HYDROCARBON DYNAMICS LIMITED — Capital/Financing Update 2011

Jan 3, 2011

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4 January 2011

Deshotels 20-H No.1 Flow Test Update

M echanical issues an d the impa c t of holida y s continu e to delay t h e flow tes t ing and c o mpletion o f the Deshot e ls 20-H No.1 well in t h e Turner Bayou Chal k project.

T o summar i se progres s to date – the horizo n tal leg of t h e well intersected a n u mber of m a jor fractur e z ones in th e targeted A ustin Chal k formation and flowe d oil and ga s to surfac e during drilling. A liner (casing) wa s run throu g h the hori z ontal leg a nd cemented in place. Twenty i n tervals, comprising a n a ggregate 6 40 feet o f the 3,755 feet lengt h of the h o rizontal leg, were p e rforated. A plan wa s i m plemented to acidiz e each of t h e perforat e d intervals with the g o al of cleaning up the perforation s o f residual c ement an d enhancin g communi c ation bet w een the p e rforated in t ervals and the oil an d g as bearing fracture z o nes.

P rogress w i th the acidizing proce d ure has b e en imped e d by the m echanical f ailure of p a ckers use d to selective l y isolate e a ch perfor a ted zone and ensure that the ac i d is direct e d to the most relevant a reas of th e formation. As a res u lt, it appe a rs that th e perforate d zones wh i ch would b enefit mo s t from acidizing have n o t been ef f ectively tr e ated and o il and ga s productio n to date is adversel y a ffected. The acidizin g procedur e has bee n temporari l y suspend e d pending a revised remediatio n p lan and th e securing o f appropri a te service s .

In the mea n time, prod u ction facilities, compri s ing oil sto r age tanks, a natural gas flow lin e connectin g to a nearby natural ga s sales line and associ a ted equip m ent, are b e ing install e d.

T he sched u le for co m pletion of t he production faciliti e s and the effective a cidizing of the well i s d ifficult to predict but i s expected to be with i n three weeks. At th a t time a c o mprehens i ve flow te s t w ill be carried out to establish t h e flow ca p acity of t h e reservoi r . Followi n g this the well will b e i m mediatel y put into production.

W hile it is n ot believe d that the c u rrent outp u t of the w e ll is an in d ication of i t s producti o n potentia l , the well is n ow producing oil at a p proximate l y 600 barr e ls per day and natur a l gas at a p proximatel y 5 00 mcf pe r day throu g h a 20/64 inch choke.

N otwithstanding, the f r ustration c a used by t h e delays i n bringing t he well int o producti o n, Pryme i s c onfident that the ulti m ate perfor m ance of th e well will c onfirm its v iew that th e Deshotel s 20-H No. 1 w ell will be a significant oil producer which will provide an attractive financial r e turn.

S hareholde r s will be k e pt informe d as activiti e s progres s .

P ryme has a 40% wor k ing interes t (30% net r evenue interest (NRI)) in this we l l.

Project Description

T he Deshotels 20-H N o .1 well, in Pryme’s T u rner Bayo u Chalk project in the N orth Bayo u Jack Field, i s the first d eep well t o be drilled within the Turner Bayou 3D seismic surv e y. The w e ll has bee n d rilled to a d epth of 1 6 ,400 feet (5,000 met r es) vertically with a 3 , 755 feet ( 1 ,144 metr e ) horizont a l l e g through the Austin Chalk for m ation whi c h is predo m inantly oil bearing i n this regio n . The we l l l o cation wa s confirme d using hig h resolution 3D seismi c data fro m a survey c arried out in 2007 an d d ata from s u rrounding w ell bores.

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T urner Bay o u is one o f Pryme’s high value projects. It is located in Avoy e lles Parish, Louisian a . P ryme has a 40% int e rest in th e Turner B a you Chal k project ar e a, which is containe d within th e T urner Bay o u 3D seis m ic survey , and a 52 % interest in the bala n ce of Turn e r Bayou. The Turner B ayou proj e ct compris e s approxi m ately 80 s q uare mile s (50,000 a c res) whic h have bee n imaged b y a proprieta r y 3D seis m ic survey. Primary t argets are contained within six p rospectiv e formation s r anging in depth from t h e Frio for m ation at 3, 0 00 feet, t o the Tuscaloosa form a tion at 18, 0 00 feet.

F or further information pl e ase contac t :

Justin Pettett Ryan Messer Managing Director Chief Operating Officer Pryme Oil and Gas Limited Pryme Oil and Gas Limited T elephone: + 61 7 3371 1103 Telepho n e: +1 713 4 01 9806 Website: www.prymeoilandgas.com ASX Code: PYM OTCQX Code: POGLY

P ryme Oil a n d Gas Limit e d is an Au s tralian oil a n d natural g a s producer a nd explore r with intere s ts in the Gu l f S tates of the U.S. The c o mpany has oil and gas exploration p rojects foc u sed on Lou is iana, the fi f th-largest oi l - p roducing st a te in the U. S . These pr o jects are funded in part by existing c ash flow. P ryme’s boa r d of director s a nd manag e ment team has over 1 0 0 years of energy ind u stry experience and ha s uniquely f ocused loc a l k nowledge, u nderscored by the prov e n track rec o rds of its managers an d directors. D irectors of the compan y a re George L loyd (Non- E xecutive C h airman), Ju s tin Pettett ( Managing D irector) and Ryan Mess e r (Executiv e D irector) an d Greg Short (Non-Exec u tive Directo r) .

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