5 September 2017 Cooper Energy Limited (COE) BUY - (Target Price - $0.48) Financing complete, Sole sanctioned Christmas has come early Our View

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1 5 September 2017 Cooper Energy Limited (COE) BUY - (Target Price - $0.48) Financing complete, Sole sanctioned Christmas has come early Our View Andrew Williams AWilliams@taylorcollison.com.au Summary (AUD) Market Capitalisation (not adjusted) $336M Share Price $ week low (31-Aug-2017) $ week high (02-Mar-2017) $0.44 Ave Monthly Vol (year rolling) 34.4M A double deal debt and equity, secures the last piece of the financing puzzle. The Sole Project has achieved FID and now enters a construction phase. Sole continues to be a transformational project for COE and the upside potential continues to be highlighted by press and governmental releases on the critical tightness in gas markets. COE is well positioned here, with a fully funded project, defined reserves and importantly - uncontracted volumes. Key Points Key Financials adjusted for equity raising Year End (A$m) Production (kboe) FY17 Actual FY18 Est. FY19 Est Revenue EBITDAX EBIT (8) Underlying NPAT (10) Reported NPAT (12) EPS (c) (0.9) >100% >100% 46x 21x Growth (%) PER (x) EV/EBITDAX (x) Operating cash per share 0.2 PCF (x) ROE (%) (3%) 9x 7x x 7x 2% 5% $0.295 A$400mn of financing drives FID at Sole At last just as market concerns were growing, COE deliver a A$250mn fully underwritten debt package and a 2:5 non-renounceable entitlement (A$135mn) offering. Sole is covered and there s overs for activity on the Western Victoria gas assets. Nothing is ever riskless, so now financing risk is replaced by construction risk, however, with 65% of the P50 capex locked under turnkey contracts, the probability of a significant cost overrun is low in our opinion. We expect project activity to ramp up from this point heading towards a 2H19 start-up. We note stronger production guidance Work-over and development drilling is planned for Casino-Henry and the company projects an increase in production, lifting the base output ahead of the commencement of Sole. We also expect operational upside as COE moves to leverage its infrastructure opportunity at Minerva. Growth and value will be a winning combination Victorian spot gas prices have now settled between A$9-10/gj higher gas prices are here and the base has shifted. With Casino gas contracts to be renegotiated and >100PJ of uncommitted volume at Sole, the inherent upside asset value is likely to be realised more rapidly than we expected. Gas prices are the key sensitivity and in broad terms, every A$1/gj realized above spot adds some 3cps to our risked NAV. As expected, a massive reserves kick Although expected, Sole FID catalyses the booking of >40Mboe and brings 2P reserves to ~54Mboe. On reserves metrics the stock is attractive, pricing <A$4/boe, the cheapest volumes in the market for fully funded, in development reserves. Share Price Graph (AUD) We model a continuing strong NAV Our NAV (48cps) remains at a significant premium to the reference share price with higher production assumptions and cash largely offsetting the dilution from the entitlement offer. We have adjusted our Target Price to match our NAV. The NAVshare price gap should close as the Sole project moves through the construction phase. On current assumptions, our peak NAV for the company is ~71cps in FY20 as Sole cashflow maximises and further growth options de-risk. Source: Yahoo Finance Taylor Collison Limited: ABN , AFSL Participant of the Australian Securities Exchange, CHI-X Australia Pty Limited. Adelaide: GPO Box 2046 Adelaide SA Level 16, 211 Victoria Square Adelaide SA 5000 Telephone: (08) Fax (08) Sydney: GPO Box 4261 Sydney NSW Level 10, 167 Macquarie Street Sydney NSW 2000 Telephone: (02) Fax: (02)

2 Cooper Energy Limited (COE.AX) Page 2 of 11 FINANCIAL SUMMARY SHEET COOPER ENERGY COE nm = not meaningful YEAR END June na = not applicable NAV A$ $0.48 SHARE PRICE A$ $0.30 MARKET CAP A$M 479 ORDINARY SHARES M 1597 OPTIONS M COMMODITY ASSUMPTIONS FY16A FY17A FY18E FY19E FY20E PRODUCTION FY16A FY17A FY18E FY19E FY20E Brent Oil Price US$/b Australia oil Exchange rate Indonesia oil Hedged Oil Price A$/b TOTAL kb Realised Gas Price A$/gj Australia PJ Realised Oil Price A$/b TOTAL Mboe RATIO ANALYSIS FY16A FY17A FY18E FY19E FY20E Sales Volumes Mboe Shares Outstanding M EPS (pre sig items) Acps (4.2) (1.1) Product Revenue A$mn EPS (post sig items) Acps (0.6) (0.9) Ave Price Realised A$/boe PER (pre sig items) x 46.6x 21.0x 6.3x Cash Costs A$/boe OCFPS Acps Cash Margin 51% 68% 62% 57% 51% CFR x 13.3x 7.4x 2.8x DPS Acps RESERVES & RESOURCES * to be adjusted as of 25/08/2017 Dividend Yield % Reserves 1P* 2P BVPS Acps Liquids Gas TOTAL Liquids Gas TOTAL Price/Book x 0.8x 0.7x 0.6x Developed Mboe ROE % (21%) (3%) 2% 5% 14% Undeveloped Mboe ROA % (2%) (2%) 2% 3% 9% TOTAL Mboe (Trailing) Debt/Cash x 0.0x 0.8x 0.8x Interest Cover x Resources 1C 2C Gross Profit/share Acps Gas Oil TOTAL Gas Oil TOTAL EBITDAX A$M PJ Mb Mboe PJ Mb Mboe EBITDAX Ratio % Gippsland EARNINGS A$mn FY16A FY17A FY18E FY19E FY20E Cooper Revenue Otway Cost of sales (12.2) (20.1) (50.6) (75.7) (164.0) TOTAL Mboe Gross Profit Other revenue EQUITY VALUATION Other income Interest Pr A$M Acps Exploration written off 0.3 (1.6) (8.2) (2.0) (2.0) Sole Gas Project 100% 75% $337 $0.21 Finance costs (1.4) (2.6) (4.6) (8.1) (17.7) Manta Gas 100% 25% $32 $0.02 Impairment (21.9) Casino-Henry 50% $146 $0.12 Other expenses (12.0) (19.1) (12.6) (12.5) (12.5) Minerva 10% $3 $0.00 Profit before tax (26.0) (7.0) Minerva Infrastructure 10% $25 $0.02 Taxes 7.9 (2.8) (4.4) (9.8) (32.8) Cooper Basin oil 25% $25 $0.02 NPAT Reported (18.1) (12.3) Exploration assets Various $30 $0.02 Underlying Adjustments $598 $0.40 NPATUnderlying (2.8) (9.8) Net Cash/(debt) $126 $0.08 Corporate costs -$8 -$0.01 P/NAV CASHFLOW A$mn FY16A FY17A FY18E FY19E FY20E TOTAL $715 $ Operational Cash Flow Cash Producing Assets $0.14 Net Interest (1.3) Taxes Paid (3.3) (7.3) (24.6) Other Net Operating Cashflow Exploration (28.9) (32.1) (266.0) (100.0) (5.0) Capex Investments (3.5) (9.9) Net Asset Sales/other 12.4 (64.5) (16.4) Net Investing Cashflow (20.0) (106.5) (282.4) (100.0) (5.0) Dividends Paid Net Debt Drawdown Equity Issues/(Buyback) Other Net Financing Cashflow Net Change in Cash (76.2) BALANCE SHEET A$mn FY16A FY17A FY18E FY19E FY20E Cash & Equivalents PP&E & Development Exploration Total Assets Debt Total Liabilities Total Net Assets/Equity Net Cash/(Debt) (20.9) Exploration assets, $0.02 Other Australia, $0.14 Corporate, $0.07 Cooper Basin oil, $0.02 Manta Gas, $0.02 Sole Gas Project, $0.21 Source: Company data; Taylor Collison estimates; 30cps, close of trading 01/09/17

3 Cooper Energy Limited (COE.AX) Page 3 of 11 Full steam ahead from here...sole secured A financing package of ~A$400mn secures the Sole Project financing which has now reached a final project sanction point and the growth is now crystallising. The company (and project) risk profile has moved from financing risk to construction risk and with the majority of Sole capex secured under turn-key agreements, we suggest the risk to capex increases and build time is relatively low. The financing package also includes an allowance for acceleration of activity on the next phase of Otway gas growth the projected use of funds is outlined in Fig 6. Figure 1: Production growth is now tangibly material and within the forecast horizon FY20 forecasts are now within the forecast horizon and project upside is in the order of >6x above FY17a. We would also highlight the growth projected from the Otway assets, activity on which is also covered through the current round of financing. Source: Company data Based on the production guidance (Fig 1), we have adjusted our assumptions with flow on through earnings. Figure 2: Growth volumes translate to earnings In line with guidance Delivering >750% upside in revenue Underpinned by Sole contracts Rising operating margins Transformational growth earnings Source: Company data; analyst estimates On a 40% expansion of issued capital, our NAV is downgraded by ~11% to 48cps, with the dilution offset by the increase in cash and; operational and financial adjustments. Consequently, we have lowered our Target Price to 48cps in line with our NAV and retain our BUY recommendation. Our Target Price represents 60% upside to the reference share price (30cps, close of trading 1-Sep). Importantly we see, on our current forecasts the NAV of the stock peaking at 71cps in FY20 as production and cash generation from Sole maximises; and the potential resource upside (at Manta) de-risks.

4 Cooper Energy Limited (COE.AX) Page 4 of 11 An attractive investment on a number of metrics...especially reserves The impact of Sole production is obvious through the financial metrics in the forecast with low earnings and cashflow multiples that we would expect to at least double as the company approaches project start-up, particularly given our earnings assumptions do not include the upside development potential of successful drilling at Manta (as a Sole project bolt-on). Figure 3: Financial ratios Growth volumes translate to earnings FY17A FY18E FY19E FY20E EPS (pre sig items) Acps (1.1) EPS (post sig items) Acps (0.9) PER (pre sig 30cps 46.6x 21.0x 6.3x Trending to no growth PER by 2020 OCFPS Acps x 7.4x 2.8x Sub 3x cashflow post Sole start-up ROE % (3%) 2% 5% 14% ROA % (2%) 2% 3% 9% (Trailing) Debt/Cash 0.8x 0.8x Debt strongly covered EBITDAX A$M EBITDAX Ratio % 63% 57% 62% Continuing strong operating margins Source: Company data; analyst estimates; based on close of trading share price (1-Sep) Completion of financing and delivery of FID has triggered the booking of some 43Mboe of Sole reserves to the 2P portfolio, increasing the bankable volumes >350% to 54Mboe. On reserves metrics, the company is very attractively priced, at the lower end of the sector range but importantly with conventional volumes in development. The spread of EV/boe outcomes in Fig 4 indicates that only broad re-rating outcomes can be inferred but intrinsically on a unit value of <$4/boe, COE is cheap likely representing projects in construction, but we would expect this value to more closely approximate the look through unit NPV as Sole production approaches. Figure 4: Reserves metrics highlight the value inherent in conventional, pre-development (prices as of close of trading 1-Sep) Although we would not expect COE reserves to re-rate the highest point of the range, we can see perhaps a doubling opportunity through the forecast window as a minimum.

5 Cooper Energy Limited (COE.AX) Page 5 of 11 Deal done and the financing puzzle is now complete. A double deal of debt and equity transactions, means Sole Project financing is now complete and a formal project sanction has been delivered. The company announcement was a little surprising with a larger equity component than some market participants may have been anticipating, especially given the greater debt terms and availability, but Cooper is also taking the opportunity to accelerate activity through its Western Victorian gas assets. The total package looks appropriate and has been well supported by the market. Figure 5: Financing the details and highlights A A$400mn fully underwritten finance package Debt package terms and covenants FID achieved on Sole Project Reserves upgraded A dual finance stream: A$250mn senior, secured reserve based lending facility, fully underwritten by ANZ and Natixis, with a A$15mn working capital facility. A fully underwritten 2:5 accelerated, non-renounceable entitlement offer raising ~A$135mn at A$0.295/share. TC Comments: Against a budgeted capex estimate of A$355mn for Sole, the total package more than covers the company for expected Sole expenditure, particularly in combination with the A$151mn equity raising completed in February. The cash balance as of 30-Jun, was ~A$147mn and is projected to be ~A$262mn on a proforma basis post the current equity raising. Source: Company data; analyst commentary Senior secured A$220mn available at financial close based on P 90 capex (A$200mn at P 50) based on current secured gas sales with potentially more available as additional gas contracts are secured and/or reserves are increased. 7-year tenor with refinance flexibility Fully amortised by maturity date Liquidity reserve of A$20mn to be maintained Debt service coverage test post Sole completion Secured asset cash flows restricted to secured asset expenditure or debt servicing in construction phase TC Comments: These covenants appear to be on relatively less restrictive terms than we expected especially with respect to the discretionary deployment of cashflows post commencement of Sole production. which also satisfies conditions precedent for the Orbost Gas Plant transaction and gas sales agreements to be finalised. FID triggers the conversion of Sole gas volumes to 2P and delivers an increase of >350% to 54Mboe. TC Comments: We have been flagging this upside in our sector reserves comparison table (Fig. 4), which continues to highlight the investment opportunity we see as inherent in the stock as Sole gets closer to first production. We would highlight that the financing package includes some A$66mn of capital allocated to commitments and opportunities in the portfolio (ex-sole), largely associated with the Western Victoria assets, where the Henry field is due additional development. The work programme also includes a Casino-5 well workover which is projected to deliver production and reserves upside as benefits. The production guidance on the Otway assets (primarily Casino-Henry) has been increased to >55TJpd noting that 2HFY17 flow rates were around 40TJpd a significant growth opportunity to capture.

6 Cooper Energy Limited (COE.AX) Page 6 of 11 Figure 6: Sources and uses of funds Sole and beyond A$151mn equity raising in February Accords with P 50 capex estimates (A$355mn) Note bank finance is based on higher potential Sole capex estimates, requiring additional equity capital cover. Largely Western Victoria drilling and growth Source: Company data; analyst commentary Figure 7: A portfolio of opportunities with the offshore Otway assets providing material production and value benefits Source: Company data

7 Cooper Energy Limited (COE.AX) Page 7 of 11 Western Victoria a new look Ex-Santos assets acquired in Oct-2016 that provide an underpinning production and cashflow base ahead of the commencement of the Sole Project; and now are poised to deliver a further leg of growth through investment opportunities to be addressed over the next 12 months. At the time of the acquisition we noted that the transaction came with with steak knives in the form of production, infrastructure and exploration upside. Figure 8: A portfolio of opportunities with the offshore Otway assets providing material production and value benefits Critically important here is the opportunity to reset gas pricing as the Casino project contracts become available for renewal through to Mar As published by the company, the Victorian spot gas market appears to have stabilised between A$9-10/gj, which accords with our anecdotal information although we suggest there is upside to that estimate. The company also has operational upside through the Minerva asset which has the associated gas plant. We have noted previously: With the Minerva field approaching the end of its economic life, the value in this asset lies in the processing plant. At a 10% working interest, we d expect COE to look to acquire the remaining 90% held by BHP-Billiton (BHP), where rationally, we suggest it would have no material economic reason to retain the asset. Timing and price remain conjectural but we suggest BHP may be prepared to deal to exit the asset. Controlling the processing option would provide flexibility being able to deliver gas east or west through the network resulting in supply options and perhaps the capacity to arbitrage between the Victorian and South Australian markets. Casino provides steady state production out to end- FY23 in the absence of further discoveries but we believe there are a number of high quality prospects and leads in areas surrounding the Casino infrastructure. Source: Company data As reported, the company has some 33 prospects in inventory, identified in VIC/P44, VIC/RL11, VIC/RL12, VIC/L24 and VIC/L30: 21 prospects within 5km of existing Casino-Henry-Netherby pipeline 29 prospects within 10km of existing Casino-Henry-Netherby pipeline 9 prospects are considered low risk: > 45% chance of technical success We would expect to hear more on the potential of the associated exploration permits in due course and at this stage we carry only a nominal uplift to our NAV for this aspect of the portfolio.

8 Cooper Energy Limited (COE.AX) Page 8 of 11 Valuation and target price We have adjusted our Target Price to 48cps after adjustments for the equity issue and guidance through the forecast period. This is a 4% downgrade from our previous estimate (50cps) and still represents a compelling premium to the reference share price (29.5cps close trading 4-Sep). Our risked NAV for the company is downgraded to 48cps after adjustments. We highlight the roll through peak value for the company we now estimate at 71cps in FY20. Figure 9: Valuation breakdown Roll Forward NPV Risked Unrisked Pr A$mn A$/share A$mn A$/share FY19 FY20 Sole Gas Project 100% 75% $338 $0.21 $451 $0.28 Sole Gas Project $553 $695 Manta Gas 100% 25% $32 $0.02 $126 $0.08 Manta Gas $63 $95 Casino-Henry 50% $118 $0.10 $118 $0.10 Casino-Henry $103 $89 Casino-Henry (upside) 50% 50% $29 $0.02 $57 $0.04 Casino-Henry (upside) $29 $43 Minerva 10% $3 $0.00 $3 $0.00 Minerva Minerva Infrastructure 10% $25 $0.02 $25 $0.02 Minerva Infrastructure $39 $49 Cooper Basin oil 25% $25 $0.02 $25 $0.02 Cooper Basin oil $20 $20 Tunisia Indonesia 55% Exploration assets Various $30 $0.02 $30 $0.02 Exploration assets $30 $30 $599 $0.40 $835 $0.55 $837 $1,021 Net Cash/(debt) $125 $0.08 $125 $0.08 Net Cash/(debt) ($21) $128 Corporate costs ($8) ($0.01) ($8) ($0.01) Corporate costs ($8) ($8) TOTAL $716 $0.48 $952 $0.63 TOTAL $808 $1,141 Shares on issue (mn) 1597 Shares on issue (mn) cps $0.51 $0.71 Source: Analysts estimates There remains upside to our valuation on, what we expect to be a continuing strong environment for gas prices on uncontracted volumes. We have applied the current Victorian spot gas price (between $9-10/gj) across the remaining uncontracted volumes, to be adjusted quarterly, but suggest we think this still has some upside potential. In broad terms, a $1/gj increase in price on the uncontracted gas would add up to 3cps to our risked valuation. FY17 result a statutory loss but a return to profit beckons Operationally the company has delivered production and revenue growth commensurate with expectations of increasing gas sales and a reduction in oil volumes, reporting a 122% increase in EBITDAX a strong outcome. Figure 10: FY17 financials comparison FY16a FY17a y-on-y FY17f a-f % diff Sales 20,257 34,648 71% 39,000 (4,352) (11%) Other revenue Operating costs (9,948) (11,889) 20% (19,328) 7,439 (38%) EBITDAX 10,382 23, % 19,822 3,220 16% Corporate costs (15,005) (20,842) 39% (25,468) 4,626 (18%) DD&A (284) (10,033) (10,033) Impairments (21,865) 0 0 EBIT (26,772) (8,366) (69%) (5,646) (2,720) 48% Net interest 777 1,331 71% % Pre-tax profit (25,995) (7,035) (73%) (4,651) (2,384) 51% Tax 7,907 4,786 (39%) 1,395 3, % PRRT (7,598) NPAT (Underlying) (18,088) (9,847) (46%) (3,256) (6,591) 202% Significant items 24,598 (2,465) (110%) (4,521) 2,056 (45%) NPAT (Reported) 6,510 (12,312) (289%) (7,777) (4,535) 58% Source: Company data

9 Cooper Energy Limited (COE.AX) Page 9 of 11 We note intrinsically higher operating costs as expected (production and corporate), largely associated with the move to operatorship. Figure 11: FY17 financial highlights and comments An as expected result Balance sheet strengthened The cash position improves Source: Company data The result was largely in-line with expectation a statutory loss, but impacted across the accounts by higher costs than modelled and the provisioning (assessment) of PRRT with respect to the Western Victorian gas projects. Total assets increased by >300% on the acquisition of the offshore Otway assets and capitalised expenditure on the Gippsland Basin gas projects. The increase in assets was partially offset the assumption of contingent payments to be made on the finalisation of the gas asset transaction and provisions related to future abandonment liabilities. COE reports a cash and investments position of ~A$147.5mn as at 30-Jun, post receipt of the proceeds of the equity raising undertaken through the period.

10 Cooper Energy Limited (COE.AX) Page 10 of 11 Disclaimer The following Warning, Disclaimer and Disclosure relate to all material presented in this document and should be read before making any investment decision. Warning (General Advice Only): Past performance is not a reliable indicator of future performance. This report is a private communication to clients and intending clients and is not intended for public circulation or publication or for the use of any third party, without the approval of Taylor Collison Limited ABN ("Taylor Collison"), an Australian Financial Services Licensee and Participant of the ASX Group. TC Corporate Pty Ltd ABN ( TC Corporate ) is a wholly owned subsidiary of Taylor Collison Limited. While the report is based on information from sources that Taylor Collison considers reliable, its accuracy and completeness cannot be guaranteed. This report does not take into account specific investment needs or other considerations, which may be pertinent to individual investors, and for this reason clients should contact Taylor Collison to discuss their individual needs before acting on this report. Those acting upon such information and recommendations without contacting one of our advisors do so entirely at their own risk. This report may contain forward-looking statements". The words "expect", "should", "could", "may", "predict", "plan" and other similar expressions are intended to identify forward-looking statements. Indications of and guidance on, future earnings and financial position and performance are also forward looking statements. Forward-looking statements, opinions and estimates provided in this report are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Any opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice and Taylor Collison assumes no obligation to update this document after it has been issued. Except for any liability which by law cannot be excluded, Taylor Collison, its directors, employees and agents disclaim all liability (whether in negligence or otherwise) for any error, inaccuracy in, or omission from the information contained in this document or any loss or damage suffered by the recipient or any other person directly or indirectly through relying upon the information. Disclosure: Analyst remuneration is not linked to the rating outcome. Taylor Collison may solicit business from any company mentioned in this report. For the securities discussed in this report, Taylor Collison may make a market and may sell or buy on a principal basis. Taylor Collison, or any individuals preparing this report, may at any time have a position in any securities or options of any of the issuers in this report and holdings may change during the life of this document. In May 2016 Taylor Collison as Joint Lead Manager, assisted Cooper Energy in a Placement which raised $18.4 million. Taylor Collison received a fee of 3.5% for this deal. Taylor Collison is a co-manager to the $151.2mn (March-2017) Equity Placement and Non-Renounceable Entitlement Offer for which Taylor Collison received a fee. Taylor Collison also underwrote $3 million of the rights issue (retail component) for a fee of 2.0% Taylor Collison is a co-manager to the ~$135mn (August-2017) 2:5 Non-Renounceable Entitlement Offer for which Taylor Collison received a fee. Analyst Interests: The Analyst(s) may hold the product(s) referred to in this document, but Taylor Collison Limited considers such holdings not to be sufficiently material to compromise the rating or advice. Analyst(s) holdings may change during the life of this document. Analyst Certification: The Analyst(s) certify that the views expressed in this document accurately reflect their personal, professional opinion about the financial product(s) to which this document refers. Date Prepared: September, 2017 Analyst: Andrew Williams Release Authorised by: Scott Dolling

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