21 June 2017

The Manager

The Australian Securities Exchange The Announcements Officer

Level 4/20 Bridge Street SYDNEY NSW 2000

Dear Sir/Madam

WESTERN AUSTRALIAN EXPLORATION UPDATE

Level 2

47 Stirling Highway

Nedlands WA 6009

T: + 61 (08) 6389 0322

F: + 61 (08) 6389 0697

investors@keypetroleum.com.au

We attach herewith an ASX Announcement for Investors pertaining to exploration activities in EP437, R1 and EP104.

Regards

IAN GREGORY

Company Secretary

KEY PETROLEUM LIMITED

ACN 120 580 618

Level 2

47 Stirling Highway

Nedlands WA 6009

T: + 61 (08) 6389 0322

F: + 61 (08) 6389 0697

investors@keypetroleum.com.au

ASX Announcement

Western Australian Exploration Update

EP437 - Perth Basin, Western Australia

Key Petroleum Limited (via wholly owned subsidiary) (Operator) 43.47%

Rey Resources Limited (via wholly owned subsidiary) 43.47%

Pilot Energy Limited 13.06%

Key has progressed its planning for the proposed Wye Knot-1 well including:

A long lead and well planning authority for expenditure for wellheads, tubulars, materials and other ancillary equipment has been issued to the joint venture and been duly executed;

The tendering process for contractors and other project management services has commenced;

Preliminary documentation for the approval of the drilling activity has been prepared which includes generic safety management system and environment plan documentation. Formal lodgement of approval documents will be submitted after the tendering process for contractors has been completed; and

A preferred Wye Knot-1 well location has been chosen to minimise disturbance and environmental footprint but other well locations are also being considered and discussions with a number of landowners in the area are currently being undertaken.

The Wye Knot oil prospect is located down-dip from the Wye-1 gas discovery, drilled in 1996 at the crest of a four-way dip closed structure that benefits from additional closure via faulting to the northeast and northwest.

Wye-1 tested gas at commercial rates from two good quality reservoirs, with the Bookara and the Arranoo sandstone reservoirs flowing 4.4MMscf per day and 2.5MMscf per day, respectively. Neither of the reservoirs exhibited a water leg and both exhibited good, live oil shows during drilling. The presence of oil shows indicates that the reservoirs were originally oil-filled at the Wye location, with the oil being displaced to a down-dip rim by subsequent gas migration in to the crest of the structure.

This dual-charge model is evident elsewhere within the north Perth Basin, including at the nearby Dongara gas field, where the Dongara-8 well produced at an initial rate of 8000 barrels of oil per day from an oil rim.

The Wye Knot-1 well to test the Wye Knot Prospect is planned to be positioned at a step out distance sufficient enough to investigate the potential for an oil leg below the gas pay encountered in Wye-1 in the Triassic Bookara and Arranoo sands but also sufficiently test the potential of the Permian sequence which was not fully intersected at Wye-1.

SE

Wye Knot-1 (Proposed) Wye-1

Top Bookara Depth Map

Wye-1

º

DN95-106

Wye Knot-1 º (Currently Proposed)

DN95-102

Due to the limited data available on the Permian and the reliance on intraformational seals down-dip, no prospective resources for this interval have been assigned but this interval still represents upside in the prospect. The drilling of Wye Knot-1 will provide insight into the distribution of the Permian in the western portion of the Allanooka Block and may assist with future definition of prospective Permian resources in EP437.

As previously announced, the Operator has made the following assessment of the prospective resources of the Triassic interval, incorporating the Arranoo potential within the Kockatea Formation, as follows:

Gross (100%)

Net to Key (43.47%)

Permit

Prospect/ Field

Petroleum Fluid

Low (1C)

Estimate

Best (2C) Estimate

High (3C) Estimate

Low (1C)

Estimate

Best (2C) Estimate

High (3C) Estimate

EP437

Wye Knot

Oil

0.16

MMbbls

1.4

MMbbls

6.1

MMbbls

0.07

MMbbls

0.61

MMbbls

2.65

MMbbls

Notes - General:

  1. MMbbl = million barrels; Bcf = billion cubic feet

Notes - Prospective Resources:

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

  2. The estimate of Prospective Resources included in the announcement have been prepared in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System ("PRMS") approved by the Society of Petroleum Engineers. The PRMS defines prospective resources as those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations.

  3. The prospective resources were estimated by mapping the extent of the prospect using the seismic data and applying ranges of volumetric parameters based on regional data. Recovery efficiencies were estimated using generalised recovery factors which Key assessed as reasonable. The parameters were then combined deterministically.

  4. Gross Prospective Resources are 100% of the on-block volumes estimated to be recoverable from the Prospect in the event that a discovery is made and subsequently developed.

  5. The volumes reported are "Unrisked" in the sense that the Geological Chance of Success (GCoS) factor has not been applied to the designated volumes. The Operator estimates various GCoS for the prospects.

R1 - Canning Basin, Western Australia

Gulliver Productions Pty Ltd (Operator) 85.23%

Indigo Oil Pty Ltd 14.77%

Retention Lease R1 is in Year 1 of its second renewal. The Operator is progressing its Year 1 work commitments, which are the following:

250km2 of new Airborne Aerial Electromagnetic Survey (AEM-PTP)

The Operator has submitted all relevant approval documentation and is awaiting final assessment and approval by DMP WA to acquire this aerial survey over R1. The survey will test for hydrocarbon anomalies by the measurement of redox cells produced by the upward migration of hydrocarbons. The survey is designed to fully cover the Lease, providing a baseline response from the Point Torment Gasfield and potentially highlighting additional hydrocarbon anomalies that coincide with mapped prospects along the prolific Lennard Shelf Trend. Particular interest is focussed on the Stokes Bay (Stokes Bay-2) Prospect, which is designed to properly test the Anderson Formation.

Current geological and geophysical interpretation indicates that a Grant Formation channel may have incised the Anderson seals at Stokes Bay-1, resulting in an invalid test of the Anderson at this location. Stokes Bay Prospect is located to the northwest and updip of the Stokes Bay-1 objective and is interpreted to have a draped seal.

The Operator believes this technology is an effective and non-intrusive method of testing the area.

Figure 1. Grant Formation Channel incision at Stokes Bay-1 and location of Stokes Bay Prospect to the northwest

Environmental development studies related to the Point Torment tidal and mudflat area

The Operator plans to undertake field assessment of the Point Torment-1 and Stokes Bay-1 causeways and other associated infrastructure to determine the safest and most environmentally sound method of development of both current and future discoveries.

Pilot Energy Limited published this content on 21 June 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 20 June 2017 23:55:12 UTC.

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