Target Energy : Quarterly Activities and Cashflow Report 30 June 2016

• Target Net Proven Fairway Reserves increased to 2.9 MMBOE
• 2016 Reserves Update increases Target Reserves by over 600%
• Divestment Process Continues At Fairway

1. Operations Texas

• Reserves Update

  An independent 2016 reserves update for the Fairway assets has been completed. The update indicates that, as of 30 June 2016, Target's net proven reserves at Fairway totalled approximately 2.9 million barrels of oil equivalent (Table 1).

  Category	Fairway TEX Net Reserves		BOE
  Oil (bbls)		Gas (Mscf)	(BOe)
  Proved Developed Producing (PDP)	36,200	57,300	45,750
  Proved Developed Not Producing (PDNP)	298,000	1,772,500	593,417
  Proved Undeveloped (PUD)	1,907,800	1,928,600	2,229,233
  Total Proved Reserves (1P)	2,242,000	3,758,400	2,868,400
  Probable	0	0	0
  Total Proved & Probable Reserves (2P)	2,242,000	3,758,400	2,868,400
  Possible	0	0	0
  Total Proved, Probable & Possible Reserves (3P)	2,242,000	3,758,400	2,868,400

  Table 1

  The study was undertaken by Robert S. Lee (P.E.) of Lee Engineering in Midland, Texas. This represents a 620% increase in 3P Reserves over the 2015 update with the 2016 study also upgrading previous Probable and Possible Reserves into the Proven Category.

  Recent horizontal drilling in the region provided new analog production data that, for the first time, allowed an assessment of (horizontal) Proved Undeveloped reserves in our leases. It also recognised the Proved reserves existing behind pipe in the Fairway wells. The Company has issued a separate release containing additional information regarding the Reserves Report.

  TARGET ENERGY LIMITED Address 6 Richardson St (Suite 5), West Perth WA 6005

  Mailing Address PO Box 140 West Perth WA 6872 | ABN 73 119 160 360 | Ph +618 9476 9000

  Fax +618 9476 9099 | email admin@targetenergy.com.au | www.targetenergy.com.au

  Quarterly Report for the quarter ending 30 June 2016
• Divestment Program

  Earlier in the year Target Energy Limited engaged global investment bank Canaccord Genuity ("Canaccord") as adviser to the divestment of the Fairway Project ("Fairway") in the Permian Basin, Texas.

  The Operator of the Fairway project has since commenced a divestment program of additional leases and wells, some of which are near to or contiguous with Fairway leases. While Target does not hold any interests in these additional properties, it has agreed to their inclusion in a combined package, which improves the overall marketability of both sets of properties. Marketing of the combined package by Canaccord is presently underway with bids expected in August.

• Drilling / Workovers

  No new drilling operations were undertaken in the Quarter. Workovers were undertaken at wells in the Darwin and BOA leases.

• Sydney Wells

As previously advised, following payout Apache Energy exercised its rights as a non‐drilling co‐ tenant to back‐in to the Sydney #1 and #2 wells. During the reporting period the Operator further advised the partners of retrospective adjustments to revenues and costs due to the change in interests in the Sydney wells. The adjustment was for US$242,000.

Louisiana

The Pine Pasture #3 well remained shut in during the reporting period.

1. Production (1 April - 30 June 2016)

   Project	TEX WI	Gross Gas Prodn in Period (mmcf)	Cumulative Gross Gas Prodn (mmcf)	Net Gas Prodn in Period (mmcf)	Cumulative Net Gas Prodn (mmcf)	Gross Oil Prodn in period (BO)	Cumulative Gross Oil Prodn (BO)	Net Oil Prodn in Period (BO)	Cumulati ve Net Oil Prodn (BO)
   E. Chalkley	35%	‐	61	‐	22	‐	115,833	‐	40,542
   Fairway	33%‐60%	17	405	9	226	6,658	212,032	3,324	116,268
   Total		17	466	9	248	6,658	327,866	3,324	156,810

   Net Production is scaled to Target's Working Interest, before royalties; mmcf = million cubic feet; mmcfgd = million cubic feet of gas per day; BO = barrels of oil, BOPD = barrels of oil per day, BOEPD = barrels of oil equivalent per day (Target reports a thermal equivalent when combining gas and oil production, where 1BOE

   = 6 mcf).

   Quarterly Report for the quarter ending 30 June 2016

2. Lease Holdings

   Target Energy Leaseholdings		County / Ph Description		Depth Limits	TEX WI	Gross acres	Net acres
   Lease Name
   Fairway
   BOA	Howard	S12 S/2 , Block 33 T‐2S, A‐1353, T&P RR Survey	None	50.00%	320.0	160.0
   BOA North #4	Howard	S12 N/2 , Block 33 T‐2S, A‐1353, T&P RR Survey	None	50.00%	160.0	80.0
   BOA North #5	Howard	S12 N/2 , Block 33 T‐2S, A‐1353, T&P RR Survey	None	55.56%	160.0	88.9
   Darwin N/2	Howard	S44 N/2, Block 33, T‐1S, A‐1292, T&P RR Survey	None	50.00%	320.0	160.0
   Darwin SW/4	Howard	S44 SE/4, Block 33, T‐1S, A‐1292, T&P RR Survey	None	60.00%	160.0	96.0
   Ballarat	Glasscock	S 184 and 185, Bl 28, A‐815 and A‐A483, W&NW Survey	None	55.56%	160.0	88.9
   Taree	Glasscock	W/2 S193, Bl 28, A‐815 and A‐A483, W&NW Survey	None	60.00%	*320.0	192.0
   Sydney #1	Glasscock	NW/4 S 188 Block 29 A‐170 W&NW Survey	None	43.13%	160.0	69.0
   Sydney #2	Glasscock	E/2 S 188 Block 29 A‐170 W&NW Survey	None	33.75%	320.0	108.0
   "Section 4"	Howard	S4, Block 32, T‐2‐S, A‐1354 T & P RR Co Survey	None	60.00%	440.0	264.0
   Wagga Wagga #1	Glasscock	NE/4 S221, Block 29, A‐496; W&NW RR Co Survey	None	35.00%	160.0	56.0
   Wagga Wagga #2	Glasscock	SE/4 S221, Block 29, A‐496; W&NW RR Co Survey	None	38.89%	160.0	62.2
   Ballarat West	Glasscock	part NW/4 of S185, Bl 29, W&NW RR Co. Survey	None	50.00%	123.9	62.0
   East Chalkley
   Unit Agreement: CK W RA SU	Cameron Ph	S11, 13, 14 &15, T12S‐R6W	8,000 ft ‐ 10,000 ft	35.00%	714.9	250.2

   *subject to completion of lease extensions Total 3678.8 1732.2

   Corporate

3. Legal

   Legal action by Target subsidiary TELA Garwood LP ("TELA Garwood") continues against Victory Energy Corporation and Aurora Energy Partners ("Victory", "Aurora"). TELA Garwood's suit charges that Aurora, acting by and through its general partner, Victory, breached its obligation to purchase certain of TELA Garwood's interests in the West Texas Fairway Project (Howard and Glasscock counties) pursuant to a Purchase and Sale Agreement between TELA Garwood and Aurora dated June 30, 2014.

   The court had previously ruled that the Victory's individual officers and directors should be dismissed from the lawsuit ‐ TELA Garwood's motion for reconsideration on this limited issue was denied in July. A trial date is presently set for mid‐August 2016.

4. Cash Position

5. As previously advised, the Company has convertible notes on issue totalling approximately

   $8.971 million which mature on 31 March 2017. Noteholders representing approximately 72% of these notes have agreed to assist the Company by deferring the requirement to pay interest on the notes thereby alleviating the Company's expenditure requirements.

   The Company has also reduced corporate overheads to a minimum level whilst the sale process is underway. Amongst other cost reductions, the Managing Director has agreed to a 60% reduction in his fees and the other directors have agreed to defer any fees owed to them for the time being.

   Quarterly Report for the quarter ending 30 June 2016

   The Company has appointed Canaccord Genuity as adviser to the divestment of the balance of Fairway. Canaccord is working with Target and its partners to market Fairway and negotiate with counterparties. The assets are now being jointly marketed with a larger parcel of properties. Bids are expected in August.

   The Company had cash resources at 30 June 2016 of $87,000. This balance included $80,000 loaned to the Company by directors , with a further $65,000 advanced subsequent to quarter end. These director loans are to be secured by a second‐ranking lien (equal with existing 2nd Tranche Convertible Note‐holders) in the Fairway asset.

   At this time the most likely source of additional funding remains the sale of the Company's remaining interests in Fairway. If a favourable outcome from the sale process cannot be achieved in the short term, the Company will be required to seek additional financing and/or seek to restructure the existing convertible notes. There is no certainty that either an additional financing or a restructuring of the existing convertible notes would be successful, should they become necessary.

   For further information, please contact the company at admin@targetenergy.com.au.

   Yours sincerely,

   Laurence Roe Managing Director

   NOTE: In accordance with ASX Listing Rules, any hydrocarbon reserves and/or drilling update information contained in this report is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr Laurence Roe, B Sc, Managing Director and an employee of Target Energy Limited, who is a member of the Society of Exploration Geophysicists and has over 30 years experience in the sector. He consents to the reporting of that information in the form and context in which it appears.