Monday, 7 March 2011 Howard Humphreys Research Analyst hhumphreys@seismicresearch.com.au Investment Outlook: Risk Assessment: Recommendation: Moderate risk, buy Pro Forma Valuation (per share)* Asset net present value ( NPV ) Admin and Business Development Company Valuation Add: Cash (after IPO) Less: Debt (as at Dec 10) Net Asset Value (NAV) *after IPO and an A$8.1m deferred payment for 299 A$0.77 (A$0.04) A$0.73 A$0.06 (A$0.01) A$0.78 Pro Forma Capital Structure* Share Price A$0.50 Ordinary Shares 133.3m Total Options 11.0m Market Cap (fully diluted) A$68.3m Less: Cash (A$8.2m) Add: Debt A$1.2m Enterprise Value A$61.3m *After IPO of 30m shares Directors & Management Non Executive Chairman MD & CEO Non Executive Director Non Executive Director Non Executive Director Geoff King Andy Carroll Ian Mutton Barry Dawes Nigel Hartley Top 5 Shareholders* MPS Staff Super Fund Pty Ltd 13.8% Pagodatree Investments Limited 11.3% Liberty Petroleum Corporation 10.3% Andy Carroll 8.4% Martin Place Securities Nominees 6.7% *Pre listing Estimates Phoenix Oil and Gas Ltd Building a portfolio of cash generating oil and gas assets Phoenix Oil & Gas Limited s ( Phoenix s ) business model is primarily to acquire royalty interests in oil and gas assets with existing production, reserves that will be developed or assets with exploration potential. The Company s focus is on acquiring royalties or net profit interests, which have the benefit of a share of the revenue or profit, without the obligation to fund capital expenditure. Thereby minimising the need for debt, or capital raisings that result in shareholder dilution. Phoenix currently has over twenty oil and gas assets located offshore Australia, in the Gippsland Basin (Victoria) and Browse Basin (WA); onshore Australia in the Amadeus, Officer, Cooper, Bowen and Surat Basins; and in the Seychelles. For a full overview of Phoenix s assets see p. 2 through p. 5. The selection of assets is critical to making the Company profitable now and into the future. As such, Phoenix s management plays a very important role in determining the investment outlook for the Company as a whole. Andy Carroll, Phoenix s MD and CEO, is a petroleum engineer with over 30 years of international oil and gas experience. For more detail on Phoenix s management and Board see p. 2 and p. 3. Phoenix has demonstrated that it is able to secure interests in quality, lower risk assets that are run by good operators; the Company has a track record of adding value. Phoenix secured, at an $80/bbl oil price, a 7.2% 8.0% net profit interest in the Tintaburra Block (or ATP 299P), a mature oil producing block operated by Santos (ASX: STO). Now, with the price of oil trading north of $100/bbl, the asset is arguably worth considerably more. Seismic Research has developed what we believe is a conservative model for valuing Phoenix s various oil and gas assets, adjusted for each asset s estimated probability of success. According to Seismic Research s NPV calculation, the net asset value of the Company is A$0.78/share (upon listing). Phoenix s listing price of A$0.50/share gives the Company a Price/Net Asset Value ( P/NAV ) ratio of 0.64.
Page 2 Investment Outlook & Risk Assessment Investment Outlook: Risk Assessment: Recommendation: Investment Outlook Moderate risk, buy Phoenix s business model is primarily to acquire royalty interests in oil and gas assets. The selection of oil and gas assets is critical to making the Company profitable now and into the future. As such, Phoenix s management plays a very important role in determining the investment outlook for the Company as a whole. Company Management Phoenix has an experienced management team and board, led by its Managing Director and CEO, Mr Andy Carroll; a petroleum engineer with over 30 years of international oil and gas experience. Trained with BP, he was most recently the MD of PXA (sold at a profit to QGC). Andy was previously MD of Great Artesian Oil and Gas, Executive Chairman of Ausam Resources (sold to Bounty Oil) and a Technical and Commercial Advisor with AGL Energy (see p. 3 for a summary of the Board). Phoenix has demonstrated that it is able to secure an interest in quality, lower risk assets that are run by good operators. Phoenix has secured a 7.2% 8.0% net profit interest in the Tintaburra Block (or ATP 299P), a mature oil producing block operated by Santos (ASX: STO) and it has secured royalty interests over two coal seam methane assets, operated by a ConocoPhillips and Origin Energy JV, that will likely supply gas to the Queensland Clean LNG project on Curtis Island. Asset Valuation But what about the value of the assets selected so far? Seismic Research has developed what we believe is a conservative model for valuing Phoenix s various oil and gas interests. We calculated a net present value ( NPV ) for each of the assets and adjusted each asset for its estimated probability of success; ranging from 1% for the assets in the Seychelles, to 100% for the currently producing assets. The valuation is summarised below and more detail can be found on p. 6. Multiple of Asset Valuation Most listed funds, or listed companies with rights to royalties, trade at a multiple to their net asset backing. The rationale is that you need to take into account how effectively the management can utilise the existing assets and cash flow to fund future projects and royalty acquisitions. This multiple is not a pre determined level; it s determined by the market and is, to a certain degree, arbitrary. According to Seismic Research s NPV calculation, the equity value of the Company is A$0.78/share (upon listing and given that Phoenix issues 30m shares). Phoenix s listing price of A$0.50/share gives the Company a Price/Net Asset Value ( P/NAV ) ratio of 0.64. In Jan 2011 Credit Suisse gave Franco Nevada, a Company with a similar business model to Phoenix, a P/NAV target of 1.28. So it is likely that, as Phoenix further proves its credentials and gains credibility in the market, it will trade at a premium to its NAV. Risk Assessment Phoenix s strategy to acquire small positions in larger, and hopefully lower risk, assets is a lower risk strategy in comparison to a traditional small cap oil and gas company. You are not betting the whole farm on one well and there is likely to be less financing risk; for most of the Company s assets Phoenix has no capital cost outlays beyond the initial purchase price. As such, large debt financing arrangements and large, dilutive capital raisings are not necessary. Asset Valuation Seismic Research would like to advise any potential investor that since there are many components and parameters going into any potential valuation of Phoenix Oil & Gas, this is a highrisk valuation that is subject to many variables. To attempt to take this into account we have been conservative in estimating production volumes, future revenues and probabilities of success. Table 1: Phoenix Valuation Summary Risked NPV (A$m) Per Share (A$) Production Assets 20.3 0.15 Development Assets 56.6 0.41 Exploration Assets 28.2 0.21 Administration (6.1) (0.04) Company Valuation 99.0 0.73 Add: Cash 8.2 0.06 Less: Debt (1.2) (0.01) Net Asset Value (NAV) 106.0 0.78
Page 3 Background Phoenix Oil & Gas Limited s ( Phoenix or the Company ) business model is primarily to acquire interests in oil and gas assets with existing production, reserves that will be developed or assets with exploration potential. The Company s focus is on acquiring royalties, which have the benefit of a share of the revenue or profit, without the obligation to fund capital expenditure....royalties...have the benefit of a share of the revenue or profit, without the obligation to fund capital expenditure. Phoenix currently has a number of oil and gas assets located offshore Australia, in the Gippsland (Victoria) and Browse Basins (WA); onshore Australia in the Amadeus, Officer, Cooper, Bowen and Surat Basins; and in the Seychelles. Management Phoenix has an experienced management team and board, led by its Managing Director and CEO, Mr Andy Carroll. Andy is a petroleum engineer with over 30 years of international oil and gas experience. Trained with BP, he was most recently the MD of PXA (sold to QGC). Andy was previously MD of Great Artesian Oil and Gas, Executive Chairman of Ausam Resources (sold to Bounty Oil) and a Technical and Commercial Advisor with AGL Energy. Andy is a petroleum engineer with over 30 years of international oil and gas experience. Andy is supported by a balanced board, headed by Mr Geoff King, Phoenix s Non Executive Chairman. Geoff has 36 years of oil and gas management experience with companies including Esso Australia and Ampolex. The other board members include, Mr Ian Mutton, a corporate governance lawyer, Mr Barry Dawes, who runs a boutique resources brokerage, and Mr Nigel Hartley, who spent 12 years as Oil Search s CFO. Geoff has 36 years of oil and gas management experience with companies including Esso Australia and Ampolex. The Offshore Gippsland Basin Located primarily off the south east coast of Victoria, the Gippsland Basin is one of Australia s most prolific petroleum producing regions. Production has been declining since the 1980s, but Gippsland was once Australia s biggest producer (it has since been overtaken by the Northwest Shelf in WA). Phoenix has royalty interests over four licences in the offshore part of the Gippsland Basin (see Table 2). Table 2: Gippsland Basin Assets VIC L29 Gippsland, Victoria 0.30% royalty VIC P54 Gippsland, Victoria 0.30% royalty VIC P45 Gippsland, Victoria 0.15% royalty VIC P59 Gippsland, Victoria 0.30% royalty VIC L29 (The Longtom Gas Field) VIC L29, a production licence, covers an area of ~63km 2 and is located immediately south of VIC P54. The licence hosts the Longtom Gas Field and is 100% owned and operated by Nexus Energy (ASX: NXS). A gas sales agreement was signed with Santos in 2005 for Santos to process up to 350PJ of gas from Longtom through its existing Patricia Baleen pipeline and onshore processing facilities. The Field is currently producing from 2 horizontal wells, Longtom 3 and Longtom 4. A gas sales agreement was signed with Santos in 2005 for Santos to process up to 350PJ of gas from Longtom... Gippsland Exploration Permits VIC P54, which is 100% owned and operated by Nexus Energy, (ASX: NXS) covers an area of ~630km 2 with water depths ranging between 36m and 60m. The licence is in close proximity to a number of major producing oil and gas fields, including the Longtom and Baleen gas fields. It is located close to existing infrastructure (including pipelines). VIC P54 is in close proximity to a number of major producing oil and gas fields, including Longtom and Baleen. The VIC P45 licence (50% Exoil, 50% Moby Oil & Gas) is a large licence, covering an area of ~900km 2. The giant Kingfish Field (50% Esso Australia, 50% BHP) is located immediately to the north and west of VIC 45P. Discovered over 40 years ago, Kingfish is Australia s largest ever oil discovery and it has since produced over 1 billion barrels of oil. Eight wells have been drilled over VIC P54, with three discoveries. None of these discoveries have been developed, but a number of leads have been identified using high quality 3D seismic. The giant Kingfish Field (50% Esso Australia, 50% BHP) is located immediately to the north and west of VIC 45P. The VIC P59 licence (65% Apache, 35% Kufpec) is another large licence, covering an area of ~1,112km 2. There have been no commercial discoveries over the block, but a number of subeconomic discoveries have been made and the Terakihi Blackback Field (50% Exxon, 50% BHP) is located immediately north of the licence....the Gippsland Basin is one of Australia s most prolific petroleum producing regions.
Page 4 The Browse Basin The Browse Basin, located off north west coast of Western Australia ( WA ), is one of Australia s most hydrocarbon rich offshore basins. As of January 2006, total estimated reserves for the Basin added up to 29TCF of gas, 438MMbbls of LPG, 629MMbbls of condensate and 14MMbbls of oil. Government numbers for the end of 2009 bring the total estimated gas reserves up to 35TCF. Phoenix has royalty interests over two licences in the Browse Basin (see Table 3). Government numbers for the end of 2009 bring the total estimated gas reserves [for the Browse Basin] up to 35TCF. Table 3: Browse Basin Assets WA 314 P Browse Basin, WA 0.0625% royalty WA 315 P Browse Basin, WA 0.0625% royalty WA 314 P and WA 315 P are located ~480km north of Broome, WA, and each cover an area of ~2,000km 2. ConocoPhillips is the operator of both of the permits and holds a 10% and 60% interest in WA 314 P and WA 315 P respectively, with Karoon Gas (ASX: KAR) holding the remaining 90% and 40% in each respective licence. ConocoPhillips is the operator of both of the permits and holds a 10% and 60% interest in 314 P and 315 P... Exploration on WA 314 P Two wells, Buffon 1 ST2 and Kontiki 1 have been drilled on WA 314 P. Buffon 1 ST2 encountered significant gas shows but a drill stem test encountered mostly formation fluid (salt water). Kontiki 1, drilled in 2009, reached a total depth of 4,600m, but encountered poor quality reservoir sands and poor gas shows. Despite the disappointment on the first two wells, Grace (another large target at P50 5.7TCF) has yet to be drill tested. Exploration on WA 315 P One well, Poseidon 1, has been drilled on WA 315 P. The Poseidon structure straddles both WA 315 P and WA 398 P. The well penetrated three gas bearing sands with a pay zone totalling 228m, but the gas water contact was not penetrated by the well. Current Contingent Resources for the Poseidon Field are estimated to be 3TCF (P90) and 7TCF (P50), but it is not in the public domain what percentage of the volume is estimated to fall in WA 315 P. Current Contingent Resources for the Poseidon Field are estimated to be 3TCF (P90)... Resources certification is planned by Karoon Gas (ASX: KAR) after interpretation of the 3D seismic survey conducted in 2010 and after the results of the 2011 drilling program are received. The Officer Basin The Officer Basin, which straddles South Australia and Western Australia, is considered underexplored, with only a handful of exploration wells drilled to date. This is in part due to the Basin s remote location, but also due to its age and lack of exposure. Some of the wells encountered oil shows, but none were developed for production. No production facilities exist in the area, but there is a major pipeline from the North west Shelf to Kalgoorlie that passes ~200km west of the Basin. Table 4: Officer Basin Assets WA EP 468 Officer, WA 100% Ownership Phoenix operates and has 100% ownership of WA EP 468, located in the western side of the Western Officer Basin, WA. Data over the licence is limited to a few mineral drill holes (not wells) completed over 30 years ago, a detailed airborne geophysical survey and a seismic line extending into the Officer Basin. One of the mineral drill holes had hydrocarbon shows in the form of staining and the presence of bitumen. One of the mineral drill holes had hydrocarbon shows in the form of staining and the presence of bitumen. The Amadeus Basin The Amadeus Basin, located in central Australia, is a proven petroleum producing province containing both oil and gas. The Basin hosts both the producing Mereenie Oil Field and the Palm Valley Gas Field. Yet it is also a frontier basin, where only around 30 wells have been drilled to explore for petroleum over an area of ~170,000km 2. Table 5: Amadeus Basin Assets NT EP(A) 155 Amadeus, NT 100% Ownership NT EP(A) 156 Amadeus, NT 100% Ownership NT EP 112 Amadeus, NT 1% royalty* EP 115 Amadeus, NT 1% royalty* EP 118 Amadeus, NT 1% royalty* EP 125 Amadeus, NT 1% royalty* EP(A) 111 Amadeus, NT 1% royalty* EP(A) 120 Amadeus, NT 1% royalty* EP(A) 124 Amadeus, NT 1% royalty* *1 st year royalty = 0.84% Phoenix is 100% owner and operator of two licences in the Amadeus Basin; NT EP(A) 155 and NT EP(A) 156. NT EP(A) 155 covers the previously drilled Mt. Winter Prospect. The first well had good oil shows in a number of formations. The Mt. Winter 2A well was drilled and intersected some very good oil shows, but no tests were performed. The seismic survey coverage for the area is low and, as such, it is unlikely that the structure was properly tested. The Mt. Winter 2A well was drilled and intersected some very good oil shows, but no tests were performed.
Page 5 Phoenix recently reached an agreement to acquire royalty interests in seven exploration permits and permit applications (see Table X) for which Central Petroleum (ASX: CTP) is the operator and majority owner. Three exploration targets have been identified by CTP in the permits where Phoenix has an interest; Johnstone (EP 115), Waterhouse (EP 112) and Mt Kitty (EP 125). Three exploration targets have been identified by CTP in the permits where Phoenix has an interest... Two wildcat wells, Johnstone West 1 and Surprise 1, were drilled by CTP in EP 115 during 2010. Johnstone West 1 encountered oil shows and a net pay zone of 15m that did not flow to surface on testing. Surprise 1 also encountered oil shows and a retrieved core is currently being analysed. Johnstone West 1 encountered oil shows and a net pay zone of 15m that did not flow to surface on testing. The Cooper Eromanga Basin The Cooper Eromanga Basin is located across the north east of South Australia and the south east of Queensland. DrillSearch estimates that cumulative oil production from the Cooper Eromanga basin since 1977 is 270MMbbls of oil, 82MMbbls of condensate, 123MMbbls of LPG and 5.5TCF of gas. The Basin is an established petroleum producing region with pipelines and production facilities. The Basin is an established petroleum producing region with pipelines and production facilities. Table 6: Cooper Eromanga Basin Assets ATP 299P (Settling) Cooper, Qld 7.2% net profit ATP 299P (Non Settling) Cooper, Qld 8.0% net profit Tintaburra Block (or ATP 299P) is a mature oil producing block operated by Santos (ASX: STO). The block comprises 15 producing fields, with 4 fields accounting for 85% of total production and 87% of the 2P Reserves (see Table 7 for a summary of Tintaburra s Reserves). Average production for the half year ending June 2010 was 1,664bbls/day. Phoenix has 7.2% and 8.0% net profit interests over the various sub blocks of ATP 299P. Tintaburra Block (or ATP 299P) is a mature oil producing block operated by Santos (ASX: STO). Table 7: Reserves and Contingent Resources 1P 2P 3P Reserves (PJ) 1.91 7.09 16.09 1C 2C 3C Resources (PJ) 0.09 2.54 7.91 Source: DrillSearch Queensland Coal Seam Methane Assets Phoenix has royalty interests in three coal seam methane ( CSM ) assets (see Table 8), which are located in the Bowen and Surat Basins in south east Queensland. Table 8: Queensland Coal Seam Methane Assets PL 101 Surat, Qld 2.125% royalty ATP 574 P Surat, Qld 2.500% royalty PL 171 Surat, Qld 2.500% royalty PL 101 is 100% owned and operated by Asia Pacific LNG, a 50 50 JV between ConocoPhillips and Origin Energy (ASX: ORG). PL 101 contains the Peat Field, one of the earliest Australian CSM fields, which has a long term gas sales contract in place to supply BP s Bulwer Island Clean Fuels Project. The Peat Field produces around 4PJ of coal seam gas per annum and is expected to continue producing at similar rates past 2035. 2P Reserves as at the end of 2008 were estimated to be 139PJ. The Peat Field produces around 4PJ of gas per annum and is expected to continue producing at similar rates past 2035. ATP 574 P and PL 171 are adjacent permits in the Surat Basin in Queensland. These permits are operated by BG Group, who has a 60% and 80% interest in ATP 574 P and PL 171 respectively. PL 171 is located near the proposed pipeline for the Queensland LNG project being undertaken by BG Group. As such, these permits seem well placed to provide gas for this LNG terminal. A seven well drilling campaign led to the independently certified Reserves outlined in Table 9 below. PL 171 is located near the proposed pipeline for the Queensland LNG project being undertaken by BG Group. Table 9: ATP 574 P and PL 171 Reserves (PJ of Gas) Permit 2P 3P ATP 574 P 38 449 PL 171 88 234 Source: Victoria Petroleum The Seychelles, Indian Ocean The Seychelles Archipelago lies in the western part of the Indian Ocean, ~1,500km off the eastern coast of Africa and ~700km north east of Madagascar. Until recently, exploration activity in the Seychelles has been sparse; there have been only four wells drilled and exploration activities, which stopped in 1996, have only recently been re started. Phoenix has a 0.075% royalty interest over WHL Energy s (ASX: WHN) total acreage in the Seychelles; WHL s permits cover an area of ~20,700km 2. WHL is in the process of acquiring line 7,000kms of modern 2D seismic over its identified prospects, prior to a farm out process later in 2011. Although the prospects are based on poor historic seismic, WHL holds that many of its targets have multi billion barrel potential.
Page 6 Company Valuation Using guidance from the Company and a series of assumptions outlined in Tables 10 14, Seismic Research has valued each of Phoenix s assets individually and summed the parts to come to a Company total valuation. Table 10: Production Royalty & Net Profit Assets Name Royalty Prob. of Success VIC P29 (Longtom) 0.3% 100% PL 101 (Peat Field) 2.125% 100% ATP 299 (Tintaburra) 7.2%/8.0%* 100% *net profit interests for settling/non settling parties Table 11: Development Royalty Assets Name Royalty Prob. of Success WA 315 P (Poseidon) 0.0625% 25% PL 171 (Qld CSM) 2.5% 100% ATP 574 (Qld CSM) 2.5% 100% Table 12: Exploration Ownership Assets Name Interest Prob. of Success NT EP(A) 155 100% 5% NT EP(A) 156 100% 5% WA EP 468 100% 5% Valuation Results Table 13: Exploration Royalty Assets Name Royalty Prob. of Success WA 314 P 0.0625% 15% VIC P54 0.30% 15% VIC P45 0.15% 10% VIC P59 0.30% 10% Seychelles Permits 0.075% 1% NT EP(A) 111 1% (0.84%*) 5% NT EP 112 1% (0.84%*) 5% EP 115 1% (0.84%*) 5% EP 118 1% (0.84%*) 5% EP(A) 120 1% (0.84%*) 5% EP(A) 124 1% (0.84%*) 5% EP 125 1% (0.84%*) 5% *in the 1 st year of production the royalty is 0.84% Major Assumptions Table 14: Modelling Assumptions Discount Rate 10% Consumer Price Index 3% p.a. (2011+) Tapis Oil Price (US$/bbl) 100 (2011+) Condensate Tapis Discount 20% (2011+) Domestic Gas Price (A$/GJ) 4.00 (2011+) Wellhead LNG Price (A$/GJ) 8.50 (2011), 9.77 (2012+) AUD USD Exchange Rate 1.00 (2011), 0.90 (2012+) Model Duration 20 years Table 15: Phoenix Model, Valuation Results Component Un risked NPV Risked NPV Risked NPV/Share Production Assets 20.4 20.4 0.15 Development Assets 76.6 57.0 0.42 Exploration Assets 596.0 28.3 0.21 Administration 6.1 6.1 0.04 Company Valuation 686.8 99.6 0.73 Add: Cash 8.2 8.2 0.06 Less: Debt 1.2 1.2 0.01 Net Asset Value 693.8 106.6 0.78 Sensitivity Analysis Seismic Research used the following LNG Contract Pricing formula below to determine a relationship between the LNG contract price and oil. Using this relationship we have conducted oil price sensitivity analysis on Phoenix s assets; our base case is a Tapis crude oil price of US$100/bbl. P(LNG) = 1.25 + (0.12 * Oil Price per bbl) Figure 1: Oil Price (US$/bbl) and Asset NPV/Share (A$/share) Exploration Assets Development Assets A$/sh. Production Assets 1.20 1.02 1.00 0.90 0.77 0.80 0.64 0.60 0.51 Table 16: Oil Price Sensitivity Analysis Oil Price (US$/bbl) 80 90 100 120 Asset NPV 0.51 0.64 0.77 1.02 Admin & Other 0.04 0.04 0.04 0.05 Company Valuation 0.47 0.60 0.73 0.98 Cash 0.06 0.06 0.06 0.06 Debt 0.01 0.01 0.01 0.01 Net Asset Value 0.52 0.65 0.78 1.03 0.40 0.20 0.00 80 90 100 110 120 US$/bbl
Page 7 Table 17: Forecast Revenue Statement Financial Year Ending Jun 11 Jun 12 Jun 13 Jun 14 Revenue 227 3,561 9,932 20,950 Interest Income 203 464 666 1,034 Other income 5 8 12 17 Gross Revenue 435 4,032 10,610 22,001 Employee & consultancy expenses 272 284 293 302 Due diligence & professional fees 241 244 251 258 Finance costs 85 93 103 113 ASX and share registry expenses 50 50 50 50 Depreciation expense 2 6 14 36 Exploration expenditure 80 899 Deferred payments 1,000 1,000 State Royalty Expenses 0.4 1 336 1,199 Impairment Expense 750 Other expenses 71 106 116 128 Total Expenses 1,471 783 2,242 3,985 Operating Profit/Loss (before tax) 1,036 3,249 8,368 18,017 Company tax 0 960 2,494 5,376 Operating Profit/Loss 1,036 2,288 5,874 12,640 Financial Year Ending Jun 11 Jun 12 Jun 13 Jun 14 Basic EPS (cents) 0.8 1.7 4.4 9.5 Diluted EPS (cents) 0.8 1.7 4.3 9.2 Ordinary Shares (m) 133.3 133.3 133.3 133.3 Fully Diluted Capital (m) 136.7 136.7 136.7 136.7 Basic P/E ratio (@ 50cps) 29.1 11.3 5.3 Diluted P/E Ratio (@ 50cps) 29.9 11.6 5.4 Cash at Bank (FY Ending) 8,127 8,131 8,135 9,722 Dividends Paid 0 0 4,000 12,000 and Phoenix Oil & Gas
Page 8 The Author of this Report The analyst principally responsible for the production of this research report is: Howard Humphreys Research Analyst hhumphreys@seismicresearch.com.au Analyst Certification: Any views expressed in this research report by Seismic Research Solutions Pty Ltd ( Seismic Research ) accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research report receives compensation based on overall revenues of Seismic Research and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. Seismic Research Seismic Research Solutions Pty Ltd ABN: 96 143 340 194 Level 5, 17 19 Bridge Street Sydney CBD NSW 2000 Email: enquiries@seismicresearch.com.au Website: www.seismicresearch.com.au Seismic Research Solutions is an Authorised Representative of an AFSL holder (AFSL: 338 943). Authorised Representative number: 389 109. This research document is intended solely for the information of the particular person to whom it was provided by Seismic Research Solutions Pty Ltd ( Seismic Research ) and should not be relied upon by any other person. If you are not the intended recipient you must not use or disclose the information in this research document in any way. In preparing this research document, Seismic Research did not take into account the investment objectives, financial situation and particular needs of the reader. Before making an investment decision on the basis of this research document, the reader needs to consider, with or without the assistance of a financial adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. Although we believe that the information this research document contains is accurate and reliable, Seismic Research has not independently verified the information contained in this document, which is derived from publicly available sources, directors and proposed directors and management. Seismic Research assumes no responsibility for updating any information contained in this research document or for correcting any error or omission which may become apparent after the document has been issued. Seismic Research does not give any warranty as to the reliability of any information contained in this research document and does not accept any liability for any loss caused by representations, errors or omissions on the part of Seismic Research or by any of its directors, employees or associates. As at Monday, 07 March 2011 Howard Humphreys, the author of this document, does not have a relevant interest in Phoenix Oil & Gas Limited ( Phoenix ). Seismic Research, its directors, employees and associates may have a relevant interest in Phoenix. This position may change at any time. Seismic Research was commissioned by Phoenix to compile this research document. In consideration Seismic Research received a consultancy fee. Seismic Research may earn referral fees in respect of investors that Seismic Research refers to companies looking to raise capital.