INVICTUS ENERGY LTD — Capital/Financing Update 2012

Dec 20, 2012

ASX Announcement 21 December 2012

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Sunbird Executes Agreement to Acquire 870 Bcf Ibhubesi Gas Project Offshore South Africa

• Agreement executed to acquire 870 Bcf (2C) Ibhubesi Gas Project offshore South Africa for an initial US$1.5m

• Sunbird will acquire 76% of production licence; JV partner PetroSA holds 24%

• Largest undeveloped gas discovery in South Africa

• Large scale gas to power development plans to supply high value local energy market

• Opportunity to develop an energy project of national significance

Southern Africa gas explorer and developer Sunbird Energy Ltd (ASX:SNY) is pleased to announce that it has executed an agreement to acquire a 76% interest in the 870 Bcf (2C) Ibhubesi Gas Project offshore west coast South Africa for an initial purchase price of US$1.5 million.

The acquisition, when completed, will provide Sunbird with a 76% interest in Production Right Block 2A, which covers a 5,000km[2] area within the Orange Basin and contains the Ibhubesi gas discovery. The block is located 380km north west of Cape Town and 105km off the coast of the Northern Cape Province.

Sunbird Managing Director Will Barker said: “Following the recent launch of PetroSA’s Ikhwezi Project, the Ibhubesi Gas Field is now the largest undeveloped gas discovery in South Africa. Through this acquisition and the subsequent development of the project, we are able to transform Sunbird from a gas explorer to one of the leading gas developers and producers in southern Africa.”

On completion of the transaction, which is partly subject to approval of a transfer of title from the South African Department of Mineral Resources, Sunbird will have the right to operate and develop the Ibhubesi Gas Project. Existing joint venture partner PetroSA, the national oil company of South Africa, will retain its 24% interest in the block.

Beyond the initial US$1.5m paid today, the following additional enhancement payments have also been agreed with the vendors, conditional on Sunbird achieving project milestones and commercial development success:

• US$1m payable upon Ministerial approval of transfer of title

• US$5m payable on execution of a Gas Sales Agreement

• US$10m on Final Investment Decision or First Gas Sales

• Sales Enhancement Fee equal to 1% of net gas sales revenues

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630

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The gas field has been explored and appraised over the past 14 years. Since 1998 eight wells have been drilled and undergone production testing, together with the acquisition of 1,880 km[2] of 3D seismic. An independent assessment of the field in 2009 by a leading international reserves auditor estimated that the Ibhubesi Gas Field contained the following resources:

Gross Contingent Resources for Sequence 14 Sand(Bcfe)	Gross Contingent Resources for Sequence 14 Sand(Bcfe)	Gross Contingent Resources for Sequence 14 Sand(Bcfe)
1C	2C	3C
201	869	1,366

Note: the resource is classified as “contingent” under the Society of Petroleum Engineers’ (SPE) Petroleum Resources Management System, as there is currently no sales agreement in place. On execution of a Gas Sales Agreement the resource estimates will convert to reserves on a proven, probable and possible basis (i.e. 1P, 2P and 3P).

In addition to the existing resource base, the production licence provides significant exploration upside with numerous further drilling targets defined by the extensive 2D and 3D seismic data. Estimates of these prospective resources are detailed in the table below:

	Unrisked Gross Prospective Resources (Bcf)
Reservoirs	P90	P50	P10
Sequence 14 Sand **(outside 3D) **	4,360	6,369	9,082
Sequence 15 Sand	1,189	1,702	2,324
Kudu Sand	106	286	628
TOTAL	5,655	8,357	12,034

Gas Field Properties

The Ibhubesi Gas Field is comprised largely of a series of channel sand deposits. Reservoir depths range from 3,000 to 3,500m at average water depths up to 250m. These deposits are characterised by geometrically complex but highly productive reservoirs, with porosity ranging from 16% to 25% and permeability averaging 100 mD and up to 200 mD. Production tests conducted on the discovery wells generated flow rates averaging 22.5 MMcf/d with 351 bbl/d of condensate from a single zone and up to a high of 72 MMcf/d with 1,450 bbl/d of condensate from a test of multiple zones, demonstrating the high productivity of the field.

The gas composition of the field is high quality with no impurities requiring treatment. The pipeline quality gas also contains valuable Liquid Petroleum Gases and condensate, with yields estimated at 20 barrels of LPG and condensate per 1 MMcf.

Production Right

The Block 2A Production Right was registered in October 2009 for a term of 25 years. The transaction will see Sunbird acquire 100% of two South African companies from their ultimate

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630

2

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parent companies, namely Forest Oil Corporation and The Anschutz Corporation. Acquisition of the two companies will provide Sunbird with an aggregate 76% interest.

The Production Right is currently under a 5 year Gas Market Development Period that enables the operator to secure a gas sales agreement to underpin development of the field prior to commencing the 25 year production period.

There are no exploration or development work commitments during the Gas Market Development Period, which can be extended subject to approval by the Petroleum Agency of South Africa.

Under the Production Right’s associated Environmental Management Plan, existing approvals are in place for the drilling and development of the block, a 100km pipeline to Island Point and an onshore gas processing facility together with other associated infrastructure.

Will Barker said: “The Production Right provides Sunbird with a fully-approved 25 year licence term with the flexibility to commence development as soon as commercial off take and funding agreements are in place and without any obligations for current work or capital commitments.”

Development Opportunity

Standard Bank, on behalf the Block 2A JV partners, has undertaken a detailed Feasibility Study for the development of the Ibhubesi Gas-to-Power Project. The Feasibility Study is based on the development of the field to supply an 811 Megawatt (MW) gas-fired power plant. The study assessed development options, regulatory requirements, market conditions, project economics and funding options.

The Feasibility Study demonstrated that the Ibhubesi Gas-to-Power Project provides a unique, economically attractive and commercially competitive source for the supply of electricity to the highly constrained electricity market along the west coast of South Africa.

Market Opportunity

Southern Africa has traditionally relied heavily on coal for power generation with close to 90% of all power being source from base load coal-fired power plants. With a lack of domestic gas supply and limited peaking power capacity, Ibhubesi is uniquely positioned to provide a local gas supply that will greatly assist the region in meeting its growing energy needs, improve its energy security and alleviate power shortages.

With the vast majority of South Africa’s power generation capacity located in the coal fields of eastern South Africa, Ibhubesi’s gas can be used to expand power generation on the west coast. This location on the Western Cape provides significant advantages to the national electricity grid including mitigating transmission losses, providing critical load-following and peaking capacity (complimenting wind and solar) at economically competitive tariffs.

Gas use in South Africa is dominated by PetroSA and Sasol as feedstock to their large scale Gas-toLiquid (GTL) facilities, with only very limited supplies available for power generation and the domestic gas market. Currently gas is sourced via pipeline from Mozambique for Sasol’s GTL facilities in Secunda and Sasolburg and from offshore the Southern Cape for PetroSA’s GTL facilities

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630

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in Mossel Bay. PetroSA are undertaking development drilling at their Ikhwezi Project with the aim of extending the operating life of the Mossel Bay facility.

The opportunity also exists to displace the use of diesel as the fuel source for the 1,300 MW Ankerlig Power Station located north of Cape Town. The Ankerlig Power Station is critical in meeting peak power requirements and the use of diesel for the gas turbine facility leads to very high running costs. Ibhubesi is ideally positioned to provide an alternative fuel source for this facility.

Significant Project Milestones

With the substantial technical, engineering and commercial work completed on the project to date, Sunbird will be focused on achieving major milestones that deliver significant increases in the underlying asset value. These milestones include:

• Secure Gas Sales Agreement

• Convert contingent resource to proven reserves

• Undertake a Front End Engineering and Design (FEED) study on development plans

• Secure project funding

• Undertake development/appraisal drilling program

• Grow the reserves base to support development expansion

Complements Existing Sunbird Operations

The Ibhubesi Gas Project provides a strategic fit with Sunbird’s business strategy to supply gas to the under-supplied and high-value energy market within South Africa. Sunbird’s management team has a strong track record for the development of large scale gas developments.

Sunbird’s existing joint venture partner in South Africa, Umbono Capital, will also provide a key role in the advancement of the project. Umbono’s combination of technical skill, experience with the South African regulatory system, government relations and industry contacts will be valuable to achieving project milestones in a timely manner.

Mr Barker said: “With approximately AUD$6 million in cash reserves prior to the acquisition and no additional work commitments on Block 2A, Sunbird remains well funded to complete the existing core hole drilling program at its Mopane Project and to advance it to pilot production drilling in 2013.”

“This has enabled the Ibhubesi acquisition to be funded out of Sunbird’s existing cash on hand.”

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630

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Figure 1. Sunbird’s Ibhubesi Gas Project in Block 2A and surrounding licence holders.

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Figure 2. Production testing of the A-K2 well, DST#1 31 MMcf/d, Ibhubesi Gas Field in 2000.

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630

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For further information please visit www.sunbirdenergy.com.au or contact:

Will Barker Managing Director, Sunbird Energy Ltd Tel: +61 8 9463 3260 Kat Fremlin Media Contact, Allchurch Communications Tel: +61 8 9381 6625

About Sunbird Energy Ltd

Sunbird Energy Ltd is an ASX-listed (ASX:SNY) gas explorer and developer focused on southern Africa where limited domestic gas supply and growing energy needs have created significant opportunity for the development of large scale energy projects.

Sunbird holds a 76% stake in the 870 Bcf (billion cubic feet) Ibhubesi Gas Project offshore of the west coast of South Africa, acquired in December 2012. Ibhubesi is South Africa’s largest undeveloped gas field. It has multiple development opportunities including gas-fired power projects to supply the high value South African market. Sunbird’s joint venture partner in the project is PetroSA (24%), the national oil company of South Africa.

Sunbird also has a portfolio of five Coal Bed Methane (CBM) projects covering an extensive area (9,904km[2] ) of prospective coal basins across in South Africa and Botswana. Sunbird is conducting a phased exploration program that will define the resource base and demonstrate the commercial potential of its portfolio of CBM assets which contain a Best Estimate Gas-in-Place of 5.3 Tcf (trillion cubic feet).

Sunbird Energy Ltd – ACN 150 956 773 Level 1, 50 Ord Street, West Perth, WA 6005 www.sunbirdenergy.com.au T: +61 (0) 8 9463 3260 F: +61 (0) 8 9462 6630