HYDROCARBON DYNAMICS LIMITED — Interim / Quarterly Report 2017

Oct 30, 2017

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31 October 2017

September 2017 Quarterly Activity and Cashflow Report

Summary

• Completed Rights Issue raising $3.05m

• Three large and two smaller north American producers have requested field trials

• Entered into Sales and Marketing arrangements in Middle East & South America

• Continued assessment of north American heavy and paraffinic oil accumulations for potential joint venture or acquisition

• Contacted over 50 potential customers in north America, Asia and the Middle East for the sale of MultiFlow and Tank Clean

• Received numerous oil samples from potential customers for laboratory testing

• Extended Executive Chairman’s contract by 6 months to the end of March 2018

• Cash position at 30 September of A$3.78m

New marketing Arrangements

Indago entered into two new arrangements to market products in regions that Indago executives and sales staff do not have the resources to service themselves. This is a key part of Indago’s marketing strategy whereby it will concentrate its financial and human resources on opportunities in North America and seek to enter into sales, marketing and distribution arrangements with suitable partners in other parts of the world.

In the Middle East, the Company has awarded Gulf Crude Dynamics (GCD) a distribution agreement that will allow GCD to market MultiFlow and Tank Clean in the Middle East on an exclusive basis. The contract was awarded with firm milestones for GCD to reach in order to maintain distribution rights. GCD also have the right to establish a blending facility in the Middle East for HCD products and long‐ term exclusive marketing rights in the region upon payment to Indago of US$20 million. It is anticipated that GCD will need to establish successful sales and raise significant capital to exercise this option. Advanced discussions occurred during the quarter to apply HCD products down‐hole in a very substantial heavy oilfield as well as to participate in tank cleaning operations on a trial basis in Abu Dhabi.

ABN: 75 117 387 354 Tel: +61 3 9642 2899 | Fax: +61 3 9642 5177 Level 6, 412 Collins Street, Melbourne VIC 3000 Australia

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Indago has also entered into a Sales and Marketing agreement with NovaTech LLC to promote sales to over a dozen significant producers in several Central and South American countries including Colombia, Ecuador, Peru, and the Caribbean nations.

The Company is also in the process of identifying partners for sales initiatives in China, India and Eastern Europe, as well as global partners for the Tank Clean product.

North American Initiatives

Indago has focused on identifying oil accumulations in North America where HCD Multi‐Flow could cost‐effectively improve production, handling, storage and/or transport of heavy or paraffinic crudes. In Canada, Indago identified the conventional heavy oil plays of the Upper and Lower Manville Geological Formation and the Athabasca Oil Sands of Alberta, and the paraffinic crudes of the Cardium and Viking Formations of Alberta and Saskatchewan as oil accumulations that could benefit from the application of HCD Multi‐Flow. Indago has engaged large upstream companies in each of these major plays, has received numerous crude oil samples for independent laboratory testing, and is currently negotiating field trials with three of the upstream companies. In the USA, Indago identified the paraffinic crudes of the Uinta basin of Utah as crudes suitable for application of HCD Multi‐Flow, and is working with three of the largest oil producers in the basin to collect “live” crude samples from well‐heads in the field. Indago also identified several heavy oil fields in West Texas, Southwest Texas and Oklahoma and is negotiating with independent producers to test Multi‐Flow in gathering pipeline networks and storage facilities. Indago is negotiating field trials also in gathering pipeline networks and storage facilities with two independent California Heavy Oil producers.

Financial

During the Quarter Indago completed a fully underwritten 1 for 3 Rights Issue that raised approximately $3 million prior to costs. The issue was well supported by shareholders. At 30 September, Indago Energy had cash resources of $3.78 million.

Newkirk Project, Kay County Oklahoma (100% WI 81.25%NRI)

No work was conducted during the Quarter. After lease expiries and modest re‐leasing, Indago’s net acreage position reduced from acres of Indago leases expired leaving Indago with a net position of 4,049 net acres to 3,715 net acres. The Company expects a further 567 net acres will expire during the current quarter.

ABN: 75 117 387 354 Tel: +61 3 9642 2899 | Fax: +61 3 9642 5177 Level 6, 412 Collins Street, Melbourne VIC 3000 Australia

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Management & Director Arrangements

The Company extended the Executive Chairman’s contract for an additional 6 month period ending on 31 March 2018. The contract was extended on the same terms and conditions as previously announced to the ASX on 6 April 2017 with a slight adjustment for CPI.

Executive Director Mr Allan Ritchie, has become a non‐ Executive Director, and will continue to focus his efforts on developing HCD product sales in the Middle East and elsewhere via direct involvement with INK partners.

Oil and Gas Tenements

Project	Location	Interest acquired or disposed of during the quarter net to Indago	Total acres owned net to Indago	Working Interest held as at 30 September 2017
Newkirk	Kay and Noble Counties, Oklahoma	334	3,715	100% in Acreage,50% in JV

For further information please contact:

Stephen Mitchell

Chairman Indago Energy Limited

Julie Edwards Company Secretary Indago Energy Limited

Telephone: +61 3 9642 2899

Website: www.indagoenergy.com

ASX Code: INK

ABN: 75 117 387 354 Tel: +61 3 9642 2899 | Fax: +61 3 9642 5177 Level 6, 412 Collins Street, Melbourne VIC 3000 Australia

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Glossary

$	Australian Dollars
US$	United States Dollars
Bbls/day	Barrels (of oil) per day
MBO	Thousand barrels of oil
MMBO	Millions barrels of oil
MBOE	Thousand barrels of oil equivalent
MMBOE	Millions barrels of oil equivalent
BOE	Barrels of oil equivalent
BOE/day	Barrels of oil equivalent per day
EUR	Estimated Ultimate Recovery
Mcf	Thousand cubic feet (of natural gas)
Mcfd	Thousand cubic feet (of natural gas) per day
MMcf	Million cubic feet of natural gas
NRI	Net revenue interest
WI	Working interest
TVD	Total vertical depth
TMD	Total measured depth
MD	Measured depth
3.28 feet	Equals 1 metre

ABN: 75 117 387 354 Tel: +61 3 9642 2899 | Fax: +61 3 9642 5177 Level 6, 412 Collins Street, Melbourne VIC 3000 Australia

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

Indago Energy Limited

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ABN Quarter ended (“current quarter”)

75 117 387 354 30 September 2017

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter	Year to date
		$A’000	(9 months)
			$A’000
1.	Cash flows from operating activities
144	Receipts from customers	220	220
1.2	Payments for
	(a) exploration & evaluation	(115)	(202)
	(b) development	-	-
	(c) production	-	-
	(d) staff costs	(325)	(683)
	(e) administration and corporate costs	(244)	(758)
1.3	Dividends received (see note 3)	-	-
1.4	Interest received	-	11
1.5	Interest and other costs of finance paid	(1)	(2)
1.6	Income taxes paid	-	-
1.7	Research and development refunds	-	-
1.8	Other - Royalties	(40)	(103)
1.9	Net cash from / (used in) operating	(505)	(1,517)
	activities
2.	Cash flows from investing activities
2.1	Payments to acquire:
	(a) property, plant and equipment	(5)	(5)
	(b) tenements (see item 10)	-	-
	(c) investments	(5)	(996)
	(d) other non-current assets	-	-

• See chapter 19 for defined terms 1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter	Year to date
		$A’000	(9 months)
			$A’000
2.2	Proceeds from the disposal of:
	(a) property, plant and equipment	-	-
	(b) tenements (see item 10)	-	-
	(c) investments	-	-
	(d) other non-current assets	-	-
2.3	Cash flows from loans to other entities	5	(159)
2.4	Dividends received (see note 3)	-	-
2.5	Other (cash purchased on acquisition)	-	4
2.6	Net cash from / (used in) investing	(5)	(1,156)
	activities
3.	Cash flows from financing activities
3.1	Proceeds from issues of shares	3,051	3,047
3.2	Proceeds from issue of convertible notes	-	-
3.3	Proceeds from exercise of share options	-	-
3.4	Transaction costs related to issues of	(208)	(208)
	shares, convertible notes or options
3.5	Proceeds from borrowings	-	57
3.6	Repayment of borrowings	(17)	(40)
3.7	Transaction costs related to loans and	-	-
	borrowings
3.8	Dividends paid	-	-
3.9	Other (provide details if material)	-	-
3.10	Net cash from / (used in) financing	2,826	2,860
	activities
4.	Net increase / (decrease) in cash and
	cash equivalents for the period
4.1	Cash and cash equivalents at beginning of
	period	1,485	3,653
4.2	Net cash from / (used in) operating
	activities (item 1.9 above)	(505)	(1,517)
4.3	Net cash from / (used in) investing activities
	(item 2.6 above)	(5)	(1,156)
4.4	Net cash from / (used in) financing activities
	(item 3.10 above)	2,826	2,860
4.5	Effect of movement in exchange rates on	(15)	(54)
	cash held
4.6	Cash and cash equivalents at end of	3,786	3,786
	period

• See chapter 19 for defined terms

1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

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5. Reconciliation of cash and cash Current quarter Previous quarter
equivalents $A’000 $A’000
at the end of the quarter (as shown in the
consolidated statement of cash flows) to the
related items in the accounts
5.1 Bank balances 3,786 1,485
5.2 Call deposits - -
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
5.5 Cash and cash equivalents at end of 3,786 1,485
quarter (should equal item 4.6 above)
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6. Payments to directors of the entity and their associates Current quarter $A'000

6.1 Aggregate amount of payments to these parties included in item 1.2 (250) 6.2 Aggregate amount of cash flow from loans to these parties included 5 in item 2.3

6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

• 6.1 - Directors fees, Consultancy and Royalties

• 6.2 - Director loan repayment (acquired with HCD purchase)

7. Payments to related entities of the entity and their Current quarter associates $A'000

7.1 Aggregate amount of payments to these parties included in item 1.2 - 7.2 Aggregate amount of cash flow from loans to these parties included - in item 2.3

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• 7.3 Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

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• See chapter 19 for defined terms 1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

8.	Financing facilities available	Total facility amount	Amount drawn at
	Add notes as necessary for an	at quarter end	quarter end
	understanding of the position	$A’000	$A’000
8.1	Loan facilities	-		-
8.2	Credit standby arrangements	-		-
8.3	Other (please specify)	-		-
8.4	Include below a description of each facility above, including the lender,		interest rate and
	whether it is secured or unsecured. If any additional facilities have been entered into or are
	proposed to be entered into after quarter	end, include details of those facilities as well.

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9.	Estimated cash outflows for next quarter	$A’000
9.1	Exploration and evaluation		112
9.2	Development		-
9.3	Production		-
9.4	Staff costs		273
9.5	Administration and corporate costs		184
9.6	Other - Royalties		65
9.7	Total estimated cash outflows		634

10.	Changes in	Tenement	Nature of interest	Interest at	Interest at
	tenements	reference		beginning	end of
	(items 2.1(b) and	and		of quarter	quarter
	2.2(b) above)	location
10.1	Interests in mining	Newkirk	100% in Acreage,	4049 Acres	3715 Acres
	tenements and		50% in Joint Venture
	petroleum tenements
	lapsed, relinquished
	or reduced
10.2	Interests in mining
	tenements and
	petroleum tenements
	acquired or increased

• See chapter 19 for defined terms 1 September 2016

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: 31 October 2017 Company secretary

Print name: Julie Edwards

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms 1 September 2016

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