AusTex Oil : Full Year Reserves Report

ASX / Media Release

29 March 2017

2016 FULL YEAR RESERVE REPORT

FULL YEAR HIGHLIGHTS

• 1P Reserves of 6,689 mboe as at 2016 Year End;
• Net Present Value (NPV10) for 1P reserves of $32.24m;
• 10% Increase in NPV from previous reserves report; and
• Recent acquisitions deliver well above prices paid and create drill ready opportunities.

AusTex Oil Limited

A.C.N. 118 585 649 ASX: AOK

OTCQX: ATXDY

Corporate Snapshot

Market Cap: AU$18.0m

@ $0.032

p/share (undiluted)

Shares on issue

Ordinary: 562.5m

Preference: 220.1m

Options: 38.0m

Shareholders: 1,930

Directors

Michael Stone

(Non-Executive Chairman)

Richard Adrey

(Co-Managing Director)

Nick Stone

(Co-Managing Director)

Russell Krause

(Non-Executive Director)

Justin Clyne

(Non-Executive Director & Company Secretary)

Contact

Level 9, 2 Bligh Street,

Sydney NSW 2000 AUSTRALIA Tel [phone]

Fax [phone]

www.austexoil.com

https://twitter.com/AusTexAOK

AusTex Oil Limited (ASX: AOK, OTCQX: ATXDY, AusTex or the Company), is pleased to provide shareholders with a summary of its independent full-year reserves estimates. The independent reserves estimates were evaluated and prepared by Pinnacle Energy Services LLC in Oklahoma City in the United States.

The NPV10 for 1P Reserves is US$32.24m, based on the January 1st, 2017 NYMEX strip pricing, representing a 10% increase in net reserves since the Company's last reserves report (refer ASX announcement of 31 August, 2016). In addition to the increase in net reserves there are several positive factors to be taken out of the assessment which gives the Company reason to believe that a robust drilling campaign can continue to prove the underlying worth in the Company's growing asset base. Some of these factors include:

• The Company's recent acquisition of Southwest Petroleum (refer ASX announcement

  18 November, 2016) delivered reserves of $6.617m, more than double the acquisition price of $3.25m (which also included real estate and capital equipment independently appraised at $1m to our net ownership);

• A significant increase in drill locations through recent acquisitions not accounted for in the reserves estimates;

• Conservative drilling rates were used in the assessment of 12 new wells at Snake River beginning in June 2017 and 2 wells per year at Southwest whereas the board believes a more robust campaign is warranted at current prices and, subject to the success of these wells, should contribute to a higher assessment in the future;

• The fact that only one new well was drilled in 2016 means that there is little new well data that could be used to support a more robust assessment of proved undeveloped reserve locations; and

• No assessment of any 2P reserves due to current oil economics.

The Board believes that this is a conservative estimate of the Company's reserves position. The Company's recent acquisitions have delivered several drill ready locations not factored into the reserves assessments.

Executive Commentary

Co-Managing Director, Richard Adrey, commented:

"There are reasons to believe in a more positive outlook for the future with a relatively sustained period of stability in both the oil price and vender pricing.

"The Board reiterates its view expressed in previous reserves assessments that we do not believe prices for oil and gas can last at the depressed levels seen in recent years.

"As noted in previous announcements, we remain confident in the embedded value of our assets at Snake River and in our recent acquisitions and believe we are seeing an opportune time to commence a robust drilling campaign once again with the forward NYMEX curve appearing more attractive than in recent times."

Net Reserves and Net Present Value

Table 1 demonstrates the Net Reserves (after working interests and royalties are removed but before taxes) and Net Present Value as of December 31, 2016 for the combined prospect areas of the Snake River Project as well as the Sweet, Ceja and Southwest Prospect Areas in Oklahoma and the Company's acreage in Kansas:

Combined Prospect Areas:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	118	1,555	8,073	2,901	0	62,826	24,456
Proved Non-producing (PNP)	1	8	53	17	805	(483)	(459)
Proved Undeveloped (PUD)	33	732	3,601	1,332	12,175	22,932	8,243
Total Proved (1P)	152	2,295	11,727	4,250	12,980	85,275	32,240

Table 1: Net Reserves for the combined project and prospect areas Snake River Project, Oklahoma:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	43	900	7,830	2,205	0	42,426	16,936
Proved Non-producing (PNP)	1	8	53	17	150	171	69
Proved Undeveloped (PUD)	23	638	3,255	1,180	10,925	20,213	7,090
Total Proved (1P)	67	1,546	11,138	3,402	11,075	62,810	24,095

Table 2: Net Reserves for the Snake River Project in Oklahoma Sweet Prospect, Oklahoma:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	7	0	0	0	0	0	0
Proved Non-producing (PNP)	0	0	0	0	0	0	0
Total Proved (1P)*	7	0	0	0	0	0	0

Table 3: Net Reserves for the Sweet Prospect in Oklahoma * Uneconomic until workovers are performed Kansas:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	6	47	0	47	0	1,021	396
Proved Non-producing (PNP)	0	0	0	0	0	0	0
Total Proved (1P)	6	47	0	47	0	1,021	396

Table 4: Net Reserves for the Company's acreage in Kansas Ceja Prospect, Oklahoma:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	6	115	0	115	0	2,971	1,133
Proved Non-producing (PNP)	0	0	0	0	0	0	0
Total Proved (1P)	6	115	0	115	0	2,971	1,133

Table 5: Net Reserves for the Company's Ceja Prospect in Oklahoma Southwest Prospect, Oklahoma:

Reserve Class	Number of Properties	Net Reserves		Net Reserves	Net Capital	Net Cashflow	NPV Disc @ 10%
Oil MBL	Gas MMCF	MBOE (1:6)	M$	M$	M$
Proved Developed Producing (PDP)	59	492	243	532	0	16,408	5,992
Proved Non-producing (PNP)	0	0	0	0	655	(655)	(528)
Proved Undeveloped (PUD)	16	94	346	152	1,250	2,719	1,153
Total Proved (1P)	75	586	589	684	1,905	18,471	6,617

Table 6: Net Reserves for the Southwest Prospect in Oklahoma Pricing

As stated above, the NYMEX strip pricing as of January 1, 2017 was used for this evaluation. The price forecast is as follows:

Year Oil Gas
2017	$56.19	$3.63
2018	$56.59	$3.14
2019	$56.10	$2.87
2020	$56.05	$2.88
2021	$56.21	$2.90
2022	$56.51	$2.93
2023	$57.23	$3.02
2024	$57.70	$3.16
2025	$58.03	$3.31
2026	$58.03	$3.46
2027	$58.03	$3.61
2028	$58.03	$3.76
2029+	$58.03	$3.90

Table 7: NYMEX strip pricing forecast

Based on an evaluation of actual oil prices received by the Company from January 2016 to December 2016, differentials to NYMEX prices were applied to each lease.

The calculated oil price differential for Snake River was $(1.15) per barrel and the calculated gas price differential was -14% per mcf. The Kansas Prospect area oil differential was $(2.43) per barrel and the Sweet Prospect area oil differential was $(1.30) per barrel and -14% per mcf for gas. The Ceja Prospect area oil differential was $(1.15) per barrel and the calculated gas price differential was

-14% per mcf for gas. The Southwest Prospect area oil differential was $(1.50) per barrel and the calculated gas price differential was -10% per mcf for gas.

Taxes

Oklahoma severance tax rate used for existing production wells is 7.095% for both oil and gas. All new wells drilled in Oklahoma have a severance tax of 2% for 36 months which increases to 7.095% thereafter. Kansas severance taxes used are 4.33% for both oil and gas. Any ad valorem tax is assumed to be included in lease operating expenses.

Expenses

Fixed operating expenses of $594/well/month and variable expenses of $9.06/Bbl oil produced are being used for the Snake River and Ceja areas. For the Sweet Prospect area, fixed operating expenses being used are $494/well/month with variable expenses of

$37.12/Bbl oil produced. In the Kansas Prospect area, fixed operating expenses are $166/well/month and variable expenses are

$22.17/Bbl oil produced. For the Southwest Prospect area, operating expenses of $235.66/well/month and variable expenses of

$13.63/Bbl oil produced are being used.

Capital expenditures in the Snake River area for future wells is $475,000 per well which includes costs for drilling the required saltwater disposal wells and other infrastructure. Capital expenditure in the Southwest area for future wells is $250,000 per well.

Future Development Timeline

Future wells in the Snake River were assumed to be drilled one well per month starting in June 2017 with all Proven Undeveloped locations will be drilled by April 2019. Future wells in the Southwest area were assumed to be drilled at a pace of 2 per year beginning in March 2017 with all Proven Undeveloped locations being drilled by September 2021.

Methodology and Assumptions

Information used in the report was provided by AusTex Oil Limited's US based subsidiary entities and supplemented by data gathered from public sources. The evaluation was performed using SEC reserve standards and the NYMEX strip pricing as of 1 January, 2017.