HYDROCARBON DYNAMICS LIMITED — Capital/Financing Update 2014

Jun 30, 2014

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1 J uly 2014

D e ar Sharehol d er,

O n 30 June 2 0 14, Pryme E nergy Limit e d ( Pryme or the Company ) lodged a prospect u s with Aust r alian Securi t ies and Investme n ts Commiss i on (ASIC) and Australia n Securities Exchange ( ASX ) for the following of f ers:

• (a ) to raise a p proximately $5.2 millio n by a reno u nceable rig h ts issue of approximat e ly 516,680, 9 85 shares a nd 258,340,4 9 3 new opti o ns (New Securities) o n the basis o f 3 new sh a res for ever y 2 shares h eld at an is s ue price of 1 cent per s h are together with 1 fre e attaching o ption for e v ery 2 shar e s subscribed for under the Prospectu s ( Rights Issu e Offer ) . The option s have an e x ercise pric e of 2 cents each and a n expiry dat e of 23 July 2016; and

• (b ) to issue u p to 46,245,422 Adjusti n g Offer Sh a res to the p articipants o f the Marc h 2014 Rights Issue on the basis of 1 Adjusting O ffer Share for every 1 March Rig h ts Issue share deliver e d for no subscription price (Adjusting Offer),

(Prospectus) .

The funds rais e d under th e Rights Issu e Offer will b e used to:

• fund t h e Capitola O il Project;

• to pro v ide general working capital; and

• • to pay the costs of the rights is s ue offer pr o cess includi n g the unde r writing fee.

• $4.0 million of t he Rights I s sue Offer is underwritte n by Patersons Securitie s Limited (Underwriter) .

The timetable f or the Right s Issue Offe r is as follo w s:

Pro spectus lod ged with AS IC and ASX	30 June
Ap Pro pendix 3B lo spectus dged withA SX for quota tion of share s and optio ns under the	30 June
No tices sent to Shareholde rs	1 July
“E pa x” date(dat rticipate in th e from which e Offer) Shares trad e on ASXw ithout the en titlement to	2 July
Rig hts tradingc ommences	2 July
Re Rig cord Date( hts IssueO to determine ffer) eligibility of Shareholde rs to particip ate in the	4 July
An to ticipated des Eligible Shar patch of Pro eholders spectus and Entitlement and Accept ance Forms	8 July
La st day for Rig hts trading	10 July
Se curities quot ed on a defe rred settlem ent basis	11 July
Clo sing Date	17 July

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AS X notified of under-subs criptions	22 July
Iss ue date	23 July
De ferred settle ment trading ends	23 July
Ne w Securities commence normal trad ing on ASX	24 July

Further details of the capit a l structure o f the Comp a ny are set out in section 2.4 of the Prospectus.

The timetable f or the Adju s ting Offer is as follows:

Re cord Date (t o determine eligibility to participate in the Adjustin g Offer)	20 June
Pro spectus lod ged with AS IC and ASX	30 June
Ap pendix 3B lo dged withA SX	30 June
An to ticipated des Eligible Shar patch of Pro eholders spectus and Entitlement and Accept ance Forms	8 July
Clo sing Date	17July
AS X notified of AdjustingO ffer subscrip tions	22 July
Iss ue date (toa ll participan ts other than Directors)	23 July
Ne pa w Securities rticipants oth commence er than Dire normal trad ctors) ing on ASX( in respect o f all	24 July
Iss ue date (toD irectors - su bject to Sha reholder ap proval)	6 August 2014
Ne su w Securities bject to Shar commence eholder app normal trad roval) ing on ASX( in respect o f Directors -	7 August 2014

It i s anticipate d that the Pr o spectus off e ring New S e curities an d Adjusting O ffer shares w ill be mailed out to Eligible S h areholders on 8 July 2 014. The P rospectus may be viewed on th e ASX web s ite at ww w .asx.com.au or alt e rnatively o n Pryme’s w e bsite at ww w .prymeene r gy.com.

A p plication will be made to ASX for o fficial quotation of the N ew Securit i es and Adj u sting Offer shares. In the calculation of a ny entitlem e nt, fraction s will be rou n ded up to t h e nearest w hole numb e r. No shareholder appr o val is r equired for t he Rights I s sue Offer.

Overseas Shareholders

The Rights Iss u e offer is o n ly made to Eligible Sha r eholders (s h areholders with a regist e red address in Australi a or N e w Zealand o n the Record Date of 4 July 2014) . Therefore, if you are a sharehold e r with a registered address th a n in Australia or New Zealand (Excluded Shareholder) , n o offer will b e made to y o u. In maki n g this decis i on, th e Directors have taken i n to account the small nu m ber of ove r seas share h olders and t he costs an d administra t ive complexity of c omplying wi t h applicabl e regulations in jurisdicti o ns outside A ustralia an d New Zeala n d.

The Company has appoi n ted the Un d erwriter as a nominee to sell the rights to th e New Sec u rities to w h ich E x cluded Sha r eholders ar e entitled. T h e Underwrit e r will have absolute an d sole discr e tion to dete r mine the ti m ing and pricing at w hich rights will be sold and the m a nner of any such sale. The Comp a ny will pay a brokerage fee

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equal to 1.5% o n the total g ross dollar v alue of the all rights sold or $1,500 plus GST, w hichever is g reater. The net pr o ceeds (if a ny) from the sale of ri g hts after t h e deductin g of expen s es will be f orwarded t o the Exclu d ed S h areholders in proportio n to the sale of such rig h ts. Exclud e d Sharehol d ers may re c eive no net proceeds if the co s ts of the sale are great e r than the s a le proceed s .

The Adjusting O ffer is only made to pa r ticipants of t he March 2 0 14 Rights I s sue and wh o have a re g istered address in Australia o r New Zeal a nd on the Record Da t e of 20 Ju n e 2014 (Adjusting Offer Eligible Shareholder) . Therefore, if y ou were a p articipant o f the Marc h 2014 Rights Issue, but do not h av e a regist e red addres s in A u stralia or N e w Zealand on the Re c ord Date o f 20 June 2 0 14 (Adjusting Offer Excluded Shareholder) , no A d justing Offe r will be made to you.

If you have a ny questio n s in relati o n to this l e tter pleas e seek prof e ssional ad v ice or contact Pryme on +61 7 3371 11 0 3 during of f ice hours.

Y o urs sincerel y ,

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G e orge Lloyd C h airman

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