KEY PETROLEUM LIMITED — AGM Information 2019

Nov 14, 2019

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Key Petroleum Limited 2019 Annual General Meeting

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Disclaimer

The information in this presentation is an overview and does not contain all information necessary for investment decisions. In making investment decisions, investors should rely on their own examination of Key Petroleum Ltd and consult with their own legal, tax, business and/or financial advisors in connection with any acquisition of securities.

The information contained in this presentation has been prepared in good faith by Key Petroleum Ltd. However, no representation or warranty, expressed or implied, is made as to the accuracy, correctness, completeness or adequacy of any statement, estimates, opinions or other information contained in this presentation.

Certain information in this presentation refers to the intentions of Key Petroleum Ltd, but these are not intended to be forecasts, forward looking statements, or statements about future matters for the purposes of the Corporations Act or any other applicable law. The occurrence of events in the future are subject to risks, uncertainties, and other factors that may cause Key Petroleum Ltd’s actual results, performance or achievements to differ from those referred to in this presentation. Accordingly, Key Petroleum Ltd, its directors, officers, employees and agents do not give any assurance or guarantee that the occurrence of events referred to in this presentation will occur as contemplated.

The Company confirms that it is not aware of any new information or data that, in its opinion, materially affects the information included in the relevant market announcement and that all the material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.

Competent Person’s Statement

Except where otherwise noted, information in this release related to exploration and production results and petroleum resources is based on information completed by Mr JL Kane Marshall who is an employee of Key Petroleum Limited and is a qualified petroleum reserves and resources evaluator. Resources reported in this announcement are based on representative information and supporting documentation. Mr Marshall is a Practising Petroleum Engineer and Petroleum Geologist and holds a BSc (Geology), a BCom (Investment and Corporate Finance) and a Masters in Petroleum Engineering. He is a member of the Society of Petroleum Engineers (SPE), American Association of Petroleum Geologists (AAPG), The Geophysical Society of Houston (GSH), Petroleum Exploration Society of Great Britain (PESGB), Formation Evaluation Society of Australia (FESAus), Petroleum Exploration Society of Australia (PESA), South East Asia Petroleum Exploration Society (SEAPEX) and Society of Petrophysicists and Well Log Analysts (SPWLA) and has over 20 years of relevant experience. Mr Marshall consents to the inclusion of the information in this document.

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Overview & Commodity Outlook

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Company Profile

Issued Capital

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Cooper Eromanga Basin
Perth Basin
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Market Capitalisation	$10 million
Ordinary Shares	1,684,198,051
Unlisted Options	25,500,000

Board & Management

Rex Turkington	Non-executive Chairman
Min Yang	Non-executive Director
Geoff Baker	Non-executive Director
Dennis Wilkins	Non-executive Director
Kane Marshall	Managing Director
Ian Gregory	Company Secretary
Ric Jason	Exploration Manager

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2019 Highlights

• Zero Health and Safety Incidents in Operations

• Zero Environmental Incidents in Operations

• Completion of L7 Farmout Agreement with a subsidiary of Triangle Energy (Global) Limited (“Triangle”)

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• Completion of ATP 920 and Ace Area Farmout Agreement with Pancontinental Oil & Gas NL (“Pancon”)

• Almost half of all rehabilitation and decommissioning completed at L7

• ATP 920, 924 and ATP 783 Primary Work Commitments completed

• Land Access Agreement executed to drill Bookara and High Cliff Target in the Bookara Shelf Project

• In principle agreed terms for land access agreed to drill Kingia target in Bookara Shelf

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• Key Services integral part of the business with revenue to bottom line and rapidly expanding business model into 2020

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Commodity Sentiment – Oil Bulls

Sentiment Improving with Asset Managers and the Decline in US Shale

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Brent Price $USD
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Source: EIA

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US Weekly Oil Production
2014-2016
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Source: EIA

• Brent oil prices appear to have stabilised with hedge funds in North America continuing to buy oil derivatives in November, anticipating the oil market has entered an upward price cycle as the global economy steadies and the surge in shale production fades.

• Long term, the decline in capital investment in new oil supply is highly likely to trail an eventual decline in oil consumption (from substitution to newer greener alternatives). The aggregate capital expenditure on conventional oil is at multi-decade lows, an important point for contrarian investors.

• The oil price crash of 2014 2016, forced US shale producers to retreat back to ‘sweet spots’ and abandon new frontiers for unconventional. This period saw significant ‘sweet spots’ drilled out to service exceptionally high debt levels and production.

• The shale industry does not have the same ‘sweet spots’ from –

• which it can fund substantial step out instead focus could move to smaller scale low quality onshore conventional targets.

• Along with OPEC maintaining cuts at the time of the Aramco IPO, volatility in the oil price is expected to continue however the investment environment in exploration and development in Australia remains favourable.

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Commodity Indicators – Oil Internationally Demand Robust and Global Production Stable

• Consumption and demand for liquid fuels in excess of 100 mm bb/d continues globally with US Shale dominating production and China experiencing a decline.

• China has around 80 days of oil in storage, including those in its strategic petroleum reserve (SPR), oil storage at oil firms and commercial stocks.

• China is the world’s largest importer of crude oil and will complete building the second phase of its strategic oil storage facilities in 2020. Imports may begin to slow however production in other areas globally will taper off with little in the way of new oil discoveries due to continued cuts to exploration budgets.

• Australia has around 20 days stockpile of fuel reserves and little in the way of refinery infrastructure in Australia for domestic crude (Port Bonython, Kwinana and Inland Oil Refinery).

• At some point Australia will need to address its lack of energy security policy and investment must flow back into domestic oil exploration.

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Source: EIA

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Global Production
US Shale
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Source: https://yearbook.enerdata.net/crude-oil/world-production-statitistics.html

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Commodity– East Coast Gas Market of Australia Niche Opportunities Exist

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• Impending gas shortages on the east coast of Australia will see future domestic gas prices heading towards LNG netback price equivalents, which is the price of LNG in Asia less the cost to get Australian gas there. LNG netback is linked to the spot price.

• Traditional east coast reserves such as the Gippsland Basin are depleting with no new 2P reserves to meet demand. Opportunities exist to create niche supply in the market.

• Unless significant new reserves are commercialised shortly (seemingly unlikely), investment will potentially accelerate in Cooper Basin gas exploration where Key has a substantial footprint and production is dominated by Beach and Santos.

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Source: Australian Energy Regulator

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Source: Australian Energy Regulator

Australian Financial Review, March 28, 2019

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Commodities, Infrastructure and Key Right Time, Right Place

• The Bookara Shelf Oil Project is located 400 kilometres from Kwinana Refinery – clear pathway to monetise assets.

• Meeba and Canaway Ridge Oil Projects are located 400 kilometres and 166 kilometres respectively from the Eromanga Oil Refinery.

• The Tanbar Gas Project is located in close proximity to APA Group owned Caprentaria Gas Pipeline ~ 17.5 kilometres.

• Access to Santos owned Mount Howett Gas Field complex, located 95 kilometers east of the Tanbar Gas Project, for the processing of raw gas has been granted via the MoU between Key and Santos executed in March 2019.

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Upstream Assets

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Cooper Eromanga Basin, Queensland Meeba Project (ATP 920 and Northern Extent of ATP 924)

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• The Meeba Project comprises the drillable Ace Prospect, and the trend extending north all the way to the Inland Oilfield.

• A Farmout Agreement was executed for the Meeba Project with Pancon who will earn 20% in ATP 920 and 25% in the Ace Area by funding 27% of Ace-1, they have also made an up-front payment of $150,000.

• Further drilling participation is being discussed while Meeba and Tanbar projects are renewed by the Regulator

• Key has identified additional prospects within the Meeba Project from seismic reprocessing, including along trend from the Inland Oilfield These prospects have been incorporated into the Prospective Resource Range for the Meeba Project now defined as 1U (Low) 11.3 mmbbls, 2U (Best) 33.7 mmbbls, and 3U (High) 83.7 mmbbls*.

Cautionary Statement : Prospective Resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) and relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

*As announced to the ASX on 30 October 2019

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Cooper Eromanga Basin, Queensland Tanbar Gas Project (ATP 924)

• Extensive flooding earlier in the year prevented Key from undertaking on ground preparatory works however a Land Access Agreement for each of the Meeba and Tanbar Gas Projects is expected to be executed imminently.

• A Letter of Intent was entered into with Refine Energy for use of Rig #2 in the drilling of Ace-1 and either Alfajor-1 or Taj-1. The rig is currently stacked east of Mount Isa.

• A contingent programme is to be included in anticipation of success.

• Future development offtake has been discussed with the Department of State Development in Queensland utilising either raw gas through the Santos operated Mount Howett complex or tied into the Carpentaria Gas Pipeline.

• The Prospective Resource range for the Tanbar Gas Project is defined as 1U (Low) 150 Bcf, 2U (Best) 500 Bcf, and 3U (High) 950 Bcf*.

Cautionary Statement : Prospective Resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) and relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

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*As announced to the ASX on 11 April 2019

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Cooper Eromanga Basin, Queensland Canaway Ridge Project (ATP 783)

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• Anomalous geochemical values above background were detected and have now been interpreted to be across the Chandos Updip Prospect which was previously identified on vintage 2D seismic.

• Down-dip and north-west of the Chandos Updip Prospect, Chandos-1 was drilled in 1966 and recovered 3.9 barrels of oil from an interval 39 metres in thickness during a drill stem test from the Wimma Sandstone.

• Chandos currently being considered as part of a contingent drilling programme in the Meeba and Tanbar Programme

• Prospect chance of success for Chandos Up-dip is 18% with prospective resource range as 0.7 mm bbls (1U and low case), 2.3 mmbbls (2U and base case) and 4.5 mmbbls (3U and high case)*.

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Cautionary Statement: Prospective Resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) and relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

*As announced to the ASX on 7 November 2019

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Perth Basin, Western Australia Bookara Shelf Project (WA 481-P, EP 437 and L7)

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• Key is progressing towards the drilling phase with a signed Access Agreement with the Landowner completed for the Wye Knot-1 exploration well, a dual Bookara and High Cliff target. The Well Management Plan has been approved from Regulator and the Operator now awaits feedback on Safety and Environmental Plans.

• Follow up potential exists at each of the Parce and Becos Prospects which are on trend from Wye Knot and have multi level targets, including at each of the Kingia and High Cliff Formations which have been the subject of success at Strike Energy’s West Erregulla-2 gas discovery.

• The Parce-1 Well Management Plan is being prepared with access terms agreed in principle and due to be formalised shortly. The Joint Venture will consider this as a drilling candidate in the same campaign as Wye Knot-1.

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Perth Basin, Western Australia Bookara Shelf Project (EP 437 and L7) cont’d

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• Completion of the Mount Horner Farmout Agreement with budget preparation in anticipation of Work Programme activities (3D seismic acquisition and drilling of two wells) commencing.

• Offshore studies, including seismic inversion, is underway in WA-481-P to de-risk deeper Permian prospects, including the Kingia Formation. Key is currently managing this work on behalf of the Joint Venture as part of the completion of the Work Programme prior to the permit renewal process.

• Reservoir parameters are exceptional in well penetrations on the Bookara Shelf with petrophysical determinations in the order of 20% to 25% average porosity, comparable to West Erregulla-2.

• Most notably, in the Mount Horner area of L7, oil shows in the Permian reservoirs of the first wells in the high side closure were never followed up, a discovery in this basin validates Key strategy to acquire assets along the Bookara Shelf for the deeper Triassic and Permian oil plays.

• Key has mapped a number of Waitsia style leads in a similar structural setting to that of Waitsia. Key also believes that the low side closure directly under Mount Horner has significant potential to deliver similar results to the discoveries immediately on trend.

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Business Development

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Key Services Growing Oilfield Services Capability

• Rehabilitation activities at Mount Horner Oilfield have progressed well with flowline removal completed and disturbed areas fully rehabilitated. Key has developed low impact and safe process for removing oilfield flowlines, disposal and remediation.

• Other areas of infrastructure have also had decommissioning activities completed and all costs fully reimbursed by Mitsui.

• Abandonment of three wells in the Mount Horner Oilfield is to be conducted in the fourth quarter of 2019 with remaining abandonment to be completed early in 2020.

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Key Services Rapidly Expanding Business

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• Completed work for other clients including remote areas.

• Civil earthworks capability increased to include work for drilling pad preparation, decommissioning and transportation services.

• Camp and logistics capabilities proven with scope to increase camp inventory and deploy to other projects.

• Transportation services division expanded to be able to freight crude.

• The Services part of business is to be integrated across all upstream assets providing operational support.

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2020 Outlook

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Outlook

• High Cliff and Kingia Drilling in Perth Basin Well Management Plan approved by Regulator and awaiting Safety and Environmental approvals.

• Mount Horner decommissioning work is ongoing and planned to be carried out in conjunction with Perth Basin Drilling Programme in order to minimise personnel movement.

• Finalise the Mount Horner Work Programme and Budget with Triangle comprising 3D seismic and the drilling of two wells.

• Awaiting renewal of Cooper Basin ATP 920, ATP 924 and ATP 783 to facilitate formalising drilling programme with Refine Energy Rig #2 which is committed to Key for Meeba and Tanbar programmes.

• The WA-481-P: renewal and offshore exposure to the upside in deeper Permian prospectivity has seen significant interest from third parties.

• 2020 is to be a year of material activity after a period of rationalising and building portfolio opportunities and leveraging operational capabilities.

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For further information please contact

Mr JL Kane Marshall

Telephone: +61 (0) 8 9381 4322

Email: investors@keypetroleum.com.au Updated Website: www.keypetroleum.com.au

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