Lofin milestone discovery, development drilling success

Highlights

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

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]

• Lofin 2C contingent resources: 2020bcf gas and 18.25mmbbl condensate (100% basis) (50bcf and 0.46mmbbl net to Lion)

• Successful Oseil-­‐28 development well boosts average production by 17% on the preceding quarter

• Unconventional joint studies nearing completion in the prolific North and Central Sumatra Basins

• Active new business program in opportunity rich environment

  Despite difficult industry conditions Lion Energy Limited ('Lion' or 'Company') continues to make solid operational progress, particularly on the appraisal and development front. In response to these conditions Lion and its joint venture operators have implemented aggressive cost saving measures.

  The highlight for the quarter was the completion of the Lofin-­‐2 appraisal well and the subsequent release of Contingent Resource estimates for the field (ASX release dated 8 October 2015). The estimate of 2020bcf (2C contingent resource) represents a major resource and the JV partners will now focus on studying appraisal and development options for the field and securing a PSC renewal.

  Average daily oil production at our Seram PSC increased 17% to 3488bopd (87bopd net to Lion) for the quarter, from 2984bopd the previous quarter, driven by successful drilling and completion of Oseil-­‐28 well with production at 766bopd at 30 September 2015. Gross crude oil production was 320,899 barrels (7571bbl net to Lion). A crude oil lifting of 400,119bbl was completed on 8 September 2015 (Lion share 10,003bbl). Lion's share of gross lifting revenue, estimated at approximately US$0.33mil, is expected to be received 35 days following the lifting. The daily production rate at the close of the quarter of 4053bopd bodes well for further increment in the current quarter. This compares to 3440bopd at the end of the previous quarter.

  In other activities, good progress has been made on the unconventional joint studies and for planned drilling in the South Block A PSC scheduled for May 2016.

  Lion's CEO, Kim Morrison noted 'The contingent resource of 2tcf for the Lofin discovery, with Lion's working interest share of 50bcf is clearly material for the Company. Our efforts are now focussed on securing a renewal to the PSC post the 2019 expiry. We are also pleased with the results of Oseil-­‐28 which has lifted Lion's share of Seram PSC production to over 100bopd as at quarter end and we look forward to further growth with ongoing development drilling planned. Lion continues to pursue an active new business program focussing on producing or low-­‐risk appraisal opportunities.'

  
  

  Operations update (3Q-­‐FY15)

  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 13,941,562 barrels since production started in January 2003 through to 30 September 2015.

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

  
  

  Production and revenue

  During the quarter the daily production rate from the Oseil and surrounding oilfields averaged 3488bopd (Lion's net working interest being 87bopd, before government entitlement).

  The steady uptrend in production has been maintained into 2015 and a positive result from the development well drilling at Oseil-­‐28 has lifted field daily production above 4000bopd at quarter end, with the contribution from Oseil-­‐28 at 766bopd at 30 September 2015.

  Crude oil available for lifting at 30 September was 83,844bbl. A final calendar year lifting of in excess of 400,000bbl is expected in December 2015, with receipt of funds net to Lion approximately 35 days thereafter.

  
  

  Expenditures

  Seram (Non Bula) Block PSC -­‐ Location Map

  
  

  
  

  Seram (Non Bula) Block -­‐ Daily Production per Calendar Month (bopd)

  
  

  Seram (Non Bula) PSC	Exploration	Development	Production
  	US$	US$	US$
  Expenditure net to Lion (3Q-­‐CY15)1	69,685	218,856	168,796
  Note 1 - The expenditures herein are Seram PSC results and may differ from Lion's financial reporting due to timing differences

  
  

  Lofin Field

  The Lofin Field is a thrust faulted four way dip anticline located 60km west of the Oseil Field. The field is mapped on 1990 and 2008 vintage 2D seismic lines and is approximately 4km wide and 10km in length.

  The reservoir is the fractured carbonate of the Jurassic/Triassic age Manusela formation which is the reservoir in the nearby producing Oseil field. The overlying Jurassic marine Kola shale provides the regional seal with the main source rock interpreted to be the underlying mature Late Triassic Saman-­‐Saman Formation.

  The Lofin-­‐1 exploration well was spudded in the Seram (Non Bula) PSC on 17 January 2012 to test the hydrocarbon potential of the Manusela formation in the Lofin structure. In May 2012, the well was side-­‐tracked at 3420m MD and drilled to a total depth of 4427m MD and was interpreted still to be in hydrocarbons, representing a current minimum interpreted gross hydrocarbon column of 160m.

• After acidising the well flowed gas and oil/condensate at a rate of 15.7mmcfgd and 171bopd of 36.1° API condensate, with a flowing wellhead pressure of 4750psi on 24/64 inch choke.

• Downhole shut-­‐in pressure data acquired during testing operations indicated potential for a significant hydrocarbon column below the total depth of the Lofin-­‐1 well giving the joint venture significant encouragement to drill an appraisal well.

The Lofin-­‐2 well to appraise the Lofin-­‐1 discovery spudded on 31 October 2014. Lofin-­‐2 intersected the primary Manusela objective at 4615m MD (4508m ssTVD). Wireline logging at the original programmed total depth (TD) of 5471m MD (5348m ssTVD), included pressure measurements and samples. Wireline logs provided good data on the Manusela Formation carbonate reservoir which has low average porosity (~4%), net /gross of approximately 30% although with fractures evident throughout the carbonate section. The data acquired provided strong evidence that the hydrocarbon column continued deeper within the fractured Manusela limestone section. The well was therefore drilled to a revised total depth of 5861m MD (5686m ssTVD).

On pulling out of hole at this revised TD the drill pipe became stuck and on attempting to pull free parted with the top of the 253m long portion of stuck drill string at 5025m MD (4948m ssTVD). A number of attempts to free the stuck pipe were unsuccessful and the joint venture elected to conduct a flow test over the open-­‐hole section of the Manusela Formation.

A successful well test commenced on 21 May 2015 and was conducted as a multi-­‐rate test using different choke sizes to maximise reservoir information, over a 7 day period. On a 52/64 inch choke the well flowed gas at approx. 17.8mmcfpd with approx. 2634bpd water and completion fluid and approx. 54 bpd of 34.9° API condensate, with a flowing wellhead pressure of 2250 psi (96 hour flow period on 52/64 inch choke). On the smallest choke setting (16/64 inch) the well was flowing gas at approx. 4.95mmcfpd with approx. 12 barrels condensate and approx. 280bpd water with a flowing wellhead pressure of 5000psi (12 hour flow period on 16/64 inch choke). Tested gas quality is good with approximately 5% C02.

The results indicate well flow was occurring around the stuck drill pipe and the presence of water in the test is interpreted to come from the lower part of the well coincident with a decrease in gas readings while drilling from around 5586m MD (5456m ssTVD) to total depth. The well delineated a continuous gas column of up to approximately 1300m for the large Lofin structure.

The Lofin-­‐2 well provided critical new information on porosity of the Manusela limestone, net/gross within the hydrocarbon column, fracture density, hydrocarbon saturation, fluid type and contacts.

Lofin Resource Estimate

As disclosed in the company's announcement on 8 October 2015, the data acquired during the drilling of Lofin-­‐1ST1 and Lofin-­‐2, combined with seismic data, has been used in calculating contingent resources for the Lofin Field. The resource estimates for gas and condensate are classified as contingent resources as there is no certainty of development due to various factors including, amongst others, economic, regulatory, market and facility, corporate commitment and extension award of the Seram Non-­‐Bula Block PSC beyond the current 31 October 2019 expiry date. The joint venture is currently reviewing further appraisal requirements and potential development options for the Lofin Field.

An overview of contingent resources for the Lofin Field (100% and Lion working interest share) compiled by Lion in accordance with SPE-­‐PRMS classification is shown below:

1. Contingent Resources those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources are a class of discovered recoverable resources. There is no certainty that any portion of the contingent resources will be developed or, if developed, there is no certainty as to either the timing of such development or whether it will be commercially viable to produce any portion of the resources.

2. The condensate is associated with the gas discovery and is estimated from a yield of 8.5 bbl/mmcf.

3. Recoverable hydrocarbon gas volumes have been reduced to account for shrinkage due to condensate recovery.

4. These are the gross recoverable volumes, (i.e., 100% working interest) estimated for the Lofin Area, without any adjustments for company working interest or encumbrances.

5. These are the Company gross recoverable volumes estimated for the Lofin Area, adjusted for company working interest (i.e., 2.5% working interest) but without adjustments for encumbrances.

6. MMBOE is Million Barrels of Oil Equivalent. BOE's may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

7. 1C Contingent Resource estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate. The C1 drainage area is a cylinder based on the lowest tested gas and a radius of 1,875m.

8. 2C Contingent Resource estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

9. Resources are calculated deterministically