CENTRAL PETROLEUM LIMITED — Management Reports 2013

May 22, 2013

ASX ANNOUNCEMENT & MEDIA RELEASE

ASX CODE: CTP

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23 May 2013

MANAGING DIRECTOR’S MARKET UPDATE

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It is n o w more th a n a year si n ce Central Petroleum L td (ASX: C T P) ( “Central” or “Company” ) began a process o f change which has bee n dramatic, d isruptive b u t ultimatel y highly suc c essful in redi r ecting the C ompany’s f o cus and its fortunes. As the incom i ng MD & C E O, I consid e r it is import a nt that shareholders remember th e crisis the Company fac e d so that t h ey can appreciate what t h e Company has achiev e d and wher e we expect to be in the next 12 mo n ths.

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WHERE WAS THE COMPANY?

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During the calend a r 2011 the Company s h ares trade d on at a V W AP of 6.1 c ents which is less than half the VW A P of the last 12 mo n ths. The u n derlying r e ason was t hat althou g h the Company had sub s tantial land assets, it also had commensurate e xploration e xpenses w h ich it could not meet. In the abs e nce of an y significant revenue s o urces the investor m a rkets anticip a ted that C e ntral woul d again hav e to raise capital to fun d the explo r ation requi r ed to maintain its permi t rights and to keep the C ompany solvent.

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While t he Surprise discovery w as great n e ws for the C ompany’s longer term prospects, i t also increa s ed the capital required t o explore a n d develop the Surprise p rospect. T h e Share Pu r chase Plan t h at followe d was only s upported b y 9% of shareholders, despite bei n g extende d four times. The Com p any faced a serious f inancial cri s is. The former Mana g ing Director was termin a ted as an executive, a nd subseq u ently remo v ed as a di r ector by a 75% vote b y the shareh o lders with nearly 50% voting. Petroleum No m inees Pty L t d had bou g ht close to 5% of the iss u ed stock and, through requisitionin g of an EGM , was seekin g to replace the whole board.

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The C o mpany wa s facing $30 million in e xpenditure commitme n ts on its petroleum p e rmits before their respe c tive renew a ls in the ne x t 18 months and nearl y $10 million commitme n ts on its co a l assets in the same period. It h ad little d a ta to guid e the effici e nt and effective develo p ment of it s Surprise f i eld. The C o mpany had 19 full time employe e s to advan c e the explor a tion of 58 m illion acres.

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The C o mpany’s fo c us was diff u sed and it w as not cle a r whether C entral was a CSG comp a ny, a UCG c o mpany, a h elium com p any, a coa l company o r an oil & g as company, let alone what propor t ion of its s carce human and capit a l resource s it would be allocating to each of those activiti e s to suppo r t developm e nt and gen e rate reven u e.

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WHAT THE COMPANY HAS ACHIEVED?

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Since A ugust last y e ar Central h as diligentl y addressed the comple x set of issu e s it faced a n d has now cr e ated a soli d platform u p on which t o commerci a lise its acre a ge.

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The fir s t step was t o provide clarity of pur p ose so we c an focus th e Company e ffort. It sho u ld be clear now to all st a keholders t hat Central is an oil an d gas comp a ny, pure a n d simple, with an increa s ed focus o n the large potential in t he Horn Va l ley Siltston e and the A r thur Creek Shale. The A m adeus Basi n is a proven hydrocar b on provinc e blessed wi t h existing i n frastructur e . The petrol e um system around Mereenie and Palm Valley appears lik e ly to exte n d to the Surprise area gi v en the analogous quali t y of the res p ective crud e .

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Most i m portantly, the farmou t s to Santos and Total a nnounced i n the secon d half of last year provid e $90 millio n for Stage 1 Developm e nt capital, o f which onl y $12 millio n is to be s o urced from C e ntral. If bo t h farmouts proceed to S tage 3 ove r the next fo u r years, on these areas alone nearly double Central’s mark e t capitalisa t ion will ha v e been sp e nt. To pla c e these d e als in contex t , $78 millio n will be sp e nt on these areas over t he next 12 m onths wit h out a single share being issued to c o ver those exploration c osts. By c o mparison, t o cover th e past $93 m illion explor a tion expen d iture (Cent r al’s share b e ing $85 million) prior t o January 2 0 12 over 1.3billion shares were issued.

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The B o ard has be e n restructu r ed to such an extent t h at only on e current di r ector was o n the board at the tim e when the former Managing Director’s appo i ntment wa s terminate d . In addition to the B o ard chang e s, manage m ent has also been reinvigorated . Since joining as Managing Director I’ve appoin t ed two for m er executi v es who we r e an integr a l part of th e QGC succes s story. To have peopl e like Mike Herrington , our Chief Operating O fficer, and Leon Devan e y, our Chie f Commerci a l Officer, experienced i n exploratio n and commercialisation of oil and ga s , as well as the trials and tribulatio n s which occ u r in growin g a small ca p company i n to an ASX Top 50 company is very r e assuring. W ith an incr e ased focus o n explorati o n now fina n cially viable a s a result o f the farmo u t deals, it w as timely that we could also attract such experienced and w e ll‐qualified geo‐techni c al people a s Mike Bucknill and D r. Robbert Willink an early payba c k on our m o ve to Brisbane.

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We ha v e been co n centrating o n de‐riskin g the Surprise discover y , processin g and interpreting the 3D Seismic sh o t over the area this tim e last year, a nd analysing the result s of the six‐ m onth Extended Producti o n Test. Thi s work culminated in th e constructi o n of a stat i c reservoir m odel leadin g to the certification of r e serves and t he next ste p towards c o mmercialis a tion.

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The re f ocusing of the Compan y led to a decision to exit the coal p e rmits. Wit h the coal m a rkets being in a cyclical downturn i t became di f ficult to ju s tify the financial costs a ssociated ( n early $10 m i llion) with holding the tenements . Both the human res o urce costs and the financial burde n of holdin g the permits were far too grea t for the C o mpany at this stage of its develo p ment, and t he decision was taken t hat all of our people an d money sh o uld be focu s ed on our e x citing future in the o i l and gas permits. T h is was cle a rly in the best intere s ts of shareh o lders.

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It is m o re than 14 months sin c e this Com p any embar k ed on a ca p ital raising ( which in th e past came o n average o nce every 7 months). This is alre a dy the lon g est period in the Com p any’s history between c a pital raisin g s. This has been achie v ed through a reductio n of our net cash‐ burn r a te from a little over $ 1 million pe r month to a little over $1 million a quarter (around $400k per month) despite ar o und one‐th i rd increase in staff nu m bers. The efficiencies were achiev e d through a 40% redu c tion in und e rlying cost s coupled with the focu s on joint‐v e nture activiti e s, particularly where w e are the Operator.

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WHERE WE EXPECT TO BE IN 12 MONTHS

We ai m to be in pr o duction at S urprise on t he western side of the f a ult this cal e ndar year. W ith the dri l ling campai g n on our acreage by 30 June 2014 w e aim to ha v e drilled on a least 3 differe n t locations, one at Surprise East (wi t h drilling s c heduled to c ommence i n April next y ear), four c o re holes in the Southern Georgina B a sin and on e well at Mt K itty (sched u led in Janu a ry 2014). If this can be achieved a record 6 o r 7 holes will be drilled in the next 12 months.

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In addi t ion, over 2 0 00km of seismic will ha v e been sho t and processed hopeful l y uncoverin g numer o us attracti v e leads and prospects. T he product i on at Surprise #1 shoul d cover our ongoing cash requirements lea d ing to a de g ree of fina n cial indepe n dence for t h e first time.

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As a re s ult of this c o mmerciall y focused ac t ivity, Centr a l should have achieved t he solid found a tions neces s ary for it to become a n e w Australian force in the onshore c o nventional and uncon v entional pe t roleum ind u stry.

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Richard Cottee

Managing Director and Chief Executive Officer

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Company enquiries, please contact:

Richa r d Cottee, M anaging Director +61 7 3181 38 0 0

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Media enquiries, please contact:

Martin Debelle at Citadel +6 1 2 9290 3 0 33 or Mobile +61 (0) 4 09 911 18 9

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General Disclaimer and explanation of terms:

This document may contain forw a rd-looking st a tements. Forward lookin g statements a re only pre d ictions and are subject to ris k s, uncertaint i es and assu m ptions which are outside t h e control of C entral. Thes e risks, uncerta i nties and a s sumptions include (but a r e not limite d to) commo d ity prices, c u rrency fluctuations, econo m ic and financial market c onditions in various countries and r e gions, envir o nmental ris k s and legislative, fiscal or r egulatory de v elopments, p olitical risks, project dela y or advance m ent, approv a ls and cost es t imates. Actu a l values, res u lts or events may be mat e rially differen t to those ex p ressed or im p lied in this do c ument. Give n these unce r tainties, rea d ers are cauti o ned not to p lace relianc e on forward l ooking statem e nts. Any for w ard looking statement in this docum e nt is valid only at the d a te of issue of this docum e nt. Subject t o any contin u ing obligatio n s under applicable law a n d the ASX L isting Rules, or any other Li s ting Rules o r Financial Regulators’ rule s , Central, its agents, directors, officers, e mployees, a d visors and co n sultants do n ot undertake any obligation to update o r revise any information o r any of the fo rward looking statements in this docu m ent if event s , conditions or circumsta n ces change or that unex p ected occurre n ces happen to affect su c h a stateme n t. Sentence s and phrase s are forwar d looking stat e ments when t h ey include a n y tense fro m present to f u ture or simil a r inflection w ords, such a s (but not lim i ted to) "believ e ," "estimate," "anticipate," " plan," "predic t ," "may," "ho p e," "can," "w i ll," "should," " expect," "inte n d," "is design e d to," "with t h e intent," "p o tential," the n egative of these words or such other v ariations the r eon or compar a ble terminol o gy, may indi c ate forward l o oking statem e nt.

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