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1 Petrel Energy Limited ACN PROSPECTUS RENOUNCEABLE PRO RATA ENTITLEMENT OFFER This is an offer to Eligible Shareholders to participate in a partially underwritten renounceable pro rata entitlement offer on the basis of one (1) New Share for every one (1) Share held by Eligible Shareholders on the Record Date at an Issue Price of $0.01 per New Share to raise approximately $5.3 million (before costs), with no minimum subscription amount (Offer). Eligible Shareholders will also receive one (1) Option for every two (2) New Shares subscribed for at no additional consideration. The Offer is partially underwritten by Patersons Securities Limited (ACN ). Eligible Shareholders may also apply for Shortfall Shares under the Shareholder Shortfall Offer. The Offer opens on 19 August 2016 and closes at 5.00pm AEST on 30 August 2016 (unless it is lawfully extended). Valid acceptances must be received before the closing deadline. Applications can only be made by following the instructions on an Application Form that was attached to a paper copy of this Prospectus. The personalised Application Form sent to Eligible Shareholders sets out the Eligible Shareholders Entitlement to participate in the Offer. Important Information This Prospectus is an important document and requires your attention. You should read the contents and instructions in this Prospectus and on the Application Form in their entirety. If you do not understand their contents or are in any doubt about how to deal with your Entitlements or the course you should follow, please consult your stockbroker, accountant, financial planner or other professional adviser without delay and before making an investment decision. The Shares and Options offered under this document should be considered speculative v2 1

2 CORPORATE DIRECTORY Petrel Energy Limited ACN Directors Alexander Sundich David Casey Andrew Williams Russell Porter (Chairman) (Managing Director and CEO) (Non-Executive Director) (Non-Executive Director) Company Secretary and CFO Ian Kirkham Registered Office Level 6, 10 Bridge Street Sydney NSW 2000 T: Share Registry Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 GPO Box 3993 Sydney NSW 2001 T: F: ASX Code Ordinary shares: PRL Contents Key dates 3 Important note 3 Letter from the Chairman 7 1 Purpose of the Offers 8 2 Details of the Offers 10 3 Effect of the Offers 19 4 ASX Disclosures 25 5 Company's Share Price on ASX 26 6 Investment Risks 27 7 Additional Information 30 8 Summary of Material Contract 34 9 New Zealand Warning Statement 36 Glossary of Terms 37 Directors Statement and Consent v2 2

3 Key Dates Proposed Timetable Lodgement of Prospectus with ASIC 12 August 2016 Notice Offer sent to all Shareholders 15 August 2016 Ex-Date: the date on which Shares commence trading without entitlement to participate in the Offer. Rights trading commences on a deferred settlement basis. 16 August 2016 Record Date (7:00pm AEST) 17 August 2016 Dispatch of Prospectus and Application Form to Eligible Shareholders 19 August 2016 Entitlement trading ends 23 August 2016 New Shares quoted on deferred settlement basis 24 August 2016 Closing Date (5:00 pm AEST) 30 August 2016 Shortfall Shares notification to ASX 1 September 2016 Dispatch of holding statements 8 September 2016 Expected commencement of trading of Shares and Options issued pursuant to Offer and Shareholder Shortfall Offer 9 September 2016 This timetable is indicative only. The Company reserves the right to vary the dates and times of the Offer without prior notice, subject to compliance with the Listing Rules and consent of the Underwriter. IMPORTANT NOTE This Prospectus is dated 12 August 2016 and was lodged with ASIC on 12 August Neither ASIC nor ASX takes any responsibility for the contents of this Prospectus nor the merits of the investment to which this Prospectus relates. No Shares or Options will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. The Company will apply to ASX within seven days after the date of this Prospectus for permission for the Shares and Options offered by this Prospectus to be officially quoted. The fact that ASX may grant Quotation of the Shares and/or Options offered pursuant to this Prospectus is not to be taken in any way as an indication of the merits of the Company or the Shares or Options offered for subscription. You should carefully consider whether the Shares and Options are an appropriate investment for you. There are significant risks associated with an investment in the Company. The Shares and Options to be issued under this Prospectus should be regarded as a speculative investment. The Shares and Options carry no guarantee whatsoever with respect to return on capital investment, payment of dividends or the future value of the Shares and Options. Share and Option prices can fall as well as rise v2 3

4 This document is important and you should read it in its entirety (including the "Investment Risks" section). If you do not understand it, you should consult your professional adviser. The distribution of this Prospectus in jurisdictions outside Australia and New Zealand may be restricted by law and persons who come into possession of this Prospectus should seek advice on, and observe the requirements of, these laws. Non-observance by such persons may violate securities laws. Any recipient of this Prospectus residing outside Australia or New Zealand should consult their professional advisers on requisite formalities. This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. No action has been taken to register or qualify this Prospectus or to otherwise permit a public offering of Shares or Options outside Australia or New Zealand. Certain words and terms used in this Prospectus have defined meanings that are explained in the section Glossary of Terms. Overseas Shareholders The Offer of Shares and Options under the Offer and Shareholder Shortfall Offer is only being extended to Eligible Shareholders, being Shareholders with an address in Australia or New Zealand. Eligible Shareholders will only be entitled to subscribe for Shares and Options under the Offer and Shareholder Shortfall Offer in accordance with the instructions in the personalised Application Form which accompanies a paper copy of this Prospectus. The offer of Shortfall Shares and Options under the Investor Shortfall Offer is only being extended to persons who are Australian residents and other persons to whom the Board is satisfied, in its sole discretion, that it would not be unlawful to offer Shortfall Shares and Options to, with or without any such conditions as the Board sees fit (in its sole discretion), based on the local laws of the country in which an Applicant may reside. Specifically, the offer of Shares and Options pursuant to the Investor Shortfall Offer is not being extended, and no Shares or Options will be issued, to residents in New Zealand. Electronic Prospectus The Prospectus is available in electronic form via the Company s website The electronic version of this Prospectus on the Company s website will not include an Application Form. Any person accessing the electronic version of the Prospectus must be an Australian or New Zealand resident and must only access the Prospectus from within Australia or New Zealand. The Corporations Act prohibits any person passing on to another person an Application Form unless it is attached to a hard copy of the Prospectus or accompanied by the complete and unaltered version of this Prospectus. Prospective applicants should read this Prospectus in its entirety before completing an Application Form. Any person may obtain a copy of this Prospectus free of charge by contacting Petrel Energy Limited. Special Prospectus Content Rules The Company is a disclosing entity for the purposes of the Corporations Act. As such, it is subject to regular reporting and disclosure obligations. Specifically, as a listed company, the Company is subject to the Listing Rules which, subject to certain exceptions, require immediate disclosure to the market of any information the Company has, and which a reasonable person would expect to have, a material effect on the price or value of its securities. This Prospectus is issued by the Company in accordance with the provisions of the Corporations Act which are applicable to a transaction specific prospectus. In general terms, a transaction specific prospectus is only required to contain information in relation to the effect of the issue of v2 4

5 the offered securities on the Company and the rights and liabilities attaching to the offered securities to the extent it is reasonable for investors and their professional advisors to expect to find it in this Prospectus. It is not necessary to include general information in relation to all the assets and liabilities, financial position, profits and losses or prospects of the Company unless it has not previously been disclosed but is relevant to these matters. This Prospectus is intended to be read in conjunction with publicly available information on the Company which has been notified to ASX. Copies of documents released to ASX in relation to the Company may be obtained from the ASX announcements website. The Company will provide a copy of each of the following documents, free of charge, to any person who requests it during the application period for this Prospectus: the Annual Financial Report for the Company for the financial year ended 30 June 2015 (being the annual financial report most recently lodged with ASIC by the Company); and continuous disclosure notices given by the Company after the lodgement of the Annual Report and before the lodgement of a copy of this Prospectus with ASIC. A list of the disclosure notices is set out in section 4. Risks The Shares and Options offered under this Prospectus are considered highly speculative and an investment in Petrel is not risk free. A non-exhaustive list of some of the key risk factors to an investment in Shares, Options and the Company are described in Section 6 under the heading Investment Risks, which the Directors strongly recommend that all Applicants read in full before deciding whether to apply for Shares and Options pursuant to this Prospectus. Some of these key risks include: Funding Risk; Exploration and Production Risk; General Economic Risk; Share Market Risk; License Work Commitments Performance; Foreign Operations Risk; Environmental Impact Risk; Taxation; and Insurance Risk. In addition to the above specific risks that relate directly to the Company, there are also other general risks, many of which are largely beyond the control of the Company and its Directors, that investors should consider and which may also have a material impact on the financial position and prospects of the Company and the market price of any Shares and Options issued pursuant to this Prospectus. No Forecasts The business of oil and gas exploration, appraisal and development is speculative where there are no proven oil or gas reserves, and there are significant uncertainties associated with forecasting v2 5

6 revenues and expenses of such operations. Accordingly, the Directors believe that reliable forecasts cannot be prepared and forecasts have therefore not been included in this Prospectus in accordance with ASIC Regulatory Guide 170. Privacy The Company (and the Share Registry on its behalf) collects, holds and uses personal information of security holders in order to service their needs as security holders, provide facilities and services that they request or that are connected with their interests in Shares and Options and carry out appropriate administration. The information may also be used from time to time and disclosed to persons inspecting the securities register, bidders for the securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers and mail houses. A security holder may request access, correct and update his or her personal information held by the Company or the Share Registry, by contacting the Company Secretary. Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Commonwealth) (as amended), the Corporations Act and certain rules such as the ASX Settlement Operating Rules of ASX v2 6

7 LETTER FROM THE CHAIRMAN Dear Shareholder, On behalf of the Directors of Petrel Energy Limited, I am pleased to invite you to subscribe for New Shares in the Company at $0.01 each, under a renounceable 1 for 1 entitlement offer (Offer). For every two New Shares issued, the Company will also issue one New Option for no additional consideration. Each New Option entitles the holder to acquire one Share at $0.04, on or before 30 August The last 18 months have been a difficult time for the oil and gas industry, which has been acutely felt by the junior end of the market. Despite these challenging times, your management has moved the Company forward through progressing the drilling approvals process in Uruguay and undertaking a systematic process of engagement with oil and gas industry counterparties. While the counterparty engagement process had not yielded a large industry partner, it has resulted in a comprehensive technical dialogue in relation to the Company s Uruguay acreage. The Company is now in a good position to address the residual technical issues surrounding its assets through a modest drilling campaign in Uruguay. The proceeds raised under this Prospectus will be used to fund this exploration drilling campaign. Specifically, the money raised will be applied to drilling up to four conventional wells for the purpose of seeking to confirm the significant oil and gas upside in the Company s Uruguay acreage, as evidenced by the Company s independently certified oil and gas resources. The primary objectives of the drilling program will be to test source rock quality and extent i.e resource upside ; and conventional reservoir quality and extent with Darcy permeability (1000+md). Importantly, while not the primary objective, we are also fortunate that 3 of the 4 wells being drilled are targeting structures identified by seismic with potential for oil and gas trapped in either the same sequence or up-dip of oil shows and/or oil weeping from core samples, while the fourth is targeting a very material AVO gas anomaly. As a consequence, the upcoming programme will not only address key technical issues pertaining to the Uruguay acreage, but will also provide an opportunity for early exploration success from a very modest but specifically tailored exploration programme. As Shareholders would be aware, oil and gas exploration can be an exciting business but comes with significant risks and there are no assurances that the intended drilling program will produce positive results. However, for the reasons outlined above, we believe it is appropriate for Petrel to undertake this drilling at this time. I sincerely hope that you, like the Directors of the Company, see the merits of this decision and support the Offer. Yours sincerely Alexander Sundich Chairman 12 August v2 7

8 1. PURPOSE OF THE OFFERS It is proposed to raise up to $5,300,560 by the issue of up to 530,055,992 Shares pursuant to this Prospectus together with 265,027,996 Options (for no additional consideration). 1 The purpose of the issue is to cover Petrel s overhead costs and fund Schuepbach Energy International LLC (SEI) (owned 51% by Petrel and 49% by Schuepbach International Holdings LLC (SIH)) to complete a two to four well US$5.2m drilling programme in the Salto, and Salto & Piedra Sola concessions, to meet its Uruguay concession commitments (Drilling Programme). Although the Drilling Programme has not been finalised, and Petrel s 49% partner SIH has not yet committed to participating in the Drilling Programme, Petrel expects SIH to fund most, if not all, of its share of the Drilling Programme. The below table outlines the proposed use of funds under several scenarios, depending on the amount raised by the issue of Shares pursuant to this Prospectus, whether SIH elects to participate in funding some or all of the Drilling program, and whether Petrel decides to initiate a two or four well Drilling Programme. Scenario A outlines the use of funds if all parties elect to fully fund SEI, in which case SEI intends to complete all four wells to meet its commitments in both Salto and Piedra Sola concessions; and Scenario B outlines the unlikely event where the Company has to fully fund SEI to carry out the Drilling Programme, in which case SEI intends to complete two wells to meet its Salto concession commitments; and Scenario C outlines the use of funds if Petrel receives only the $3m Underwritten Amount, in which case SEI intends to complete a two well Drilling Programme with reduced commitments from both Petrel and SIH in order to meet its Salto concession commitments. To the extent that SIH does not elect to participate in the some or all of the Drilling Programme (by subscribing for units in SEI - ie Scenario B), it will be diluted by virtue of additional units being issued to the Company. In the unlikely event that the Company is only able to raise up to the Underwritten Amount, and SIH does not participate in the issue of SEI units, then the Company will initiate, through its 51% shareholding, at least the mobilisation, drilling and results of one high impact well and will need to raise ongoing funds to continue follow-up appraisal on its concessions in Assuming that no Existing Options are exercised prior to the Record Date 8

9 Scenario A B C $5.3m Max Opt. 1 $5.3m Max Opt. 2 $3m Underwritten 51% of 4 Wells 100% of 2 Wells 51% of 2 Wells Well 1- Achar 1 - PS - - Well 2 - Cerro Padilla 1 - PS - - Well 3 - J Structure - Salto Well 4 - Shallow AVO - Salto Wells /mob/demob 3,500 2,417 2,417 Project G&A Follow up wells or seismic 1, Uruguay Project USD 5,200 2,817 2,817 Uruguay Project 6,933 3,756 3,756 Petrel % 51% 100% 51% Petrel s Share in 3,536 3,756 1,916 Cost of Rights Issue G&A and Other Projects Total 5, ,000 The Directors intend to seek to place any remaining Shortfall Shares after the Shareholder Shortfall Offer and the issue to the Underwriter (or its nominees) to investors under the Investor Shortfall Offer within three months following the Closing Date, and to the extent necessary, carry out additional capital raising activities, so as to provide additional funding to complete the full four well Drilling Program. There is, however, no guarantee that the Company will raise sufficient funds to complete the full four well Drilling Programme or to meet its general working capital requirements through the Offer, the Shareholder Shortfall Offer, the Investor Shortfall Offer or any subsequent placements. Please refer to the risks in Section 6 on page 29 of this Prospectus, particularly relating to funding risks. The above table is a statement of current intentions as at the date of this Prospectus. As with any budget, intervening events (including additional requirements arising from exploration and other activities) and new circumstances have the potential to affect the manner in which the funds are ultimately applied, which the Directors reserve the right to do. 9

10 2. DETAILS OF THE OFFERS The details of the Offer are as follows. 2.1 Offer Ratio and Price For every one (1) Share held on the Record Date, an Eligible Shareholder is offered one (1) New Share at an issue price of $0.01 per New Share. For every two New Shares issued, Applicants will also receive one (1) New Option for no additional consideration. The issue price of $0.01 per New Share is payable on application. Each New Option entitles the holder to acquire one Share at $0.04 on or before 30 August Record Date The Record Date for the Offer is 7:00pm AEST on 17 August Eligible Shareholders Eligible Shareholders are those holders of Shares who: are registered as a holder of Shares as at 7:00pm AEST on 17 August 2016 (the Record Date); have a registered address in Australia or New Zealand; and are not located in the United States and are not acting for the account or benefit of a person in the United States. If you are a Shareholder who does not satisfy each of the criteria listed above, you are an Overseas Shareholder. Refer to Section 2.5 for more information regarding the Offer and Overseas Shareholders. By returning a completed Application Form or making a payment by BPAY, you will be taken to have represented and warranted that you satisfy each of the criteria listed above. Eligible Shareholders who are nominees, trustees or custodians are therefore advised to seek independent professional advice as to how to proceed Entitlements and acceptance Details of how to make an Application under the Offer and Shareholder Shortfall Offer are set in section 2.18 to 2.21 of this Prospectus. The Entitlement of Eligible Shareholders to participate in the Offer will be determined on the Record Date and set out on the Application Form accompanying the paper copy of this Prospectus mailed to Eligible Shareholders. The Directors reserve the right to reject any Application that they believe is submitted by or on behalf of a person who is not an Eligible Shareholder Overseas Holders The Offer of Shares and Options under this Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus. The Company has decided not to make the Offer or the Shareholder Shortfall Offer to Shareholders who do not have a registered address in Australia or New Zealand (Overseas Shareholders), having regarding to each of the following: 10

11 the number of Overseas Shareholders in each jurisdiction where the Offer would be made; the number and value of New Shares and New Options that the Overseas Shareholders would be offered; and the cost of complying with the legal requirements and requirements of a regulatory authority in each jurisdiction of the Overseas Shareholders. Accordingly, the Offer and Shareholder Shortfall Offer is not being extended, and New Shares and New Options will not be issued, to Shareholders with a registered address outside of Australia or New Zealand. The Company will be sending to each Overseas Shareholder details of the Offer and advice that the Company will not offer New Shares or New Options to that Shareholder. The offer of Shares and Options under the Investor Shortfall Offer is only being extended to persons located in Australia and other persons to whom the Board is satisfied, in its sole discretion, that it would not be unlawful (with or without such conditions as the Board sees fit) based on the local laws of the country in which an Applicant may reside to offer Shares or Options. Specifically, the offer of Shares and Options under the Investor Shortfall Offer is not being extended to persons located in New Zealand. Shareholders resident in New Zealand should refer to the New Zealand Warning Statement in section 9 of this Prospectus, and otherwise consult their professional advisers as to whether any governmental or other consents are required or whether formalities need to be observed to allow them to accept their Entitlement. This Prospectus is sent to shareholders with registered addresses outside Australia and New Zealand for information purposes only Renounceable Offer The Entitlement to New Shares and New Options is renounceable. This means that Eligible Shareholders who do not exercise all or a portion of their Entitlements may sell that portion of their Entitlements not exercised on the ASX. Information on how an Eligible Shareholder s Entitlements may be sold on the ASX is set out in section 2.22, Eligible Shareholders may also transfer all or some of their entitlements to another person off-market (i.e. other than through ASX). Information on how an Eligible Shareholder s can transfer their Entitlements off-market is set out in section Any portion of an Eligible Shareholder s Entitlements that are not exercised will lapse and the New Shares and New Options the subject of those Entitlements will form part of the Shortfall Shares and Options and will be either taken up by other Eligible Shareholders under the Shareholder Shortfall Offer, the Underwriter or its nominees (up to the Underwritten Amount) pursuant to the terms of the Underwriting Agreement or by other investors under the Investor Shortfall Offer Existing Option Holder Participation Holders of Existing Options are not inherently entitled to participate in the Offer. However, holders of Existing Options that are exercisable, may participate in the Offer by exercising their relevant exercisable Existing Options and becoming registered as a holder of Shares by the Record Date. Holders of Existing Options will be notified by the Company of the need to exercise their respective Existing Options before the Record Date, if they wish to participate in the Offer. 11

12 2.8. Shareholder Shortfall Offer The Company is offering to Eligible Shareholders the opportunity to subscribe for Shortfall Shares (which will be in addition to their Entitlement) under the Shareholder Shortfall Offer. Under the Shareholder Shortfall Offer, Eligible Shareholders will be entitled to apply for Shortfall Shares and Options in excess of their Entitlement, at the same issue price as the New Shares, being $0.01 per Shortfall Share, together with one (1) Option for every two (2) Shortfall Shares subscribed for (for no additional consideration). The total number of Shortfall Shares and Options available will be determined by the number of Entitlements that have not been taken up under the Offer. Eligible Shareholders wishing to subscribe for Shortfall Shares and Options must apply for them at the same time as they apply for New Shares under their Entitlement by completing the relevant section of their Application Form. There is no limit on the number of Shortfall Shares and Options that Eligible Shareholders may apply for under the Shareholder Shortfall Offer. However, applications under the Shareholder Shortfall Offer will only be satisfied to the extent that there are Shortfall Shares and Options available. Subject to the Directors retaining discretion to refuse to accept applications (in whole or in part) for Shortfall Shares and Options where the effect of issuing Shortfall Shares and Options to the applicant will result in the applicant s, or another person s, Voting Power in the Company increasing from 20% or below to more than 20%, applicants under the Shareholder Shortfall Offer will be allocated the lesser of: the number of Shortfall Shares and Options applied for by the Applicant; and if the number of Shortfall Shares and Options available for subscription is less than the aggregate number of Shortfall Shares and Options applied for by all unsatisfied applicants, the number of Shortfall Shares and Options applied for, scaled back on a pro rata basis according to all unsatisfied applicants' respective shareholdings in the Company as at the Record Date for the Offer. If, following the allocation process referred to immediately above, there are any remaining Shortfall Shares and Options, that allocation process will be repeated continuously until all applications for Shortfall Shares and Options have been satisfied in full or there are no further Shortfall Shares and Options. Following Completion of the above process, any remaining Shortfall Shares and Options will be issued to the Underwriter or its nominees up to the Underwritten Amount in accordance with the Underwriting Agreement. There is no guarantee that an Eligible Shareholder will receive all of the Shortfall Shares and Options they have applied for under the Shareholder Shortfall Offer. If an Eligible Shareholder receives less Shortfall Shares and Options than they have applied for, the Application Monies for those Shortfall Shares and Options which have not been allocated will be returned to the relevant Eligible Shareholders without interest Investor Shortfall Offer The Directors reserve the right to offer and place any Shortfall Shares and Options that have not been not subscribed for pursuant to the Offer, or otherwise by the Underwriter, at their discretion at any time within three months of the Closing Date, which Shares will, in no circumstances, be issued at an issue price of less than $0.01 (Investor Shortfall Offer). 12

13 Any investors who are not currently Eligible Shareholders wishing to participate in the Investor Shortfall Offer must submit an Application Form accompanying a paper copy of this Prospectus as given to them by the Company and follow the instructions given to them by the Company. The Directors retain their discretion to refuse to accept applications under the Investor Shortfall Offer (in whole or in part). The Investor Shortfall Offer, which is a separate offer to the Offer and Shareholder Shortfall Offer, is made under this Prospectus and will remain open for up to three months from the Closing Date. The Shares and Options issued in accordance with the Investor Shortfall Offer will rank equally with the New Shares and New Options issued pursuant to the Offer and the Shareholder Shortfall Offer. The Directors reserve the right to pay a commission of up to 6% (exclusive of GST) of any amounts subscribed under the Investor Shortfall Offer through any licensed securities dealers or Australian financial services licensee in respect of any Applications lodged and accepted by the Company Fractional Entitlements Fractional Entitlements to Options will be rounded down to the nearest whole number Rights on Offer of Shares and of Options The Shares offered pursuant to this Prospectus will have the same rights as the Company s fully paid ordinary shares, and will rank equally with, those shares on issue as at the date of this Prospectus. The rights attaching to Shares are set out in the Company s constitution, a copy of which can be obtained from the Company on request, and are summarised in section 7. The terms and conditions of the Options offered pursuant to this Prospectus are set out in the section 7 Additional Information under section 7.2 Rights attaching to Options" Offer Partially Underwritten The Offer is underwritten by the Underwriter up to the Underwritten Amount. Subject to the terms of the Underwriting Agreement, the Underwriter will lodge or cause to be lodged with the Company, Applications for Shortfall Shares and Options up to the Underwritten Amount. The Underwriter is entitled to nominate all the Applicants. Mr Alexander Sundich has advised the Company that he has committed to sub-underwrite up to $150,000 of the Underwritten Amount. A summary of the other material terms of the Underwriting Agreement appears under the heading "Underwriting Agreement" in the Summary of Material Contracts section of this Prospectus No Minimum Subscription There is no minimum subscription for the Offer as the Offer is partially underwritten by the Underwriter. In the event that the Underwriting Agreement is terminated for any reason, including without limitation, failure to satisfy a condition or the occurrence of a termination event, the Company will not proceed with the Offer, the Shareholder Shortfall Offer or the Investor Shortfall Offer. If the Company does not proceed with those offers, any Application Money received by the Company will be refunded to Applicants (without interest). 13

14 2.14. Allotment of Shares and Grant of Options It is expected that Shares and Options offered under the Offer, Shareholder Shortfall Offer and to the Underwriter or its nominees, will be allotted and issued no later than 5 September 2016 with despatch of holding statements expected to occur on 8 September The allotment of Shares and grant of Options under the Investor Shortfall Offer will be undertaken progressively. A Statement of Holding for the purposes of CHESS for the Shares and Options allotted pursuant to this Prospectus will be mailed, at the risk of the Applicant, by ordinary post to the address appearing on the completed Application Form. Where the number of Shares and Options allotted is less than the number of additional Shares and Options applied for, the surplus Application Monies will be returned by cheque within 14 days after the Closing Date (in the case of the Offer or Shareholder Shortfall Offer) or 14 days of receipt of the Application (in the case of the Investor Shortfall Offer). Interest will not be paid on monies refunded. If the Application Form is not completed properly, or if the accompanying payment is for the wrong amount, it may still be treated as a valid Application. The Directors' decision whether to treat the Application as valid, and how to construe, amend or complete the Application Form is final. However, an Applicant will not be treated as having applied for more New Shares and New Options than is indicated by the amount of the cheque for Application Monies Expenses of the Offer The estimated expenses which are payable by the Company for legal fees, registry, printing fees and other costs incurred in preparing and distributing this Prospectus in respect of the Offer and the Shortfall Offer are estimated to be approximately $88,190 plus underwriter / broking fees of 6% of proceeds Quotation of Options and Shares The Company will make application to ASX for quotation of the Shares and Options offered pursuant to this Prospectus on the date of this Prospectus. If ASX does not grant Quotation of the Shares or Options offered pursuant to this Prospectus before the expiration of three months after the date of this Prospectus (or such period as varied by ASIC), the Company will not issue any Shares or Options and will repay all Application Money within the time prescribed under the Corporations Act, without interest. The fact that ASX may grant Quotation of the Shares and/or Options offered pursuant to this Prospectus is not to be taken in any way as an indication of the merits of the Company or the Shares or Options offered for subscription Taxation implications The Directors do not consider it appropriate to give Shareholders advice regarding the taxation consequences of subscribing for Shares and Options under this Prospectus. The Company, its advisers and its officers do not accept any responsibility or liability for any such taxation consequences to Shareholders. Shareholders should consult their professional tax adviser in connection with subscribing for New Shares and New Options under this Prospectus. 14

15 2.18. How to Accept the Offer, Shareholder Shortfall Offer or Investor Shortfall Offer Each of the Offers the subject of this Prospectus can be accepted as follows: Method of Acceptance Application Form + Cheque BPAY Offer Shareholder Shortfall Offer Investor Shortfall Offer By completing, and the Share Registry or the Company receiving, your personalised Application Form with the requisite Application Monies or making a payment by BPAY (in respect of the Offer and Shareholder Shortfall Offer), you: agree to be bound by the terms of this Prospectus and the provisions of the Company s constitution; authorise the Company to register you as the holder(s) of the Shares and Options allotted to you; declare that all details and statements made in the Application Form are complete and accurate; acknowledge that the Prospectus is not investment advice and does not constitute a recommendation that you subscribe for Shares and Options under the Offer, the Shareholder Shortfall Offer or the Investor Shortfall Offer; declare that you have full legal capacity to subscribe for Shares and Options under the Offer, the Shareholder Shortfall Offer and the Investor Shortfall Offer; acknowledge that once the Company receives the Application Form or your payment by BPAY (as applicable), you may not withdraw it except as allowed by law; agree to apply for, and be issued with up to, the number of Shares and Options that you apply for at the Issue Price per New Share; authorise the Company and its officers or agents to do anything on your behalf necessary for the Shares and Options to be issued to you; in the case of the Offer and the Shareholder Shortfall Offer, represent and warrant that you are an Eligible Shareholder; and have read and understood this Prospectus and the Application Form and that you acknowledge the matters, and make the warranties and representations and agreements contained in this Prospectus and the Application Form. 15

16 2.19. Payment by BPAY For payment by BPAY please follow the instructions on the Application Form. You can only make a payment via BPAY if you are the holder of an account with an Australian financial institution that supports BPAY transactions and are making an Application under the Offer or Shareholder Shortfall Offer. Please note that should you choose to pay by BPAY : you do not need to submit the Application Form but are taken to make the declarations on that Application Form; and you are deemed to have applied for such whole number of Shares and Options which is covered in full by your Application Monies, whether that number is less than, equal to, or more than your Entitlement (in the latter case, you will be deemed to have applied for Shortfall Shares and Options under the Shareholder Shortfall Offer). When paying by BPAY please make sure you use the specific Biller Code and your unique customer reference number (CRN) which can be found on the front of your personalised Application Form. If you pay by BPAY, and the amount paid is more than the total Application Monies for your Entitlement, such excess amount will be treated as an application for such number of Shortfall Shares and Options as may be subscribed for at the Issue Price (rounded down to the nearest whole number). It is your responsibility to ensure that your BPAY payment is received by the Share Registry by no later than 5.00pm AEST on the Closing Date. You should be aware that your financial institution may implement earlier cut-off times with regards to electronic payment, and you should therefore take this into consideration when making payment. Any Application Monies received for more than your final allocation of New Shares will be refunded as soon as practicable after the Closing Date. No interest will be paid on any Application Monies received or refunded Payment by cheque For payment by cheque, you should complete your Application Form in accordance with the instructions on the Application Form and return it accompanied by a cheque in Australian currency for the amount of the Application Monies payable to "Petrel Energy Limited Rights Issue A/C " and crossed "Not Negotiable". Your cheque must be: for an amount equal to the Issue Price multiplied by the number of New Shares that you are applying for (including any Shortfall Shares and Options applied for); and in Australian currency drawn on an Australian branch of a financial institution. If the amount of your cheque for Application Monies (or the amount of which the cheque clears in time for allocation) is insufficient to pay in full for the number of Shares you have applied for in your Application Form, you will be taken to have applied for such number of Shares (rounded down to the nearest whole number) as your cleared Application Monies will pay for (and to have specified 16

17 that number of Shares on your Application Form). Alternatively, your Application will not be accepted. Any Application Monies received for more than your final allocation of Shares will be refunded as soon as practicable after the Closing Date. No interest will be paid on any Application Monies received or refunded. Your completed Application Form and cheque must reach the Company s Share Registry at the address set out on the Application Form and be cleared by no later than 5:00pm AEST on the Closing Date. It is your responsibility to ensure that your cheque clears by that time. You should be aware that financial institutions may have different lead times for the clearing of cheques and you should therefore take this into consideration when making payment Application Form is binding You will not have any right to withdraw your Application for Shares and Options or to be repaid any amount once your Application has been accepted. Even if an Application has not been completed or submitted correctly it may still be treated as a valid Application for New Shares and Options. Applications submitted under the Offer or Shareholder Shortfall Offer must be lodged on or before 5:00pm AEST on the Closing Date. The Directors generally reserve the right to vary the Closing Date for Applications without prior notice, subject to compliance with the Listing Rules. Applications for Shares and Options under the Investor Shortfall Offer must be made by the date notified by the Company to Applicants. The Directors recommend that completed Application Forms be posted promptly to minimise any risk of being delayed in the mail. All Application Forms must be lodged at the following address of the Share Registry: Boardroom Pty Limited Level 12, 225 George Street Sydney NSW 2000 GPO Box 3993 Sydney NSW 2001 T: F: Selling your Entitlements on ASX If you wish to sell some or all of your Entitlements on ASX, then please contact your stock broker. You can trade your Entitlements on the ASX during the Trading Period, and all trading of Entitlements must be effected by 23 August Transferring your Entitlements to another person off-market If you wish to transfer all or a portion of your Entitlements to a person off-market (i.e. other than by trading your Entitlements on ASX), you must complete and forward: a Standard Renunciation Form (which you can obtain from the Share Registry); and your Application Form, 17

18 to the Share Registry (at the address specified in section 2.21) before the expiration of the Trading Period. If a completed Standard Renunciation Form and completed Application Form in respect of the same Entitlements are received at the same time, then the Company will give effect to the Transfer of those Entitlements in priority to the exercise of that Entitlement. You may transfer all or a portion of your Entitlements in the manner set out above. If you are an Eligible Shareholder on the CHESS sub-register, or subject to regulatory approval, you must contact your sponsoring broker to effect the transfer of your Entitlements. The Company is unable to transfer rights either from or to a CHESS holding Enquiries Enquiries regarding this Prospectus should be directed to the Company Secretary or Directors on or via to Ian Kirkham at ian@petrelenergy.com. 18

19 3. EFFECT OF THE OFFERS 3.1 Capital Structure Based on the capital structure of the Company as at the date of this Prospectus, upon completion of the Offer, the securities of the Company on issue will be as follows 2 : Shares Number Shares on issue at the date of this Prospectus 530,055,992 Shares to be issued under this Prospectus 530,055,992 Total Shares on issue (notional expanded capital) 1,060,111,984 Options Exercise Price Expiry Date Number Existing Options at the date of this Prospectus 5c 31 January ,875, c 30 July ,500, c 30 July ,500,000 1 Options to be issued under this Prospectus $ August ,027,996 2 Total 286,902, The Existing Options are unlisted. 2. The above tables assume that no Existing Options are exercised on or before the Record Date, as the exercise prices per Share of those Existing Options are substantially higher than the Issue Price of New Shares. As at 12 August 2016, the following persons have a Relevant Interest in 5% or more of the Company: Voting Power Number of Shares % Mr David Casey 39,161, Cameron Richard Pty Ltd <LPS Pl No 5 Exec B/Plan A/C> 37,210, Mr Stephen Peter Mitchell 32,652, Remaining Shareholders 421,031, Total 530,055, Mr David Casey has advised the Company that he intends to take up 3,000,000 New Shares under the Offer. If no Shares are subscribed for pursuant to the Offer beyond the Underwritten Amount pursuant to the Underwriting Agreement, and the Shares to be subscribed for by Mr David Casey 2 Assuming no Existing Options are exercised prior to the Record Date 19

20 and the other Directors in accordance with their stated intentions (see Section 7.5), then their respective interests will be as follows: Voting Power Number of Shares % Mr David Casey 42,161, % Cameron Richard Pty Ltd <LPS Pl No 5 Exec B/Plan A/C> Mr Stephen Peter Mitchell Underwriter and nominees 1 Remaining Shareholders 37,210,300 32,652, ,888, ,142, % 3.9% 33.8% 52.7% Total 830,055, % 1. Under the terms of the Underwriting Agreement, the Underwriter has undertaken to procure that such sub-underwriters subscribe for the Shortfall Shares and Options such that the Underwritten Amount is subscribed for and neither the Underwriter, or any sub-underwriter will have Voting Power in the Company of 20% or more after the completion of the Offer. If the other persons who hold a Relevant Interest in the Company s Shares as at the date of this Prospectus set out above do not participate in the Offer, their interests will be diluted. 3.2 Effect of Underwriter s Voting Power As at the date of this Prospectus, the Underwriter does not have any Voting Power in the Company. Whether the Underwriter is required to subscribe for Shares and Options pursuant to the Underwriting Agreement and, therefore, any consequential increase in its Voting Power in the Company on the close of the Offer, is dependent on the size of the Shortfall Amount (if any), the extent to which Eligible Shareholders subscribe for Shortfall Shares and Options pursuant to the Shareholder Shortfall Offer, and the number of Shares and Options subscribed for by any subunderwriters. Under the terms of the Underwriting Agreement, the Underwriter has undertaken to procure that such sub-underwriters subscribe for the Shares and Options such that the Underwritten Amount is subscribed for and neither the Underwriter, or any sub-underwriter will have Voting Power in the Company of 20% or more after the completion of the Offer. The following tables set out the possible effects of the Offer on the Underwriter s Voting Power in the Company 3. 3 Assuming no Existing Options are exercised prior to the Record Date 20

21 Table 1 - after the Offer (excluding exercise of Existing Options 1 ) Voting Power 2 No Shortfall Amount 50% Shortfall Amount 100% Shortfall Amount 4 Number of Shares Shares % Number of Shares Shares % Number of Shares Shares % Underwriter 34,972, ,011, Sub-Underwriter 1 133,988, Remaining Shareholders 1,060,111, ,083, ,055, Total 1,060,111, ,055, % 830,055, Existing Options are unlikely to be exercised as the exercise prices of those options are substantially above the share price at the date of this Prospectus. 2. Assumes no Existing Options are exercised prior to the Record Date. 3. This assumes that no Shareholder takes up their Entitlement under the Offer, and the Underwriter subscribes for Shares and Options up to the Underwritten Amount. Table 2 - after the Offer (excluding exercise of Existing Options 1 ) but assuming the exercise of New Options Voting Power 2 No Shortfall Amount 50% Shortfall Amount 100% Shortfall Amount 4 Number of Shares Shares % Number of Shares Shares % Number of Shares Shares % Underwriter 52,458, ,016, Sub-Underwriter 1 200,983, Remaining Shareholders 1,325,139, ,597, ,055, Total 1,325,139, ,055, ,055, Existing Options are unlikely to be exercised as the exercise prices of those options are substantially above the share price at the date of this Prospectus. 2. Assumes no Existing Options are exercised prior to the Record Date. 3. This assumes that no Shareholder takes up their Entitlement under the Offer, and the Underwriter subscribes for Shares and Options up to the Underwritten Amount. 3.3 Financial Position The Company s cash position at 30 June 2016 was $479,243. On close of the Offer, the Company s pro forma cash position will increase to $5.3 million (after deducting the expected costs of the Offer of approximately $370,000). In the event that the Offer is fully subscribed and all of the Options offered pursuant to this Prospectus are subsequently exercised, the Company will raise up to a further $10.6m on the exercise of those Options. The tables on the following pages show the pro forma balance sheet based on the reviewed figures as at 30 June 2016, the adjustment to be made as a result of the Offer (both if the Offer is fully subscribed, and if only the Underwritten Amount is subscribed for), and the pro forma figures after the Offer based on the figures as at 30 June

22 Offer fully subscribed (gross proceeds of $5.3m) ASSETS Current assets Cash and cash equivalents Other current assets Total current assets Balance Sheet Net Rights Balance Sheet 30 June 2016 Issue Proceeds Pro Forma $ $ $ 479,243 4,894,336 5,373, , , ,351 4,894,336 5,652,687 Non-current assets Exploration and evaluation expenditure 22,873,852-22,873,852 Plant and equipment Total non-current assets Total assets 64,108-64,108 22,937,960-22,937,960 23,696,311 4,894,336 28,590,647 LIABILITIES Current liabilities Trade and other payables Employee benefits Borrowings Total current liabilities 806, ,202 92,095-92, , ,610 1,318,907-1,318,907 Total liabilities NET ASSETS 1,318,907-1,318,907 22,377,404 4,894,336 27,271,740 EQUITY Contributed equity 43,758,913 4,894,336 48,653,249 Foreign currency translation reserve 2,478,891-2,478,891 Options reserve 794, ,313 Accumulated losses (33,258,357) (33,258,357) Equity attributable to owners of the Parent 13,773,760 4,894,336 18,668,096 Non-controlling interests Total equity 8,603,644-8,603,644 22,377,404 4,894,336 27,271,740 22

23 Offer subscribed to Underwritten Amount (gross proceeds of $3m) ASSETS Current assets Cash and cash equivalents Other current assets Total current assets Balance Sheet Net Rights Issue Balance Sheet 30 June 2016 Proceeds Pro Forma $ $ $ 479,243 2,731,810 3,211, , , ,351 2,731,810 3,490,161 Non-current assets Exploration and evaluation expenditure 22,873,852-22,873,852 Plant and equipment Total non-current assets Total assets 64,108-64,108 22,937,960-22,937,960 23,696,311 2,731,810 26,428,121 LIABILITIES Current liabilities Trade and other payables Employee benefits Borrowings Total current liabilities 806, ,202 92,095-92, , ,610 1,318,907-1,318,907 Total liabilities NET ASSETS 1,318,907-1,318,907 22,377,404 2,731,810 25,109,214 EQUITY Contributed equity 43,758,913 2,731,810 46,490,723 Foreign currency translation reserve 2,478,891-2,478,891 Options reserve 794, ,313 Accumulated losses (33,258,357) (33,258,357) Equity attributable to owners of the Parent 13,773,760 2,731,810 16,505,570 Non-controlling interests Total equity 8,603,644-8,603,644 22,377,404 2,731,810 25,109,214 23

24 Notes: These pro-forma Statement of Financial Position have been prepared on the basis of the Company s reviewed financial statements for the twelve-month period ending 30 June 2016 and on the basis of the following transactions and adjustments having occurred on that date: 1. where the Offer is fully subscribed, the issue of 530,055,992 New Shares, together with 265,027,996 New Options, pursuant to this Prospectus, issued at an Issue Price of $0.01 per New Share, raising gross proceeds of $5.3m; 2. where the Offer is subscribed up to the Underwritten Amount, the issue of 300,000,000 New Shares, together with 150,000,000 New Options, pursuant to this Prospectus, issued at an Issue Price of $0.01 per New Share, raising gross proceeds of $3,000,000 (based on Underwritten Amount only); and 3. deducting the estimated aggregate costs of the Offer under each scenario. This information is presented on the basis that there have been no movements in the assets and liabilities of the Company between 30 June 2016 and the close of the Offer. 3.4 Accrued Liabilities to be paid with shares In late 2015 Petrel undertook a significant cost cutting exercise with director and executive remuneration to be paid through a mix of cash and shares until Petrel was adequately funded again (2015 Liabilities). For the eight-month period to 31 July 2016 executives were paid two months cash salary and directors were paid one month s cash fees (2016 Liabilities). This has allowed Petrel to continue negotiations with potential partners and finalise the Underwriting Agreement. At 31 July 2016 the unpaid remuneration payable to Directors and executives is $361,921 ($68,781 as at 31 December 2015 and $293,139 for the period 1 January 2016 to 31 July 2016). Subject to Shareholder approval, it is proposed that these liabilities be settled with the issue of Shares issued at $0.03 for the 2015 Liabilities, and Shares issued at the Issue Price (ie at $0.01) for the 2016 Liabilities. Remuneration paid at 3c per Share Remuneration paid at 1c per Share Sep-Dec 15 Price Shares Jan-July 16 Price Shares David Casey (incl. super) $38,781 $0.03 1,292,708 $155,125 $ ,512,500 Alex Sundich $5,000 $ ,667 $25,000 $0.01 2,500,000 Andrew Williams $5,000 $ ,667 $25,000 $0.01 2,500,000 Russell Porter $20,000 $ ,667 $25,000 $0.01 2,500,000 Ian Kirkham $63,014 $0.01 6,301,440 Total $68,781 2,292,708 $293,139 29,313,940 24

25 4. ASX DISCLOSURES The Company is a disclosing entity under the Corporations Act and is subject to regular reporting and disclosing obligations under the Corporations Act and the Listing Rules. Copies of documents lodged with the ASX by the Company may be obtained from, or inspected at, an office of ASX, during normal business hours, and on the Company's website at As required by section 713(4)(a)(iii) of the Corporations Act, the Company specifically refers shareholders to its 2015 Annual Report and the following ASX disclosures (being all disclosures from the date of the lodgement of the 2015 Annual Report up to the date of this Prospectus) and will give copies of the 2015 Annual Report or these other disclosures to Shareholders on request: Date Subject Pages Link 5/08/2016 Renounceable Rights Issue Presentation 18 PDF 5/08/2016 Renounceable Rights Issue to fund high impact drilling program 5 PDF 5/08/2016 Reinstatement to Official Quotation 1 PDF 4/08/2016 Suspension from Official Quotation 2 PDF 2/08/2016 Trading Halt 2 PDF 29/07/2016 Quarterly Reports 12 PDF 29/04/2016 Quarterly Reports 12 PDF 15/04/2016 Appendix 3B 12 PDF 14/03/2016 Appendix 3B 12 PDF 11/03/2016 Appendix 3B 12 PDF 7/03/2016 Half Yearly Report and Accounts 17 PDF 15/02/2016 Change in substantial holding 2 PDF 12/02/2016 Notice Under Section 708A 1 PDF 12/02/2016 Change in substantial holding 3 PDF 11/02/2016 Appendix 3B 14 PDF 5/02/2016 Capital Raising Top Up 1 PDF 3/02/2016 Capital Raising to Fund Uruguay Project 1 PDF 1/02/2016 Presentation the year of Answers 24 PDF 1/02/2016 Chairman s Letter to Shareholders 2 PDF 1/02/2016 Trading Halt 2 PDF 29/01/2016 Quarterly Reports 13 PDF 23/12/2015 Change of Director's Interest Notice 3 PDF 18/12/2015 Change of Director's Interest Notice 3 PDF 10/11/2015 Change of Directors Interest Notice 2 PDF 10/11/2015 Change of Directors Interest Notice 2 PDF 10/11/2015 Change in substantial holding 3 PDF 9/11/2015 Appendix 3B 12 PDF 9/11/2015 Results of Meeting 1 PDF 9/11/2015 Annual General Meeting Presentation 17 PDF 25

26 28/10/2015 Quarterly Activities and Cashflow Report 14 PDF 13/10/2015 Annual Report to Shareholders 64 PDF 5. COMPANY'S SHARE PRICE ON ASX The last sale price of Shares on ASX on 11 August 2016 (being the last trading day before the date of this Prospectus of 12 August 2016) was $0.02. The highest and lowest market sale prices of Shares on ASX during the three months immediately preceding 12 August 2016 were: Highest - $0.024 on 14 June Lowest - $0.014 on 29 July

27 6. INVESTMENT RISKS Prospective investors should be aware that the value of the Company s securities on ASX may be influenced by many unpredictable factors and may rise and fall depending on factors beyond the control of the Company. Shareholders taking up their entitlements under the Offer should be aware that the New Shares and New Options carry no guarantee with respect to the return of capital or price at which those New Shares or New Options will trade. The Company is at an early exploration stage. Any profitability in the future from the Company s business will be dependent upon successful exploration, development, production and marketing of petroleum from the Company s petroleum exploration licences and investments. The New Shares and New Options being offered under this Prospectus are considered speculative due to the present stage of development of the Company and the risks inherent in the petroleum exploration business in Australia and overseas. While some of the risks can be minimised by the use of safeguards and appropriate systems, some are outside the control of the Company. The principal risk factors applicable to the business of the Company include but are not limited to the following. Licence Work Commitments and Funding Risk The purpose of the issue is to cover the Company s overhead costs and the Company s 51% share of SEI s anticipated costs to complete a two to four well drilling programme in the Salto, and Salto & Piedra Sola concessions, to meet its Uruguay concession commitments (Drilling Programme). In the event that SIH elects not to fund its 49% share of the Drilling Programme and, the Company only receives the $3m Underwritten Amount, it will drill one well and will need to raise further funds, or consider alternative funding methods, in order to complete the Drilling Programme, satisfy its four well obligation in respect of the concessions, and otherwise continue in its exploration activity. Initially, the Company will seek to fund the Drilling Programme by seeking to place any balance in Shortfall Shares and Options under the Investor Shortfall Offer or undertaking additional capital raisings through the placement of further Shares and/or Options. However, there is no certainty that the Company will be able to raise additional capital, or that it will be able to do so on favourable terms. If the Company is able to raise additional capital, it may be required to do so at a significant discount to the Issue Price. If this occurs, this may significantly dilute existing Shareholders. If the Company cannot raise additional capital through the issue of additional Shares, it may be forced to dispose of some or all of its interest in one or more of its assets. If the Company is required to dispose of assets in those circumstances to a third party, it is likely that such disposal will not be on favourable terms, including price. If Petrel is not able to raise additional funding in a timely manner through either the issue of additional Shares or the disposal of assets, it may be required to relinquish its interests in the Salto & Piedra Sola concession in late 2017 or early 2018, which could have a significant detrimental effect on the viability of Petrel. Exploration and Production 27

28 The business of exploration and project development involves a degree of risk. To prosper, the Company depends on factors that include: successful acquisition of appropriate exploration licences; successful exploration and the establishment of petroleum resources and reserves; design, construction and operation of efficient production infrastructure; managerial performance; and efficient marketing of the products. Exploration is a speculative endeavour. Exploration and development operations can be hampered by force majeure circumstances and cost overruns for unforeseen events, including unexpected variations in location and quality of the petroleum and equipment and plant malfunction. Risk of Foreign Operations The Company operates and invests in Uruguay where there may be a number of associated risks over which it will have no or limited control. These may include economic, social, or political instability or change, nationalisation, expropriation of property without fair compensation, cancellation or modification of contract rights, hyperinflation, currency non-convertibility or instability, and changes of laws affecting foreign ownership, government participation, royalties, taxation, working conditions, foreign nationals work permits, rates of exchange, exchange control, exploration licensing, minerals export licensing, export duties, government control over product pricing, and other risks arising out of foreign governmental sovereignty over the areas in which the Company s operations are conducted, as well as risks of loss due to civil strife, acts of war, terrorism, guerrilla activities and insurrections. The Company s operations may also be adversely affected by laws and policies of Australia affecting foreign trade, taxation and investment. In the event of a dispute arising in connection with its operations the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Australia or enforcing Australian judgements in foreign jurisdictions. Environmental Impact Constraints The Company s operations are subject to the environmental risks inherent in the oil and gas industry. The Company s exploration and development programmes are, in general, subject to approval by government authorities before it can undertake activities which are likely to impact the environment. Failure to obtain such approvals will prevent the Company from undertaking the desired activities. Exploration and development of any of the Company s properties is also dependent on meeting planning and environmental laws and guidelines. Although the Company believes that it is in compliance in all material respects with all applicable environmental laws and regulations, there are certain risks inherent to its activities that could subject the Company to extensive liability. The Company is unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would materially increase the Company s cost of doing business or affect its operations in any area. However, there can be no assurances that new environmental laws, regulations or stricter enforcement policies, once implemented, will not oblige the Company to incur significant expenses and undertake significant investments in such respect which could have a material adverse effect on the Company s business, financial condition and results of production operations. 28

29 Taxation Taxation obligations can vary depending on the circumstances of each individual Shareholder, the particular circumstances relating to his or her holdings of securities, and the taxation laws applicable to Shareholders as residents of different jurisdictions. The acquisition and disposal of New Shares and New Options and the exercise of the New Options may have taxation consequences which will differ depending on the specific financial and personal circumstances of each Shareholder. Shareholders should consult their own professional advisers on the taxation implications of investing in the New Shares and New Options as it relates to them. The Company, its advisers and officers do not accept any responsibility or liability for any taxation consequences to holders of New Shares and New Options. It is solely the responsibility of individual Shareholders to inform themselves of their taxation position resulting from the investment in New Shares and New Options under this Prospectus. Changes in taxation law and its application in Australia and overseas may adversely affect the operations and business of the Company. General Economic Climate The Company s future revenues and operating costs can be affected by such factors as supply and demand for goods and services, industrial disruption, interest rates, currency fluctuation, inflation and global economic conditions or events. Accordingly, the future profitability of the Company and Share prices may be affected by these factors. These factors are beyond the control of the Company. Share Market The market price of Shares may be subject to general movements in local and international stock exchanges, economic conditions, currency fluctuations and interest rates. The New Shares or Shares issued on the exercise of the New Options may trade at a price above or below the issue price depending on a range of factors including the performance of the market generally; the performance of the oil and gas sector of the market; national and international economic performance; market perceptions of the Company; the degree of success in the Company s exploration endeavours and results of development of petroleum reserves (if and when that stage is reached) by the Company; and the financial performance of the Company. Insurance The Company maintains insurance within ranges of coverage that it believes to be consistent with industry practice and having regard to the nature of activities being conducted. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of the Company. 29

30 7. ADDITIONAL INFORMATION 7.1 Material Rights Attaching to Shares Shares issued pursuant to the Offer, Shareholder Shortfall Offer and Investor Shortfall Offer will have the same rights and liabilities as Petrel s existing Shares on issue as at the date of this Prospectus. The rights attaching to Shares are derived through a combination of statute, the Constitution of the Company, common law and other applicable legislation. The following is a broad summary (though not an exhaustive or definitive statement) of the rights which are attached to Shares. Voting Rights Subject to any rights or restrictions for the time being attached to any class of Shares, at a meeting of shareholders, each shareholder entitled to vote may vote in person or by proxy or attorney or, being a corporation, by a representative duly authorised under the Corporations Act, and has one vote on a show of hands and one vote per Share on a poll. General Meetings Each shareholder is entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, accounts and other documents required to be furnished to shareholders under the Constitution, the Corporations Act or the Listing Rules. Dividend Rights The Directors have the power to declare the dividend amount payable on a share, the time for payment and method of payment. Dividends may be paid on Shares of one class but not another and at different rates for different classes. The Directors are not anticipating paying dividends at this stage of the Company s development. Rights on Winding-up If the Company is wound up, any surplus will be divided amongst shareholders in proportion to the amounts paid on Shares held by shareholders. Subject to the Constitution, the Corporations Act and the Listing Rules, the liquidator may, with the authority of a special resolution, divide among the shareholders in kind the whole or any part of the property of the Company and may, for that purpose, set such value as the liquidator considers fair upon the property and determine how the division is to be carried out between the shareholders. Offer of Shares Subject to the Corporations Act and the Listing Rules, the Company may issue shares and grant options over unissued shares on any terms, with any rights or restrictions attached to the shares, at any time, and for any consideration the Directors decide. Transfer of Shares Subject to the Constitution, the Corporations Act and ASTC Settlement Rules of ASX, Shares are freely transferable. However, the Directors may refuse to register a transfer or apply a holding lock 30

31 to prevent a transfer of Shares only in limited circumstances, such as where the Company has a lien on those Shares. 7.2 Rights attaching to Options The full terms and conditions on which the Options to be issued pursuant to this Prospectus are as follows:- a. Each Option entitles the holder to subscribe for one Share. b. The Options shall expire at 5.00pm AEST on 30 August 2017 ( Expiry Date ). Any Option which has not been exercised on or before the Expiry Date automatically lapses. c. The Options are exercisable at an exercise price of $0.04 per Option exercisable at any time on or before the Expiry Date. d. The Options are fully transferable. e. All Shares issued pursuant to the exercise of Options will be allotted within 10 business days after the exercise of the Options and will rank pari passu in all respects with Shares. The Company will apply for official quotation by ASX of all Shares issued upon exercise of the Options on or before the third business day on which ASX is open after the date of allotment of the Shares. f. Exercise of the Options is effected by completing and submitting the Notice of Exercise of Options (the form of which will accompany the holding statement for the options) to the Company together with the required exercise price. If the Options are exercised in part prior to the Expiry Date, the Company will issue a holding statement for the balance of the Options held and not yet exercised. g. There are no participating rights or entitlement inherent in the Options and holders will not be entitled to participate in new issues of capital offered to shareholders generally during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be determined in accordance with the Listing Rules. h. In the event of any reconstruction (including a consolidation, sub-division, reduction or return) of the issued capital of the Company, the number of Options or the exercise price of the Options or both will be reconstructed (as appropriate) in the manner required by the Listing Rules. i. If there is a pro-rata issue (except a bonus issue) to the holders of the Shares, the exercise price of each Option shall be reduced according to the following formula. O = O - E[P-(S+D)] N + 1 Where O = the new exercise price of Option. O = the old exercise price of Option. E = the number of Shares into which one Option is exercisable. P = the average market price per Share (weighted by reference to volume) of the Shares during the 5 trading days ending on the day before the exrights or ex-entitlements date. S = the subscription price for a Share under the pro-rata issue. 31

32 D = the dividend due but not yet paid on the Shares (except those to be issued under the pro-rata issue). N = the number of Shares with rights or entitlements that must be held to receive a right to one New Share. j. If there is a bonus issue to the holders of Shares, the number of Shares over which the Option is exercisable will be increased by the number of Shares which the holder of Option would have received if the Option had been exercised before the record date for the bonus issue. k. If and to the extent any of the preceding terms and conditions are inconsistent with the rules or requirements of ASX, the Listing Rules or ASX requirements will prevail in all respects to the extent of the inconsistency. l. These terms and conditions will be governed by the laws of the State of New South Wales and the holder of the options unconditionally submits to the jurisdiction of the courts of that State and courts of appeal from them. 7.3 Consents The following have given their written consents to the issue of this Prospectus with references to them included in the form and context in which they are included and have not withdrawn those consents before the lodgement of this Prospectus with ASIC. Boardroom Pty Limited has given and has not before lodgement of this Prospectus withdrawn its written consent to being named in this Prospectus as share registrar to the Company in the form and context in which it is named. Boardroom Pty Limited has made no statement included in this Prospectus, nor any statement on which a statement in this Prospectus is based. Patersons Securities Limited has given and has not before lodgement of this Prospectus withdrawn its written consent to being named in this Prospectus as the Underwriter to the Offer in the form and context in which it is named. Patersons Securities Limited has made no statement included in this Prospectus, nor any statement on which a statement in this Prospectus is based. Third parties named in this Prospectus and not specifically named in this section have not consented to the inclusion of their names in this Prospectus. The Directors assume responsibility for the references to those third parties and the statements that include those references. 7.4 Litigation The Company is not involved in any litigation. 7.5 Directors and Others Interest Other than as set out in this section or elsewhere in this Prospectus, no Director or proposed Director; person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus; or promoter of the Company holds, or has held within two years before the date of this Prospectus, any interest in the Offer or holds, or has held within two years before the date of this Prospectus, any interest in the Offer or promotion of, or in any property acquired or proposed to be acquired by, the Company in connection with its formation or promotion or the Offer. Set out below are the amounts that anyone has paid or agreed to pay and the nature and value of any benefit anyone has given or agreed to give to a Director or proposed Director to induce him to become, or to qualify him as, a Director of the Company; or for services provided in connection with 32

33 the formation or promotion of the Company or the Offer by any Director or proposed Director, any person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus or any promoter of the Company. Boardroom Pty Limited provides share registry services to the Company. Share registry costs in relation to this Offer are estimated to be $25,690. During the two years before the lodgement of this Prospectus with ASIC, Boardroom Pty Limited has received fees of $37,396 inclusive of goods and services tax for share registry services provided to the Company. The aggregate number of securities of the Company held directly, indirectly or beneficially by the current Directors or their related entities at the date of this Prospectus are: Number of Shares Number of Existing Options Alexander Sundich 25,299,126 - David Casey 39,161,954 - Russell Porter - 3,000,000 Andrew Williams 1,111,111 - Total 65,572,191 3,000,000 Mr Alexander Sundich has advised the Company that he that he has committed to sub-underwrite up to $150,000 of the Underwritten Amount. Mr David Casey has advised the Company that he intends to take up 3,000,000 Shares under the Offer. Mr Andrew Williams has advised the Company that he intends to take up his full Entitlement of 1,111,111 Shares under the Offer. Mr Russell Porter is not entitled to participate in the Offer and will not be taking up any Shares under the Offer. Remuneration of Executive Directors and Non-Executive Directors are disclosed in the annual report of the Company. 7.5 Documentation A copy of the Company s Constitution is available for inspection during normal business hours, free of charge, at the registered office of the Company for 12 months after the date of this Prospectus. 33

34 8. SUMMARY OF MATERIAL CONTRACT In the opinion of the Directors, the material contract, in the context of the Offer, that has been entered into by the Company is summarised below. Underwriting Agreement The Company has entered into the Underwriting Agreement with the Underwriter, dated 3 August The Company has agreed to pay to the Underwriter an underwriting fee representing 6% of the number of New Shares offered under the Offer multiplied by the Issue Price. The Underwriter has agreed to partially underwrite the Offer for the Underwritten Amount of $3,000,000. The Underwriter has also undertaken to ensure that such portion of the shortfall Shares is sub-underwritten so that the Underwriter, or a sub underwriter, will not have a Voting Power in the Company of 20% or more after completion of the Offer. The Underwriting Agreement contains representations, warranties, indemnities and undertakings in favour of the Underwriter that are not unusual for an underwriting arrangement. In particular, the Underwriting Agreement contains certain warranties by the Company relating to matters such as the conduct of the Company, the content of the Prospectus and other information provided by the Company in relation to the Offer. The Underwriting Agreement also imposes various obligations on the Company, including the obligation to comply with all applicable laws in respect of the Offer and to apply for the quotation of the New Shares on ASX. The Underwriting Agreement also places certain restrictions on the Company in relation to the issue of shares by the Company or the selling, disposing or transferring of any securities held by the Directors, for a period of three months from the date of the Underwriting Agreement. The obligations of the Underwriter under the Underwriting Agreement to underwrite the Offer are conditional on customary conditions including amongst others, the dispatch of this Prospectus. If certain events occur, the Underwriter has the right to terminate the Underwriting Agreement. In summary, these include: events or circumstances which will or are likely to have a material adverse effect on the Offer, the Underwriter, or the Company, including any of the all ordinances index or the Standard and Poors / ASX 200 Index falls below 7.5%; the Company does not lodge the Prospectus, or a replacement or supplementary prospectus where required, or fails to provide the Underwriter with copies of the Prospectus; an insolvency or similar event occurs in respect of the Company; Official Quotation has not been granted for all New Shares by 31 August 2016 or, having been granted, is subsequently withdrawn, withheld or qualified; the Prospectus does not contain the relevant disclosure requirements as set out under the Corporations Act, or any person who has previously consented to the inclusion of its, his or her name in the Prospectus, withdraws that consent; the Company is unable to issue the New Shares or New Options; 34

35 ASIC takes adverse action against the Company or there are charges made against any of the Directors; the Takeovers Panel makes a declaration that circumstances in relation to the affairs of the Company are unacceptable or indicates an intention to make such declaration unless the Company provides certain undertakings; there is an outbreak of hostilities or a material escalation of hostilities (including a terrorist act or any diplomatic, military, commercial or political establishment) involving one or more of Australia, New Zealand, the United Kingdom, the United States of America or the Peoples Republic of China; a contravention by the Company of its constitution, the Corporations Act or the Listing Rules or any other applicable legislation, policy or requirement of ASIC or ASX; a breach by the Company of the representations and warranties and undertakings that it has given in favour of the Underwriter; false or misleading due diligence results or verification material; the Company makes public statements in relation to the Prospectus or Offer without prior approval of the Underwriter; the Company suspends its debt payments; litigation, arbitration, administrative or industrial proceedings are commenced or threatened against the Company, other than any claims foreshadowed in the Prospectus; a judgement in an amount exceeding $25,000 is obtained against the Company and is not set aside or satisfied within 7 days; there is a change in the composition of the Board or a change in the senior management of the Company; there is a material change in the major or controlling shareholdings of the Company or a takeover offer or scheme of arrangement pursuant to Chapter 5 or 6 of the Corporations Act is publicly announced in relation to the Company; there is a delay in any specified date in the timetable which is greater than 7 days; the Company alters its capital structure in any manner not contemplated by this Prospectus; or the Company has made a misrepresentation, or engaged in misleading or deceptive conduct in respect of this Offer or this Prospectus. The Underwriting Agreement is otherwise on terms and conditions that are usual for an agreement of its nature. 35

36 9. NEW ZEALAND WARNING STATEMENT This offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act (Aust) and regulations made under that Act. In New Zealand, this is subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 and Part 9 of the Financial Markets Conduct Regulations The Offer and the content of this prospectus are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act 2001 (Aust) and the regulations made under that Act set out how the offer must be made. There are differences in how financial products are regulated under Australian law. For example, the disclosure of fees for managed investment schemes is different under the Australian regime. The rights, remedies and compensation arrangements available to New Zealand investors in Australian financial products may differ from the rights, remedies, and compensation arrangements for New Zealand financial products. Both the Australian and New Zealand financial markets regulators have enforcement responsibilities in relation to this offer. If you need to make a complaint about this Offer, please contact the Financial Markets Authority, New Zealand ( The Australian and New Zealand regulators will work together to settle your complaint. The taxation treatment of Australian financial products is not the same as for New Zealand financial products. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser. This Offer may involve a currency exchange risk. The currency for the financial products is not New Zealand dollars. The value of the financial products will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the financial products to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars. If the financial products are able to be traded on a financial product market and you wish to trade the financial products through that market, you will have to make arrangements for a participant in that market to sell the financial products on your behalf. If the financial product market does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the financial products and trading may differ from financial product markets that operate in New Zealand. 36

37 GLOSSARY OF TERMS Applicant means an applicant for New Shares and New Options who duly completes an Application Form and pays the applicable Application Monies. Application means an application for Shares and Options pursuant to the Offer, Shortfall Offer or Investor Shortfall Offer and made on an Application Form or deemed to be made through the payment of the relevant Application Monies in accordance with terms of the Application Form. Application Form means an entitlement and acceptance form accompanying a paper copy of this Prospectus, pursuant to which Eligible Shareholders may apply for New Shares and New Options pursuant to the Offer and Shareholder Shortfall Offer and other persons may apply for Shares and Options pursuant to the Investor Shortfall Offer. Application Monies means the $0.01 issue price multiplied by the number of Shares for which an Applicant has applied. ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited ABN (also known as Australian Securities Exchange). Closing Date means the last date by which Applications on an Application Form will be accepted, which is 5:00pm AEST on 30 August 2016 or such other date as the Directors determine. Company means Petrel Energy Limited ACN and, where the context requires, includes the Company's subsidiaries. Corporations Act means the Corporations Act 2001 (Commonwealth). Directors means the directors of the Company. Dollars or $ means dollars in Australian currency. Eligible Shareholder means a Shareholder with a registered address in Australia or New Zealand on the Company s Share register at the Record Date. Entitlement means the right to subscribe for New Shares and New Options initially offered to Eligible Shareholders under the Offer based on the number of Shares held by that Eligible Shareholder on the Record Date. Every Entitlement giving the holder, upon the payment of the Issue Price, the right to receive one New Share and one New Option for every two New Shares subscribed for. Existing Options means the existing quoted and unquoted options over unissued ordinary shares in the Company at the date of this Prospectus. Exercise Price means $0.04 per New Option. Investor Shortfall Offer means the offer and placement within three months of the Closing Date of any Shortfall Shares and Options not subscribed for pursuant to the Offer or Shareholder Shortfall Offer, or otherwise placed to the Underwriter or its nominees. Issue Price means the price payable on subscription for each New Share, being $0.01. Listing Rules means the Listing Rules of ASX. New Options means quoted Options offered under the Offer, the terms of which are set out 37

38 under section 7. New Shares means Shares offered under the Offer. Offer means the renounceable entitlement offer of New Shares and New Options to Eligible Shareholders under this Prospectus. Option means an option to acquire a Share. Prospectus means this prospectus dated 12 August Record Date means the date and time at which Shareholders must hold Shares in order to qualify for the pro-rata entitlement in the Offer, being 7:00pm AEST 17 August Relevant Interest has the meaning given to that term in the Corporations Act. SEI means Schuepbach Energy International LLC, a company incorporated under the laws of Delaware. Share means a fully paid ordinary share in the Company. Shareholder means a holder of Shares registered on the share register of the Company. Shareholder Shortfall Offer means the offer to Eligible Shareholders of Shortfall Shares and Options in addition to their Entitlement. "Shortfall Amount" means the difference between the number of New Shares that would be issued if all Shareholders took up all of their entitlements under this Offer, and the total number of New Shares for which valid Application Forms and Application Monies have been received. Shortfall Shares and Options means such number of New Shares for which valid Applications have not been received, together with one New Option for every two New Shares for which valid applications have not been received. Standard Renunciation Form means the renunciation and transfer form available from the Share Registry, for Eligible Shareholders wishing to transfer some or all of their Entitlements to another person. Trading Period means the period commencing 16 August 2016 and ending on 23 August "Underwriter" means Patersons Securities Limited ACN Underwriting Agreement means the underwriting agreement dated 3 August 2016 between the Company and the Underwriter. "Underwritten Amount" means the amount payable by the Underwriter or one or more nominees, on application for the first $3,000,000 under the Offer, pursuant to the Underwriting Agreement. Voting Power has the meaning given to that term in the Corporations Act. 38

39 DIRECTORS STATEMENT AND CONSENT The Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors. In accordance with section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with ASIC and has not withdrawn that consent. Signed for and on behalf of Petrel Energy Limited David Casey, Managing Director 39