Annual Financial Report

30 March 2015 88 ENERGY LIMITED ASX LODGEMENT OF ANNUAL REPORT 88 Energy Limited (ASX:88E; AIM:88E)("88 Energy" or the "Company")advises that a copy of the Company's Annual Report for the year ended 31 December 2014 has been lodged on the ASX and is also available on the Company's website at www.88energy.com. The Annual Report was sent to shareholders today. Set out below is the Chairman's Statement as included in the Company's Annual Report. Also set out below is a summary of the Company's audited financial information for the year ended 31 December 2014 as extracted from the Annual Report, being: Consolidated Statement of Comprehensive Income; Consolidated Statement of Financial Position; Consolidated Statement of Changes in Equity; and Consolidated Statement of Cash Flows. CHAIRMAN'S STATEMENT Dear Shareholders It has been a landmark year. The Moroccan project provided a significant challenge for our new MD who rose to the occasion and steered the Company through the ensuing turbulence. Thanks to David's endeavours we have emerged with a new name, 88 Energy Limited; a new project in Alaska and a recapitalised entity complimented by a Board with in excess of 100 years of oil and gas experience. We look forward with enthusiasm to the future that lies ahead. The newly acquired Project Icewine on the North Slope of Alaska is a highly leveraged opportunity into which 88 Energy has first mover advantage with ground floor entry and operatorship. It's the type of opportunity a small explorer should identify with if it desires to get on the front foot and make a difference. The North Slope of Alaska is a mature oil producing region, hosting the largest onshore field in North America. Significant infrastructure is in place including an all year round access road, the Dalton Highway, and the TransAlaska Pipeline System (TAPS), both of which run through our newly acquired Project Icewine. Significantly, Project Icewine contains two play types that are considered highly prospective with considerable upside. The conventional oil play is ranked number 1 by the US Geological Survey for onshore exploration potential in North America and the unconventional play has an independently estimated gross unrisked mean prospective resource of 492 million barrels of recoverable oil (being up to ~431 million barrels net to the Company based on an 87.5% interest) from 8 billion barrels estimated oil in place. Project Icewine's location on the only year round access road, adjacent to the TransAlaska pipeline, means that any success we may have can be quickly monetised. Frontier exploration by its very nature is characterised by high risk and high rewards. There are no guarantees of success, however your Board is committed to managing 88 Energy with competence and integrity in a way that maximises the opportunity for shareholders to participate in the economic benefits of prudent exploration and development. On behalf of the Board, I welcome those new shareholders who participated in the recent successful capital raising and thank our existing shareholders for your continued support of the Company. Yours faithfully, Michael Evans Non-Executive Chairman CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014 Note 2014 2013 $ $ Income 3(a) 175,848 505,937 Administrative expenses 3(b) (2,858,366) (2,549,059) Occupancy expenses (1,028,345) (616,565) Employee benefit expenses 3(c) (1,179,662) (1,022,062) Share-based payment expense 17 (1,716,426) (604,843) Depreciation and amortisation expense (25,654) (24,933) Exploration expenditure expensed as (400,717) (172,818) incurred Exploration expenditure written off 10 (20,229,361) (2,112,508) Impairment of available-for-sale - (230,782) investments Loss on available-for-sale investments (14,216) (63,120) Interest expense (89) (827) Foreign exchange losses (436,117) - Loss before income tax (27,713,105) (6,891,580) Income tax expense 4 - - Net loss attributable to members of the (27,713,105) (6,891,580) parent Other comprehensive income for the year Other comprehensive to be recycled to profit or loss in subsequent periods: Change in fair value of (60,061) 60,061 available-for-sale investments (net of tax) Total comprehensive income for the year (27,773,166) (6,831,519) Basic and diluted loss per share 5 (9.65) (3.85)* (cents) * The loss per share calculations for all periods prior to 31 December 2014 have been adjusted by factors of 1.138 to reflect the bonus element of the 18 February 2015 share placement where placement participants received one free attaching listed option for every two placement shares. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 Note 2014 2013 $ $ ASSETS Current Assets Cash and cash equivalents 6 805,210 6,089,313 Other receivables 7 266,284 121,212 Total Current Assets 1,071,494 6,210,525 Non-Current Assets Plant and equipment 8 23,590 49,243 Other financial assets 9 42,726 3,566,500 Exploration and evaluation expenditure 10 - 7,742,856 Other assets 11 604,695 - Total Non-Current Assets 671,011 11,358,599 TOTAL ASSETS 1,742,505 17,569,124 LIABILITIES Current Liabilities Trade and other payables 12 393,933 915,761 Total Current Liabilities 393,933 915,761 TOTAL LIABILITIES 393,933 915,761 NET ASSETS 1,348,572 16,653,363 EQUITY Contributed equity 13(a) 67,985,300 55,889,563 Shares reserved for share plans 13(a) (1,667,500) - Reserves 13(b) 12,741,333 10,761,256 Accumulated losses (77,710,561) (49,997,456) TOTAL EQUITY 1,348,572 16,653,363 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 Issued Shares Share Available-for-sale Accumulated Total reserved based investments losses capital for share payment reserve equity plans reserve $ $ $ $ $ $ Balance at 1 January 49,196,225 - 10,096,102 - (43,105,876) 16,186,451 2013 Loss for the year - - - - (6,891,580) (6,891,580) Other comprehensive - - - 60,061 - 60,061 income/(loss) Total comprehensive - - - 60,061 (6,891,580) (6,831,519) loss for the year, net of tax Shares issued during 7,063,943 - - - - 7,063,943 the year Share-based payments - - 605,093 - - 605,093 Equity raising costs (370,605) - - - - (370,605) Balance at 31 December 55,889,563 - 10,701,195 60,061 (49,997,456) 16,653,363 2013 Balance at 1 January 55,889,563 - 10,701,195 60,061 (49,997,456) 16,653,363 2014 Loss for the year - - - - (27,713,105) (27,713,105) Other comprehensive income/(loss) - - - (60,061) - (60,061) Total comprehensive - - - (60,061) (27,713,105) (27,773,166) loss for the year, net of tax Shares issued during 14,412,255 (1,751,600) - - - 12,660,655 the year Shares cancelled (84,100) 84,100 - - - - Share-based payments - - 2,040,138 - - 2,040,138 Equity raising costs (2,232,418) - - - - (2,232,418) Balance at 31 December 67,985,300 (1,667,500) 12,741,333 - (77,710,561) 1,348,572 2014 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014 Note 2014 2013 $ $ Cash flows from operating activities Interest received 175,848 69,331 Payments to suppliers and employees (6,386,643) (3,686,428) Net cash flows used in operating 6 (6,210,795) (3,617,097) activities Cash flows from investing activities Payments for exploration and evaluation (9,300,344) (707,045) activities Project Icewine deposit (604,695) - Payments for plant and equipment - (30,467) Loans to other entities (300,000) - Loans repaid by other entities 300,000 - Purchase of available-for-sale - (609,402) investments Proceeds from sale of available-for-sale 79,248 221,495 investments Net cash flows used in investing (9,825,791) (1,125,419) activities Cash flows from financing activities Proceeds from issue of shares 11,100,374 7,063,943 Share issue costs (347,891) (370,605) Net cash flows from financing activities 10,752,483 6,693,338 Net increase/(decrease) in cash and cash (5,284,103) 1,950,822 equivalents Effects of exchange rate changes on cash - (36,419) and cash equivalents Cash and cash equivalents at beginning 6,089,313 4,174,910 of year Cash and cash equivalents at end of year 6 805,210 6,089,313 The above consolidated statements should be read in conjunction with the accompanying notes END David Wall Managing Director 88 Energy Limited Level 2, 5 Ord Street West Perth WA 6005, Australia Ph: +61 8 9485 0990 www.88energy.com Contacts RFC Ambrian Limited As Nominated Adviser Mr Oliver Morse +61 8 9480 2500 Refer to the Independent Resource Report in the most recent Prospectus on the Company website for details. Adjusting for the risk of geological success, this equates to a gross mean prospective resource of 200 million barrels of recoverable oil for Project Icewine (~175 million barrels net to the Company based on an 87.5% working interest). The estimates of quantities of petroleum that may potentially be recovered by the application of future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. Prospective resource assessments were estimated using probabilistic methods in accordance with SPE-PRMS standards.

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