KEY PETROLEUM LIMITED — Capital/Financing Update 2012

Jul 8, 2012

Petroleum Ltd Key

9 July 2012

The Manager Australian Securities Exchange Company Announcements Office Level 4/20 Bridge Street SYDNEY NSW 2000

Dear Sir

RE: INVESTOR UPDATE REGARDING DIVESTMENT OF NON-CORE ASSETS AND AN EXPLORATION UPDATE

Please find attached an ASX Announcement for Investors regarding the divestment of Key Petroleum Limited’s non-core assets together with an update on the Company’s Australian exploration activities.

Regards

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KANE MARSHALL Managing Director KEY PETROLEUM LIMITED

Key Petroleum Ltd

Suite 7, 154 Hampden Road, Nedlands, Western Australia 6009 T: +61 (0)8 6389 0322 F: +61 (0)8 6389 0697 E: info@keypetroleum.com.au W: www.keypetroleum.com.au ABN 52 120 580 618

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ASX ANNOUNCEMENT

9 July 2012

INVESTOR UPDATE ON DIVESTMENT OF NON-CORE ASSETS AND EXPLORATION ACTIVITIES

The Board of Key Petroleum Limited (“Key”) is pleased to provide the following investor update in respect of the Company’s strategy of divesting non-core assets and accelerating its Australian based exploration efforts for 2012.

UNITED KINGDOM

Key Petroleum Limited has completed a sale of its subsidiaries Key Petroleum UK Limited and Key Petroleum Weald Basin Limited which owns and operates the two small oilfields, Lidsey and Brockham in the Weald Basin, United Kingdom, to Angus Energy Weald Basin No.1 Ltd for £100,000 cash. The Board considers this to be an very good result given that these assets being operated from Australia were not profitable, even at high Brent crude oil prices. The estimated total liability associated with the abandonment and the restoration of these fields would be significantly greater than the sale price

SURINAME

Through its 50% shareholding in Portsea Oil and Gas Limited (“Portsea”), Key held an indirect 1.75% interest in the Coronie andUitkijk Blocks in Onshore Republic of Suriname. Key is pleased to announce that it has recently sold its 50% interest in Portsea for an amount of AUD50,000 cash. As a result of this sale, Key has no more financial or exploration commitments or exposure in the country of The Republic of Suriname.

TANZANIA

The Company is continuing to finalise terms for the sale of all Tanzanian interests, which include the sale of the 5% interest in the Kiliwani North development, all rights associated with the older Nyuni PSA and the entire share capital of Funguo Petroleum Pty Ltd as part of a complete divestment package of Key’s Tanzanian interests.

ITALY

Key is currently negotiating with parties regarding the sale of Key’s wholly owned subsidiary Puma Petroleum S.r.l. The Company has now been notified that its three applications for the Elba and Lampedusa areas have been rejected on the grounds of recently introduced legal decrees which forbid drilling in certain offshore waters. The Company is investigating whether there are grounds to appeal the rejection of these applications due to recently amended legal decrees in Italy. Any successful appeal could increase the value of the subsidiary company in the event that a sale of Puma Petroleum S.r.l. can be completed.

CANNING BASIN

EP438

Key, through its wholly owned subsidiary Gulliver Productions Pty Ltd (“Gulliver”), is currently working with joint venture partner Buru Energy Limited (“Buru”) to finalise the drilling program and necessary approvals for the drilling of Cyrene-1. The well is currently scheduled to be drilled immediately after the Ungani North-1 well and will target a conventional Willara Formation oil play with estimated potential of five million barrels of recoverable oil if hydrocarbons are discovered. An oil discovery at Cyrene-1 which is adjacent to the NW Highway to Port of Broome, could be rapidly brought into commercial production.

Key Petroleum Ltd

Suite 7, 154 Hampden Road, Nedlands, Western Australia 6009 T: +61 (0)8 6389 0322 F: +61 (0)8 6389 0697 E: info@keypetroleum.com.au W: www.keypetroleum.com.au ABN 52 120 580 618

In addition to the drilling and testing of the Willara Formation objective, a core will be cut through the lower Goldwyer Formation to evaluate the unconventional shale oil potential of this permit area as well as acquiring the necessary data for detailed fracture stimulation design in the event that hydrocarbons are present in this sequence.

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Hedonia-1, drilled by Gulf in 1984 on the same structure as Cyrene encountered good oil shows and fluorescence whilst drilling through the same sequence of shale. In Hedonia-1 the Goldwyer shale is 135 metres thick and is in the oil generation window.

After the drilling of the Cyrene-1 exploration well, Buru will have completed its obligations as part of the original Farmout Agreement between Gulliver and Buru and the final contributing interests will be as follows:

Buru Energy Ltd 37.5% Diamond resources (Canning) Pty Ltd (Mitsubishi Corporation) 37.5% Gulliver Productions Pty Ltd (Key Petroleum Ltd) 20% Indigo Oil Pty Ltd 5%

EP448

Further in-house technical studies by Key have identified a number of conventional leads which require additional seismic to matrix to drillable status. Key has also engaged RPS Energy to undertake a study of the unconventional potential of the Goldwyer Formation in this Permit. The Company believes that as a result of these studies the Goldwyer Formation, similar to that encountered in the EP438 area is within the oil generation window and confirms that there is potential of at least one significant unconventional Goldwyer oil play which has been called the Ambrose Prospect. In addition to this unconventional play, the four conventional structural leads that have been identified at the Nita and Willara objectives are called Holding, Garner, Walsh and Croft. The current interests in EP448 are as follows:

Gulliver Productions Pty Ltd (Key Petroleum Ltd)	70%
Indigo Oil Pty Ltd	20%
United Oregon Ltd	10%

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NORTH PERTH BASIN

EP437

The Company has been undertaking a technical evaluation and review of EP437 permit in the North Perth Basin. This review has identified conventional prospects within the Bookara Sandstone sequence of the Triassic Kockatea Shale which includes a large structure to the north and some potential unconventional play types within the Jurassic sequences in this area. The Company is pleased to announce that it has now received confirmation from the Department of Mines and Petroleum that Key’s application to have the work commitments varied from a seismic option in year 6 to a firm well has now been granted. It is now the intention of the EP437 joint venture to drill exploration well Waugh-1 and if a suitable rig can be contracted, drilled at some stage later this year. The current interests in EP437 are as follows: Key Petroleum Australia Pty Ltd (Key Petroleum Ltd) 50% Empire Oil Company WA Ltd (Empire Oil and Gas Limited) 50%

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STRATEGY AND BOARD CHANGES

Key has previously outlined its intent to dispose of its international assets and focus all efforts in Australia with particular emphasis on the Canning Basin projects and its North Perth Basin areas as part the Company’s forward strategy. The remainder of 2012 should see Key participate in at least 1 well with Cyrene-1. With the addition of ex-Santos and Conoco veteran geophysicist and petroleum engineer Ian Paton to the Board of Key, the Company is now also evaluating new ventures that will align with the current portfolio of assets and the Key strategy.

On the strategy and forward plan, Managing Director, Kane Marshall stated “I think the investment community at large would be pleased that we are fulfilling our promises. The international interests are essentially liabilities which have high overheads and consume a lot of our management time. We’ve outlined the need to maximise shareholder value by disposing of these interests and ramping up exploration efforts in Australia. We’ll now get on with our Canning and North Perth Basin activities in addition to evaluating new opportunities.”

Competent Persons Statement

Information in this ASX Release relates to information compiled by Mr Kane Marshall. Kane Marshall is a Practicing Petroleum Engineer and holds a BSc (Geology), a BCom (Inv & Corp Fin) and a Masters Petroleum Engineering. He is a member of the Society of Petroleum Engineers (SPE) and the American Association of Petroleum Geologists (AAPG).

For further information, please contact:

Kane Marshall BSc (Geology), BCom (Inv & Corp Fin), Masters PetEng SPE, AAPG Managing Director Key Petroleum Ltd

Telephone: +61 8 6389 0322 Email: kmarshall@keypetroleum.com.au