OEX.L Regulatory News (OEX)

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2020 FINANCIAL REPORT

CONTENTS

Directors' Report...........................................................................................................................................................

Remuneration Report - Audited....................................................................................................................................

Lead Auditor's Independence Declaration ...................................................................................................................

Consolidated Statement of Profit or Loss and Other Comprehensive Income..............................................................

Consolidated Statement of Financial Position...............................................................................................................

Consolidated Statement of Changes in Equity..............................................................................................................

Consolidated Statement of Cash Flows........................................................................................................................

Notes to the Consolidated Financial Statements…………………………………….......................................................

Directors' Declaration....................................................................................................................................................

Independent Audit Report.............................................................................................................................................

Shareholder Information...............................................................................................................................................

For the year ended 30 June 2020

The directors of Oilex Ltd present their report (including the Remuneration Report) together with the consolidated financial statements of the Group comprising of Oilex Ltd (the Company) and its subsidiaries for the financial year ended 30 June 2020 and the auditors' report thereon.

DIRECTORS

The directors of Oilex Ltd in office at any time during or since the end of the financial year are:

(Interim Chairman and Managing Director)

B App Sc (Geology), GAICD

Mr Salomon was appointed as a Non-Executive Director in November 2015, Managing Director on 18 March 2016, and Interim Chairman on 5 May 2020 following the resignation of Mr Lingo. Mr Salomon has over 34 years of experience working for upstream energy companies. Further details of Mr Salomon's qualifications and experience can be found in the Executive Management section of the Directors' Report.

During the last three financial years Mr Salomon has not been a director of any other ASX listed companies.

(Non-Executive Chairman)

Bachelor of Arts with Honours, Juris Doctorate, MAICD

Mr Lingo was appointed as a Non-Executive Director in February 2016 and Non-Executive Chairman in February 2017. Mr Lingo has more than 34 years of experience in a diverse range of oil and gas leadership roles, including business development, new ventures, mergers and acquisitions and corporate finance. Mr Lingo has worked with Tenneco Energy and El Paso Corporation in the US and Australia, Sunshine Gas Limited, AGL Energy, Roc Oil Limited, the Commonwealth Bank of Australia, Drillsearch Energy Limited and Elk Petroleum Limited.

During the last three financial years up to his resignation on 5 May 2020, Mr Lingo has been a director of the following ASX listed companies:

· Elk Petroleum Limited (from August 2015 to March 2019)

Mr Bolton was appointed as an Executive Director on 26 March 2020. Mr Bolton has significant experience in the development and financing of new minerals projects, particularly in emerging economies. Further details of Mr Bolton's qualifications and experience can be found in the Executive Management section of the Directors' Report.

During the last three years Mr Bolton has not been a director of any other ASX listed company.

(Non-Executive Director)

Mr Haywood was appointed as a Non-Executive Director in May 2017. Mr Haywood has over 16 years of international experience in delivering value for his investment network through a blended skill set of corporate and operational experience, including more than six years in the Middle East, building early stage and growth projects. More recently, Mr Haywood has held senior management positions with UK and Australian public companies in the natural resource and energy sectors including oil and gas exploration and development in UK, EU and Central Asia. Mr Haywood's expertise stretches across UK and Australian public markets, with a cross-functional skill set encompassing research, strategy, implementation, capital and transactional management. Mr Haywood is currently Chief Executive Officer of Block Energy Plc.

During the last three years Mr Haywood has not been a director of any other ASX listed companies.

(Non-Executive Director)

B Sc (Geology), M Sc (Petroleum Geology)

Mr Schwarz was appointed as a Non-Executive Director in September 2019. A former director of BG Exploration and Production Limited and CEO of independent exploration company Virgo Energy Ltd, Peter is an AAPG Certified Petroleum Geologist and business development professional with over 40 years' experience in the oil and gas industry. Peter has previously held various senior management roles with Amerada Hess, BG, and Marubeni and is currently a director of Finite Energy Limited, an oil and gas consultancy business he founded over 10 years ago, specialising in strategy and business development advice in the UK and Europe.

During the last three years Mr Schwarz has not been a director of any other ASX listed companies.

COMPANY SECRETARY

The Executive Director, Mr Mark Bolton (B Bus) was appointed Company Secretary in June 2016.

CORPORATE GOVERNANCE STATEMENT

The Corporate Governance Statement, which reports on Oilex's key governance principles and practices is available on the Oilex website.

In establishing its corporate governance framework, the Company has referred to the recommendations set out in the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 3rd edition. The Company has not early adopted the 4th edition of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations which come into effect for the Company's financial year commencing 1 July 2020.

The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices do not follow a recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation.

The Corporate Governance Statement provides detailed information on the Board and committee structure, diversity and risk management.

DIRECTORS' MEETINGS

Directors in office and directors' attendance at meetings during the 2019/20 financial year are as follows:

(1) Following the changes to the Board at the Annual General Meeting on 25 November 2015, the Board resolved that the full Board would perform the role of the Audit and Risk Committee and the Remuneration and Nomination Committee. The Company is considering the appointment of additional independent non-executive directors in order to achieve best practice corporate governance and may reconstitute the Committees at that time.

(2) Held indicates the number of meetings available for attendance by the director during the tenure of each director.

(3) Mr Lingo was Chairman until his resigned from the board on 5 May 2020.

(4) Current Chairman from 5 May 2020 following Mr Lingo's resignation.

(5) Mr Schwarz and Mr Bolton were appointed to the board on 4 September 2019 and 26 March 2020, respectively.

EXECUTIVE MANAGEMENT

(Interim Chairman and Managing Director)

B App Sc (Geology), GAICD

Mr Salomon was appointed as a Non-Executive Director in November 2015, Managing Director on 18 March 2016, and Interim Chairman on 5 May 2020. Mr Salomon has a Bachelor Degree in Applied Science and is a member of the American Association of Petroleum Geologists and the Society of Petroleum Engineers, and has over 34 years of experience working for upstream energy companies. Mr Salomon has worked for a number of oil and gas companies in various senior positions including General Manager Exploration and New Ventures at Murphy Oil Corporation and Global Head of Geoscience at RISC PL, in addition to a number of Executive Director roles including Strategic Energy Resources, Norwest Energy and Nido Petroleum. At several times in his career, Mr Salomon has acted as an independent consultant for various oil and gas companies, including New Standard Energy and Pacrim Energy. Mr Salomon first worked on Indian projects in 1994 while at Ampolex and since that time has maintained connection with the Indian industry, at various times bidding in India's exploration and field development rounds and working with Indian companies as joint venture partners, both in India and internationally.

Mr Mark Bolton

(Executive Director and Company Secretary)

B Business

Mr Bolton was appointed Chief Financial Officer and Company Secretary in June 2016, and Executive Director on 26 March 2020. He has significant experience in the resource sector in Australia, having worked as Chief Financial Officer and Company Secretary for a number of resource companies since 2003. Prior to this, Mr Bolton worked with Ernst & Young as an Executive Director in Corporate Finance. Mr Bolton has experience in the areas of commercial management and the financing of resource projects internationally. He also has extensive experience in capital and equity markets in a number of jurisdictions including ASX, AIM and the TSX.

(Head - India Assets)Bachelor of Engineering (BE in Chemical Engineering, including petroleum management)

Mr Khare was appointed Head - India Assets on 8 November 2016 and is based in Gandhinagar India and has over 19 years of experience in the petroleum industry. Mr Khare's area of expertise include upstream oil and gas, as well as midstream and downstream project implementation and operations management. Mr Khare originally worked for Oilex as GM Operations & Business Development, and has experience working for various Indian companies including Cairn India Ltd and Reliance Petroleum.

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the financial year included:

· exploration for oil and gas;

· appraisal and development of oil and gas prospects; and

· production and sale of oil and gas.

There were no significant changes in the nature of the activities during the year.

OPERATING RESULTS

The loss after income tax of the consolidated entity for the year ended 30 June 2020 amounted to $4,492,638 (2019: loss of $3,118,121).

Following the voluntary shut-in of the Cambay Field in Q1 2019 resulting in the cessation of production, no revenue has been recognised during the full financial year.

In the absence of a repayment schedule for outstanding cash calls from Gujarat State Petroleum Corporation (GSPC), the Company has continued to provide in full the amounts owing from its Joint Venture partner as well as amounts owing from the Cambay and Bhandut Joint Ventures, with the exception of a US$110,000 (A$163,836) Cambay cash call payment [received/expected to be received] subsequent to reporting date.

In addition to the above expected cash payment, a reduction in Joint Venture cash call and recharges since 30 June 2019 has resulted in a reversal in the provision for doubtful debts related to Cambay and Bhandut cash calls and recharges of $226,108. This reversal has been partially offset by a provision for doubtful debts expense of $94,794 required for the Group's share of JPDA JV cash call receivables, and other receivables of $24,001. As a result, operating results include a credit to the provision for doubtful debts expense of $107,313 (2019: $108,206 expense).

OPERATING RESULTS (continued)

Exploration costs have increased to $1,008,719 (2019: $491,675) reflecting the increased activity in seeking and evaluating new business opportunities.

Other costs $1,270,152 (2019: Cost of sales $504,926) includes an increase in write-down of inventory to net realisable values of $1,030,060 (2019: $161,354).

The prior year results included a reduction in variable operating expenses as part of Group's effort to reduce costs. In the current year, efforts to contain costs have continued with further reductions in administration employee expenses $718,210 (2019: $819,627). Total administration expenses of $2,015,477 (2019: $1,957,850) include the above-mentioned reduction in employee expenses; however, this has been offset by increased legal expenses related to the Cambay PSC.

Other expenses $336,921 (2019: $40,990) have increased as a result of the termination penalty provision (non-cash) in relation to JPDA 06-103 PSC (refer Note 27) increasing from USD$600,000 to USD$800,000; resulting in a termination penalty provision expense of $297,885 (USD$200,000) (2019: $nil).

The impact of the Coronavirus (COVID-19) up to 30 June 2020 has been financially negative for the consolidated entity. This is largely due to its general impact in India where significant delays have been experienced with the sale process being conducted by GSPC for its' 55% interest in the Cambay Production Sharing Contract (PSC). As a result, Indian operations have continued to be maintained on a 'care and maintenance' basis for a longer period than originally anticipated.

Cash and cash equivalents held by the Group as at 30 June 2020 has decreased to $173,816 (2019: $357,970).

FINANCIAL POSITION

The net assets of the consolidated entity totalled $5,030,007 as at 30 June 2019 (2019: $3,364,861).

DIVIDENDS

No dividend was paid or declared during the year and the directors do not recommend the payment of a dividend.

REVIEW OF OPERATIONS

A review of the operations of the Group during the financial year and the results of those operations are set out in the Review of Operations on pages [xx to xx] of this report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The Review of Operations details those changes that have had a significant effect on the Group.

Other than those matters, there have been no other significant changes in the state of affairs of the Group that occurred during the financial year.

LIKELY DEVELOPMENTS

Additional comments on expected results on operations of the Group are included in the Review of Operations on pages [xx to xx].

Further disclosure as to likely developments in the operations of the Group and expected results of those operations have not been included in this report as, in the opinion of the Board, these would be speculative and as such, disclosure would not be in the best interests of the Group.

ENVIRONMENTAL ISSUES

The Group's oil and gas exploration and production activities are subject to environmental regulation under the legislation of the respective states and countries in which they operate. The majority of the Group's activities involve low level disturbance associated with its drilling programmes and production from existing wells. The Board actively monitors compliance with these regulations and as at the date of this report is not aware of any material breaches in respect of these regulations.

SIGNIFICANT EVENTS AFTER BALANCE DATE

a) The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has been financially negative for the consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian and Indian Governments and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

b) On 17 July 2020, the Company announced it has issued the second and final tranche of 55,555,556 ordinary shares pursuant to the placement first announced on 16 March 2020; and amended as announced on 27 April 2020. The share issue was pursuant to an equity capital raising to secure further funding of £0.25 million (A$0.5 million) through the subscription of 277,777,778 new shares at £0.009 per share (0.1792 AUD cents) per share.

The Company also announced:

· the issue of 103,033,333 shares to advisors and consultants in lieu of cash fees payable; and

· further to the approval by shareholders at the annual general meeting held on 30 June 2020 and the Company announcement on 15 May 2020, the Company issued the following unlisted options:

- Series B Loan Options 115,727,273 exercisable at £0.0011 on or before 31 July 2020

- Series D Loan Options 204,545,455 exercisable at £0.0011 on or before 30 June 2021.

c) On 27 July 2020, the Company announced that substantial progress has been made towards the Company's strategic objective to regain a participating interest in the West Kampar PSC in Indonesia, which is expected to lead, subject to financing, to recommencing production from the Pendalian Oilfield.

Following various meetings and correspondence with the Government of Indonesia (GoI) and with the support of the Company's local Indonesian partner, the GoI has advised that our Proposed Direct Bid, through the Joint Study of the West Kampar Region, is declared administratively complete and have recorded it as a proposal for a Direct Offer through a Joint Study as stipulated in ESDM Regulation No. 35 of 2008.

This confirmation from the GoI, which is exclusive to Oilex, provides a pathway to conduct the Joint Study on the proposed development of West Kampar which will then provide certain preferential rights in the ultimate award of the West Kampar PSC by the GoI. Oilex's interest in the study and ultimate potential award of the PSC will be on a 50-50 joint basis with its local Indonesian partner, PT Ephindo.

d) On 31 July 2020, the Company announced that it has taken further steps to strengthen its balance sheet as the Company continues to navigate the impact of Covid-19 on its business and global equity markets. In particular, the Company entered into an amendment agreement to vary the repayment obligations for its Series C (GBP£125,000) loan. Furthermore, the Company secured additional equity investment of £0.25 million to increase its working capital flexibility and reduce its financial debt obligations.

Amendment to Series C Loan Funding Agreement (GBP £125,000)

Pursuant to the amendment agreement, the loan repayment date has been extended from 1 August 2020 to 31 October 2020. All other terms remain the same and are extended to 31 October 2020, except for the issue of 113,636,364 new options exercisable at £0.0011 on or before 29 January 2021.

The options, which if exercised in their entirety, will result in a cash inflow to the Company of £125,000 (A$224,901). The proceeds from such conversion of options will be applied to the outstanding Series C Loan balance, which is fully drawn down.

The issue of the new options is subject to shareholder approval under ASX Listing Rule 7.1 on or before 30 November 2020. Failure to secure shareholder approval will require immediate repayment of the loan principal and accrued interest.

Equity Capital Raising

The Company has arranged an equity capital raising, through Novum Securities Limited and to existing institutional shareholders, to secure further funding of £0.25 million (A$0.5 million) through the subscription of 312,500,000 new shares at GBP 0.08 pence (0.144 AUD cents) per share.

SIGNIFICANT EVENTS AFTER BALANCE DATE (continued)

Funds raised from the subscription are intended to be applied towards increasing the Company's working capital base and debt reduction The additional funding will support the Company's initiative to implement the settlement with GSPC, which has been delayed by the impact from Covid-19.

On 10 August 2020, the Company announced that it has issued the 312,500,000 shares. Pursuant to advisory agreements with Novum, the Company also issued 15,000,000 unlisted options exercisable at GBP 0.08 pence on or before 12 August 2022 upon the completion of the capital raise.

e) On 7 August 2020, the Company, in its capacity as Operator, on behalf of the Joint Venture Participants in Joint Petroleum Development Area ("JPDA") 06-103 Production Sharing Contract ("PSC") in East Timor announced it had executed a Deed of Settlement and Release (Deed) with the Autoridade Nacional Do Petroleo E Minerais ("ANPM") to terminate the ongoing arbitration proceedings arising from the termination of the PSC by the ANPM in 2015 and settle all claims and counterclaims between the parties.

The execution of the Deed sees an amicable conclusion to the arbitration proceedings, as announced in October 2018, where Oilex and its joint venture partners in the PSC were subject to a penalty claim of US$17 million (plus interest) on a joint and several basis. Oilex is the Operator of the PSC on behalf of the joint venture.

Under the terms of the Deed, Oilex has committed to a settlement of US$800,000 payable in the 2021 and 2022 financial years, which has been fully provided for at 30 June 2020. In addition, the Company has entered into an unsecured loan facility agreement for US$800,000 with two of its joint venture partners to fund the settlement. The Deed further provides the Company with the option, at its sole discretion, to extend the settlement payments into the 2023-24 financial year. Reference is made to Note 14 for further detail on this loan facility.

f) On 14 September 2020, the Company announced that it has agreed to amend the Share Purchase Agreement (SPA) with Armour Energy Limited (Armour), as announced on 15 June 2020, for the proposed sale of all of its interests in the Cooper-Eromanga Basin (Proposed Transaction). Pursuant to the SPA, Armour will acquire 100% of the issued capital of CoEra Limited (CoEra), a wholly owned Company subsidiary which holds all of Oilex's interests in the Cooper-Eromanga Basin.

The amendments:

· extend the completion date from 15 September 2020 until 15 October 2020 to enable Armour to seek its shareholder approval pursuant to ASX Listing Rule 7, with such shareholder meeting scheduled for 18 September 2020, and allow additional time to satisfy the Conditions Precedent. Armour received shareholder approval for the transaction at its 18 September 2020 General Meeting;

· amend the date upon which Armour pays to Oilex the past costs of $125,000 to within 5 Business Days after receipt of Armour's above shareholder approval. Oilex received these funds in late September 2020; and

· reduce the timeframe for the Tranche 2 share adjustment from 90 days to 60 days from completion.

There were no other significant subsequent events occurring after year end.

FINANCIAL POSITION

Capital Structure and Treasury Policy

As at 30 June 2020 the Group had unsecured loans at face value $804,959 (2019: $580,000). Refer note 14 of the Consolidated Financial Statements for details of the carrying amount, terms and conditions, repayment schedule, and options attached to the loans.

Details of transactions involving ordinary shares during the financial year are as follows:

In accordance with the ASX Waiver granted 22 October 2019 the Company advises that the number of remuneration shares that were issued to non-executive directors totalled nil. This represents 0.00% of the Company's issued capital as at 30 June 2020.

The non-executive directors were entitled to the issue of 10,399,814 remuneration shares (representing part payment of director's fees) during the financial year ended 30 June 2020. These remuneration shares shall be issued in the next financial period.

As at the date of this report the Company had a total issued capital of 4,119,629,999 ordinary shares and 241,014,753 unlisted options exercisable at weighted average price of $0.002 per share.

FINANCIAL POSITION (CONTINUED)

Material Uncertainty Related to Going Concern

The financial report and audit opinion for the year ended 30 June 2020 identifies a material uncertainty regarding continuation as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realisation of assets and settlement of liabilities in the normal course of business. The Group will require funding in order to continue its exploration activities and progress the Cambay Project.

The funding requirements of the Group are reviewed on a regular basis by the Group's Executive Director and Company Secretary, and Managing Director and are reported to the Board at each board meeting to ensure the Group is able to meet its financial obligations as and when they fall due. Until sufficient operating cash flows are generated from its operations, the Group remains reliant on joint venture contributions, equity raisings or debt funding, as well as asset divestitures or farmouts to fund its expenditure commitments.

The Company continues to actively develop funding options in order that it can meet its expenditure commitments and its planned future discretionary expenditure, as well as any contingent liabilities that may arise.

DIRECTORS' INTERESTS

The relevant interest of each director in shares and unlisted options issued by the Company, as notified by the directors to the ASX in accordance with Section 205G (1) of the Corporations Act 2001, at the date of this report is as follows:

SHARE OPTIONS

All options were granted in the current and previous financial years.

At the date of this report, unissued ordinary shares of the Company under option (with an exercise price) are:

(1) Issued in connection to Series D unsecured loans. Refer note 14 of the Consolidated Financial Statements for further detail.

These options do not entitle the holder to participate in any share issue of the Company or any other body corporate.

During the financial year, the following unlisted options expired or were cancelled upon cessation of employment:

SHARE OPTIONS (continued)

During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of unlisted options as follows (there were no amounts unpaid on the shares issued):

The Group paid a premium in respect of insurance cover for the directors and officers of the Group. The Group has not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors' liability and legal expense insurance contracts, as such disclosure is prohibited under the terms of the insurance contract.

PROCEEDINGS ON BEHALF OF THE COMPANY

No proceedings have been brought on behalf of the Company, nor has any application been made in respect of the Company under Section 237 of the Corporations Act 2001.

NON-AUDIT SERVICES

The Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor's expertise and experience with the Group is important.

The Board has considered the non-audit services provided during the year and is satisfied that the provision of the non-audit services is compatible with, and did not compromise, the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

· all non-audit services were subject to the corporate governance procedures adopted by the Group and these have been reviewed by the Board to ensure they do not impact the impartiality and objectivity of the auditor; and

· the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

Refer note 26 of the Consolidated Financial Statements for details of the amounts paid to the auditors of the Group, PKF Perth and KPMG Perth, and their network firms for audit and non-audit services provided during the year.

rounding of Amounts

The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest dollar, unless otherwise stated.

LEAD AUDITOR'S INDEPENDENCE DECLARATION

The Lead Auditor's Independence Declaration for the year ended 30 June 2020 has been received and can be found on page [xx].

REMUNERATION REPORT - AUDITED

The Board has performed the function of the Nomination and Remuneration Committee since June 2016 when the Board considered that, given the size and composition of the existing Board, that there are no efficiencies to be gained by having a separate committee. The Board has adopted a Nomination and Remuneration Committee Charter, which describes the role, composition, functions and responsibilities of the committee. The Nomination and Remuneration Committee is responsible for the review and recommendation to the Board, of the Company's Remuneration Policy, senior executives' remuneration and incentives, the remuneration framework for directors, superannuation arrangements, incentive plans and remuneration reporting.

1. PRINCIPLES OF COMPENSATION

Remuneration is referred to as compensation throughout this report. The Remuneration Report explains the remuneration arrangements for directors and senior executives of Oilex Ltd who have authority and responsibility for planning, directing and controlling the activities of the Group (key management personnel).

The compensation structures explained below are designed to attract, retain and motivate suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:

· the capability and experience of the key management personnel;

· the ability of key management personnel to control the performance of the relevant segments;

· the current downturn of the resources industry;

· the Company's performance including:

· the Group's earnings; and

· the growth in share price and delivering constant returns on shareholder wealth;

· exploration success; and

· development of projects.

Compensation packages include a mix of fixed compensation and long-term performance-based incentives. In specific circumstances the Group may also provide short-term cash incentives based upon the achievement of Company performance hurdles or in recognition of specific achievements.

Fixed compensation consists of base compensation and employer contributions to superannuation funds. Compensation levels are reviewed annually through a process that considers individual, sector and overall performance of the Group. In addition, reviews of available data on oil and gas industry companies provide comparison figures to ensure the directors' and senior executives' compensation is competitive in the market.

Reductions in remunerations introduced in 2016 and 2017 for Non-Executive Directors, the Managing Director, the Executive Director and Company Secretary, and all staff have remained in place, with further reductions for some staff in April/May 2020, for the financial year ended 2020.

Compensation for senior executives is separately reviewed at the time of promotion or initial appointment.

Performance linked compensation includes both short-term and long-term incentives designed to reward key management personnel for growth in shareholder wealth. The short-term incentive (STI) is an "at risk" bonus provided in the form of cash or shares, while the long-term incentive plan (LTI) is used to reward performance by granting options over ordinary shares of the Company.

Short-term incentive bonus

The Group does not utilise short-term incentives on an annual or regular basis, as these are not considered part of the standard compensation package for key management personnel.

In certain circumstances the Board may, for reasons of retention, motivation or recognition, consider the use of short-term incentives.

Short-term incentives, if granted, are at the discretion of the Board having regard to the business plans set before the commencement of the financial year as well as the achievement of performance targets as determined by the Board. These targets include a combination of key strategic, financial and personal performance measures which may have a major influence over company performance in the short-term.

1. PRINCIPLES OF COMPENSATION (CONTINUED)

Short-term incentive bonus (continued)

There were no short-term incentives, performance bonuses or shares granted to senior executives or staff during the year ended 30 June 2020.

Long-term incentive bonus

Shareholders approved the 2017 Employee Incentive Plan (the Plan) at the AGM held 29 November 2017, which has yet to be implemented.

The Plan is a long-term incentive plan designed to allow the Group to attract and retain talented employees. The Plan aims to closely align the interests of directors, senior executives, employees and eligible contractors with those of shareholders and create a link between increasing shareholder value and employee reward.

The Plan permits the Board to grant shares and rights to acquire shares in the Company. Rights granted under the Plan may be in the form of options with a market-based exercise price, or performance rights, or a combination of these depending upon the Company's objectives in making the grant.

Vesting conditions may include one or more objectives and/or time-based milestones set at the discretion of the Board.

Whilst the Company moved certain assets to development in previous financial years, these have been impaired, and the Company does not generate profits or net operating cash inflows and as such does not pay any dividends, and consequently remuneration packages are not linked to profit performance. It is the performance of the overall exploration and appraisal programme and ultimately the share price that largely determines Oilex's performance. The Board therefore considered that fixed compensation combined with short-term and long-term incentive components is the best remuneration structure for achieving the Company's objectives to the benefit of shareholders. The table below sets out the closing share price at the end of the current and four previous financial years.

The remuneration of directors may consist of a cash component as well as an equity component; and is designed to retain directors of a high calibre, whilst rewarding them for their ongoing commitment and contribution to the Company on a cost-effective basis. The issue of shares, rights or options to directors, subject to shareholder approval, is judged by the Company, to further align the directors' interests with that of shareholders, whilst maintaining the cash position of the Company. The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing shares, rights or options to directors.

The Company did not issue any long-term incentives to directors, senior executives or staff during the year ended 30 June 2020.

Total compensation for all Non-Executive Directors is based on comparison with external data with reference to fees paid to Non-Executive Directors of comparable companies. Directors' fees cover all main Board activities and membership of committees, if applicable.

The Board resolved to further reduce the remuneration of Non-Executive Directors by 10% effective from 1 October 2016 and these reductions remained in place during the year ended 30 June 2020.

The annual fee for Mr Lingo (Chairman until his resignation on 5 May 2020) including superannuation was set at $70,956 per annum effective from 1 October 2016 and remained in place until 31 July 2019.On 6 September 2019, the Company announced an expanded operational role for Mr Lingo to drive the Cooper Basin Strategy. A new agreement for Mr Lingo, effective from 1 August 2019, had an initial term of 6 months and provided for a monthly consultancy fee of $20,000 per month, plus superannuation; and is also inclusive of the Chairman's fees. The agreement was subsequently extended until 30 March 2020 with a further one-month extension to 30 April 2020.

The Australian based Non-Executive Directors fees including superannuation was set at $49,275 per annum effective 1 October 2016 and remains unchanged.

The annual fee for Mr Haywood, the Company's United Kingdom based Non-Executive Director was set at £30,000 per annum on commencement in May 2017 and remains unchanged.

1. PRINCIPLES OF COMPENSATION (CONTINUED)

The annual fee for Mr Schwarz, the Company's United Kingdom based Non-Executive Director was set at £30,000 per annum on commencement in September 2019.

At the Annual General Meeting held 29 November 2018 shareholders approved the issue of remuneration shares, whereby Non-Executive Directors agreed to receive part of their Directors fees paid through the issue of shares in lieu of cash payments, for the period of 1 November 2018 through to 31 October 2019, in order to conserve the cash reserves of the Company. Similar shareholder approval was also received at the Annual General Meeting held on 27 November 2019 for the period 1 November 2019 through to 31 October 2020.

The aggregate maximum fixed annual amount of remuneration available for Non-Executive Directors of $500,000 per annum was approved by Shareholders on 9 November 2011.

In addition to the fixed component, the Company can remunerate any director called upon to perform extra services or undertake any work for the Company beyond their general duties. This remuneration may either be in addition to, or in substitution for, the director's share of remuneration approved by Shareholders.

The Board has adopted the following Clawback Policy applicable from August 2015.

In relation to circumstances where an employee acts fraudulently or dishonestly, or wilfully breaches his or her duties to the Company or any of its subsidiaries, the Board has adopted a clawback policy in relation to any cash performance bonuses (including deferred share awards) or LTIs. The Board reserves the right to take action to reduce, recoup or otherwise adjust an employee's performance based remuneration in circumstances where in the opinion of the Board, an employee has acted fraudulently or dishonestly or wilfully breached his or her duties to the Company or any of its subsidiaries. The Board may:

· deem any bonus payable, but not yet paid, to be forfeited;

· require the repayment by the employee of all or part of any cash bonus received;

· determine that any unvested and/or unexercised LTIs will lapse;

· require the repayment of all or part of the cash amount received by the employee following vesting and subsequent sale of a LTI;

· reduce future discretionary remuneration to the extent considered necessary or appropriate to take account of the event that has triggered the clawback;

· initiate legal action against the employee; and/or

· take any other action the Board considers appropriate.

There were no remuneration recommendations made in relation to key management personnel by remuneration consultants in the financial year ended 30 June 2020.

At the Annual General Meeting held 27 November 2019 shareholders adopted the 30 June 2019 Remuneration Report with a clear majority of 401,127,006 votes in favour, being 99.56% of the votes cast.

2. EMPLOYMENT CONTRACTS

The following table summarises the terms and conditions of contracts between key executives and the Company:

(1) The Company may terminate the contract immediately if serious misconduct has occurred. In this case the termination payment is only the fixed remuneration earned until the date of termination and any unvested options will immediately be forfeited.

(2) The Managing Director's contract has extended by mutual agreement between the Company and Mr Salomon on an ongoing basis as at the date of this report..

(3) The Executive Director and Company Secretary's contract has been extended by mutual agreement between the Company and Mr Bolton on an ongoing basis as at the date of this report.

3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION

Details of the nature and amount of each major element of remuneration of each director of the Company and other key management personnel of the consolidated entity are:

The Directors of the Company may be Directors of the Company's subsidiaries. No remuneration is received for directorships of subsidiaries. All key management personnel other than A Khare are employed by the parent entity.

Refer to the following explanatory notes for additional information.

3. DIRECTORS' AND EXECUTIVE OFFICERS' REMUNERATION (CONTINUED)

(1) Benefits, including non-monetary include relocation costs and related expenses, as well as minor benefits, such as payments on behalf of employees considered personal, insurance premiums, car parking and any associated fringe benefits tax.

(2) Includes, where applicable, accrued employee leave entitlement movements.

(3) The 2020 share-based payment disclosures relate to the issue of remuneration shares (refer point 4 below). No unlisted options were issued to key management personnel or executives as remuneration during the year ended 30 June 2019 or 30 June 2020. In accordance with the ASX waiver granted 22 October 2019, the Company advises that the number of remuneration shares that were issued to directors in the year ended 30 June 2020 totalled nil and the percentage of the Company's issued capital represented by these remuneration shares was 0.00%.

The Non-Executive directors were entitled to the issue of 10,399,814 remuneration shares during the financial year ended 30 June 2020. These remuneration shares shall be issued in the next financial year.

(4) Fees for Non-Executive Directors are not linked to the performance of the Group. At the Annual General Meeting held 29 November 2018 shareholders approved the issue of remuneration shares, whereby Non-Executive Directors agreed to receive part of their Directors fees paid through the issue of shares in lieu of cash payments, for the period of 1 November 2018 through to 31 October 2019, in order to conserve the cash reserves of the Company. Similar shareholder approval was also received at the Annual General Meeting held on 27 November 2019 for the period 1 November 2019 to 31 October 2020.

(5) Mr Lingo was appointed a Non-Executive Director on 11 February 2016 and interim Chairman on 23 February 2017 at an annual salary of $70,956 inclusive of statutory superannuation. On 6 September 2019, the Company announced an expanded operational role for Mr Lingo to drive the Cooper Basin Strategy. A new agreement for Mr Lingo, effective from 1 August 2019, had an initial term of 6 months and provided for a monthly consultancy fee of $20,000 per month, plus superannuation; and is also inclusive of the Chairman's fees. The agreement was subsequently extended until 30 March 2020 with a further one-month extension to 30 April 2020.

During 2020 Mr Lingo elected to receive no remuneration shares.

(6) Mr Haywood was appointed a Non-Executive Director on 29 May 2017. Mr Haywood is based in the United Kingdom and is paid £30,000 per annum. The amount disclosed is converted into Australian dollars at the applicable exchange rate at the date of payment. During 2020 Mr Haywood received no remuneration shares (refer point 3 above). As at 30 June 2020 remuneration shares not yet issued to Mr Haywood had a value of $12,531. These shares shall be issued in the next financial year.

(7) Mr Schwarz was appointed a Non-Executive Director on 4 September 2019. Mr Schwarz is based in the United Kingdom and is paid £30,000 per annum. The amount disclosed is converted into Australian dollars at the applicable exchange rate at the date of payment. During 2020 Mr Schwarz received no remuneration shares (refer point 3 above). As at 30 June 2020 remuneration shares not yet issued to Mr Schwarz had a value of $22,377. These remuneration shares shall be issued in the next financial year.

(8) Mr Salomon was appointed Managing Director in March 2016 with an initial fixed annual remuneration of $350,000 per annum, inclusive of statutory superannuation, which was reduced to $271,950 inclusive of statutory superannuation effective from 1 October 2016, following the implementation of cost reductions by the Company. During the current financial year up to 31 March 2020, Mr Salomon, requested and was granted 18.5 days leave without pay, further reducing his salary by $19,350, inclusive of statutory superannuation. A reduction in Mr Solomon's working hours to further reduce costs was implemented on 1 April 2020.

(9) Mr Bolton was appointed Chief Financial Officer and Company Secretary on 3 June 2016 and Executive Director on 26 March 2020, with an initial fixed annual remuneration of $273,750 inclusive of statutory superannuation, which was reduced to $260,063 effective 1 October 2016. The amount paid in the year ended 30 June 2020 reflects the reduced working hours implemented 1 October 2017 to facilitate a 20% reduction in salaries. A reduction in Mr Bolton's working hours to further reduce costs was implemented on 1 April 2020.

(10) Mr Khare became key management personnel on 8 November 2016 and is based in India. The amount paid in the year ended 30 June 2020 reflects the reduced working hours implemented 1 October 2017 to facilitate a 20% reduction in salaries. A further reduction in working hours was implemented on 1 May 2020. Mr Khare's remuneration has been converted from Indian Rupees at the average exchange rate for the year.

Analysis of bonuses included in remuneration

There were no short-term incentive cash bonuses awarded as remuneration to key management personnel during the financial year.

4. Equity Instruments

All rights and options refer to rights and unlisted options over ordinary shares of the Company, which are exercisable on a one-for-one basis.

There were no rights or options over ordinary shares granted as compensation to key management personnel during the financial year (2019: nil).

No rights and options over ordinary shares in the Company were granted as compensation to key management personnel and executives since the end of the financial year.

No terms of equity-settled share-based payment transactions (including options granted as compensation to key management personnel) have been altered or modified by the issuing entity during the financial year.

During the financial year no shares were issued on the exercise of options previously granted as compensation.

There are no rights or options currently held by key management personnel, (2019: nil).

There were no shares, rights or options over ordinary shares in the Company granted to or exercised by key management personnel in the current year.

There are no rights or options held by key management personnel, or their related parties as at 1 July 2019 through to 30 June 2020.

5. KEY MANANGEMENT PERSONNEL TRANSACTIONS

There were no other transactions with entities associated with key management personnel in the year ended 30 June 2020 (2019: nil).

5. KEY MANANGEMENT PERSONNEL TRANSACTIONS (CONTINUED)

The movement during the financial year in the number of ordinary shares in the Company held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

END OF REMUNERATION REPORT - AUDITED

Signed in accordance with a resolution of the Directors.

West Perth

Western Australia

30 September 2020

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001