Quarterly Report to Shareholders 30 September 2012

QUARTERLY REPORT TO SHAREHOLDERS

30 SEPTEMBER 2012

Summary

Cambay PSC (45% & Operator) onshore Gujarat, India

·; Independent review of Cambay-76H, completed post 30 September 2012, has provided various recommendations to minimise the risk of similar issues recurring in the planned offset well.

·; Importantly, significantly higher pressures and associated flow of hydrocarbons - very positive in tight reservoirs - were encountered post fracture stimulation of the reservoir and had a direct influence on the outcome of the Cambay-76H well.

·; Now in the process of finalising well design and assessing the availability of a rig and long lead time equipment for the Cambay offset well while waiting on approvals.

JPDA 06-103 PSC (10% & Operator) offshore Timor Sea

·; The Bazartete prospect, the location of the third commitment well, has the potential to contain 70.8 million barrels of mean prospective oil resources (Oilex assessment, unrisked, 100% basis) with a 23% chance of success.

·; Investigations are ongoing to secure a suitable rig for drilling the Bazartete prospect.

·; The current contract period expires on 15 January 2013 and a request for extension of the period has been made to the regulatory authority.

Corporate

·; Successfully completed $7.09 million (gross) capital raising via a fully underwritten entitlement offer.

·; Implemented a cost reduction program that has already significantly lowered executive personnel and overhead costs

·; Cash position of $9.5 million as at 30 September 2012.

·; Michael Maloney appointed Chief Operating Officer based in India with primary responsibility being the development of the Cambay Field tight reservoir project.

·; Andrew Pfaff appointed General Manager Operations, initially part-time and then full-time in India when approvals for the next phase of work at Cambay are received.

·; The appointment of a Chief Finance Officer based in Perth is expected to be announced in the next month.

Overview

Oilex has taken significant steps forward in its strategy of transitioning from conventional oil and gas explorer to an early mover unconventional energy producer, focused on projects with world-class tight reservoir potential. Implementing this strategy by utilising proven technology developed for tight/shale and unconventional reservoirs in North America, the Company has completed its first stage objective of securing the services of additional key personnel to form a strong technical team to complement the existing expertise.

Post 30 September 2012, the review of the Cambay-76H well was completed by an independent US expert. The recommendations of this review will be incorporated into the design of future wells.

Oilex has been actively seeking a rig to drill the third well in the Timor Sea JPDA 06-103 contract area on behalf of the Joint Venture. Due to the lack of availability of a rig, an application for an extension to the contract term has been submitted to the regulatory authority, Autoridade Nacional do Petroleo.

OPERATIONS REVIEW

CAMBAY FIELD, Gujarat, India

·; Results of the analysis of the drilling and completion operations on the Cambay-76H well have been collated and interpreted with the Company engaging an independent US-based consultant to provide an analysis of the issues with milling operations at Cambay-76H which led to the well being suspended before a flow test could be conducted.

·; During drilling operations and running casing, the well was controlled using 13.2 ppg mud, indicating formation pressure of approximately 4,000 psi. However, post fracture stimulation downhole pressures were in excess of 5,080 psi for an extended period of time. The conclusion from the independent expert is that the sustained high pressure in the months after fracture stimulation indicates probable connection to a deeper high-pressured zone.

·; Utilising the results of this review, the Company is finalising the design of the Cambay offset well and assessing the availability of equipment and materials that are critical to drilling the well, while Oilex awaits final approvals from the Joint Venture and regulatory authorities.

·; The independent expert was provided access to all of the data collected during drilling, completion, fracture stimulation, and milling and fishing operations, and provided the following conclusions:

o Drilling of the well to 2,740m including 640m horizontal section was completed with minimal problems, ahead of the projected schedule.

o The fracture stimulation was run in eight stages over seven days with no problems and with good results from the microseismic acquisition.

o Clean out of the completion assembly encountered numerous problems that accumulated in their magnitude after encountering probable foreign metal in the hole and/or distorted casing leading to suspension of the well.

·; Based on the independent expert's analysis of the operations and the design of the well, it was recommended that in order to minimise the risk of similar failures recurring in future wells, the Company take into account the following factors:

o The design of the casing to incorporate higher safety factors to counter the potential for deformation during fracture stimulation in future wells, given the high natural formation overpressure.

o Recommendations from the service providers for all downhole equipment and procedures will be requested based on the high formation pressure and fracture stimulation program prior to final selection.

o Continue to use synthetic oil base mud for drilling operations.

o Utilise a rotating head so that well control operations do not interrupt drilling and clean out. This negates the need to use heavy drilling fluids that may cause formation damage and wellbore blockage.

o Utilise the natural pressure in the formation to assist the cleanout operations during milling.

Furthermore, the independent expert concluded that the structural failure of the drill pipe during cleanout operations was due in most part to high torque caused by deposition of precipitates from the high density fluids inside casing and excessive friction due to possible distorted casing. The degree of fatigue that the drill pipe had undergone prior to being used on Cambay-76H could not be determined.

This analysis will be carefully applied in the design of the planned offset well.

·; The Cambay-73 well is a conventional vertical well drilled and completed in 2008 with smaller-scale fracture stimulation and 10 metres of active perforations in the Y Zone. The clean-up and production from Cambay-73 commenced in April and the well was shut-in on 28 June 2012.

·; It is anticipated that the pressure and fluid data recorded during production can be directly used to model Y Zone reservoir performance for a horizontal multistage fracture stimulated well. Preliminary results have been encouraging and support previous Cambay-76H production modelling. The well was flowing at a rate in excess of 300 mcfgd with associated condensate prior to it being shut-in.

·; An application for resumption of the Cambay-73 production and test program has been submitted to the regulatory authority, the Directorate General of Hydrocarbons.

JPDA 06-103, TIMOR SEA

·; The proposed Bazartete-1 well location has been selected by the JPDA 06-103 Joint Venture as site of the third commitment well. The Bazartete prospect has been assessed by Oilex to have the potential to contain 70.8 million barrels of mean prospective oil resources (unrisked, 100% basis) with a 23% chance of success.

·; Negotiations are ongoing to secure a suitable rig for drilling in the contract area. Well planning and design continued during the quarter.

·; The permit Initial Period ends on 15 January 2013. Oilex, as Operator, has requested an extension to the Initial Period on behalf of the Joint Venture. There are no rigs available to drill the well before the end of the Initial Period.

BHANDUT FIELD, Gujarat, India

·; Following a work-over in the prior quarter, Bhandut-3 flowed gas to surface from a thin gas zone. Commercial options are under investigation with expressions of interest in acquiring small volumes of gas from some local interested parties.

West Kampar PSC, Central Sumatra

·; Negotiations are continuing as Oilex pursues a commercial resolution to the Joint Venture dispute. At the same time, the Company has taken steps to protect its participating interest in the West Kampar PSC and has requested legal advice from its Indonesian lawyers on enforcing its Arbitration Award in Jakarta.

* See note to Asset Schedule

WA-388-P, Australia

·; The WA-388-P offshore exploration permit term expired on 28 August 2012 and following discussion with the National Offshore Petroleum Titles Administrator ("NOPTA"), the Operator advised NOPTA on 8 October 2012 that the joint venture partners had elected not to proceed with the renewal of the permit. NOPTA advised on 25 October 2012 that the permit is deemed to have expired on 27 August 2012.

CORPORATE

·; The Company successfully completed a fully underwritten pro-rata renounceable entitlements issue during the quarter, raising gross proceeds of A$7.09 million, with the assistance of Patersons Securities Limited as Lead Manager and Underwriter. The offer was based on an entitlement to 2 new shares for every 5 shares held at a price of A$0.07 per share. All participants also received one attaching ASX listed option for every two new shares subscribed for, exercisable at A$0.15 per share. This resulted in 101,329,954 ordinary shares being issued in addition to 50,665,017 15c options. A further 101,329,954 15c options were issued to the Underwriter.

·; Oilex retained cash at the end of the Quarter of A$9.5 million.

·; Oilex made strong and tangible progress in its strategic transition to intensify its immediate-term focus on unconventional reservoirs in India. The transition was described at the Extraordinary General Meeting of shareholders on 7 September 2012.

Please refer to the Oilex website for full report.

Cost reduction program & PERSONNEL CHANGES

·; In order to manage its capital prudently, Oilex is in the process of implementing a comprehensive cost reduction program as part of its re-structuring process.

·; Significant changes have been made in the organisation of the Company:

o As the fundamental platform of Oilex's next phase of development and growth, a core team has been established to provide the leadership and deliver the efficient execution of the Cambay project.

The team comprises three new members, Mr Mike Maloney, Chief Operating Officer; Mr Andrew Pfaff, General Manager Operations who have been appointed in the last three months; and a Chief Finance Officer, whose appointment is expected to be announced soon. Mr Pete Bekkers, Chief Geoscientist and Ms Andrea Bissett, Financial Controller, who have both been with Oilex since the inception of the Cambay Tight Reservoir Project, are the other key members of the core team.

o With the core members of the team in place, Technical Director Mr Ray Barnes has advised that he will be stepping down as a Director at the Annual General Meeting in November 2012. Mr Barnes will not be replaced on the Board. The Company is grateful for Ray's contribution to the Board and his technical insight during his tenure, and appreciates his offer of assistance in the future.

o Technical responsibilities currently held by Mr Barnes will be shared between Mr Pete Bekkers, Chief Geoscientist, and Mr Andrew Pfaff, the recently appointed General Manager Operations. Mr Bekkers is the principal geoscientist involved in the subsurface interpretation of the Cambay Field. Since project initiation, he has worked closely with NuTech Energy Alliance (USA) on the detailed technical analysis, Morning Star LLC (USA) on the tight reservoir engineering and resource certification advice, and Netherland Sewell Associates (USA) on the Cambay resources assessment. Mr Pfaff provides a complementary set of skills in subsurface engineering analysis, design, completion, fracture stimulation and testing of horizontal wells as well as project management, broad drilling and production operations experience in most of the active US producing basins where resources are found in tight or shale reservoirs. Mr Pfaff also has the distinct advantage of having worked on the first tight/shale gas drilling programs in China in recent years in a joint operating venture with a government-owned oil company.

o Exploration Manager, Mr John Lamberto has agreed to move to a part-time role and he will continue to assist the Company in its evaluation of the JPDA joint venture as well as specialist geophysics analysis and interpretation related to the Cambay development program.

o Costs for the operations team in Gujarat, India have also been significantly reduced with the release of technical personnel who will not be replaced now that the new core technical team is in place.

o It is anticipated that the new Chief Finance Officer will be appointed within the next month and that they will commence duties early in 2013. In the meantime, the finance and commercial functions will continue to be ably managed by the Financial Controller and the Chief Operating Officer with excellent support from the respective finance and commercial teams in India and Perth in the interim period.

o The previous Finance Director, Mr Ben Clube, has not been replaced since his resignation in September 2012. With the impending resignation of Mr Barnes, the Board will be reduced to four Directors (one executive and three non-executive) and that structure is likely to be retained for the near term.

o The Managing Director has offered to take a reduction in salary and benefits by 20%, reducing the cost to $400,000 pa gross effective from 1 September 2012.

o The Company has relocated to more economical office premises in Perth.

Health, Safety, Security and Environment

No Lost Time Incidents were recorded for Oilex personnel or contractors at any location during the quarter.

The Company's website www.oilex.com.au is regularly updated with current information.

(1) 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 SPE following the failure of SPE to repay funds due. The assignment has been provided to BPMigas but has not yet been approved or rejected. If Oilex is paid the funds due then it will not pursue this assignment.

(2) The WA-388-P offshore exploration permit term expired on 28 August 2012 and following discussion with NOPTA, NOPTA advised on 25 October 2012 that the permit is deemed to have expired on 27 August 2012.

(1)

LIST OF ABBREVIATIONS AND DEFINITIONS USED HEREIN

For further information, please contact:

Information in this report relating to hydrocarbon reserves or resources has been compiled by Mr Ray Barnes B.Sc. (Hons), the Technical Director of Oilex Ltd who has over 38 years' experience in petroleum geology and is a member of the AAPG. Mr Barnes consents to the inclusion of the information in this report relating to hydrocarbon reserves and resources in the form and context in which it appears. Resource estimates contained in this report are in accordance with the standard definitions set out by the Society of Petroleum Engineers, Petroleum Resources Management System, 2007.

This document may include forward-looking statements. Forward-looking statements include, but are not necessarily limited to, statements concerning Oilex Ltd's planned exploration program and other statements that are not historic facts. When used in this document, the words such as "could", "plan", "estimate" "expect", "intend", "may", "potential", "should" and similar expressions are forward-looking statements. Although Oilex Ltd believes that its expectations reflected in these are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward-looking statements.

Rule 5.3

Appendix 5B

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/01, 1/6/10, 17/12/10.

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.

Sign here:…………………………………………….Date: 31 October 2012

Managing Director

Print name: B H McCarthy