QUARTERLY REPORT. For Quarter ending 30 September 2011 HIGHLIGHTS COMPANY OVERVIEW

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1 QUARTERLY REPORT For Quarter ending 30 September 2011 HIGHLIGHTS La Posada sold for US$7.5m. Napoleonville development well Dugas & Leblanc #3 commenced production in M sand. Presently producing at 205 bopd and 1.78 mmcfg per day. Abita well flow tested at commercial production rates in the lower three of nine logged hydrocarbon bearing intervals. Facilities are being constructed for production to commence in Dec. Recoverable reserves estimated at 8BCFG and thousand barrels oil. Lyons Point currently setting casing at 14,200ft, approximately 18 days to reach first reservoir target at 15,500ft. Lyons Point is a high impact prospect targeting 3 MMBC & 60 BCFG (up to 4 MMBC & 80 BCFG). Completed $2.5m rights issue. COMPANY OVERVIEW South Louisiana La Posada Discovery sold for US$7.5M D&L#3 On production at 205 bopd & 1.78 mmcfgd with reserve potential of 400,000 bbl s and 1.2 BCFG. Abita production to commence Dec -- likely recoverable reserve of 8 BCF and MMBLs Lyons Point setting casing at 14,200ft Napoleonville Salt Dome Potential for 500 BCF and 3.8 MMBO Balanced portfolio of 13 quality prospects 50 Square Miles of 3D Seismic Historical Production of 188 BCF and 20.2 MMBO. Energy Prices WTI $90.20 (BBL) Henry Hub $3.65 (MMBTU) Major Shareholders Charles Morgan 19.95% Craig Burton 10.21% Macquarie Bank 5.56% Jim Trimble 3.5% ASX Codes: GGE / GGEO Mr Charles Morgan Executive Chairman Share Price: 0.5c / 0.1c Mr Mark Freeman Executive Director Shares 3,739m Mr Stephen Keenihan Director Listed Options 1,469m (1.5c) Mr Allan Boss Director Mkt cap $18.6m Mr Jim Trimble Director Drill Program Date P50 Oil P50 Gas Lyons Point Drilling 3-4 MMBO BCF West Klondike December MMBO 6-17 BCF Abita ETA Production Dec Qtr MBO 8 BCF

2 DUGAS & LEBLANC #3 ON PRODUCTION IN M SAND Napoleonville- Dugas & Leblanc #3 Well, Assumption Parish, Louisiana, Non Operator 39.5% WI The D&L#3 M sand was successfully perforated and placed on production on 18 October 2011 with initial flow rates of 160 BOPD, 1,150 MCFD and 16 BSWPD from a 9/64 inch choke. The well is presently producing at 205 BOPD, 1.78 MMCFD and 0 BSWPD through a 10/64 inch choke. All production is presently being processed through existing facilities (see images below). The Company has estimated hydrocarbon potential in the M sand as follows: Oil (BBL) Gas (MCF) Projected Recoverable Reserve 400,000 1,200,000 The reserve potential of the M sand is expected to increase with reservoir performance data. Following further seismic and analogue interpretational work the M sand may have further updip potential of an additional BCF of gas, which if confirmed will need to be recovered from either a development well or side track to the D&L#3. Partners in the D&L#3 well are: Company WI Grand Gulf Energy Ltd 39.4% Golden Gate Petroleum Ltd 15% Other Partners 45.6% Grand Gulf Energy Limited 1292 Hay Street, West Perth WA 6005 Page 2 T +61 (0) F +61 (0) E info@grandgulf.net

3 LYONS POINT WELL DRILLING AHEAD Pruitt et al #1 Well, Lyons Prospect, Acadia Parish, Louisiana, USA- Non Operator 5% WI Highlights Lyons Point is a high impact prospect targeting 3 MMBC & 60 BCFG (up to 4 MMBC & 80 BCFG) Adjacent to Leleux Field which produced 5 MMBC and 300 BCFG from target reservoir Currently setting casing at 14,200 ft, approximately 18 days to reach first reservoir target at 15,500ft The Pruitt et al #1, the initial test well for the Lyons Point Prospect was spudded on 13 September 2011 and is presently setting casing at 14,200ft. The well is being operated by Clayton Williams Energy Inc. under a turnkey fixed cost drilling contract with Precision Drilling. The expected drilling time to reach the first target objective at 15,500ft is 18 days. The Lyons Point Prospect will be drilled to a total depth of 16,300 feet. The prospect has a closure of circa 400 acres with a most likely resource potential of 3 MMBC (Million Barrels Condensate) and 60 BCFG (Billion Cubic Feet Gas) with upside potential of 4 MMBC and 80 BCFG. The Lyons Point Prospect is a seismically defined, upthrown fault bounded structural closure. The objective section is provided by the prolific Oligocene Marginulina Texana (MT) 1, 2, and 3 Sands, which are projected to be together 700 feet thick. The MT sands are productive in several fields in the immediate surrounding area and include the nearby Leleux Field, which has cumulative production of 5 MMBC and 300 BCFG from the MT interval. The ASX participants in the Lyons Point Prospect are as below: Paying Interest % Initial Well Working Interest % Initial & Subsequent Wells Net Revenue Interest % Grand Gulf Energy Ltd (GGE) Tango Petroleum Ltd (TNP) Verus Investments Ltd (VIL) Kilgore Oil & Gas Ltd (KOG) Other COMPETENT PERSONS STATEMENT: The information in this report has been reviewed by Mark Kramer (Registered Geologist, Texas USA), who has over 36 years experience within oil and gas sector. Mark Kramer consents to the inclusion in this report of the information in the form and context in which it appears. Mark Kramer is not a full time employee of the Company. Page 3 Grand Gulf Energy Limited, 1292 Hay Street, West Perth WA 6005 T +61 (0) F +61 (0) E info@grandgulf.net

4 ABITA TESTED, Non Operator 20%WI (15% after payout) Highlights The 30, upper 30 Stray and 29 sands were successfully flow tested at commercial rates The well logged 171ft of net pay in 9 intervals Recoverable resources estimated at 350, ,000 barrels Oil and 8 BCFG Scheduled production Dec 2011 The well is being operated by Clayton Williams Energy Inc (NASDAQ: CWEI) in Plaquemines Parish, Louisiana. The well was drilled and completed in June 2011 and logged 171ft of net pay in 9 intervals. The Operator has undertaken an initial tricompletion of the three bottom intervals and flow test results are as follows: Sand TVD Interval (ft) Est Net Pay (ft) Gas (Mcfd) Oil/Condensate (Bcpd) Water (Bopd) 29 9,787-9, , Upper 30 9,940 9, , ,024-10, , GGE s estimate of the likely resources of this discovery (unaudited) is 7.9 BCFG and 350, ,000 bbls over 9 intervals. The Operator s decision to undertake a triple completion provides the JV with the ability to economically open and shut each interval with a wireline, reducing expensive completion workover rig requirements. Each interval will be put on production individually and produced until depletion sequentially. Following depletion of these three intervals a further three intervals will be completed in a similar manner. Targeted date of first sales for the well is scheduled for mid December. The JV is presently reviewing the need for a development well to accelerate the oil production from the 19 sand. The JV is also undertaking a technical review of the seismic and subsurface geology to determine the field extension potential for another oil and gas accumulation on the same geologic feature in the fault compartment immediately to the northeast (see map). The JV believes the discovery well crossed a critical fault (before penetrating a lower sand package) to add support to the northerly prospect. Objective sands are those found productive in the discovery well and deeper sands produced in Coquille Bay Field to the south. The prospective fault block has similar potential found in the discovery well. The lower sand package in the discovery fault block was accordingly not tested in the initial well and any future development wells may be designed to penetrate this sand. The lower sand had a pre drill estimate of 400,000 bbls of oil and is a significant producer in the adjacent field. Page 4 Grand Gulf Energy Limited 1292 Hay Street, West Perth WA 6005 T +61 (0) F +61 (0) E info@grandgulf.net

5 WEST KLONDIKE, Non Operator 10.5%WI Highlights West Klondike is targeting 2 MMBL and 6 BCF (unrisked 4.8 MMBL/17 BCF) Multiple pay sands with significant production on trend Well anticipated to spud in December and take 30 days to drill The Company has a 10.5% working interest in the West Klondike Prospect which covers an area of 640 acres in Iberville Parish, Louisiana. This prospect will be drilled to a total depth of 10,900ft and is expected to be drilled in December The West Klondike Prospect is a fault block closure which has been identified on 3D seismic data and is in close proximity to analogous offset production. The targeted sand sections are the Marg Tex, Lario and Upper and Lower Nod Blan, all of which produce in the fields highlighted on the sub regional map (Map 1). The most likely resource potential is 2 MMBL and 6 BCF gas with upside potential of 4.8 MMBL and 17 BCF gas. There is also a larger, separate, high pressure, deeper prospect in the leased area that will require a separate well. The target sands of this deeper feature (Bridas) have recently yielded a significant discovery approximately 2.5km to the NE. The Company s share of the initial well costs is 13.96% (~US$450,000) of the total (including entry costs). In a success case the Company s share of completion costs are a further US$85,000. Analogue fields Klondike Stratigraphic production from Lario Sand only 3.8 MMBO and 3.4 BCFG Happytown Field Analogous structure, timing, depth and deposition Marg Tex 5.3 MMBO & 54BCF Sayou De Glaises Field Analogous structure, timing and deposition Marg Tex 18.8 BCFG & 8.8 MMBO Page 5 Grand Gulf Energy Limited 1292 Hay Street, West Perth WA 6005 T +61 (0) F +61 (0) E info@grandgulf.net

6 La Posada Sold for US$7.5m On 23 September the Company announced the sale of its 4.75%WI in La Posada for US$7.5m. This is a significant funding milestone that has been achieved representing a material cash injection into the Company and monetising an untested development asset. The Company will continue to focus its activities on high quality exploration and development prospects. A summary of the Company s resource potential is presented below. Development Working Interest $2.5M FULLY UNDERWRITTEN ENTITLEMENTS ISSUE Net Oil ( mbo) Net Gas ( bcf) Abita 20% (15% APPO) D&L#3 39.5% Total Development Exploration Lyons Point 5% West Klondike 10.5% Desiree 52% Total Exploration 672-1, Total 902-1, On 27 th July 2011 the Company announced a fully underwritten $2.5m one for five entitlements issue together with a one for two free attaching option at 0.4 cents per share. The Rights Issue was completed in August COMPETENT PERSONS STATEMENT: The information in this report has been reviewed and signed off by Mr KC Whittemore (Registered Geologist, Texas USA), and Kevin Kenning (Registered Reservoir Engineer) with over 36 and 30 years relevant experience respectively within oil and gas sector. This report contains forward looking statements that are subject to risk factors associated with resources businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Page 6 Grand Gulf Energy Limited 1292 Hay Street, West Perth, Western Australia 6005 T +61 (0) F +61 (0) E info@grandgulf.net

7 Rule 5.3 Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10. Name of entity GRAND GULF ENERGY LTD ABN Quarter ended ( current ) September 2011 Consolidated statement of cash flows Cash flows related to operating activities Current Year to date 1.1 Receipts from product sales and related debtors Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature (393) (1,072) (11) (232) (393) (1,072) (11) (232) 1 1 received 1.5 Interest and other costs of finance paid (18) (18) 1.6 Insurance pre-payment (refundable) 1.7 Other (provide details if material) Net Operating Cash Flows (1,194) (1,194) Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 7,173 7, Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) 7,173 7,173 Net investing cash flows 1.13 Total operating and investing cash flows (carried forward) 5,979 5,979 + See chapter 19 for defined terms. 30/9/2001 Page 1

8 1.13 Total operating and investing cash flows (brought forward) 5,979 5,979 Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 2,493 2, Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1,050 1, Repayment of borrowings (1,764) (1,764) 1.18 Dividends paid 1.19 Costs of Capital (134) (134) Net financing cash flows 1,645 1,645 Net increase (decrease) in cash held 7,624 7, Cash at beginning of /year to date Exchange rate adjustments to item Cash at end of 8,254 8,254 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current $A' Aggregate amount of payments to the parties included in item Aggregate amount of loans to the parties included in item Explanation necessary for an understanding of the transactions Payments include consulting and directors fees, provision of a serviced office and accounting services. $80,000 of amounts included in sec 1.23 costs relates to fees outstanding for the year end 30 June Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows Nil 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest Nil + See chapter 19 for defined terms. Page 2 30/9/2001

9 Financing facilities available Add notes as necessary for an understanding of the position. Amount available 3.1 Loan facilities Amount used 3.2 Credit standby arrangements Estimated cash outflows for next 4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration Total 1,765 Reconciliation of cash Reconciliation of cash at the end of the (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. 5.1 Cash on hand and at bank Current Previous 8, Deposits at call 5.3 Bank overdraft 5.4 Other (provide details) Total: cash at end of (item 1.22) 8, Changes in interests in mining tenements 6.1 Interests in mining tenements relinquished, reduced or lapsed Tenement reference Nature of interest (note (2)) Interest at beginning of Interest at end of La Posada Held through to Subsidiary Interests in mining tenements acquired or increased West Klondike Lyons Point Held through to Subsidiary Held through to Subsidiary See chapter 19 for defined terms. 30/9/2001 Page 3

10 Issued and quoted securities at end of current Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference + securities (description) 7.2 Changes during (a) Increases through issues (b) Decreases through returns of capital, buy-backs, redemptions Total number Number quoted Issue price per security (see note 3) (cents) Amount paid up per security (see note 3) (cents) Ordinary securities 3,739,805,994 3,739,805, Changes during (a) Increases through issues (b) Decreases through returns of capital, buy-backs Convertible debt securities (description) 7.6 Changes during (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options Unlisted Options 623,300, ,500 45, , ,000,000 1,000,000 40,000,000 75,000, ,300, ,500 $0.004 $0.015 Exercise price $0.04 $0.04 $0.04 $0.05 $0.009 $0.009 $0.004 $0.015 Expiry date 18 Sep Dec June Nov Mar May 2014 Listed Options 1,469,545,952 1,469,545,952 $ June Issued during 7.9 Exercised during 7.10 Expired during 311,650, ,650,541 $ June , ,500 $ June See chapter 19 for defined terms. Page 4 30/9/2001

11 7.11 Debentures (totals only) 7.12 Unsecured notes (totals only) 7.13 Partly paid shares Compliance statement 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4). 2 This statement does give a true and fair view of the matters disclosed. Sign here:... Date: 27/10/ (Director/Company secretary) Print name:... Notes 1 The ly report provides a basis for informing the market how the entity s activities have been financed for the past and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2 The Nature of interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. + See chapter 19 for defined terms. 30/9/2001 Page 5

12 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with. == == == == == + See chapter 19 for defined terms. Page 6 30/9/2001