Strike Energy : 24-02-2017 Strike Energy’s Half Year Financial Report (2 MB)

Directors' Report

ST RI KE E N ER G Y L IMI TE D

The Board of Directors (the "Board" or the "Directors") of Strike Energy Limited (the "Company") and its subsidiaries (together referred to as the "Group") submit their report for the half-year period ended 31 December 2016.

The names and details of the Company's Directors and Officers who were in office during or since the end of the half- year period and until the date of this report are outlined below. All Directors and Officers were in office for this entire period, unless otherwise indicated:

During the half-year period, the Group focused on the advancement and further evaluation of its Southern Cooper Basin assets in South Australia and entered into sale agreements for its production assets in the United States.

Exploration and development

Strike is one of the largest exploration lease holders in the South Australian Cooper Basin with over 2.2 million acres across five permits.

Production testing continued during the first half of the financial year with a focus on uninterrupted water production from the Klebb wells. The beam pump on Klebb 1 recorded exceptionally high up-time which was also achieved for the jet pumps on Klebb 2 and Klebb 3. Post completion of the first half of the financial year, Klebb 3 re-initiated gas flow affirming our confidence of achieving commercial flow rates from the current pilot configuration.

We expect to build upon this success, maintaining high availability, reducing well pressures through uninterrupted de- watering and increasing gas production to commercial rates in the second half of the financial year. Additional pilot enhancements will be implemented with the near-term deployment of beam pumps in the Klebb 2 and 3 wells to ensure that future peak gas flows are not constrained by the mechanical limitations of the jet pumps.

The distributed power project was also successfully completed with net annualised savings of $250,000. This project has delivered 100% standby generation, which provides redundancy and allows maintenance to be completed without interrupting production at the pilot.

Klebb wells

The de-watering effort conducted has increased the drainage area of Klebb 3 by approximately three times. The average reservoir pressure within the Klebb 3 drainage area has been reduced by an estimated 30% over the past 9 months. We are extremely pleased with this performance, supporting our confidence in our ability to successfully dewater the reservoir across a large drainage area. The January 2017 re-initiation of gas desorption from Klebb 3 was realised at an estimated pressure slightly lower than observed in February 2016.

This re-initiation of gas desorption from Klebb 3, the most productive of the four wells in the Klebb pilot, is particularly encouraging. History matching of this new data supports management's previous estimates of gas content and saturation for the coal and the commercial potential of the resource.

The Klebb 1 beam-pump maintained its steady operation, with consistent uptime and flowing pressure allowing the gas rate to slowly increase and the flare to build from sporadic to continuous. The uptime performance of Klebb 2 has been consistent supporting the de-watering effort.

Performance issues have continued to affect the Klebb 4 ESP and the well was shut-in during December awaiting a vendor technician inspection and recommendation. Further operations to reinstate the pump are currently being investigated and will not impact the core objectives of the pilot.

2016 HALF YEAR REPORT | 1