Company update

ASX/MEDIA ANNOUNCEMENT

12 October 2015

COMPANY UPDATE

Galilee Energy Limited (ASX:GLL) ('Galilee' or the 'Company') continues to deliver on its renewed strategy that was outlined in April 2014. Since the new Board and management team was elected the asset base of Galilee has gone through a period of significant growth. The immediate focus is unlocking the value of these projects through booking reserves in the Galilee Basin and moving towards production in the US projects.

A new presentation is attached to this announcement which outlines a compelling investment case and Galilee's near term milestones.

INVESTMENT HIGHLIGHTS

• Well funded, diversified oil and gas explorer trading near cash backing

• Experienced leadership team with a demonstrated track record of top tier Australian CSG and conventional exploration success, with exceptionally strong alignment with the directors and management who are well invested with c.11% ownership

• Galilee continues to focus its funds on high impact exploration and has significantly reduced its corporate expenditure over the last two years

• Execution on corporate strategy is accelerating with significant achievements in all three focus areas (maximising value of Glenaras Gas Project, building production base, growing exploration portfolio)

• 100% owned Glenaras Gas Project is a highly strategic asset with an opportunity to supply cheap gas into the structurally undersupplied east coast gas market

• Onshore US assets have potential to generate near term US$ cash flows with follow-up drilling scheduled for late 2015 on the liquids rich Hoffer gas discovery

• Excellent CSG exploration potential in Chile represents a valuable long term growth option

Managing Director Peter Lansom said 'Over the last 2 years Galilee has constructed a portfolio of strategic assets with a diversification of development stage and geography. We are now very focused on booking significant reserves at the Glenaras Gas Project and unlocking production in the US. We look forward to delivering significant value to our loyal shareholders as we begin to transition from explorer to developer.'

A: Level 4, Rowes Building, 235 Edward Street, Brisbane QLD 4000 / P: GPO Box 1944, Brisbane QLD 4001 /

T: +61 7 3177 9970

E: [email protected]

GALILEE ENERGY LIMITED

ABN: 11 064 957 419

ASX: GLL

www.galilee-energy.com.au

ASX/MEDIA ANNOUNCEMENT

For further information contact:

Peter Lansom Managing Director Galilee Energy Limited

+61 7 3177 9970

[email protected]

About Galilee

Galilee's Board and management are focused on building and expanding its asset mix to create a mid-tier exploration and production company. Galilee has a clear plan to grow shareholder value and the capacity to execute.

• Strong Balance sheet

• Proven successful Board and Management

• New strategic direction

www.galilee-energy.com.au

Page 2 of 2

12 OCTOBER 2015

COMPANY UPDATE

ASX: GLL

Company overview

• Well funded, diversified oil and gas explorer trading near cash backing

• Experienced leadership team with a demonstrated track record of top tier Australian CSG and conventional exploration success

• Strong shareholder alignment with the directors and management who are well invested with c.11%

  ownership

• Galilee continues to focus its funds on high impact exploration and has significantly reduced its corporate expenditure over the last two years

• Execution on corporate strategy is accelerating with significant achievements in all three focus areas (maximising value of Glenaras Gas Project, building production base, growing exploration portfolio)

• 100% owned Glenaras Gas Project is a highly strategic asset with an opportunity to supply cheap gas into the structurally undersupplied east coast gas market

• Onshore US assets have potential to generate near term US$ cash flows with follow-up drilling scheduled for late 2015 on the liquids rich Hoffer gas discovery

• Excellent CSG exploration potential in Chile represents a valuable long term growth option

WELL FUNDED EXPLORER EXECUTING ON A CLEAR CORPORATE STRATEGY

Corporate snapshot

Note:

1 Directors and management acquired shareholdings from 2013 at an average cash consideration per share of A$0.125

Share price (A$) Volume traded (m)

> 2,508 PJ 2C Resources

(worth A$75m @ A$0.03/GJ)

> Near term US cash flows

Current Galilee share price fails

to reflect fundamental value

Source: IRESS

Note:

0.18

0.16

0.14

0.12

0.10

0.08

Jan-15 Mar-15 May-15 Jul-15 Sep-15

2.5

2.0

1.5

1.0

0.5

-

1. Excludes 3.45m unlisted performance rights on issue (vesting price A$0.25-0.35; expiry date Dec-15-Dec-17)

2. Please refer to Competent Person Statement on page 27 of this presentation

Volume GLL share price S&P/ASX 300 Energy Index (rebased)

Board and management team

EXPERIENCED LEADERSHIP TEAM WITH A

HISTORY OF AUSTRALIAN CSG EXPLORATION SUCCESS

Coal seam gas experience of Galilee Board and management team

• Core Galilee exploration team is ex-Origin Energy

  • Key members of the team that built Origin Energy's portfolio of upstream CSG assets, the largest CSG resource in Queensland which now underpins the A$25bn APLNG project

• Board and management have a track record of successfully increasing reserves and creating asset value

  • Expanded Gloucester (AJ Lucas) 3P Reserves from zero to > 700PJ1 before being sold to AGL Energy for A$370m

  • Increased Narrabri (Eastern Star Gas) 3P Reserves from zero to 2,797PJ before being acquired by Santos for A$942m

    
    

    
    

    Peter Lansom - Managing Director

    KEY MANAGEMENT

    David King - Non-Executive Chairman

    BOARD

    • Currently Non-Executive Chairman of Cellmid

    • Former Non-Executive Director of Sapex, Gas2Grid and Eastern Star Gas

    • Former CEO of Beach Petroleum

      Ray Shorrocks - Non-Executive Director

    • Director at Patersons Securities (Head of Corporate Finance, Sydney)

    • Currently Non-Executive Director of Estrella Resources

    • 25+ years experience in conventional and unconventional exploration

      and development

    • Former Chief Petroleum Engineer at Origin Energy

    • Previous Executive Director at Eastern Star Gas

      Paul Bilston - Executive Director

    • Senior executive roles at AGL Energy, AJ Lucas

    • Former Managing Director of Challenger Energy

      Ashley Edgar - Geoscience consultant

    • 25+ years experience in conventional and unconventional exploration

    • Instrumental in building Origin Energy's CSG portfolio

    • Former Executive GM Exploration at Eastern Star Gas

    Note:

    1 Internal estimates prior to sale

    
    

    Executing on a clear strategy

    
    

    EXECUTION OF OUR STRATEGY IS WELL UNDERWAY WITH STRONG PERFORMANCE IN ALL THREE FOCUS AREAS

    
    

    Maximise the value of the

    Glenaras Gas Project

    Demonstrate commercial gas flow, book 1

    reserves and optimise value for shareholders

    Build a strong production base 2

    Deliver value and upside in assets by

    utilising our expertise

    
    

    Grow the exploration portfolio 3

    Acquire low cost, early stage positions in frontier basins

    
    

    • 100% GLL following AGL acquisition

    • New resource assessment

    • Workover programme complete

    • Production testing to commence mid October 2015

      
      

    • Hoffer gas discovery made in Texas

    • First development well to spud mid Q4 2015

    • Exciting prospects in Kansas 3D seismic

      
      

    • CEOP submitted in Southern Chile

    • Multi Tcf CSG resource potential

    
    

    Galilee global portfolio

    
    

    NEGLIGIBLE VALUE ASCRIBED BY THE MARKET TO GALILEE'S PORTFOLIO OF HIGHLY STRATEGIC ASSETS

• Galilee has constructed a portfolio consistent with its corporate strategy

• A key focus in building the portfolio has been to maintain and acquire assets with significant strategic value

  • Glenaras Gas Project is the most advanced project in the Galilee Basin and has potential to unlock a significant new CSG supply source

  • Acquired onshore US shallow oil targets for near term cash flow, capitalise on depressed drilling costs and

    rich gas targets with strong economic returns - even in the current depressed commodity environment

    Global portfolio and implied valuation (A$m)

    A$18.3m

    
    

    2

    1

    Glenaras Gas Project

    CSG Exploration Recently expanded contingent resources to 2,508 PJ (2C)

    
    

    (A$16m)	 2,508PJ (2C) CSG Resource onshore cash flow A$2.3m
    Implied valuation of core Galilee assets

    • Near term US

    • Frontier CSG exploration (Chile)

    Onshore US Liquids rich gas Near term, high margin production opportunity

    
    

    
    

    Source: IRESS

    3

    Chile CSG

    Frontier exploration prospect

    
    

    Market capitalisation

    @ A$0.12

    
    

    Cash balance (30-Jun-15)

    
    

    Outstanding operational delivery

    
    

    SUSTAINED OPERATIONAL PERFORMANCE SINCE THE ELECTION OF THE NEW BOARD IN OCTOBER 2013

• Galilee has outperformed the S&P/ASX300 Energy Index and oil price, in a period of oil price collapse and despite significant capital markets headwinds

Share price performance since October 2013 (Acps)

30

26 June 2013

Current board and

25 management

acquired 16% stake

31 October 2013

20 Current board elected

27 May 2014

MOU signed with Chile's state owned E&P company ENAP

18 June 2014

Joint venture agreed to explore in Illinois

24 June 2014

Joint venture agreed to explore in Texas

30 July 2014 Agreement to target low cost, high return shallow oil (Kansas)

19 Nov 2014

Kansas 3D seismic programme commences

23 Feb 2015

Gas discovery in Lavaca County (Texas) with 43ft net pay

1 Sep 2015

Glenaras Gas Project resource expansion to 2,508PJ (2C)

17 Sep 2015

Rig mobilisation at Glenaras Gas Project

15

+9%

10

(26%)

(34%)

5

-

Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015

Source: IRESS

GLL S&P/ASX 300 Energy (rebased) Brent oil (A$, rebased)

Prudent cash management

GALILEE'S NEW STRATEGY HAS REDUCED CORPORATE EXPENDITURE AND FOCUSED FUNDS ON EXPLORATION

• Since its election in October 2013, Galilee's Board and management has been executing on a clear strategy of focused investment and reduced corporate expenditure

  - Galilee has continued to reduce corporate expenditure consistently over the last 18 months

• Galilee has no debt outstanding and is fully funded for our upcoming exploration program

  
  

  Galilee half yearly admin expenditure (A$m)

  Quarterly admin to exploration ratio (x)1

  
  

  2.0

  
  

  1.6

  
  

  1.8

  
  

  New board appointed

  
  

  2.00

  
  

  1.60

  
  

  New board appointed

  
  

  1.2

  
  

  0.8

  1.0

  
  

  0.9 0.8

  1.20

  
  

  0.80

  
  

  Increasingly focused expenditure

  
  

  0.4 0.40

  
  

  -

  2H 2013 1H 2014 2H 2014 1H 2015

  -

  Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

  
  

  Source: IRESS

  Notes:

  
  

  Administration expenditure (A$m)

  
  

  Galilee Peer median

  1 Constellation of 142 ASX-listed GICS Energy companies with positive exploration expenditure and a market capitalisation

  
  

  Glenaras Gas Project - Galilee Basin (ATP 529P)

  
  

  GLENARAS GAS PROJECT IS GALILEE'S FOUNDATION ASSET AND REMAINS A KEY EXPLORATION FOCUS

  Location of GGP (Galilee Basin)

• Glenaras Gas Project (GGP) has the potential to become a key supplier to the structurally undersupplied east coast gas market

  • Very large, yet to be contracted, resource

  • High resource concentration (equivalent to Fairview/Spring Gully)

  • Minimal water treatment with high probability of being able to re-inject produced water

  • Positive stakeholder relationship

  • Very low well costs

• Multiple market options exist for GGP

  • South or west to Wallumbilla and Mt Isa

  • East to connect to Brisbane or Gladstone

• The distance to market is comparable to the length of the recently constructed CSG-LNG pipelines

  
  

  Glenaras Gas Project contingent resources

  
  

  2015 ASSESSMENT SIGNIFICANTLY INCREASED THE GGP RESOURCES AND HIGHLIGHTS ITS POTENTIAL VALUE

  
  

• 2015 MHA Resource Assessment significantly upgraded the Glenaras Gas Project contingent resources

  - Highlights the strong opportunity for GGP to supply gas into the structurally short east coast market

• Converting the 2C resources to 2P reserves is the key immediate focus for Galilee

- The R1 coal seam gas is critical in testing the commercial potential of the GGP and converting the

contingent resources into reserves

Glenaras Gas Project estimated resources (PJ)

5,314

Implied valuation of Glenaras Gas Project based on resource multiple valuations (A$m)

2,508

+387%

Conversion of 2C to 2P

Assumes conservative 50% 2C -> 2P conversion

308

12

+868%

259

1,090

75

+A$73m

2

640

777 - 1,153

1C 2C 3C

2011 2015

Current GLL Enterprise Value

2C (trading) A$0.03/GJ 1

2P (Westside 2014)

A$0.51/GJ 2

2P (historical transactions)

3

A$0.62-0.92/GJ

Source: MHA Petroleum Consultants LLC (2015), SRK Consulting (2011), Company filings

Notes:

Potential EV/Resource multiple valuations

1. 2C trading valuation based on EV/2C multiples for Blue Energy (ASX: BUL), Real Energy (ASX: RLE) and Icon Energy (ASX: ICN) as at 8 October 2015

2. Westside 2P transaction multiple based on 347PJ (2P) reserves and transaction value of A$178m at the final bid price of A$0.40/sh

3. 2P transaction multiple range based on precedent Galilee management transactions including sale of Gloucester to AGL Energy (400-500PJ 2P target range and transaction value of A$370m) and the sale of Eastern Star Gas to Santos (1,520PJ 2P and transaction value of A$942m)