COMPANY 3D Oil Limited | TDO | $ 0.06/share Date: 27 October 2015

RECOMMENDATION Speculative Buy | Very High Risk | $0.15/share target – revised up $0.04/share

EVENT Sea Lion-1 oil exploration well spuds; Prospective gas resource exceeds expectations on seismic KEY POINTS

Offshore Victoria – oil drilling started - TDO started drilling the 24.9% owned Vic/P57 Sea Lion-1 exploration well on the 26th October, following a delay in mobilisation to site. We see a good chance of finding hydrocarbons.

• Sea Lion-1 exploration well is expected to take 3-4weeks to drill. It is sited in shallow water, close to shore and on trend with other prolific Gippsland Basin oil/gas fields. We see that even a modest 11mmbbl oil discovery could be economic and believe the well provides shareholders a near term chance of solid value upside.

• We have adjusted our risked valuation for the Sea Lion-1 prospect down 6% to $0.04/share (and $0.09/share un-risked) to reflect our reduced long term real oil price from US$70/bbl to US$60/bbl. The negative impact was partly offset by a $0.05 fall to $0.725 for long term AUD/USD exchange rate. Un-risked value is $0.09/share.

Offshore Tasmania 70% owned T/49P – preliminary estimate of Prospective Resources exceed expectation

• TDO reported that preliminary interpretation of its 974km² 3D-seismic survey over northern part of T/49P permit has indicated 6.82 trillion cubic feet (TCF) best estimate Prospective Resource potential in 6 identified structures.

• Importantly TDO’s interpretation sees a drillable prospect at Flanagan – with a 1.38TCF target (with a low 0.41 and high 2.68TCF target). This analysis exceeds our previous view of Flanagan as a 0.8TCF target.

• We have raised our risked-valuation for T/49P from $0.03 to $0.07/share to reflect: Firstly a bigger and better 3-D seismic defined target with seemingly lowered risk on reservoir and seal units at Flanagan. Secondly a modest value for the large 1.2TCF prospective resource at Whalebone and for over 4TCF in four other leads.

TDO’s plan is to farm-out part of its large 70% holding in T/49P - to drill a well by 2017

The strong seismic results, a near drill-ready Flanagan prospect and a gas-short Eastern Australian Gas market boost the likelihood of a favourable farm-out that may boost our assessed $0.07/share value of this asset.

We re-iterate our Speculative Buy recommendation and $0.15/share 12-month price target (up $0.04/share)

Source: PAC Partners estimates

TDO is well funded for its 2015 program with ~A$10m in cash currently. TDO is also free carried for the first US$7.5m cost of the Sea Lion well being drilled. At the well’s completion we anticipate that TDO may have over $6.0m or 2.5¢ps in funds to initiate follow-up drilling, explore a further Vic/P57 prospect and further T/49P activities.

TDO is both an oil and a gas exploration play

• Profile: 3D Oil Limited (TDO) is an ASX listed oil and gas explorer and developer located in energy infrastructure rich Gippsland and Otway Basins. It seeks, in or near Australia, exploration-led organic growth by utilising new techniques to proven hydrocarbon-prone areas close to facilities/markets.

• Vic/P57 – 24.9% interest The Sea Lion-1 prospect has upside if multiple horizons are found. It is located west of the West Seahorse to Wirrah oil fields trend that has had a high exploration success rate. Northeast in Vic/P57 the large Felix prospect has complexity but has been mapped with 15-80mmbbl that adds potential.

• T/49P – 70% interest. This large 4,960km² Otway Basin block has been secured by its seismic program and is on trend with Origin Energy’s 2TCF Thylacine gas development and appears most likely to host wet gas resources. Queensland LNG developments are boosting local gas prices and also industry interest in T/49P.

INVESTMENT OVERVIEW

• Speculative Buy recommendation - unchanged, Very High Risk rating. Our risked NAV based price target of $0.15/share up $0.04/share (+130% to the current share price) – un-risked valuation is in excess of $2.00/sh.

• It’s ~$6m enterprise value under-prices its value. This makes TDO a corporate target on exploration success unless the market materially re-rates the stock.

• Key risks include material exploration failures, project delays and lack of follow-up funding to crystallise projects value. Lower oil prices can also reduce investor interest. These risks render investment in TDO as speculative.

CATALYSTS • Hydrocarbon shows at Sea Lion-1, 4Q15 • Positive well result and an outline of the follow-up program, 4Q15-1Q15 • T/49P full seismic interpretation to further define prospective targets, 4Q15 • A farm-out of T/49P that includes a drill program, 1Q16 • Origin Energy may explore a big gas target (Munro) that appears to spill into TDO’s T/49P permit, 2016-17

Large prospective resources Proximity of T/49P to Otway’s largest gas fields

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T/49P has significant strategic potential beyond the Flanagan Prospect, with an additional 5 leads identified and mapped across the whole permit as shown on the map on Page 1 and as listed in the table below. The permit has the potential to become a substantial new gas province which could provide a valuable contribution to the east coast gas market. As recently reported by Energy Quest, a leading energy advisory firm, the Australian east coast gas market is one of the few energy markets in the world without substantial over-capacity.

TDO is well positioned to farmout with a large interest and operatorship. The company now intends to utilise the positive results of the Flanagan survey and this compelling resource assessment to attract the best possible farmin terms for future exploration drilling and seismic in this highly prospective gas exploration area. Priority will be given to ensure the drilling of the Flanagan Prospect as soon as practically possible. TDO Managing Director Noel Newell commented that; “Our decision to invest in modern 3D seismic data has really paid off by substantially de-risking the Flanagan Prospect and highlighting the potential of the T/49P permit as a new gas province. The Flanagan Prospect is drill-ready, analogous to the nearby producing gas fields and located in a region where new gas supplies are in strong demand. We are excited to be taking this opportunity to potential farm in partners over the coming months.” Qualified Petroleum Reserves and Resources Evaluator Statement The Prospective Resources estimates in this release are based on, and fairly represent, information and supporting documents prepared by, or under the supervision of, Dr Chris Pike who is employed full-time by 3D Oil as a Senior Geophysicist. Dr Pike holds a Ph.D. Geophysics and has more than 25 years practising in Petroleum Geophysics. He is a member of the Petroleum Exploration Society of Australia, the American Association of Petroleum Geologists (AAPG - US), the Society of Exploration Geophysicists (SEG – US), the Association of Professional Engineers and Geoscientists of Alberta (APEGA - Canada) and the Professional Engineers and Geoscientists of Newfoundland and Labrador (PEGNL - Canada). Dr Pike is qualified in accordance with ASX listing rule 5.41 and has consented in writing to the inclusion of the information in the form and context in which it appears. Prospective Resources The estimates have been prepared by the company in accordance with the definitions and guidelines set forth in the Petroleum Resources Management System, 2011 approved by the Society of Petroleum Engineer. Prospective Resource estimates are for recoverable volumes and unless otherwise stated this report quotes Best Estimates and gross joint venture volumes. The estimates are unrisked and have not been adjusted for both an associated chance of discovery and a chance of development.

For further information please contact:

Noel Newell Managing Director 3D Oil Limited Phone: +613 9650 9866

T/49P Prospective Resource Estimate (TCF) Recoverable GasLocation Status Low Best HighFlanagan Prospect 0.41 1.38 2.68Whalebone Strong Lead 0.38 1.20 2.72Munro (T/49P Part) Lead 0.04 0.19 0.57Whistler Point Lead 0.19 0.93 1.88British Admiral Lead 0.17 0.54 3.22Seal Rocks Lead 0.28 2.59 10.64

T/49P Total 1.47 6.82 21.71 Source: TDO announcement 22 Oct 2015

Flanagan is ~40km away from the Thlyacine Gas field and its pipeline.

The Flanagan 3-D Seismic survey has confirmed 1 key prospect and 5 leads – which TDO have interpreted to have a Best Resource Estimate of ~6.8TCF gas potential.

The area is lightly explored and so risk of exploration failure remains high. However the physical setting and closeness to Thylacine boost attractiveness of the block.

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3D Oil Limited Level 5, 164 Flinders Lane

Melbourne VIC 3000 Tel: +61 3 9650 9866

Fax: +61 3 9639 1960

www.3doil.com.au ASX Release 22 October 2015

T/49P Preliminary Prospective Resource Estimates

x Flanagan Prospect drill-ready based on new 3D seismic data

x 1.38 TCF recoverable gas Flanagan Prospect – 3D Oil Limited Prospective Resource Best Estimate

x Associated seismic anomalies within Flanagan Prospect potentially

indicative of gas

x 6.82 TCF recoverable gas total in T/49P (Flanagan plus 5 leads) – 3D Oil Limited Prospective Resource Best Estimate

x Significant additional potential value in condensate and liquids associated with gas

3D Oil Limited (ASX: TDO) is pleased to announce that it has completed a preliminary estimate of the Prospective Resources for the Flanagan Prospect as well as for other leads within T/49P. 3D Oil is operator (70%) of the joint venture with its partner Beach Energy (ASX: BPT, 30%). The permit is located in the Tasmanian sector of the offshore Otway Basin, adjacent to the producing gas fields of Thylacine and Geographe and in the proximity of existing infrastructure supplying the expanding east coast gas market.

Updated T/49P prospects and leads showing nearby Otway Basin gas fields

Location of Seismic Line

Sea Lion prospect on trend with Seahorse oil fields An 11mmbbl development could provide TDO Peak year EBITDA $60m on 0.9mmbbl oil

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The planned Total Depth of the well is programmed for 1800m and scheduled to take approximately 3 weeks.

Location map for VIC/P57

Sea Lion is considered highly prospective as it is on a proven oil-producing trend, and represents one of the last undrilled 4-way dip closures at the prolific ‘Top Latrobe’ level in the Gippsland Basin. The combination of prominent mapped depth structure and the likely presence of thick high quality reservoir sands overlain by the regional seal provides the ingredients of a high quality target.

An independent report has assessed the Sea Lion most likely (P50) Prospective Resource at 11.0MMbbl of oil (combined probabilistic estimate for the three main target levels).

Structural map of Sea Lion

Source: TDO Announcement 20Oct 2015

Source: PAC Partners’ estimates

Should you have any queries, please do not hesitate to contact me on +61 404 052 913.

Lawrence Grech Senior Research Analyst

PAC Partners Level 12, 15 William Street Melbourne VIC 3000 Phone: +613 8633 9831 www.pacpartners.com.au

Recommendation Criteria Investment View PAC Partners Investment View is based on an absolute 1-year total return equal to capital appreciation plus yield.

Buy Hold Sell

> 20% 20% - 5% < 5%

A Speculative recommendation is when a company has limited experience from which to derive a fundamental investment view. Risk Rating

PAC Partners has a four tier Risk Rating System consisting of: Very High, High, Medium and Low. The Risk Rating is a subjective rating based on: Management Track Record, Forecasting Risk, Industry Risk and Financial Risk including cash flow analysis.

Disclosure of Economic Interests

The views expressed in this research report accurately reflect the personal views of Lawrence Grech about the subject issuer and its securities. No part of the analyst's compensation was, is or will be directly or indirectly related to any recommendation or view expressed in this report.

The following person(s) do not hold an economic interest in the securities covered in this report or other securities issued by the subject issuer which may influence this report:

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