Otto Energy Ltd. 7 (OEL) Last: $0.09 Target: $0.25

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1 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Avge daily volume (m) Closing price (Acents) Scott Simpson October 23, 2013 Otto Energy Ltd. 7 (OEL) BUY Last: $0.09 Target: $0.25 WHAT S CHANGED NEW OLD Rating nc BUY Target nc $0.25 Production 2013A (boe/d) 6:1 nc 1,625 Production 2014E (boe/d) 6:1 nc 2,837 CFPS 2013A (f.d.d.) nc A$0.03 CFPS 2014E (f.d.d.) nc A$0.04 SHARE DATA Shares o/s (mm, basic/f.d.) 1140/ week high/low $0.11/$0.07 Market capitalization (A$m) $125 Enterprise value (A$m) $131 Net debt (A$m) $6 Dividend yield n/a Projected return 127% FINANCIAL DATA 2013A 2014E 2015E Oil & NGLs (b/d) 1,625 2,834 3,222 Natural Gas (mmcf/d) Total (boe/d) 6:1 1,625 2,834 3,222 Equivalent growth 24% 74% 14% Brent (US$/b) A$:US$ EPS (f.d.) $0.01 $0.02 $0.02 CFPS (f.d.d.) $0.03 $0.04 $0.04 Net Debt (mm) ($18) ($8) ($44) Debt/CF nm nm nm VALUATION P/CF 4.5x 2.4x 2.3x EV/DACF 3.8x 2.2x 1.5x EV/boepd ($k) EV/2P Reserves $30.08 P/Risked NAV 0.93x P/Core NAV 0.44x All figures in USD unless otherwise stated Update for the September 2013 Quarterly Solid production despite shut-in, Galoc at 4,550bopd at Q end The Galoc field performed in-line with expectations with production of 323kbbls, lower than the Jun Q 415kbbls, due to a planned shut in for Phase II upgrades. Production averaged 3,511bopd over the 3-months and at the end of the Q was producing at 4,550bopd. Sales were ~50% lower than the June Q at US$12.9m due to the timing of liftings, with proceeds from a single cargo received in August. OEL finished the period with cash of US$19.84m and $25.3m drawn on its debt facility after $32.2m in expenditure. Galoc Phase II drilling a highlight, 8.5% increase in cost estimates During the Sep Q, OEL completed the drilling of the G-5H and G-6H wells, with a combined 3,177m of horizontal reservoir section containing a significant 1,645m of net oil pay. Subsequent to the Q, these wells were production tested, highlighting strong production potential and OEL looks set to easily meet its 12,000bopd. Subsea works are now underway and first oil from Phase II is on track for November. OEL reported that cost estimates for the project have increased ~8.5% to US$204m; however with cash of US$19.84m, undrawn debt facilities of US$11.2m, and proceeds from Cargo 33 due in November, OEL is in a solid position to fund its $17m share of remaining costs. Duhat-2 plugged and abandoned Duhat-2 well was plugged and abandoned after intersecting a shallow high-pressure water zone at ~200m which prevented drilling to TD. The prospective lower intervals remain untested and we await further news regarding plans for this permit. Drilling of Cinco-1 still awaiting formal granting of key approval After gaining unofficial approval, the JV is now awaiting written approval to move ahead with planning to drill the Cinco-1 exploration well in SC 55. Following approvals and confirmation of the revised commitment terms, BHP will look to secure a suitable deepwater rig. OEL is free-carried through this high impact well, targeting 2.1tcf and 74mmbbls of condensate for which we estimate unrisked upside of $0.42/sh. Final approval and securing of a rig will provide key catalysts for OEL. We maintain our BUY recommendation with a price target of $0.25/sh. The successful execution of the Phase II works highlights OEL s capabilities as an operator. It remains in a solid financial position, leveraged to 3-fold increase in production and to a free-carry through the high-impact Cinco-1 in 2H However it remains cheap on a cash flow basis alone, trading at a discount to our 2P NAV for Galoc of $0.13/sh and on an FY2014 debt-adjusted cash flow multiple of 2.2x. Prepared by GMP Securities Australia Pty Limited See important disclosures on the last page of this report

2 GALOC PERFORMANCE SOLID DESPITE PRODUCTION SHUT-IN The Galoc field performed in-line with expectations, with production of 323kbbls lower than the Jun Q 415kbbls, due to a planned shut in for Phase II equipment upgrades, following the off-take of cargo 32. Following a return to production the field declined in-line with expectations and was at a rate of 4,550bopd at the end of the Q. Sales were ~50% lower than the June Q at US$12.9m, due to the timing of liftings with proceeds from a single cargo received in August. OEL finished the period with cash of US$19.84m and $25.3m drawn on its debt facility after $32.2m in expenditure. Capex consisted of $22m for Phase II Galoc works, $3.24m for the Duhat-2 exploration well in SC 55 and $1.32m on exploration in Tanzania. SUCCESSFUL GALOC PHASE II DRILLING CAMPAIGN A KEY HIGHLIGHT (OEL 33% WI, OPERATOR) During the Sep Q, OEL completed the drilling of the G-5H and G-6H wells, with a combined 3,177m of horizontal reservoir section containing a significant 1,645m of net oil pay. Subsequent to the Q, these wells were production tested, highlighting strong production potential and OEL looks set to meet its 12,000bopd production forecast for the expanded field. The G-5H well tested a rate of 6,300bopd and under normal field conditions OEL suggests that the well could flow at between 8,000 and 12,000bopd. The G-6H well reportedly stabilised at a flow rate of 3,800bopd and OEL suggests that under normal production conditions could flow at between 4,000 and 6,000bopd. Hence overall the wells have capacity well beyond the targeted additional 8,000bopd yet the field will be choked back to 12,000bopd to manage long-term deliverability. Production and pressure data will be required to understand any impact of these two new wells on the production profile and reserves. Subsea works are now underway and first oil from Phase II is on track for November. Cost estimates for the project were reported to have increased ~8.5% to US$204m, with OEL s net remaining costs estimated at US$17.2m. However this is the first cost increase since the August FID estimate and OEL remains well funded for Dec Q estimated capex of $22m, with cash of US$19.84m, undrawn debt facilities of US$11.2m, and proceeds from Cargo 33 due in November (est. $13m). Following completion of the project, production and pressure data will be analyzed in order to provide any further insight into the potential of the northern Galoc area. Subject to these results, an appraisal well could be drilled in the northern Galoc area or an exploration well on the Galoc North structure as early as late Success would provide incremental high-value barrels to maintain production rates at Galoc. APPROVALS TO DRILL CINCO-1 PROGRESSING (33.18%WI) Work is continuing to progress approvals for the drilling of Cinco-1. This has been significantly delayed pending Strategic Environmental Plan Clearance (SEP Clearance) by the Provincial Council for Sustainable Development (PCSD), which was submitted for approval in August During the period the JV was reportedly granted SEP approval and is currently awaiting formal written approval documentation. Subject to receiving this sign-off and confirmation from the Philippines DOE of the revised work program under force majeure, BHP will proceed to secure an ultra deepwater drilling rig. Subject to successfully securing a rig, drilling of Cinco-1 could occur in 2H BHP is earning a 60% interest in the permit by funding the acquisition of 3D seismic (completed) and the drilling of 2 deep-water exploration wells. The first well to be drilled is the Cinco-1 prospect, targeting a mean prospective resource of 2.1tcf and 74mmbbls of condensate. Following drilling of Cinco-1, BHP may elect to fund a second well to secure its 60% interest or fall back to a 30% interest. The 3D seismic survey identified

3 a large number of additional prospects and leads across the permit with total unrisked mean prospective resources estimated at 19tcf of gas and 670mmbbls of condensate in the Nido carbonate formation alone. The Hawkeye prospect is another key target and provides additional prospectivity with an estimated 670mmbbls of mean prospective oil and its prospectivity is largely geologically independent from the result at Cinco-1. DUHAT-2 PLUGGED AND ABANDONED (80% WI) RELINQUISHED SC 69 (79%WI) During the period OEL plugged and abandoned the Duhat-2 well after encountering a very-high pressured shallow water zone at 200m. The zone was unexpected based on previous drilling and geological knowledge of the area. After encountering the high pressure salt water, the influx was initially diverted to ponds before the flow could be brought under control using heavy-weight mud. While disappointing, the well could not be safely drilled and a cement plug was installed before all drilling equipment was demobilised from site. The prospective lower intervals remain untested and we await further news regarding plans for this permit. During the Q OEL relinquish its interest in SC-69. It had previously been granted a 6-month extension to complete ongoing technical work and to secure a farm-in partner in order to fund the required commitment well for the next sub-phase. However the farm-out efforts did not result in an acceptable farm-in offer and the technical evaluation of the key p[prospects did not support drilling a well at such a high interest/cost. The relinquishment does not impact OEL s immediate pipeline of activity, however OEL will need to continue its evaluation of new ventures to maintain its pipeline of longer term growth opportunities. 2D SEISMIC UNDERWAY IN TANZANIA (50%WI) 2D seismic acquisition commenced during the Sep Q, following completion of the initial airborne gravity and magnetic surveys and commitment by the JV to enter the second year contract term. The airborne surveys and detailed technical work confirmed the presence of sedimentary basins in Kilosa-Kilombero and the possibility of a significant sedimentary basin at Pangani. At the end of the Q some 260km of 2D seismic had been acquired over two basins within the Kilosa-Kilombero PSC with initial interpretation highlighting some promising structuring. The 500km line survey is expected to be completed by the Dec Q 2013, when a decision to enter a 3 rd term requiring an exploration well, is required. While at a very early stage of exploration, the Kilosa-Kilombero and Pangani permits provide blue-sky longer term exploration potential and hence compliment OEL s very solid production underpinning.

4 MAINTAIN BUY RECOMMENDATION WITH A PRICE TARGET OF $0.25/SH We maintain our BUY recommendation with a price target of $0.25/sh which is set inline with our NAV of $0.25/sh (previously $0.28/sh). Our NAV is lower due to the removal of the Duhat-2 well from our valuation, however our core NAV is unchanged with an increase in our Galoc NAV to $0.13/sh offset by a lower net cash position. OEL s NAV and Target Price Target Price Calculation Otto Energy Ltd A$ A$/sh Production Assets Cash Undeveloped Assets Other Items incl G&A Debt Core NAV Risked Upside - Included from EMV Sheet $ $/sh Philippines - Galoc North Philippines - SC 55 - Cinco Philippines - SC 55 - Hawkeye Other Unpaid Capital Total NAV TARGET PRICE 0.25 Share Price 0.11 Expected Return 127% Notes: All asset values are NPV10 After Tax and in AUD unless noted. Five years of G&A NPV 10 are deducted to ensure 'going concern' costs are captured. Source: GMP Estimates Our price target includes risked upside for the Cinco-1, Hawkeye-1 and a northern Galoc well, with a more detailed breakdown of our asset valuations provided in the following EMV table. Our valuation highlights that OEL is currently trading at a discount to the Galoc oil field alone yet remains leveraged to a free-carry through 1-2 high impact wells. Upside to our valuation will also come from any reserves upgrade following analysis of the G-5H and G-6H well performance.

5 OEL s EMV Gross Resource (mmboe) Working Int. (%) Overall COS (%) Value/BOE (US$) Net Risked Resources (mmboe) Risked NAV ($A mm) Risked A$/sh (FD) Unrisked NAV (A$/sh) Country Property/Prospect Producing Assets Philippines Galoc - incl. Phase II % 100% Undeveloped assets Philippines Galoc - Upside to Reserves % 30% $ Exploration Philippines Galoc North % 35% $ Philippines SC 55 - Cinco % 20% $ Philippines SC 55 - Uno % 10% $ Philippines SC 55 - Hawkeye % 10% $ Philippines SC 51 - Duhat % 20% $ Philippines SC 69 - Lampos % 10% $ Philippines SC 69 - Lampos South % 10% $ Fully Diluted Shares Outstanding (mm) 1, AUD:USD Exchange Rate 1.06 Source: GMP Estimates Upcoming milestones / key catalysts include: Completion of Galoc Phase II development November 2013 First Oil from Phase II November 2013 Completion of 2D seismic in Tanzania Dec Q 2013 BHP drilling of Cinco-1 2H 2014 Drilling of a well in the northern Galoc area Dec Q 2014

6 Otto Energy Ltd. Year-end 30th June Valuation A$m A$/sh Forecast Assumptions 2012A 2013A 2014E 2015E 2016E Galoc Crude Oil - Brent (USD/bbl) Exploration and Appraisal A$:US$ Cash Debt (27) (0.02) Production Summary (mmboe) 2012A 2013A 2014E 2015E 2016E Corporate (22) (0.02) Galoc Other Other Total NAV Total Price Target 0.25 Total (kbbl/day) Valuation Sensitivity -10% 0% +10% Oil Price Sensitivity (A$/sh) PROFIT & LOSS (US$m) 2012A 2013A 2014E 2015E 2016E Exchange Rate Sensitivity (A$/sh) Sales Revenue Asset Valuation Summary Other Income Operating Costs Royalties Exploration Expensed Corporate & Admin Other EBITDA Depn & Amort EBIT Interest Operating Profit Tax expense Production Summary (mmboe) Minorites Abnormals - Post Tax NPAT Normalised NPAT EPS (basic) - A EPS (diluted) - A s CASH FLOW (US$m) 2012A 2013A 2014E 2015E 2016E Adjusted Net Profit Interest/Tax/Expl Exp Interest & Tax Depn/Amort /- Other (18.8) Operating Cashflow Capex (Exp. and Dev.) Other Investments (1.9) Free Cashflow (7.3) (10.5) (6.5) Reserves & Resources - Dividends As at July 2013 Oil Gas Total + Equity raised Reserves - 2P (mmbbls) (bcf) (mboe) + Debt drawdown (repaid) (18.0) (9.5) Galoc Other 0.0 (0.0) (0.0) Total Net Change in Cash (7.3) Directors Cash at End Period Name Position Net Cash/(Debt) Rick Crabb 49% 6% 45% Galoc Exploration and Appraisal Cash 2012A 2013A 2014E 2015E 2016E Galoc Crude Oil - Brent (USD/bbl) Non-Executive Chairman Gregor McNab Chief Executive Officer BALANCE SHEET (US$m) 2012A 2013A 2014E 2015E 2016E Ian Macliver Non-Executive Director Cash Rufino Bomasang Non-Executive Director Total Assets Ian Boserio Non-Executive Director Total Debt John Letter Non-Executive Director Total Liabilities Matthew Allen Company Secretary and CFO Shareholders Funds Substantial Shareholders Shares (m) % RATIOS AND PROFITABILITY Molton Holdings EBIT Margin, % 50.5% 34.7% 39.6% 42.8% 35.9% Santo Holdings ROA, (%) 16.6% 7.6% 13.5% 14.3% 9.4% Acorn Capital Net Debt/Equity, (%) NM NM NM NM NM EV/EBITDA, X

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