Quarterly Report 30 June 2016

29 JULY 2016

OILEX LTD - JUNE 2016 qUARTERLY rEPORT

HIGHLIGHTS

CAMBAY FIELD, ONSHORE GUJARAT, INDIA

» Oilex reaffirms its commitment to unlocking the multi TCF in-place tight gas potential in its onshore Cambay Block.

» Planning underway to complete a vertical well with the dual objective of developing un-depleted OS-II sand and to obtain core samples from the EP-IV Zone reservoir for drilling and stimulation studies.

» Gas sales from Cambay-77H continue with an average gas production rate for the quarter of 152,000 scfd, or 26 boepd (Oilex net 68,000 scfd, or 12 boepd) and with an average associated condensate & oil rate of 6 bpd (Oilex net 3 bpd).

» Reserve volumes have been re-classified to Contingent Resources, reflecting deferral of the development timetable and prevailing oil and gas prices.

» Negotiations continue with our Joint Venture partner to address payment of outstanding cash calls, contributions to programmed activities and approval of the annual budget resulting in delays to planned activities.

» During the quarter, the Joint Venture partner released US$575,000 towards part payment of outstanding cash calls.

» Application seeking permission for Extending Well Testing of Cambay-73 and Cambay-77H for another six months for each well and sale of test gas submitted for regulatory approval.

BHANDUT FIELD, ONSHORE GUJARAT, INDIA

» Production from the Bhandut facility commenced in April.

» Test Gas Production at Bhandut-3 well averaged 503,000 scfd, or 87 boepd (Oilex net 201,400 scfd, or 35 boepd) and with an average associated condensate rate of 18 bpd (Oilex net 7 bpd).

» The Joint Venture and the Government of India approved the Work Programme & Budget for Bhandut Field for the Indian financial year starting 1 April 2016.

» During the quarter, the Joint Venture partner released US$302,000 towards payment of outstanding cash calls for the Indian FY 2015-16.

» Application for three-year extension of Petroleum Mining Lease under active consideration of the government.

» Field Development Plan under preparation for commercial gas production from Bhandut-3.

» CORPORATE

» During the quarter Oilex reached a settlement with Zeta Resources Limited that ends the legal proceedings between the parties.

» Mark Bolton was appointed Chief Financial Officer and Company Secretary.

» Cash balance at 30 June 2016 was $5.2 million.

operations review

OVERVIEW

India's growing domestic gas supply demand imbalance continues to grow apace with the shortfall being principally filled with a rapid expansion in LNG imports. In 2015, domestic gas production fell by 3.8% and LNG imports increased by 14.8% on backdrop of a 5.2% overall increase in primary energy consumption(1). Unconventional gas fields, including the substantial gas resources at Cambay, have yet to play an important role in the Indian energy market.

The appointment of new executive management and changes to Oilex's Board in recent months has seen Oilex adopt a revitalised and positive culture to actively enhance value creation for all stakeholders.

In this regard, Oilex has extracted itself from a complex and costly litigation with Zeta Resources Limited (Zeta). Management has now turned its attention to Oilex's principal asset, the 45% interest in Cambay. The project retains its strong fundamentals centred around the proven rich petroleum system of the Cambay Basin and the multiple wells that have intersected and produced hydrocarbons. Multiple targets are present at stacked stratigraphic levels and commercial success requires the further refining of proven technologies focussed around long horizontal well sections, and the application of optimal drilling and completions technology.

Oilex is at an advanced stage in completing a detailed working plan to take the Cambay project forward and the results to date support a vertical well with the dual objective of (i) targeting recovery of core from the Eocene siltstone (EP-IV or Y Zone) and (ii) developing the un-depleted OS-II reservoir zone.

A lower cost vertical well will seek to obtain core samples from the EP-IV Zone reservoir for drilling and stimulation studies. This is essential prior to drilling a horizontal extension for exploitation of the Eocene siltstones. The well will also have the potential to develop gas in the shallower, productive OS-II conventional reservoir zone, or based on analysis of core results, could be used later to test the EP-IV Zone.

Subject to the success of the planned work programme, inclusive of the vertical well, Oilex anticipates lodging its Field Development Plan (FDP) in the first half of 2017 in support of its Cambay PSC extension application.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT

No lost time incidents recorded during the quarter.

CAMBAY FIELD, GUJARAT, INDIA

(Oilex: Operator and 45% interest)

Oilex reaffirms its commitment to unlocking the multi TCF in-place tight gas potential in its onshore Cambay Block, Gujarat State, India. Oilex is at an advanced stage in completing a detailed working plan to take the Cambay project forward and the results to date support a vertical well with the dual objective of developing the undepleted OS-II reservoir sand and also targeting recovery of core from the Eocene siltstone (EP-IV or Y Zone).

The vertical well will seek to obtain core samples from the EP-IV Zone reservoir for drilling and stimulation studies. This is essential prior to drilling a horizontal extension for potential later exploitation of the Eocene siltstones. The well will also have the potential to test the shallower, productive, OS-II conventional reservoir or may be later used to test the EP-IV based on results of the core. The detailed planning for this well is being finalised and is subject to Joint Venture approvals. This approach allows Oilex to take advantage of the lower cost vertical well drilling rates in India at present.

Production from the block for the quarter was approximately 152 mscfd plus 6 bpd liquids (32 boepd; Oilex net 15 boepd) with the bulk of production coming from the Cambay-77H EP-IV reservoir. Cambay-77H was on production test up to 3 June 2016 and, along with Cambay-73, is presently shut-in awaiting Government of India (GoI) approval for the continued production of test gas. Oilex has submitted a proposal to the GoI for extended well testing for six months for each well and the proposal is under active consideration of the GoI.

Cambay gas is sold into the local low pressure gas market.

Resource Update

In April 2015, Oilex tabled the reserve and contingent resource volumes associated with the EP-III/IV (X and Y Zones) resulting from the review undertaken by third party certifier, RISC. Since that time, a number of key factors have changed including:

i) a change in economic assumptions related to lower gas prices being realised because of the world wide fall in oil and gas prices;

ii) Oilex's Joint Venture partner's failure to approve ongoing work; and

iii) the resultant deferral in project timing which pushes the recovery of Reserves to beyond the current term of the PSC. Note that under the PSC extension policy dated 28 March 2016 announced by the GoI, on Oilex's request the PSC can be extended for 10 years or the economic life of the block, whichever is earlier. Oilex shall be exercising its PSC extension right under the policy at an appropriate time.

On this basis, RISC has recommended in June 2016 that the Reserve volumes be re-classified to Contingent Resources. It should be noted that the total estimated volume of hydrocarbons has not been amended. The updated recoverable hydrocarbon volumes are tabulated below:

BHANDUT FIELD, GUJARAT, INDIA

(Oilex: Operator and 40% interest)

Production of gas commenced from the Bhandut Field early in the June 2016 quarter. Production from the Bhandut-3 well averaged 503 mscfd with 18 bpd associated liquids (87 boepd; Oilex net 35 boepd) during the quarter. The field is being closely monitored while an extension of the permitted production plan is being approved. While tubing head pressure at the well has been maintained, some formation water has been identified with the gas.

Oilex is Operator and holds 40% equity in the Bhandut Field, with Gujarat State Petroleum Corporation (GSPC) holding the remaining participating interest. Previous drilling in the Bhandut Field intersected a number of hydrocarbon zones, some of which have been produced and are now shut-in. The Bhandut-3 well commenced production from a previously undeveloped sandstone at a depth of 1,010 metres at virgin reservoir pressure.

Gas produced from Bhandut-3 is initially processed at the on-site production facilities and then delivered to a third party operated gas processing plant where it is further treated to the required pipeline specification. It is subsequently compressed for entry into the high pressure gas network for delivery to an end user.

Currently the JV has approval to sell test gas from this project until 5 October 2016 pending completion and approval of a FDP. During this period, Oilex shall be submitting an FDP on single well basis and seek GoI permission for commercial gas sale. In case the FDP is approved earlier than 5 October 2016, Oilex will switch over to early commercial gas production.

Currently the Bhandut Petroleum Mining Lease (PML) is valid until 22 September 2016. An extension application for three years starting from 23 September 2016 has been submitted to the GoI.

Figure 1: Bhandut Processing Facilities (see Oilex website)

Joint Venture Management

Oilex continues to engage with its JV partner, GSPC to resolve the unpaid cash calls and to obtain a commitment from GSPC to participate in future activities or to find an alternative solution. At the end of the quarter, the total unpaid cash calls were approximately US$6.5 million. During the quarter Oilex received payments from GSPC totalling approximately US$575,000 for Cambay and approximately US$302,000 for Bhandut. Oilex continues to manage payment of JV creditors under a staged plan.

Negotiations on a budget acceptable to the JV partner for the Cambay Block have been ongoing. Oilex previously submitted a reduced budget for the Cambay Project for the Indian financial year starting 1 April 2016. This work programme concentrated primarily on maintenance of the asset however it has not been approved by the Joint Venture at this time. Oilex will shortly submit a revised work programme to the Joint Venture for approval, inclusive of the planned new vertical well. In the absence of a timely and mutually acceptable approval by the JV, Oilex may elect to sole risk the programme pursuant to the Joint Operating Agreement (JOA).

The Cambay PSC primary term expires in September 2019, and the JV has the possibility of applying for an extension of up to 10 years, such that the PSC could be extended to 2029 or economic life of the block, whichever is earlier, subject to submission of a field development plan. Subject to the success of the planned work programme, inclusive of the vertical well, Oilex anticipates lodging its FDP in the first half of 2017 in support of its PSC extension application.

The JV partner has approved the Work Programme & Budget (WP&B) for the Bhandut Field for the Indian financial year starting 1 April 2016. The JV partner has also approved the Revised Budget for the Indian financial year ended on 31 March 2016.

WALLAL GRABEN, WESTERN AUSTRALIA (CANNING BASIN)

(Oilex: Operator and 100% interest)

The Wallal Graben asset is located adjacent to the Pilbara, a global resource centre for iron ore and LNG in Western Australia.

The Wallal Graben blocks are frontier exploration blocks that represent a potential low cost entry to an underexplored area. Oilex continues to investigate low cost exploration de-risking tools and approaches that address the geological uncertainties in this basin and that potentially provides an alternative lower cost work programme.

Final award of the blocks requires signing of Heritage Agreements with the Nyangumarta and Njamal People and is linked to a request to the Department of Mines and Petroleum (DMP) that all three blocks be awarded simultaneously. Consultations on the Heritage Agreements are nearly complete following which the DMP will make an offer to grant a Petroleum Exploration Permit for each of the three blocks to Oilex for acceptance.

JPDA 06-103, TIMOR SEA

(Oilex: Operator and 10% interest)

Oilex as operator, and on behalf of the JPDA 06-103 Joint Venture participants, continues to seek a resolution to the dispute with Autoridade Nacional do Petroleo (ANP) in relation to matters associated with the termination of JPDA 06-103 PSC. In July 2015, the ANP rejected the Joint Venture request to terminate the PSC by mutual agreement in good standing and without penalty and sought to impose a penalty of approximately US$17 million upon the Joint Venture. The Joint Venture carried out significantly more exploration than required during the PSC term and believes the excess was not properly credited in accordance with the PSC. The Joint Venture continues its discussions with ANP.

The Joint Venture remains hopeful an amicable settlement will be reached with the ANP. In the event the parties are unable to reach an amicable settlement, any party may refer the matter to arbitration. If this occurs, the obligations and liabilities of the Joint Venture participants under the PSC are joint and several, with parent company guarantees provided by all JV participants. Oilex has a 10% participating interest in the Joint Venture.

WEST KAMPAR PSC, CENTRAL SUMATRA, INDONESIA

(Oilex: 45% interest and further 22.5% secured(3))

A Court approved Scheme of Arrangement has been implemented over the Operator, however, Oilex continues to pursue enforcement of the Arbitration Award and a commercial settlement.

A technical review was commenced during the June quarter.

CORPORATE

At the end of the quarter Oilex retained cash resources of $5.2 million.

Oilex continues to engage with its JV partner, GSPC, to resolve outstanding cash calls and gain approval of the work programme and budget for the Indian financial year beginning 1 April 2016. The resolution of these matters is essential for Oilex to extract maximum value from the Cambay Field. Various approaches to progress work at Cambay are being considered.

Whilst the working plans for the field are being finalised and approved, Oilex as operator, continues to bear all of the ongoing costs of the Joint Venture.

Zeta Litigation

During the quarter Oilex reached an agreement with Zeta that ends the legal proceedings between the parties. The terms of the settlement are that each party will no longer pursue its claim against the other, with the legal proceedings dismissed on a no admission of liability basis. Oilex has also agreed to make a payment to Zeta on account of costs of the litigation of $490,000.

In reaching this settlement with Zeta, Oilex has taken into account the significant costs and inherent uncertainty of litigation, and the substantial time commitments and distraction that the litigation presents for the Board and management.

Executive Appointments

Oilex has appointed Mr Mark Bolton as Chief Financial Officer and Company Secretary, with effect from 10 June 2016.

Mark has worked as CFO and Company Secretary for a number of resource companies since 2003. Prior to that he worked with Ernst & Young stepping down as Executive Director in Corporate Finance. Mark has a Bachelor of Business Degree in Accounting and Finance. His strengths are in the commercial management and financing of resource projects internationally. Coupled with this, he has extensive experience in capital and equity markets in a number of jurisdictions including ASX and AIM.

Qualified Petroleum Reserves and Resources Evaluator Statement

Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr. Peter Bekkers, Chief Geoscientist employed by Oilex Ltd. Mr. Bekkers has over 20 years' experience in petroleum geology and is a member of the Society of Petroleum Engineers and AAPG. Mr. Bekkers meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr. Bekkers also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion of this information in this report in the form and context in which it appears.

PERMIT SCHEDULE

(1) BP Statistical Review of World Energy June 2015 and 2016

(2) Sabarmati Field relinquishment proposal has been submitted to the Government of India and accepted. Awaiting formal approval for the cancellation of the Sabarmati Field PSC.

(3) Oilex (West Kampar) Limited is entitled to have assigned an additional 22.5% to its holding through the exercise of its rights under a Power of Attorney granted by PT Sumatera Persada Energi (SPE) following the failure of SPE to repay funds due. The assignment has been provided to BPMigas (now SKKMigas) but has not yet been approved or rejected. If Oilex is paid the funds due it will not be entitled to also pursue this assignment.

(4) Ultimate parent entity is Oilex Ltd.

(5) Current status is a Preferred Applicant

LIST OF ABBREVIATIONS AND DEFINITIONS

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/07/96. Origin: Appendix 8. Amended 1/07/97, 1/07/98, 30/09/01, 1/06/10, 17/12/10, 01/05/13.

Name of entity

Compliance statement

1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX.

2 This statement does give a true and fair view of the matters disclosed.

Mark Bolton

CFO & Company Secretary

Date: 29 July 2016