Quarterly Report

31 October 2013 Red Emperor Resources NL Quarterly Report for the Period Ending 30 September 2013 Issued Capital: 266M * ASX Code: RMP Closing price: A$0.05* AIM Code: RMP Closing Price: £0.031* * as at 30 September 2013 The Board of Red Emperor Resources NL (Red Emperor or the Company) is pleasedto provide the following commentary and Appendix 5B for the period ending 30September 2013. Georgia Project Red Emperor has a 20% working interest in onshore oil and gas explorationblocks VIa and VIb, covering approx. 6,500km2, in the Republic of Georgia.Earlier in the year, the Joint Venture undertook a strategic review ofoperations and subsequently completed a 200km 2D seismic program carried outby the Geophysical Institute of Israel ("GII"), with the seismic dataincorporated into a Geological Model following processing and interpretation. Results of the Geological Model, which also includes data from the Sovietperiod along with the seismic interpretation performed by RPS Energy in 2009,is helping the Joint Venture identify potential drilling locations in BlockVIb that were highlighted as prospective from the initial survey in 2009. Itis also allowing the Joint Venture to update the reserve and resourcepotential across the two license areas. During the quarter joint venture partner, Range Resources Limited (Range) andOperator, Strait Oil & Gas UK (Strait), engaged Senior Geologist, Dr. M. ArifYukler to perform a full review of both the conventional and unconventional(Coal Bed Methane "CBM") hydrocarbon potential on blocks VIa and VIb. DrYukler's review incorporated the 610 km of 2D seismic acquired across the twolicences in 2009 and 2012/13, along with all of the older Soviet data thatexisted across the blocks including seismic, well logs and geochemicalinformation. Following this extensive review the targeted hydrocarbon in-place and reservecalculations for blocks VIa and VIb were completed with the results announcedduring the quarter by JV Partner, Range Resources, as follows: Conventional Conventional Oil Conventional GasUndiscovered Oil / Gas (mmbbls) (Tcf)in Place (best estimate) (best estimate)Total Oil / Gas in 403 18.4PlaceRed Emperor 80 3.68Attributable (20%) * Low to high ranges of the in-place undiscovered oil and gas volumes have notyet been estimated. The JV is currently undertaking further modelling work toprovide such ranges. Red Emperor was advised that based on the pseudo 3D quantitative basinmodelling of the blocks, conventional oil and gas generation was computed fromthe two primary potential source rocks, Toarcian and Upper Bajocian. Thepotential amount of undiscovered oil in place in the potential reservoirtargets generated from the Toarcian and the Upper Bajocian source rocks havebeen estimated as 403 mmbbls (best estimate - 100% basis). The estimatedconventional undiscovered gas in place in the potential reservoir targetsgenerated from the Toarcian and the Upper Bajocian source rocks is 18.4 Tcf(best estimate - 100% basis). Based on current estimated reservoir parameters,targeted recovery factors for the undiscovered oil and gas estimates arecurrently 20-30%, however these estimates are subject to significantuncertainty. Coal Bed Methane Joint Venture Work was also undertaken by Range and Strait during the quarter to review thecoal bed methane ("CBM") potential that existed across the licences, over andabove the previously reported Tkibuli prospect, with the total CBM resourcecalculated using the isopach maps for the Upper Bathonian "coaly" section. Red Emperor's JV partners advised that the "coaly" section covered 368 km2 and83 km2 in blocks VIa and VIb respectively. A continuously thick and highquality coal area of 36 km2 was delineated by more than 300 wells in BlockVIa. All wells encountered gas in the Upper Bathonian coally section,according to Range and Strait. The CBM reserves in this area are computed asbeing at the Proved, Probable & Possible (3P) category. The blocks areestimated to contain 3P gas reserves of 508 Bcf (100% basis) and a total ofCBM gas in place of 3.16 Tcf (100% basis). CBM Reserve Proved (1P) Proved & Proved & EstimatedEstimates Probable Probable Total Reserve (2P) Reserve & Gas-in-Place (Bcf) (Bcf) Possible (Tcf) (3P) Reserve (Bcf)Total Gas In Place 0 0 508 3.16Red Emperor 0 0 102 0.63Attributable (20%) Red Emperor's JV partners have presented the CBM potential to the GeorgianState Agency and the Georgian Oil and Gas Corporation with both partiesagreeing on the significant potential that exists across the license areas.The news of the highly prospective hydrocarbon play has been conveyed to theEnergy Minister and the Prime Minister, who see this potential as anopportunity to improve the energy outlook for the country. Proposed Work Program Red Emperor's JV partners are currently evaluating the selection of a suitabledrill location. Given the high quality of the seismic coverage undertaken onthe CBM, the Joint Venture is focusing on a location with a high probabilityof success. A number of potential locations with good coal well coverage havealready been identified with analysis showing that the average CBM content ismore than 15 m3 /t of coal. GIG Joint Venture and Farm-Out Discussions The results are pivotal in cementing the CBM joint venture with GeorgianIndustrial Group (GIG) as development plans are finalised. Further, the JointVenture continues advanced discussions with a number of other parties withrespect to potential farm-out opportunities across both the conventional andunconventional prospects identified on the Company's licenses. Puntland Project Throughout the year, Red Emperor's JV partner and operator of its PuntlandProject, Horn Petroleum Corp (TSXV: HRN), has been focused on makingpreparations for a seismic acquisition campaign in the Dharoor PSA, which willinclude a regional seismic reconnaissance grid in the previously unexploredeastern portion of the basin as well as prospect specific seismic to delineatea drilling candidate in the western portion of the basin, where an activepetroleum system was confirmed by the recent drilling at the Shabeel-1 andShabeel North-1 locations. The focus of the Dharoor seismic program will be todelineate new structural prospects for the upcoming drilling campaign. As previously reported, based on the encouragement provided by these twoShabeel wells, the JV entered into the next exploration period in both theNugaal and Dharoor Valley Production Sharing Contracts ("PSCs") which carry acommitment to drill one well on each block within an additional 3 year term. The current operational plan is to contract a seismic crew to acquireadditional data in the Dharoor Valley block and to hold discussions with thePuntland Government to gain access regarding drill ready prospects in theNugaal Valley block. For and on behalf of the Board Greg Bandy Executive Director Appendix 5B Summary - Consolidated Statement of Cashflow Current Year to Date Quarter (12 months) $A'000 $A'000)Cash flows related to operating activitiesReceipts from product sales and related debtors - -Payments for:- exploration and evaluation (472) (472) - development - - - production - - - administration (291) (291)Dividends received - -Interest and other items or a similar nature 116 116receivedInterest and other costs of finance paid - -Income taxes paid - -Other Receipts (refunds) - -Net operating Cash Flows (647) (647) Cashflows related to investing activitiesPayments for the purchase of:- prospects - - - equity investments - - - investments - -Proceeds from the sale of:- prospects - - - equity investments - - - investments asset acquisition escrow acc - -Loans to other entities - -Loans repaid by other entities - -Proceeds from underwriting - -Net investing cash flows - - Cash flows related to financing activitiesProceeds from raisings - -Proceeds from sale of forfeited shares - -Proceeds from borrowings - -Repayment of borrowings - -Dividends paid - -Costs associated with issue of shares - -Net financing cash flows - - Net increase / (decrease) in cash held (647) (647)Cash at the beginning of the quarter / year to 11,977 11,977dateExchange rate adjustments - - CASH AT THE END OF THE QUARTER 11,330 11,330 For further information please visit www.redemperorresources.com or contact: Red EmperorGreg Bandy +61 8 9225 2826Rebecca Sandford +44 20 7025 7040 Fox-Davies Capital Limited (Nominated Adviser and Broker)Jonathan Evans/Daniel Fox-Davies +44 20 3463 5000 Background Red Emperor Resources NL (ASX: RMP | AIM: RMP) is a natural resourcesexploration company with interests in the frontier state of Puntland, Somaliaand the Republic of Georgia. In Puntland, Red Emperor holds a 20% working interest in two licencesencompassing the highly prospective Dharoor and Nugaal valleys. These twoexploration areas cover over 36,000km2. Horn Petroleum, the operator and 60%interest holder, has completed a two well program with the JV having nowentered the next phase of the two Production Sharing Contracts across bothblocks. In the Republic of Georgia, Red Emperor has a 20% working interest in onshoreblocks VIa and VIb, covering approximately 6,500km2. After the drilling of thefirst conventional well in July 2011 (Mukhiani-1) the JV began evaluating thelarge unconventional CBM potential of the area, as it is seen to be relativelylow risk and has the potential to contribute cash flow to fund furtherexploration if successful. A strategic review has also been commissioned toidentify potential drilling locations in Block VIb that were highlighted asprospective from the initial survey in 2009 as well as allowing the JointVenture to update the reserve and resource potential across the two licenseareas. Competent Person Subject to the Caveat above regarding the ARI report: All of the technicalinformation, including information in relation to reserves and resources thatis contained in this document has been reviewed internally by the Company'stechnical consultant, Mr Alexander Parks. Mr Parks is a Petroleum Engineer whois a suitably qualified person with over 15 years' experience in assessinghydrocarbon reserves and has reviewed the release and consents to theinclusion of the technical information.