Quarterly Report September 2014

23 October 2014 TANGIERS PETROLEUM LIMITED Quarterly Report for Period Ending 30 September 2014 The Directors of Tangiers Petroleum Limited ("Tangiers" or the "Company") arepleased to provide the following report on its activities during the quarterended 30 September 2014. A copy of the full quarterly report, including thediagrams referred to in the text and the Appendix 5B (Quarterly Cash FlowReport), is available on the Company's website at www.tangierspetroleum.com Highlights * The Company announced that the TAO-1 well, located in the Tarfaya Offshore Block offshore Morocco, was unsuccessful on the 4th August. * Due to uncertainty related to the final cost of the well, shares in Tangiers were suspended from trading on the 6th August. * Tangiers was re-instated to trading on the 23rd September after reaching an agreement with Galp Energia ("Galp") to finalise its obligations in regards to the costs associated with TAO-1. * A placement to raise A$1.2 million by issuing 200 million shares at $0.006 per share was announced on the 19th September. Overview Key operational activities during the quarter were: * On the 28th July, the Company announced that the secondary target in the TAO-1 well, Assaka, was unsuccessful. * The primary target at the TAO-1 well, Trident, was announced as unsuccessful on the 4th August. * Costs associated with the drilling of the TAO-1 well exceeded the Company's internal budget and a settlement agreement was reached with the Operator, Galp (see the Company's announcement dated 24 September 2014 for more detail.) The key corporate activities for the quarter were: * During the quarter the Company announced a capital raising via a placement for $1.2 million at $0.006 per share. Subsequent to the end of the quarter, the placement was approved at a shareholder meeting on 20th October. * Tangiers' Company Secretary, Robert Dalton, resigned on the 1st September and was replaced by Joint Company Secretaries, Sarah Smith and Amy Just. Financial The ASX Appendix 5B attached to this report contains the Company's cash flowstatement for the quarter. The significant elements for the period were: * exploration and evaluation expenditure of A$12.647 million (June 2014 A$0.035 million); * administration and other operating costs of A$1.552 million (June 2014 A$1.461 million); and * a net cash outflow of A$13.372 million recorded by the Company. At the end of the quarter, the Company had net cash reserves of A$1.266 millionnot including the proceeds from the recently approved placement. TAO-1 Finalisation The TAO-1 well was declared unsuccessful on the 4th August, having failed toencounter quality reservoir or significant hydrocarbon indications at eitherthe secondary objective, Asska, or the primary objective, Trident. The final cost of the TAO-1 well was in excess of the Company's internalbudget. This was largely due to factors not associated directly with thedrilling, which was completed safely and efficiently. Unfortunately, several ofthe costs were not fully quantified until after the well had reached totaldepth. Tangiers finalised its financial obligations in relation to the drilling of theTAO-1 well, being a total of US$18.56 million (see additional detail belowrelated to the exit from the permit). This was funded by the Company's cashposition and left Tangiers with a cash balance of approximately A$1.25 million. Exit from Tarfaya Offshore Block After an internal strategic review, and as part of the finalisation of itsobligations, Tangiers has undertaken to exit the Tarfaya Offshore Block either:by assigning its 25% interest to Galp Energia (Galp), Tangiers' partner and theOperator of the block, for consideration of US$3.4m; or by withdrawal when thepermit expires in February 2015. Under an agreement with Galp, if the exit has not been completed within 6months (or 12 months at the discretion of Galp), Tangiers' Moroccan subsidiary,DVM International SARL (DVM), will be liable to Galp for a payment of US$3.4m.Given that the permit expires in February 2015, and that the intention of bothGalp and DVM is for DVM to assign the permit, the Board is confident that thecontingent liability in DVM has a low chance of realisation. Assignment orwithdrawal is subject to the normal approvals process by the MoroccanGovernment and the Office National des Hydrocarbures et des Mines (ONHYM). Tangiers thanks the Moroccan Government and ONHYM for the opportunity toexplore within Morocco. Tangiers has also agreed a payment to Galp of US$3.4m, in stock or cash, if themarket capitalisation of Tangiers exceeds US$50 million within seven years ofthe agreement. This payment will also be required if Tangiers delists for anyreason, such as due to a change of control. New Ventures Tangiers is currently assessing several new venture opportunities, which are atvarious stages of maturity; however, none of these opportunities haveprogressed to binding agreements at this time. The Company looks forward toupdating shareholders on these activities as they progress. Capital Management The Company has undertaken an internal overhead review, resulting in asignificant reduction in overheads of greater than A$2.5 million per annum,including cuts to staff salaries (greater than A$300k) and Director's fees (greater than A$200k). Tangiers recently completed a placement for A$1.2 million at $0.006 per shareto sophisticated investors in order to strengthen its balance sheet. Theplacement was managed by DJ Carmichaels and was approved by shareholders on the20th October 2014. Additional Information required under ASX LR 5.4.3 List of petroleum tenements held by Tangiers at quarter ending 30 September2014: Reference Project Name Location Company Acquired during Disposed of Interest the Quarter during the Quarter Tarfaya Tarfaya Offshore Morocco 25% - - Block Unless stated elsewhere in this report, there were no beneficial interests heldin farm-in or farm-out agreements at the end of the quarter and no beneficialinterest in farm-in or farm-out agreements acquired or disposed of during thequarter, and there have been no activities relating to oil and gas productionor development during the quarter. Sarah SmithCompany SecretaryTangiers Petroleum LimitedLevel 2, 5 Ord StreetWest Perth WA 6005, AustraliaPh: + 61 8 9485 0990www.tangierspetroleum.com Contacts RFC Ambrian LimitedAs Nominated AdviserMr Oliver Morse / Ms Trinity McIntyre+61 8 9480 2500 As Corporate BrokerMr Charlie Cryer+44 20 3440 6800