Otto Energy : Quarterly Activities & Cashflow Report

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THREE MONTHS ENDED 31 DECEMBER 2015

QUARTERLY HIGHLIGHTS

Corporate:

• Secured staged farm-in for interests (earning up to 50% Working Interest) in a multi-asset portfolio offshore Gulf of Mexico and onshore Louisiana with Byron Energy Ltd.

• Entry into one of the world's most productive and lowest cost oil and gas regions with near-term drilling.

• Closing cash of US$33.56m, equivalent to A$47.95m (AUD:USD 0.7), or ~4 cents per share.

  Exploration:

• Tanzania (50%) - Ongoing farm-down discussions and commenced preparations to drill the first frontier exploration well in Q3 2016.

• Alaska (8-10.8%) - Secured contract with Geokinetics to acquire 1,170 km2 of new 3D seismic in Q1 2016.

• Philippines SC55 - commenced structured exit from Philippine assets. Two year moratorium requested from Philippines Department of Energy.

  
  

  THREE-MONTH OUTLOOK

  
  

• Louisiana/Gulf of Mexico - commence drilling the South Marsh Island - 6 (SMI-6) appraisal well in Q1 2016 with an option to drill a subsequent well at South Marsh Island - 71 (SMI-71).

• Tanzania - Undertake farm-out campaign for Kilosa-Kilombero licences ahead of drilling commencing in Q3 2016.

• Alaska - Acquire 1,170 km2 new 3D seismic over remaining acreage area (at no cost to Otto). Develop prospect and lead inventory for drilling in late 2016/early 2017.

Alaska

Seismic acquisition Q1 2016

Drilling up to 3 wells 2H 2016/1H 2017

Louisiana/Gulf of Mexico

Drilling Q1 2016,

Potential for 3 wells in 2016

Tanzania

Drilling Q3 2016

Perth Head Office

32 Delhi St West Perth WA 6005, Australia | PO BOX 1414, West Perth WA 6872 Australia T: [phone] F: [phone] E: [e-mail] ASX Code: OEL

APPRAISAL/DEVELOPMENT

LOUISIANA/GULF OF MEXICO - SOUTH MARSH ISLAND 6

Location: Offshore Gulf of Mexico Area: 20.23 km2 Otto's Interest: 50.00% - Earning via staged farm-in with Byron Energy Ltd (Operator)

Lying in a water depth of 65 feet, the SMI-6 lease has had total production of 18 MMbbl and 36 Bcf of gas. Drilling by Byron in 2015 saw the SMI-6 #1 BP02 well completed for production in the sand interval around 100m above the primary target interval - this drilling intersected 100 feet of net pay sands. Drilling of the SMI-6 #2 well will earn Otto the rights to the following net revenue interests: • Oil Mbbl (1P-2P-3P)- (567 - 1,495 - 2,167) and a prospective oil resource of 3,603 Mbbl; and • Gas Mscf (1P-2P-3P)- (5,619 - 8,639 - 6, 667) and a prospective resource of Gas 59,198 Mscf. Drilling is planned for Q1 2016 with Otto participating in order to earn a 50% participating interest (equal to a 40.625% revenue interest) in the block.

The Hercules 264 drilling rig has been contracted by Byron. The success case outcome will see Otto book reserves during the course of 2016, with planned production development by way of low-cost tie-in to nearby infrastructure (see SM 10 A on below map) planned to be completed in or around the middle of 2017. The estimated well cost for the drilling of SMI-6 is US$8 million. Otto will pay 66.67% of these costs (US$5.3 million). Any costs above this amount in respect of the SMI-6 well and all future expenditure on the license will be in accordance with Otto and Byron's participating interest (Otto 50%). If SMI-6 drilling is successful, Otto will contribute to back- costs of US$2.1m.

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32 Delhi St West Perth WA 6005, Australia | PO BOX 1414, West Perth WA 6872 Australia T: [phone] F: [phone] E: [e-mail] ASX Code: OEL

Post the drilling in SMI-6, Otto has the option to earn a 50% participating interest in SMI-70/71 through the drilling of one well. SMI-70/71 lies to the south of SMI-6 in a water depth of 131 feet and combined production from the blocks totals 5.9mmbo and 16Bcf of gas. Drilling of the well will earn Otto the rights to the following net revenue interests: • Oil Mbbl (1P-2P-3P)- (249 - 343 - 520) and a prospective resource of Oil 2,277 Mbbl • Gas Mscf (1P-2P-3P)- (135 - 186 - 323) and a prospective resource of Gas 1,680 Mscf

Drilling is also planned for Q1 2016 with an expected total well cost of US$4.5 million. Otto will pay 66.67% of these costs (US$3 million). Any costs above this amount in respect of the SMI-71 well and all future expenditure on the license will be in accordance with Otto and Byron's participating interest (Otto 50%). In addition, Otto will contribute to back-costs of US$0.9m. As with SMI-6, successful wells will allow for reserves bookings and can be readily tied into existing surrounding infrastructure for production in 2017.

Planned target interval:

D5 sands on the western flank of the salt dome

Salt Dome

Map

Existing D5 sand production: Over 20.5Mbbl of oil and 15.2Bcf of gas have been recovered from SM72/73 D5 sand interval

D5 Sand ARTM Amplitude Map

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32 Delhi St West Perth WA 6005, Australia | PO BOX 1414, West Perth WA 6872 Australia T: [phone] F: [phone] E: [e-mail] ASX Code: OEL

Kilosa-Kilombero Permit A total of 110 km of 2D seismic was acquired over the Kilombero basin in 2013. Results suggest the presence of a Neogene-age basin with a maximum depth to basement in excess of 3,000m. The age of the sediments recorded (based on low seismic velocities) appears to be similar to that of sediments observed in the now proven oil basins of Lokichar (Kenya) and Lake Albert (Uganda), where Africa Oil (TSX.V:AOI) and Tullow Oil (LSE: TLE) have had significant success. Dip lines across the basin suggest the presence of both structural traps and traps against the main basin- bounding fault, with possible Direct Hydrocarbon Indicators (DHIs or 'Flat Spots') observed at several levels at the crest. A 2014 program to acquire 430 km of additional 2D seismic data across the Kilombero basin was undertaken during Q4 2014. The focus of the program was to: Provide additional lines across the "Kito" prospect that may become a drillable target. Cover other portions of the basin which according to the initial 2013 seismic data and earlier remote sensing data have the potential to contain additional leads and prospects. The new 2D data has been processed and detailed technical evaluation of same was completed during Q3 2015. Kito well planning is now underway with drilling expected in Q3 2016.

Pangani Permit A total of 200 km of 2D seismic has been acquired over the Mvungwe and Moshi basins. The results from the survey show that the Moshi basin in the north of the permit appears to be a basin with sedimentary fill of probable Neogene age. Further evidence from the seismic survey suggests that the basin is fault-bounded, some 25 km wide, and with basin fill to between 2,000 and 3,000m depth. During Q3 2014, a further 200 km of 2D seismic data was acquired across the Moshi basin area. The focus of this survey was to better understand the geometry of the basin and firm up structures for drilling. Processing of the new data has been completed and a thorough technical analysis was completed during Q3 2015. Mature oil kitchen with Direct charge access to Kito

Oil Charge

Shell

Moshi Basin

Pangani PSA

Recent seismic data reveals a significant Neogene basin in both Contract Areas

Kilombero Basin

Kilosa Kilombero PSA

50 km

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32 Delhi St West Perth WA 6005, Australia | PO BOX 1414, West Perth WA 6872 Australia T: [phone] F: [phone] E: [e-mail] ASX Code: OEL