88 Energy Regulatory News (88E)

28 July 2016

QUARTERLY REPORT

Report on Activities for the Quarter ended 30 June 2016

The Directors of 88 Energy Limited ("88 Energy" or the "Company", ASX & AIM:88E) provide the following report for the quarter ended 30 June 2016.

Highlights

· Acreage Award Finalised for ~173,000 Additional Acres

o 88 Energy Now Holds 210,250 Net Acres

· Icewine#2H Well and Stimulation Design for HRZ in Final Stages

o Landing Zone Narrowed to Two Horizons

· Official Tender Process for Icewine#2H Major Contracts Commenced in July 2016

o Several Suitable Rigs have been Identified for Drilling of Icewine#2H

· Well Permitting on Track for Completion Ahead of Scheduled Spud in 1QCY17

· Well Performance Modelling Indicates Potential for Improved Economics

o P50 Resource Mid Case Cost Scenario Breakeven Below US$40 Oil Price

· Integrated Petrophysical Model for Young's and Poisson's Validated by Core Data

· 2D Seismic Initial Results from Processing and Interpretation Expected in August

· A$25m Oversubscribed Placement Completed to Institutional and Sophisticated Investors in Australia and UK, end of June Quarter Net Cash Reserves of A$20.3m

Finalisation of Award of Additional ~173,000 Gross Acres

Processing has been completed for the official award of 172,937 acres successfully bid on in the State of Alaska November 2015 Licensing Round. The Icewine Joint Venture now holds title on a total of 271,119 acres, with 210,250 acres net to 88 Energy's 77.5% working interest.

Accumulate Energy Alaska, Inc (100% owned U.S.subsidiary of 88 Energy Ltd) is now the fifth largest net acreage holder of any Operator on the Central North Slope.

Icewine#2H Substantial Progress on All Fronts

The well and stimulation design for Icewine#2H are both in the final stages of completion and are currently being fine-tuned.

In the interim, integration of the latest rock property analysis, including Young's Modulus and Poisson's Ratio (stiffness, compressibility), as well as fluid sensitivities, has resulted in a narrowing of the proposed landing zone to two horizons. The final horizon will be selected based on the optimal stimulated rock volume, which in turn should result in maximum flow potential. Significantly, the results from the latest rock property analysis correlate to the integrated petrophysics, increasing the Company's confidence in the validity of the model.

Early observations indicate that the excellent source reservoir rock characteristics in the HRZ and consequent high potential flow rates should significantly improve the break even price for Project Icewine in the success case scenario.

Internal modelling of well performance vs cost scenarios indicates a range of breakeven oil prices from US$68/bbl to US$27/bbl (P90 Resource High Costs to P10 Resource Low Costs) with a mid case outcome of US$39/bbl (P50 Resource Mid Cost).

Operationally, good progress continues to be made with the identification of several suitable rigs for the drilling of Icewine#2H. The official tender process for all major contracts commenced in July. Permitting remains on track for completion well before the scheduled spud date in Q1 2017.

2D Seismic Status

2D seismic extracts purchased from Franklin Bluffs 3D Speculative Survey:

· Seismic interpretation of the extracted 2D lines in the vicinity of the Icewine#2H well location is anticipated in August.

Icewine 2D seismic acquisition 2016:

· The Icewine 2D seismic data acquired earlier this year by Accumulate Energy comprises a series of regional dip and strike lines spanning the majority of the Project Icewine acreage.

· The 2D dataset is expected to be processed by the end of July, with first look interpretation following in September.

Oversubscribed A$25m Placement

On the 22nd April, the Company announced the completion of a strongly oversubscribed A$25m placement to Institutional and Sophisticated investors in Australia and the UK. Funds from the placement are to be applied against the additional acreage purchased (completed), 2D seismic acquisition (completed) and to fund ongoing work associated with the Icewine#2H well, which remains on track for spud in 1Q2017.

The ASX Appendix 5B attached to this report contains the Company's cash flow statement for the quarter. The significant elements for the period were:

· exploration and evaluation expenditure of A$14.1m, related to the 2D seismic program and finalisation of payment for ~173,000 gross acres (March 2016 A$9.6m):

o Borrowings of A$4.1 (Bank of America Credit Facility) were used to fund the majority of the operational exploration expenditure (not including acreage purchase);

o These borrowings are secured against State of Alaska credit rebates with those related to Icewine#1 costs expected to be repaid within 12 months with a small refund net to the Company, once the credits are issued. Seismic rebates are expected next calendar year;

· administration and other operating costs A$1.2m (March 2016 of A$0.7m) - the variance in admin costs is due to several one off items paid for this quarter;

· cash raised via placement A$23.7m (after costs);

· a net cash inflow of A$12.8m recorded by the Company.

At the end of the quarter, the Company had net cash reserves of A$20.3 million.

Media and Investor Relations:

Project Icewine Highlights

In November 2014, the Company entered into a binding agreement with Burgundy Xploration (BEX) to acquire a significant working interest (87.5%, reducing to 78% on spud of the first well on the project) in a large acreage position on a multiple objective, liquids rich exploration opportunity onshore Alaska, North America, referred to as Project Icewine. In November 2015, the gross acreage position was expanded by 172,937 acres (formal award finalised in June 2016) to 271,119 contiguous acres (210,250 acres net to the Company).

The Project is located on an all year operational access road with both conventional and unconventional oil potential. The primary term for the State leases is 10 years with no mandatory relinquishment and a low 16.5% royalty.

The HRZ liquids-rich resource play has been successfully evaluated based on core obtained in the recently completed (December 2015) Icewine #1 exploration well, marking the completion of Phase I of Project Icewine. Phase II has now commenced, with planning for a horizontal multi-stage fracture stimulated well, Icewine#2H, currently underway.

Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially movable hydrocarbons.

Generous exploration incentives are provided by the State of Alaska with up to 35% of exploration expenditure refundable in cash.

The primary objective is an untested, unconventional liquids-rich shale play in a prolific source rock, the HRZ shale (Brookian Sequence), that co-sourced the largest oil field in North America; the giant Prudhoe Bay Oil Field Complex. Internal modelling and analysis indicates that Project Icewine is located in a high liquids vapour phase sweetspot analogous to those encountered in other Tier 1 shale plays e.g. the Eagle Ford, Texas.

Conventional play potential can be found at Project Icewine within the same Brookian petroleum system and shallow to the HRZ shale and includes high porosity channel and deep water turbiditic sands. The Brookian conventional play is proven on the North Slope; the USGS (2013) estimate the remaining oil potential to be 2.1 billion barrels just within the Brookian sequence. Additional conventional potential exists in the deeper Kuparuk sands and the Ivashuk Formation.

Drilling in (2012), on the adjacent acreage to the north, confirmed that the HRZ shales, along with the underlying Kingak & Shublik shales, were all within the oil window which is extremely encouraging for the unconventional potential at Project Icewine. In addition, a conventional oil discovery was reported in the Kuparuk sandstones.

A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned by 88 Energy to evaluate the unconventional resource potential of Project Icewine in February 2016 and was released to the market on 6th April 2016.

About 88 Energy: 88 Energy has a 78% working interest and operatorship in ~271,000 acres onshore the prolific North Slope of Alaska ("Project Icewine"). The North Slope is the host for the 15 billion barrel Prudhoe Bay oilfield complex, the largest conventional oil pool in North America. The Company, with its Joint Venture partner Burgundy Xploration, has identified three highly prospective play types that are likely to exist on the Project Icewine acreage - two conventional and one unconventional. The large resource potential of Project Icewine was independently verified by leading international petroleum resource consultant DeGolyer and MacNaughton. In addition to the interpreted high prospectivity, the project is strategically located on a year-round operational access road and only 35 miles south of Pump Station 1 where Prudhoe Bay feeds into the TransAlaska Pipeline System. The Company is currently acquiring seismic to take advantage of the globally unique fiscal system in Alaska, which allows for up to 75% of 1H2016 exploration expenditure to be rebated in cash. The Company recently completed its maiden well at the project, Icewine#1, with excellent results from analysis of core obtained in the HRZ shale. A follow-up well with a horizontal section and multi stage frac, Icewine#2H, is planned for 1Q2017.