Amplitude Map and associated recovered volumes

Drilling is also expected in Q1 2016 with an expected total well cost of US$4.5 million. Otto will pay 66.67% of these costs (US$3 million). Any costs above this amount in respect of the SMI-6 well and all future expenditure on the license will be in accordance with Otto and Byron's participating interest (Otto 50%). As with SMI-6, successful wells will allow for reserves bookings and can be readily tied into existing surrounding infrastructure for production in 2017.

Bivouac Peak Leases

Bivouac Peak is an onshore lease area of approximately 2,400 contiguous acres along the southern Louisiana Gulf Coast and which sits inboard of SMI-6 and SMI-71. Through its agreement with Byron Energy, Otto has the option to earn a 45% participating interest (equal to a 33.525% net revenue interest) in the area which holds multiple exploration targets within a regionally proven trend of Miocene production. Byron Energy, as operator of Bivouac Peak holds a best estimate prospective resource of 6. MMbbl and 69.2 Bcf (8.9 MMBoe net to Otto).

32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: +61 8 6467 8800 F: +61 8 6467 8801

[email protected] ASX Code: OEL ABN: 56 107 555 046