Pilot Energy : June 2017 Quarterly Activities and Cashflow Report

ABN 86 115229 984

Level 3, 1060 Hay Street, West Perth WA 6005

T: +61 8 9480 0470

F: +61 8 9321 0320

Announcement to ASX 26 July, 2017

g Completion of $720,000 capital raising at 15 cents per share (post-consolidation)

g Independent expert valuation of 30 cents per share (post-consolidation)

g Removal of WA-481-P year 5 and 6 commitment wells approved by NOPA

g 12 month suspension/extension granted by NOPTA on WA-503-P

g Joint venture approved long lead items AFE for drilling Wye Knot-1 exploration well

g Completion of 1 for 50 share consolidation, and less than marketable parcel share sale facility

As announced on 3 July 2017, the Company received approval from the National Offshore Petroleum Titles Administrator (NOPTA) to replace the WA-481-P year 5 and year 6 commitment wells with an alternative work program, designed to de-risk high-graded prospects for future drilling.

WA-481-P is currently in permit year 4, expiring 19 August 2017. Previously,

each of permit years 5 and 6 incorporated a commitment to drill an exploration well. Pilot Energy applied to NOPTA to remove the commitment wells, on the basis that further technical studies are required before further drilling can take place within the permit. As such, a revised work program is now in place for years 5 and 6, comprised of seismic data reprocessing and geological/geophysical studies. These studies are designed to address the primary geological risk associated with the various prospects located within WA-481-P, such that an inventory of drill- ready prospects can be finalised for drilling.

It is likely that a firm well commitment will be required to be included upon renewal of the permit, within 2 years of its expiry in August 2019. The removal of the current commitment wells does not

Dunsborough Trend

Frankland gas discovery 42 Bcf

Leander Reef Trend

Dunsborough oil

discovery 6 MMbbls

Frankland Trend

EP437

Cliff Head oil field 18 MMbbls

Cliff Head South Trend

preclude exploration drilling before that time, subject to identifying a farmin partner. The Joint Venture will market WA-481-P to potential farmin partners in parallel with the ongoing technical work, and regards removal of the commitment wells as significantly improving the project's marketability.

WA-481-P is located adjacent to existing oil and gas infrastructure, within shallow waters to the west of numerous oil and gas fields, including the offshore Cliff Head oil field and the onshore Waitsia gas discovery. The 17,475 km2 permit covers a major portion of the offshore extension of

the north Perth basin. The primary petroleum plays are for oil and/or gas within the Dongara Sandstone and the Irwin River Coal Measures (IRCM). Both oil and gas are proven within the permit,

with the Frankland gas and the Dunsborough oil discoveries representing contingent resources of up to 59 Bcf gas and 9.8 MMbbls oil, respectively.

The permit is extensively covered by 2D and 3D seismic data, which confirms the presence of thirteen structural prospects in four distinct areas. Individual prospects offer potential for up to 78 MMbbls oil, and three of the areas are substantially de-risked by prior discoveries (at Cliff Head, Dunsborough and Frankland respectively).

During the Quarter, Pilot Energy continued to make progress with preparations to conduct a geochemical survey over the Leschenault conventional gas prospect. Leschenault is a "three-way dip" feature that relies on closure to the west by a bounding fault. The well-defined structure has two

structural culminations, either of which is a potential drilling location for a vertical well to test the two conventional reservoir targets, being the Permian Sue Sandstone and the Triassic Lesueur Sandstone.

EP480

Dampier to Bunbury Natural Gas Pipeline (DBNGP)

The main geological risk associated with Leschenault is one of cross-fault seal, i.e. whether the western bounding fault has sealing capacity to retain hydrocarbon gas migrating in to the structure. To address this risk a non- invasive geochemical survey will be conducted over the coming months, with results expected in Q4 2017. The aim of the survey is to identify

EP416

Leschenault prospect (Top Permian Depth Map)

anomalies due to micro-seepage of hydrocarbon gas components from depth, that are broadly conformable to the prospect's area of structural closure. This would suggest that either or both reservoir targets are gas-bearing, de-risking the prospect for future drilling.

As announced on 7 November 2016, RISC completed an independent assessment of prospective resources for the two main reservoir target intervals at Leschenault, confirming the potential for very significant volumes of gas, as follows:

The EP437 Joint Venture Operator (Key Petroleum) is currently preparing to drill the Wye Knot-1 exploration well. As announced on 21 June 2017, a long lead item and well-planning Authority for Expenditure for wellheads, tubulars, materials and other ancillary equipment has been approved by the joint venture. The tendering process for contractors and other project management services has commenced, and preliminary documentation for regulatory approval of the drilling operations has been prepared.

Formal lodgement of approval documents will occur once the tendering process for contractors is complete. A preferred drilling location for Wye Knot-1 has been identified, however the final well location remains subject to securing a land access agreement.

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 2.5 MMscf per day respectively. Neither of the reservoirs exhibited a water leg, and both exhibited live oil shows during drilling.

The presence of shows indicates that the reservoirs were originally oil-filled at the Wye- 1 location, with the oil likely being displaced to a down-dip oil 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

Dongara Gas Field

Wye Knot

Mt Horner oilfield

produced at an initial rate of 800 barrels of oil per day from an oil rim.

Waitsia Gas

Field

The Operator's assessment of the prospective resources targeted by Wye Knot-1 is as follows:

An oil discovery at Wye Knot-1 could be commercialised rapidly, and at low cost. Pilot Energy estimates the Net Present Value of a commercial discovery at between US$15 and US$20 per barrel, at current oil prices and depending on the size of the discovered resource. Importantly, success at Wye Knot-1 will de-risk other prospects within EP437, including Becos, Updip Wattle Grove, and Ganay.

Pilot Energy expects to receive a further R&D refund in Q1 2018, of approximately A$100,000, based on ongoing costs associated with an R&D project, which is nearing completion.

Block WA-507-P is located within the prolific Northern Carnarvon Basin, covering an area of 1,622 km2 over the Exmouth Plateau. The block is covered by an existing, high quality 3D seismic dataset, which reveals the presence of three very large structures, ranging from 27 km2 to 121 km2 in area.

These prospects have very significant prospective resources for gas and/or oil within the Triassic Mungaroo reservoir, which hosts much of the hydrocarbons discovered to date in the Northwest Shelf. The prospective resources (oil and/or gas) have been independently assessed by Gaffney Cline & Associates, as per the Company announcements of 25 February and 20 October, 2015. The permit is located in the outboard part of the Mungaroo delta system, where the reservoir is believed to be thick and areally extensive, and the hydrocarbon source formations are believed to have been deposited in a more marine environment. This provides the potential for a working oil system within the permit.

Licensing of the 6,368 km2 "Gnaraloo/Cazadores" multi-client 3D seismic dataset data is the main work commitment associated with the three-year primary term of the permit, ending 16 November 2017. Pilot Energy has paid the Permit Award Fee associated with the seismic license agreement, and with a "drill-or-drop" decision not required until November 2019, the Company has fulfilled the main work commitments associated with the Primary Term.

Figure: 3D Seismic Image Across Three Main WA-507-P Prospects (image shown courtesy of TGS Nopec)

As announced on 16June 2017, NOPTA has approved an extension of the primary term of exploration permit WA-503-P, with a suspension of the associated work commitments until 12 May 2018.

An 80km2 3D broadband seismic survey was required to be completed before 12 May 2017, however this has not been possible due to the absence of a suitable seismic vessel within Australian waters. While Pilot Energy has a low-cost contract in place to complete the survey on a multi-client basis, the survey's small size does not justify mobilising a vessel from overseas.

Pilot Energy considered various alternative solutions, including acquiring the survey on a proprietary basis with other vessels that are currently located overseas, however the cost of mobilisation and demobilisation is prohibitive. The seismic contractor has advised that a vessel is scheduled to mobilise in Q4 2017, and on this basis NOPTA has granted the twelve-month extension to the permit's primary term.

Block WA-503-P is located offshore Western Australia within the Dampier Sub-basin, inboard of the giant Northwest Shelf complex and on trend with numerous oil and gas discoveries; including the Legendre and Hurricane fields. The shallow water depth across the block (maximum 70 metres) allows for drilling by lower cost "jack up" drilling rigs.

The primary exploration focus of WA-503-P is Lower Cretaceous to Upper Jurassic sandstone reservoirs within the oil rich Legendre Trend, situated along the eastern flank of the Lewis Trough. The decommissioned Legendre field is situated some 20 km to the northeast of the block, and produced over 40 MMbbl of oil from excellent quality sandstone reservoirs.

During the reporting period the Company completed a Less Than Marketable Parcel share sale facility. Under the Listing Rules of the Australian Securities Exchange, any shareholding valued at less than $500 is considered to be a "Less Than Marketable Parcel". The Closing Date for receipt of Share Retention Forms was 28 April 2017, and of the 1,090 shareholders who held Less Than Marketable Parcels at the Record Date, Share Retention Forms were received from 144 shareholders holding a combined 10,398,650 shares.

834 holders of Less Than Marketable Parcels holding a combined total of 33,443,652 shares, which were sold to a third party for a total consideration of $66,887 (being 0.2 cents per share). Those shareholders have received payment, via Computershare. Having completed the Less Than Marketable Share Sale Facility, the number of Pilot Energy shareholders is now reduced from some