Australian Securities Exchange · Table of Contents 1 Chairman’s Le!er 2 Managing Director’s...

ABN 36 058 714 408

LONESTAR RESOURCES LIMITEDAND CONTROLLED ENTITIES

ANNUAL REPORT FOR THE 12 MONTHS ENDED 31 DECEMBER 2014(all amounts in this report are US$ unless otherwise stated)

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Table of Contents

1 Chairman’s Le!er

2 Managing Director’s Le!er

4 Review of Opera"ons & Commentary on Results

13 Annual Reserves Statement

18 Corporate Governance Statement

24 Directors’ Report

30 Remunera"on Report

41 Auditor’s Independence Declara"on

42 Consolidated Statement of Profit or Loss and Other Comprehensive Income

43 Consolidated Statement of Financial Posi"on

44 Consolidated Statement of Changes in Equity

45 Consolidated Statement of Cash Flows

46 Notes to the Consolidated Financial Statements

72 Directors’ Declara"on

73 Independent Audit Report

75 Shareholder Informa"on

77 Glossary and Disclaimer

Corporate DirectoryLonestar Resources LimitedABN 36 058 714 408

Offices:

Registered Office 11 Ventnor Ave, Ground FloorWest Perth WA 6005 Telephone +61 8 6355 6888www.lonestarresources.com

USA (Fort Worth) OfficeLonestar Resources Inc.600 Bailey Avenue, Suite 200Fort Worth, Texas 76107Telephone +1 817 921 1889Facsimile +1 817 806 5112www.lonestarresources.com

Directors

Bernard Lambilliote Nonexecu"ve ChairmanFrank D Bracken III Managing Director & CEODaniel Lockwood NonExecu"ve DirectorJohn Pinkerton NonExecu"ve DirectorChris Rowland Phd Nonexecu"ve DirectorRobert Sco! Nonexecu"ve DirectorMitchell Wells Nonexecu"ve Director

Company Secretary

Mitchell Wells

Share Registry

Computershare Investor Services Pty LtdLevel 2, Reserve Bank Building45 St Georges TerracePerth, Western Australia 6000

ASX and OTCQX Lis"ngs

Lonestar Resources Limited is is Listed on the AustralianStock Exchange as LNR and on the OTCQX as LNREF

Annual General Mee"ng

8 May 2015 at 1.00 pm BDO Australia38 Sta"on StreetSubiaco, Western Australia 6008

Auditors

BDO Audit (WA) Pty Ltd38 Sta"on StreetSubiaco, Western Australia 6008

Bankers

Na"onal Australia Bank1238 Hay StreetWest Perth, Western Australia 6005

Wells FargoWells Fargo Bank Plaza1000 Louisiana StreetHouston, Texas 77002 USA

Solicitors

Bellanhouse Legal11 Ventnor Ave, Ground FloorWest Perth Western Australia 6005

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CHAIRMAN’S LETTER

CHAIRMAN’S LETTER

Dear Shareholders

I am pleased to present you with this Annual Report for 2014.

Your Company achieved growth across all metrics for 2014 most notably in rela"on to produc"on, reserves and earnings.

In addi"on, the management team successfully secured addi"onal acreage in our core Eagle Ford area and the Company nowhas over 30,000 net areas in this prolific unconven"onal hydrocarbon play.

The depth, experience and quality of our execu"ve technical team has been enhanced during the year, and our achievedgrowth is testament to the team's ability and dedica"on.

In the second half of 2014 there was a precipitous drop in oil prices. It is testament to our disciplined hedging strategy thatapproximately 80% of the Company’s oil produc"on from exis"ng wells was hedged at over $80, a materially higher pricethan the current prevailing price. Your Company will con"nue to hedge consistent with it’s disciplined approach to riskmi"ga"on.

Similarly, we have always had, and will con"nue to maintain, a conserva"ve debt structure and plan for our drillingexpenditures to be broadly covered by our opera"ng cash flows.

Your Board has recently been strengthened through the appointment of Mr John Pinkerton as a nonexecu"ve Director.Mr. Pinkerton is a highly experienced US oil and gas execu"ve and we wholeheartedly welcome him to the Board. YourBoard now consists of seven directors only one of whom is an execu"ve of the Company.

I invite you to read the Managing Director’s opera"onal overview and the detailed Directors Report which forms part of thisAnnual Report. I also invite you to a!end the Company’s AGM which will be held in Perth in May.

Thank you for your con"nued support of the Company.

Sincerely

BERNARD LAMBILLIOTEChairman, Lonestar Resources, Ltd.

page 1Lonestar Resources Limited & Controlled En!!es

“Your Company achieved growth across all metrics for 2014most notably in rela"on to produc"on, reserves andearnings.”

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MANAGING DIRECTOR’S LETTER

MANAGING DIRECTOR’S LETTERDear Shareholders

Overview

2014 was a transforma"ve year for Lonestar Resources the Company registered substan"al gains in opera"onal and financialmetrics, and made considerable progress in terms of building a business of consequence and scale. Not only do theaccomplishments of the 2014 calendar year represent significant improvements over 2013, but they were achieved with adiscipline that posi"ons Lonestar solidly for 2015, which, based on prevailing commodity prices, offers a new set of challengesand opportuni"es for the oil and gas industry.

2014 also represented the most significant period of evolu"on and growth since the Company’s incep"on, and provides asturdy base upon which not only to endure the current commodity price environment, but to grow. Lonestar has not onlydrama"cally changed its footprint in the Eagle Ford Shale play, but the Company has augmented its execu"on team withsome of the most talented technical staff in the industry. The current team is an invaluable asset that will improve both wellresults and well costs. Moreover, the team is incredibly flexible, and can quickly develop exper"se in any part of the EagleFord Shale play.

2014 Highlights

• Eagle Ford Shale Produc"on Rises 85%. Net produc"on rose 48% to 4,480 BOEPD in 2014, compared to 3,020 BOEPDin 2013. Total Company produc"on was comprised of 3,247 barrels of oil per day, 436 barrels of natural gas liquids perday, and 4,664 Mcf of natural gas per day. Perhaps most importantly, Lonestar registered an 85% increase in its EagleFord Shale produc"on, increasing to 3,802 BOEPD for 2014. 83% of the Company’s total produc"on was crude oil andnatural gas liquids.

• Lonestar’s Revenues Increased 48%. Net Revenues From Ordinary Ac"vi"es increased 48% to $117.8 million in 2014,vs. 2013 revenues of $79.4 million. This revenue growth was achieved in spite of a 10% decrease in crude oil pricerealiza"ons. The Company’s Eagle Ford Shale business recorded a 70% increase in revenues to $99.6 million in 2014.

• Lease Opera"ng Expenses Fall 15% Per BOE. Lease Opera"ng Expense was $17.5 million, an increase of 27% on anabsolute basis. However, on a perunit basis, total Company LOE was reduced by 15% for the fullyear to $10.72 per BOE.Lonestar is not only driving costs down on a unit basis, but the Company is stringently monitoring its costs on an absolutebasis. Despite registering a 25% sequen"al increase in produc"on, Lonestar was actually able to modestly reduce itsEagle Ford Shale Lease Opera"ng Expense in absolute dollar terms from $3.1 million in 3Q14 to $3.0 million in the fourthquarter of 2014, which equates to a recordlow $6.47 per BOE.

• G&A Reduced 20% Per BOE. Even As Lonestar Augments Its Technical Team. General and Administra"ve Expense was$8.9 million, an increase of 18% on an absolute basis, but included: the addi"on of a Chief Opera"ng Officer, costsassociated with a major office reloca"on, severance expense associated with the closing of the Denver office and a FortWorthbased execu"ve. However, on a perunit basis, total Company G&A was reduced by 20% for the fullyear to$5.45 per BOE. Importantly, substan"al enhancements to the Company’s technical staff were consummated, whichfigure to improve the Company’s longterm posi"on.

page 2 Lonestar Resources Limited & Controlled En!!es

“2014 also represented the most significant period ofevolu"on and growth since the Company’s incep"on, andprovides a sturdy base upon which not only to endure thecurrent commodity price environment, but to grow.”

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MANAGING DIRECTOR’S LETTER

• Lonestar Registered a 59% Gain In EBITDAX. Earnings Before Interest Taxes Deprecia!on Amor!za!on and Explora!onExpense (EBITDAX) increased 59% to $86.0 million in 2014 vs. $54.1 million in 2013, despite a precipitous fall in crudeoil prices late in the year during the Company’s period of highest produc!on.

• Lonestar Boosted Proved Reserves By 70%. Based on the results generated from our independent consultants for theyear ended 31 December 2014. Proved Reserves net of royal!es were 31.0 million barrels of oil equivalent (MMBOE),an increase of 70% over the 18.2 MMBOE reported at year ended 31 December 2013. Lonestar’s Proved Reserves werecomprised of 23.6 million barrels of oil, 3.0 million barrels of Natural Gas Liquids, and 26.0 Billion cubic feet of naturalgas. On an energy equivalent basis, Lonestar’s Proved Reserves were 86% crude oil and natural gas liquids. The SEC PV10 of Lonestar’s Proved Reserves increased to $705.8 million, which represents an increase of 65% over 2013 levels.*

• Lonestar Increased Total Reserves by 90%. At 31 December 2014, Proved, Probable & Possible Reserves were 48.1million barrels of oil equivalent, which included 38.5 million barrels of oil, 4.0 million barrels of NGL’s, and 33.7 billioncubic feet of natural gas, and had an associated SEC PV10 value of $952.2 million. These results represent a 90% increasein Proved, Probable & Possible reserves and a 94% increase in the associated SEC PV10 value.*

• Lonestar Has Significant Liquidity. Lonestar’s drilling program has added substan!al value to its capacity to borrow, andmanagement has maintained a significant degree of liquidity. Lonestar’s senior lending group, led by Wells Fargo,confirmed a 38% increase in the borrowing base on our Senior Secured Credit Facility from $108.8 million to $150.0million, providing the Company with in excess of $100 million of liquidity at yearend 2014.

• Lonestar’s Hedge Program Provides Significant Oil Price Insula!on Through 2016. Management has protected theCompany’s liquidity and cash flows with a disciplined hedging program. Giving effect for these new hedges, the Companyhas West Texas Intermediate (WTI) swaps covering 2,496 barrels of oil per day for calendar 2015 at an average strikeprice of $88.00 per barrel and WTI swaps covering 1,905 barrels of oil per day for calendar 2016 at an average strike priceof $80.00 per barrel. In fact, Lonestar is considerably be$erhedged than its peers (average peer has hedged 36% of 2015forecast oil produc!on vs. 53% for Lonestar), few are hedged as well as Lonestar in 2016 (average peer has hedged 12%of 2016 forecast oil produc!on vs. 43% for Lonestar).

I look forward to repor!ng further progress throughout 2015.

Sincerely

FRANK D BRACKEN IIIManaging Director, Lonestar Resources, Ltd.

* Refer to the Annual Reserves Statement and associated disclosures included in this Annual Report


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REVIEW OF OPERATIONS AND COMMENTARY ON RESULTS

REVIEW OF OPERATIONS AND COMMENTARY ON RESULTSThe compara"ves in this sec"on are to the Company’s results as reported in the prior corresponding period.

Highlights for the Year to 31 December 2014:• Revenue from ordinary ac"vi"es of $118 million, an increase of 48% over 2013

• NPAT of $36 million and EBITDAX of $86 million, an increase of 19% and 59% over 2013

• 23 wells drilled and 21 wells completed in the Eagle Ford Shale in 2014

• Average daily produc"on of 4,480 BOEPD, an increase of 48% over 2013

• Proved Reserves, net of royal"es, were 31.0 MMBOE at 31 December 2014, an increase of 70% over 2013*

• Proved Reserves PV10 value of $705.8 million, an increase of 65% over 2013*

• Effec"ve 2 June 2014, Lonestar Resources, Ltd, stock commenced trading on the OTCQX under the symbol LNREF

• Closed $71.3 million purchase of 13,156 net acres in the crude oil window of Eagle Ford Shale trend in March

• Closed the offering of $220 million 8.75% Senior Unsecured Notes due 15 April 2019

• Undrawn borrowing base availability of $101 million at the end of the period

* Refer to the Annual Reserves Statement and associated disclosures included in this Annual Report


One of the Company’s wells completed in the Eagle Ford Shale

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Results of Opera"ons for the Year Ended 31 December 2014 Compared to the Year Ended 31 December 2013

Note: The tables below present petroleum and natural gas produc"on in barrel of oil equivalent (“BOE”) amounts. Forpurposes of compu"ng such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) isused. The conversion ra"o of 6:1 is based on an energy equivalency conversion method which is primarily applicable at theburner "p and does not represent value equivalence at the wellhead. Readers are cau"oned that BOE figures may bemisleading, par"cularly if used in isola"on.

Net Produc"on

Produc"on increased 48% from an average of 3,020 BOEPD during 2013 to an average of 4,480 BOEPD during 2014. Theincrease in average daily produc"on is the result of drilling 23 gross wells and comple"ng 21 gross (19.5 net) Eagle FordShale wells. Net produc"on during 2014 was comprised of an average of 3,267 Bbls/d of oil, 436 Bbls/d of NGLs, and 4,664Mcf/d of natural gas. In 2014, approximately 73% of produc"on was crude oil, approximately 10% was NGLs, andapproximately 17% was natural gas.

• Net produc"on from the Western Eagle Ford Shale assets averaged 2,741 BOEPD for the year ended 31 December2014, a 334% increase over the approximate 2,057 BOEPD for the year ended 31 December 2013. The increase wasprimarily the result of the drilling of 11 gross and comple"on of 8 gross (8 net) Eagle Ford wells which were placedon stream over the course of 2014 and the acquisi"on of producing wells in March 2014. In 2014, the Western EagleFord Shale produc"on was comprised of 1,817 barrels of oil per day, 399 barrels of NGLs per day, and 3,149 Mcf ofnatural gas per day and approximately 81% of the Western Eagle Ford produc"on during 2014 was liquidhydrocarbons.


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• Net produc"on from the Central Eagle Ford Shale assets averaged 624 BOEPD for the year ended 31 December 2014.These assets were purchased and developed during 2014. The increase was the result of the drilling and comple"onof 8 gross (6.5 net) Eagle Ford wells which were placed on stream over the course of 2014 and the acquisi"on ofproducing wells in March 2014. In 2014, the Central Eagle Ford Shale produc"on was comprised of 623 barrels of oilper day and 2 Mcf of natural gas per day and approximately 99.8% of the Central Eagle Ford produc"on during 2014was liquid hydrocarbons.

• Net produc"on from the Eastern Eagle Ford Shale assets averaged 437 BOEPD for the year ended 31 December 2014.These assets were purchased and developed during 2014. The increase was the result of the drilling and comple"onof 5 gross (5 net) Eagle Ford wells which were placed on stream over the course of 2014 and the acquisi"on ofproducing wells in March 2014. In 2014, the Eastern Eagle Ford Shale produc"on was comprised of 393 barrels of oilper day, 24 barrels of NGLs per day, and 126 Mcf of natural gas per day and approximately 95% of the Eastern EagleFord produc"on during 2014 was liquid hydrocarbons.

• The Barne! Shale assets were sold effec"ve 1 May 2013. Net produc"on from the Barne! Shale assets in 2013 was1,224 Mcf/d of natural gas or 204 BOEPD. 100% of our Barne! Shale produc"on was natural gas.

• Net produc"on from the Conven"onal proper"es averaged approximately 679 BOEPD for the year ended 31December 2014. In 2014 the produc"on from Conven"onal proper"es was comprised of approximately 434 Bbls/dof oil, approximately 13 Bbls/d of NGLs and approximately 1,387 Mcf/d of natural gas. Approximately 66% of theproduc"on from Conven"onal proper"es during 2014 was liquid hydrocarbons.

Average Sales Price

The average wellhead price for produc"on for the year ended 31 December 2014 was $71.27 per BOE, which was 3% lowerthan the $73.62 per BOE average price for the year ended 31 December 2013. Much of this variance is due to lower WTIpricing, the benchmark upon which crude oil is priced, which was 5% lower in 2014 compared to 2013. For the year ended31 December 2014, average wellhead crude oil price decreased to $87.41 per barrel from $96.95 per barrel for the year


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ended 31 December 2013. For the year ended 31 December 2014, the average NGLs price decreased to $29.26 per barrelfrom $29.78 per barrel for the year ended 31 December 2013. The average natural gas price increased 8% from $4.15 perMcf in 2013 to $4.50 per Mcf in 2014.

• For the produc"on from the Western Eagle Ford Shale assets during 2014, the average price was $68.38 per BOE, a12% decrease compared to the average price for Western Eagle Ford Shale produc"on during 2013. The averagewellhead price for the Western Eagle Ford Shale crude oil produc"on decreased 9% as compared to average pricesduring 2013 to $89.64 per Bbl. The average price for Western Eagle Ford Shale NGLs produc"on during 2014 remainedvirtually flat at $29.32 per Bbl, while the Western Eagle Ford Shale natural gas price during 2014 increased to $4.09per Mcf, or 20% as compared to average realized price for 2013.

• For the produc"on from Central Eagle Ford Shale assets during 2014, the average price was $85.39 per BOE. Theseassets were purchased and developed during 2014. The average wellhead price for Central Eagle Ford Shale crudeoil produc"on was $85.46 per Bbl for 2014. The average price for Central Eagle Ford Shale NGLs produc"on during2014 was $24.17 per Bbl, while Central Eagle Ford Shale natural gas price during 2014 $3.36 per Mcf.

• For the produc"on from Eastern Eagle Ford Shale assets during 2014, the average price was $73.70 per BOE. Theseassets were purchased and developed during 2014. The average wellhead price for the Eastern Eagle Ford Shalecrude oil produc"on was $79.70 per Bbl for 2014. The average price for the Eastern Eagle Ford Shale NGLs produc"onduring 2014 was $25.03 per Bbl, while the Eastern Eagle Ford Shale natural gas price during 2014 $2.70 per Mcf.

• On the Conven"onal proper"es, the average wellhead price was $68.37 per BOE for the year ended 31 December2014, an 11% decrease compared to the average price for Conven"onal produc"on during 2013. The averagewellhead price for Conven"onal crude oil produc"on decreased 4% as compared to average prices during 2013 to$87.89 per Bbl. The average price for Conven"onal NGLs produc"on during 2014 decreased 47% to $35.06 per Bbl,while the Conven"onal natural gas price during 2014 decreased to $5.59 per Mcf, or 8% as compared to averagerealized price for 2013.

Wellhead Revenues


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Crude oil, NGLs and natural gas revenues totaled $116.5 million for the year ended 31 December 2014 as compared to $81.2million for the year ended 31 December 2013, an increase of 44%. Revenue growth was a func"on of a 48% increase inproduc"on, par"ally offset by a 3% decrease in average realized wellhead prices. Crude oil revenue for the year ended 31December 2014 increased 46% by $32.6 million to $104.2 million. This increase in crude oil revenue consisted of $39.7million resul"ng from increased produc"on as compared to 2013 that was par"ally offset by $7.0 million resul"ng fromlower sales prices as compared to 2013. NGL revenues for the year ended 31 December 2014 increased by $1.7 million, or56% to $4.7 million, with $1.8 a!ributable to the increase in produc"on that was par"ally offset by $0.1 million a!ributableto lower sales prices compared to 2013. Natural gas revenues for the year ended 31 December 2014 increased by $1.1million, or 16% to $7.7 million with $0.5 million a!ributable to the increase in produc"on and $0.6 million a!ributable tohigher sales prices compared to 2013.

• Net oil, NGL and natural gas revenues from Western Eagle Ford Shale assets totaled $68.4 million for the year endedDecember 31, 2014, represen"ng a 17% increase as compared to $58.5 million in revenues for the year ended 31December 2013. This increase is primarily the result of the addi"on of 8 gross (8 net) wells which were placed onstream during the year ended 31 December 2014. Crude oil contributed 87% of revenues, while NGLs contributed 6%of revenues and natural gas contributed 7% of revenues.

• Net oil, NGLs and natural gas revenues from Central Eagle Ford Shale assets totaled $19.4 million for the year endedDecember 31, 2014. These assets were purchased and developed during 2014. Crude oil contributed virtually all ofthe revenue during 2014.

• Net oil, NGLs and natural gas revenues from Eastern Eagle Ford Shale assets totaled $11.4 million for the year endedDecember 31, 2014. These assets were purchased and developed during 2014. Crude oil contributed 97% of revenues,while NGLs contributed 2% of revenues and natural gas contributed 1% of revenues.

• Net oil, NGLs and natural gas revenues from Conven"onal proper"es totaled $16.9 million for the year ended 31December 2014, represen"ng a 20% decrease as compared to $21.2 million in revenues for the year ended 31December 2013. Crude oil sales contributed 82% of revenues, while NGLs sales contributed 1% of revenues andnatural gas sales contributed 17% of revenues.

Opera"ng Costs and Expenses

The table below presents a detail of expenses per BOE for the periods indicated.


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Lease Opera!ng Expenses

Lease opera"ng expenses are the costs incurred in the opera"on of producing proper"es and workover costs. Expenses fordirect labor, water injec"on and disposal, u"li"es, materials and supplies comprise the most significant por"on of leaseopera"ng expenses. Lease opera"ng expenses do not include produc"on or ad valorem taxes or general and administra"veexpenses.

Lease opera"ng expenses were $17.5 million during the year ended 31 December 2014, an increase of $3.7 million. On a unitsof produc"on basis, lease opera"ng expenses decreased 15% to $10.72 per BOE during the year ended 31 December 2014,as compared to $12.54 per BOE for the year ended 31 December 2013.

• Lease opera"ng expenses for Eagle Ford Shale assets totaled $12.2 million during the year ended 31 December 2014,a 137% increase over the year ended 31 December 2013, largely driven by an increase in the number of net producingwells during the year ended 31 December 2014. On a units of produc"on basis, lease opera"ng expenses for the yearended 31 December 2014 increased 28% to $8.83 per BOE. The increase in lease opera"ng costs in the Eagle Ford islargely a func"on of the number of producing wells resul"ng from the 2014 drilling program and the aquisi"on of theproducing wells purchased in March 2014, effec"ve 1 January 2014.

• Lease opera"ng expenses for the Conven"onal proper"es totaled $5.3 million during the year ended 31 December2014, or $21.31 per BOE compared to $7.8 million, or $28.24 per BOE for 2013. Included in the lease opera"ngexpenses for 2014 and 2013 were plug & abandonment costs of nonproducing wells of approximately $0.8 millionand $0.5 million, respec"vely. Since the Amadeus reverse merger in January 2013, Lonestar has con"nued efforts tolower opera"ng expense for the Conven"onal proper"es to maximize cash flow on this lowdecline asset.

Produc!on and Ad Valorem Taxes

Produc"on and ad valorem taxes are paid on produced crude oil and natural gas based upon a percentage of gross revenuesor at fixed rates established by state or local taxing authori"es. In general, the produc"on taxes correlate to the changes inoil and natural gas revenues. Lonestar is also subject to ad valorem taxes in the coun"es where our produc"on is located.Ad valorem taxes are generally based on the valua"on of oil and natural gas proper"es. Produc"on and ad valorem taxestotaled $7.1 million and $5.0 million for the years ended 31 December 2014 and 2013, respec"vely. The increase inproduc"on and ad valorem taxes over the period was due to both the increase in produc"on volumes as well as an increasein revenues.

Deprecia!on, Deple!on and Amor!za!on (DD&A)

Capitalized costs a!ributed to proved proper"es are subject to deprecia"on and deple"on. Deprecia"on and deple"on ofthe cost of oil and natural gas proper"es is calculated using the units of produc"on method aggrega"ng proper"es on afield basis. For leasehold acquisi"on costs and the cost to acquire proved proper"es, the reserve base used to calculatedeprecia"on and deple"on is the sum of proved developed reserves and proved undeveloped reserves. For developmentcosts, the reserve base used to calculate deple"on and deprecia"on is proved developed reserves only. Other property andequipment are carried at cost, and deprecia"on is calculated using the straight line method over the es"mated useful livesof the assets, ranging from 3 to 5 years. Lonestar’s DD&A expense was $40.7 million and $28.3 million for the years ended31 December 2014 and 2013, respec"vely. The 44% increase in DD&A expense was primarily driven by a combina"on of anincrease in crude oil and natural gas produc"on which resulted from the wells drilled in the 2014 capital program and theacquisi"on in March 2014 of addi"onal Eagle Ford Shale proper"es.

General and Administra!ve (G&A) Expenses

General and Administra"ve Expenses are costs incurred for overhead, including payroll and benefits for our corporate staff,costs of maintaining the headquarters, costs of managing produc"on and development opera"ons including numerousso&ware applica"ons, audit and other fees for professional services and legal compliance. G&A expenses, excluding stockbased compensa"on, totaled $8.9 million for the year ended December 31, 2014 compared to $7.5 million for the yearended December 31, 2013. Stock based compensa"on expense was $1.9 million and $2.2 million for the years ended 31December 2014 and 2013, respec"vely. Included in the 2014 expenses were severance costs of $0.4 million. Included in the2013 expenses is a $0.4 million expense incurred in connec"on with the closing of our Denver, Colorado office. Increasedexpenses were also the result of a staffing up management, administra"ve and field personnel to properly manage thegrowing scope of the business.

Interest Expense

For the year ended 31 December 2014, Lonestar reported interest expenses of $19.9 million, compared to $3.6 million forthe year ended December 31, 2013. The increase is primarily a!ributable to the placement of the Group’s 8.75% seniorunsecured notes in April 2014, which accounted for $14.3 million of interest in 2014. Net borrowings under the senior


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secured credit facility averaged $42.6 million during the year ended 31 December 2014, and the weighted average interestrate on outstanding borrowings was 2.95% during the year. Net borrowings under the 2nd lien facility averaged $5.3 millionduring the year ended 31 December 2014, and the weighted average interest rate on outstanding borrowings was 8.63%during the year. In April 2014, the 2nd lien facility was fully paid and subsequently terminated. Lonestar incurred a $1.1million prepayment fee in connec"on with the early prepayment of the facility equal to 2.0% of the principal balance thatwas prepaid. Net borrowings under our credit facili"es averaged $84.6 million during the year ended 31 December 2013,and the weighted average interest rate on outstanding borrowings was 3.5% during the year.

Commodity Deriva!ve Transac!ons

Lonestar applies mark to market accoun"ng to its deriva"ve contracts. During the year ended 31 December 2014, Lonestarrecognized a non cash $42.8 million gain on its commodity deriva"ve contracts related to the change in fair value of deriva"vecontracts and a $1.2 million realized gain on commodity deriva"ve contracts. During the year ended 31 December 2013,Lonestar recognized a non cash $1.0 million loss on its commodity deriva"ve contracts related to the change in fair value ofderiva"ve contracts and a $1.8 million realized gain on commodity deriva"ve contracts.

Impairment on Oil & Gas Proper!es

For the year ended 31 December 2014, Lonestar recorded an impairment on its oil and natural gas proper"es of $5.5 million,reflec"ng a development writeoff expense at our Morgan’s Bluff Hackberry Unit in Orange County, Texas. For the yearended 31 December 2013, Lonestar recorded an impairment on oil and natural gas proper"es of $2.8 million, reflec"ng adevelopment write off expense at the Morgan’s Bluff Hackberry Unit in Orange County, Texas.

The Company has WTI swaps covering 2,496 barrels per day for calendar 2015 at an average strike price of $88.00 per barreland WTI swaps covering 1,905 barrels per day for calendar 2016 at an average strike price of approximately $80.00 perbarrel.


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Reserve Upgrade:

The Group’s reserves posi"on as at 31 December 2014 and 31 December 2013 is outlined in the Annual Reserves Statementwhich forms part of this Annual Report. Reserves were materially upgraded over the period as a result of drilling completedand property acquisi"ons.

Borrowing Arrangements & Liquidity:

At the end of 2014 the Group had debt of approximately $265,000,000 and undrawn availability under the Group’s creditfacili"es of approximately $101,000,000.

Senior Revolving Credit Facility

In March 2013, the Group entered into a $400,000,000 syndicated credit facility agreement (revolving credit facility) withWells Fargo Bank (as Administra"ve Agent). The ini"al borrowing base was set at $105,000,000 but it was subsequentlyrevised up to $125,000,000. The borrowing base is redetermined semiannually based on the credit agreement. Therevolving credit facility matures on 14 March 2018. As of 31 December 2014, $49,000,000 was borrowed under the revolvingcredit facility. The borrowing base as of 31 December 2014 was $150,000,000.

The revolving credit facility may be used for loans and, subject to a $2,500,000 sublimit, le!ers of credit. The company hasnot drawn any advances on the le!er of credit as at 31 December 2014 (31 December 2013: nil). The revolving credit facilityprovides for a commitment fee of 0.5% based on the unused por"on of the borrowing base pursuant to the revolving creditfacility.

Borrowings under the revolving credit facility, at the Group’s elec"on, bear interest at either: (i) an alternate base rate (ABR)equal to the higher of (a) the Prime Rate, (b) the Federal Funds Effec"ve Rate plus 0.5% per annum, and (c) the adjusted LIBORrate of a threemonth interest period on such day plus 1.0%; or (ii) the adjusted LIBO rate, which is the rate stated on Reutersscreen LIBOR01 page market for one, two, three, six or twelve months, as adjusted for statutory reserve requirements forEurocurrency liabili"es, plus, in each of the cases described in clauses (i) and (ii) above, an applicable margin ranging from1.0% to 2.0% for ABR loans and from 2.0 to 3.0% for adjusted LIBO rate loans.

The revolving credit facility requires the Group to maintain certain financial ra"os and limits the amount of indebtedness theGroup can incur. Subject to certain permi!ed liens, the Group’s obliga"ons under the revolving credit facility have beensecured by the grant of a first priority lien on no less than 80% of the value of the proved oil and gas proper"es of the Groupand its subsidiaries.

In connec"on with the revolving credit facility, the Group and certain of its subsidiaries also entered into certain customaryancillary agreements and arrangement, which, among other things, provide that the indebtedness, obliga"ons, and liabili"esof the Group arising under or in connec"on with the revolving credit facility are uncondi"onally guaranteed by suchsubsidiaries. As of 31 December 2014 and 2013, the Group was in compliance with all covenants including all financial ra"os.

In June 2013 the Group entered into a $35 million second lien term loan agreement (“2nd lien facility”) with Wells FargoEnergy Capital, Inc. (as Administra"ve Agent). The 2nd lien facility provides for a commitment fee of 0.75% based on theunused por"on of the commitment amount under the 2nd lien facility. The 2nd lien facility matures on 14 September 2018.As of 31 December 2013, $10,000,000 was borrowed under the 2nd lien facility. In February 2014, the 2nd lien facility wasamended increasing the commitment amount to $55,000,000. In April 2014, the 2nd lien facility was fully paid andsubsequently terminated.

8.75% Senior Notes

On 4 April 2014, the Group issued at par $220,000,000 of 8.75% Senior Unsecured Notes due 15 April 2019 (“Notes”) to U.S.based ins"tu"onal investors. The net proceeds from the offering of approximately $212,000,000 (a&er deduc"ng purchasers’discounts and offering expenses) were used to repay the Group’s revolving credit facility and 2nd lien facility, and for generalcorporate purposes. Under the 2nd lien term loan agreement, the Group was required to pay a prepayment fee of $1,100,000in connec"on with the early prepayment of the facility equal to 2.0% of the principal balance that was prepaid. This facilitywas terminated upon repayment.

The Group received a $108,750,000 borrowing base commitment under the revolving credit facility, upon closing of theNotes offering.


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On or a&er 15 April 2016, the Group may redeem the Notes in whole or in part at the redemp"on prices (expressed aspercentages of the principal amount) set forth in the following table plus accrued and unpaid interest, if any, on the Notesredeemed, to the applicable date of redemp"on, if redeemed during the twelvemonth period beginning on April 15 of theyears indicated below:

Year Percentage

2016 106.563%2017 104.375%2018 and therea&er 100.000%

In addi"on, upon a change of control of the Group, holders of the Notes will have the right to require the the Group torepurchase all or any part of their Notes for cash at a price equal to 101% of the aggregate principal amount of the Notesrepurchased, plus any accrued and unpaid interest. The Notes were issued under and governed by an Indenture dated 4 April2014, between the Group, Wells Fargo Bank, Na"onal Associa"on, as trustee and the Group’s subsidiaries named thereinas guarantors (the “Indenture”). The Indenture contains covenants that, among other things, limit the ability of the Groupand its subsidiaries to: incur indebtedness; pay dividends or make other distribu"ons on stock; purchase or redeem stockor subordinated indebtedness; make investments; create liens; enter into transac"ons with affiliates; sell assets; refinancecertain indebtedness; and merge with or into other companies or transfer substan"ally all of the Group’s assets.


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ANNUAL RESERVES STATEMENT

ANNUAL RESERVES STATEMENTOn February 2nd, 2015 Lonestar Resources, Ltd. announced the results of its independent engineering reports for the yearended December 31, 2014.

Lonestar obtains reserve reports from the independent consultant it deems as the most knowledgeable in each of its areasof focus. Accordingly, W.D. Von Gonten & Co. was retained to conduct the independent evalua"on of the Company’s EagleFord Shale proper"es and LaRoche Petroleum Consultants, Ltd. was retained to conduct the independent evalua"on of theCompany’s Conven"onal assets.

For the year ended December 31, 2014, Lonestar’s independent reserve reports and PV10 es"mates employed thecommodity pricing conven"ons prescribed by the U.S. Securi"es & Exchange Commission (SEC), which employs past 12months pricing for the projec"ons. Use of SEC methodology allows the Company’s results to be compared more directly withits U.S. peers.

Based on the results generated from the independent consultants report for the year ended December 31, 2014, ProvedReserves net of royal"es were 31.0 million barrels of oil equivalent (MMBOE), an increase of 70% over the 18.2 MMBOEreported at year ended December 31, 2013. Lonestar’s Proved Reserve PV10 value of US$705.8 million represents anincrease of 65% over 2013 levels.

Lonestar’s Proved Reserves include 23.6 million barrels of crude oil and condensate, 3.0 million barrels of natural gas liquids,and 26.0 billion cubic feet of natural gas. By energy content, Lonestar’s Proved Reserves are weighted 86% to liquids.Further, Lonestar’s Proved Reserve base is comprised of 89% unconven"onal reserves and 11% conven"onal, by volume.Lastly, the Company’s Proved Reserves represent an excellent balance between Proved Developed (40%) and ProvedUndeveloped (60%).

At December 31, 2014, Proved & Probable Reserves were 43.2 million barrels of oil equivalent, which included 34.3 millionbarrels of oil, 3.7 million barrels of NGL’s, and 31.3 billion cubic feet of natural gas, and had an associated PV10 value of$859.7 million. These results represent a 70% increase in Proved and Probable reserves and a 75% increase in the associatedPV10 value.

At December 31, 2014, Proved, Probable & Possible Reserves were 48.1 million barrels of oil equivalent, which included38.5 million barrels of oil, 4.0 million barrels of NGL’s, and 33.7 billion cubic feet of natural gas, and had an associated PV10 value of $952.2 million. These results represent a 90% increase in Proved, Probable & Possible reserves and a 94% increasein the associated PV10 value.

Importantly, Lonestar’s inventory of Engineered Loca"ons, those designated as Proved, Probable or Possible, are associatedwith an es"mated 78% of its greater than 30,000 net acres in the Eagle Ford Shale. Lonestar believes that industry ac"vitymay establish addi"onal viable drilling loca"ons at no cost to the Company. It is this unengineered acreage that may serveas the fuel for organic reserve growth in the future.

During 2014, Lonestar sold its Raccoon Bend proper"es in south Texas, which contributed 0.3 MMBOE and $5.2 million onof PV10 at December 31, 2013. These assets, which were a drag on the Company’s focus in the Eagle Ford, were sold for$3.2million, and provided addi"onal capital for Lonestar’s Eagle Ford Shale drilling program while accre"ng to the Company’sequity value. During 2015, it is likely that Lonestar will con"nue to ra"onalize its Conven"onal asset base, selling assets withlimited focus or that lack opera"onal control. Sale of such assets will bolster the Company’s liquidity necessary to befinancially flexible and opportunis"c in its pursuit of addi"onal resource in the Eagle Ford Shale trend.

With the fact in mind that SEC commodity price methodology does not reflect the current futures prices for oil and gas,Lonestar has also calculated the Company’s PV10 using its third part engineering reports, based on a distribu"on of flat WTIoil price decks, with those results included in Table 1 below. In the cases in which oil prices are assumed between $45 and$65 per barrel, the Company has forecasted that capital costs and lease opera"ng expenses would decrease by an averageof 10% from yearend levels, and has applied those reduced costs to its PV10 calcula"ons.

The footnotes and defini"ons are an integral part of these tables. Table 1 provides distribu"on of PV10 values of theCompany’s Proved, Probable & Possible Reserves based on various West Texas Intermediate crude oil prices. Table 2 providesdistribu"on among Proved, Probable & Possible Categories, by hydrocarbon type, based on SEC pricing. Table 3 providesdistribu"on among Proved, Probable & Possible Categories, by area of opera"ons, based on SEC pricing.

Important tables and disclosures follow on subsequent pages.


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Footnotes:

Reserves Repor"ng:Pursuant to ASX Lis"ng Rules (“LR”) the reserves informa"on in this Annual Reserves Statement:

(i) is effec"ve as at 1 January, 2015 (LR 5.25.1)

(ii) has been es"mated and is classified in accordance with SPEPRMS (Society of Petroleum Engineers PetroleumResources Management System) (LR 5.25.2)

(iii) is reported according to the Company’s economic interest in each of the reserves and net of royal"es (LR 5.25.5)

(iv) has been es"mated and prepared using the determinis"c method (LR 5.25.6)

(v) has been es"mated using a 6:1 BOE conversion ra"o for gas to oil, pursuant to the informa"on in the disclaimersec"on of this document (LR 5.25.7)

Other Reserves Informa"on:Lonestar operates most of its proper"es which are generally held by standard oil and gas lease arrangements. Detailedinforma"on on the operator and lease arrangements is disclosed in the Company announcement related to the ini"alacquisi"on of proper"es. The Company’s working interest ownership (WI%) and netrevenue interest ownership (NRI%) inrela"on to each of its proper"es are generally included in the Company’s presenta"ons which are available on the ASX orthe Company’s websites. Well spacing assump"ons and lateral length assump"ons are generally included in the Company’spresenta"ons as is addi"onal informa"on on capital cost and taxa"on assump"ons. In accordance with ASX LR 5.43 theCompany confirms that it is not aware of any new informa"on or data that materially affects the reserves informa"onincluded in previous Company announcements including as to material assump"ons and technical parameters underpinningthe es"mates, other than as set out in this Annual Reserves Statement.

Qualified Petroleum Reserves and Resources Evaluators: In accordance with ASX Lis"ng Rules 5.41 and 5.42: The reserve repor"ng provided in this document in rela"on to the Company’s Eagle Ford Shale proper"es is based on andfairly represents informa"on and suppor"ng documenta"on that has been prepared by Mr. William D. Von Gonten, Jr., P.E.,and Mr. Taylor D. Ma!hes, P.E. who are employed by W. D. Von Gonten & Co Petroleum Engineering. Mr. Von Gonten holdsa Bachelor of Science degree in Petroleum Engineering from Texas A&M University and Mr. Ma!hes holds a Bachelor ofScience degree in Petroleum Engineering from Texas A&M University. Both of these persons are Registered TexasProfessional Engineers. Mr. Von Gonten has 24 years of experience as a Petroleum Engineer and Mr. Ma!hes has morethan 5 years of experience as a Petroleum Engineer. Both of these persons are members of the Society of PetroleumEngineers . Messrs. Von Gonten and Ma!hes have consented to the inclusion in this document of the informa"on andcontext in which it appears. The reserve repor"ng provided in this document in rela"on to the Company’s Conven"onal proper"es is based on and fairlyrepresents informa"on and suppor"ng documenta"on that has been prepared by Mr. William M. Kazmann who is Presidentand Senior Partner La Roche Petroleum Consultants, Ltd. Mr. Kazmann received his Bachelor of Science and Master of Sciencedegrees in Petroleum Engineering from the University of Texas at Aus"n in 1973 and 1975 respec"vely. He has worked inthe oil and gas industry since that "me. Mr. Kazmann is a Licensed Professional Engineer in the State of Texas and is amember of the American Associa"on of Petroleum Geologists, Society of Petroleum Engineers, Society of IndependentProfessional Earth Scien"sts (serving as Na"onal Director from 1993 to 1996 and Na"onal Treasurer in 1994 and 1995),Dallas Geological Society, and Dallas Petroleum Club (serving as Director from 2004 through 2006). Mr. Kazmann hasconsented to the inclusion in this document of the informa"on and context in which it appears.


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Commodity Pricing Used: Lonestar’s reserves and PV10 have been es"mated using index prices determined in accordance with US SEC pricingguidelines for oil and natural gas, without giving effect to deriva"ve transac"ons, and were held constant throughout theli& of the proper"es. The unweighted arithme"c averages of the firstdayofthemonth prices for the year ended December31, 2014 were $94.99 per bbl for oil and $4.35 per mmbtu for natural gas and for the year ended December 31, 2013 were$96.94 bbl for oil and $3.66 per mmbtu for natural gas. These prices were adjusted by lease for quality, energy content,regional price differen"als, transporta"on fees, marke"ng deduc"ons and other factors affec"ng the price received at thewellhead.

Reserves Cau"onary Statement: Hydrocarbon reserves and resource es"mates are expressions of judgment based on knowledge, experience and industryprac"ce. Es"mates that were valid when originally calculated may alter significantly when new informa"on or techniquesbecome available. Addi"onally, by their very nature, reserve and resource es"mates are imprecise and depend to someextent on interpreta"ons, which may prove to be inaccurate. As further informa"on becomes available through addi"onaldrilling and analysis, the es"mates are likely to change. The may result in altera"ons to development and produc"on planswhich may, in turn, adversely impact the Company’s opera"ons. Reserves es"mates and es"mates of future earnings are,by nature, forward looking statements and subject to the same risks as other forward looking statements.

Other Defini"ons:“BOE” is barrel of oil equivalent. For purposes of compu"ng such units, a conversion rate of 6,000 cubic feet of natural gasto one barrel of oil equivalent (6:1) is used. The conversion ra"o of 6:1 is based on an energy equivalency conversion methodwhich is primarily applicable at the burner "p and does not represent value equivalence at the wellhead.

“MMBOE” is million barrels of oil equivalent.

“MBOE” is thousand barrels of oil equivalent.

“Mbbls” is thousand barrels of oil or NGL’s.

“MMcf” is million cubic feet of natural gas.

“Net Revenue” is calculated net of royal"es, produc"on taxes, lease opera"ng expenses, and capital expenditures, beforeFederal Income Taxes.

“PV10” or “NPV10” is defined as the future Net Revenues of the Company’s Proved or Probable Reserves, discounted at 10%per annum. The es"mated future net revenue values do not necessarily represent the fair market value of Lonestar’sreserves.


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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE STATEMENTThe Board and management of Lonestar recognise the importance of implemen"ng and maintaining high standards ofcorporate governance. With this in mind the Board is in the process of adop"ng the approaches outlined by the ASXCorporate Governance Council in the ‘Corporate Governance Principles and Recommenda"ons 3rd Edi"on’ paper (“ASXRecommenda"ons Paper”).

The principles and recommenda"ons iden"fied in the ASX Recommenda"ons Paper are outlined below along with a summaryor statement of the Company’s prac"ces in rela"on to each recommenda"on, consistent with the ‘why or why not’ approachoutlined in the ASX Recommenda"ons Paper. Where a recommenda"on has not been complied with, reasons have beengiven.

This Corporate Governance Statement is current as at 30 March 2015 and unless otherwise stated, the prac"ces outlinedbelow were in place for the en"rety of the repor"ng period.

PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHTRecommenda"ons 1.11.7

1.1 Roles and Responsibili"es of Board & Management:

The Board Charter, which is on the Company’s website, specifies the respec"ve roles and responsibili"es of the Board, theCEO, and Senior Management. The Board is responsible for the corporate governance of the Company, including the se'ngand monitoring of objec"ves, goals and corporate strategy. Management is responsible for the day to day running of theGroup’s affairs and the implementa"on of the strategy.

The Board guides and monitors the business of the Company on behalf of its shareholders. Its focus is to enhance theinterests of shareholders and other key stakeholders and ensure the group is properly managed. This includes ensuringinternal controls and repor"ng procedures are adequate and effec"ve. The Board has access to independent advisers whereit iden"fies such a need.

As outlined in the Board Charter, the responsibili"es of the Board include:• Overseeing the Company, including its control and accountability systems;• Providing input into, and final approval of management’s development of corporate strategy and performance

objec"ves;• Appoin"ng and removing the CEO, or equivalent;• Ra"fying the appointment and, where appropriate, the removal of senior management other than the CEO, including

the CFO, the COO and the company secretary;• Monitoring senior management’s performance and their implementa"on of strategy;• Reviewing, ra"fying and monitoring systems of risk management and internal control and legal compliance;• Approving and monitoring compliance with the Company’s Code of Conduct;• Ensuring appropriate resources are available to senior management;• Developing the succession planning of the Company;• Monitoring the opera"onal and financial performance of the Company;• Reviewing and approving the Company’s financial statements and (with the assistance of the Audit & Risk

Management Commi!ee) overseeing the Company’s compliance with applicable audit, accoun"ng and repor"ngrequirements;

• Ensuring the integrity of the Company's financial repor"ng (with the assistance of the Audit & Risk ManagementCommi!ee) and other public disclosure through approval and monitoring of such disclosure and the approval of theCompany’s con"nuous disclosure policies;

• Developing the overall approach to corporate governance of the Company, including conduc"ng reviews of thebalance of responsibili"es within the Company to ensure division of func"ons remain appropriate to the needs of theCompany and ensuring the Board func"ons independently of senior management;

• Appoin"ng an external auditor (based on recommenda"ons of the Audit & Risk Management Commi!ee) as andwhen required, provided that any appointment made by the Board must be ra"fied by shareholders at the nextannual general mee"ng of the Company;

• Monitoring compliance with the Company's legal obliga"ons;• Reviewing the adequacy and form of Directors’ compensa"on to ensure it realis"cally reflects the responsibili"es

and risks involved in being a Director;


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• Providing an orienta"on on the induc"on of each new Director and ensuring the appropriate ongoing educa"on ofDirectors in respect of the Company and its business;

• Making assessments of the effec"veness of the Board, its commi!ees and each Director;• Establishing a diversity policy and se'ng measurable objec"ves for achieving diversity, and in par"cular gender

diversity, and to assess on at least an annual basis the objec"ves and the progress towards achieving the objec"ves;• Developing and monitoring controls for the stewardship of subsidiary companies including the establishment of

procedures for the appointment of directors.

1.2 Appointment of Directors:

The Company’s Cons"tu"on allows the Directors to appoint at any "me a person to be a Director either to fill a vacancy oras an addi"on to exis"ng Directors provided the total number of Directors does not exceed the maximum number specifiedby the Cons"tu"on. The selec"on and reappointment of Directors is ul"mately the responsibility of the Board, but theRemunera"on & Nomina"on Commi!ee assists the Board in carrying out this duty.

Detailed informa"on on the size and composi"on of the Board and the selec"on process for new Directors are included inthe Board Charter and the Remunera"on & Nomina"on Commi!ee Charter which are on the Company’s website. Prior toundertaking directorship appointments the Board undertakes a review of which skills and competencies are required andpersons with these quali"es are sought out. The Board maintains a skills matrix a copy of which is included below.

Informa"on on new Directors is provided to security holders in the announcement regarding their appointment and whenDirectors are up for elec"on or reelec"on. This enables shareholders to make informed decisions on whether to elect orreelect a Director.

1.3 Agreements with Directors & Senior Execu"ves:

On appointment, new Directors receive and sign a Le!er of Appointment that sets out the terms and policies that apply tothat person’s role as a Director of the Company. The new Director is required to sign the Le!er of Appointment pursuantto which they agree to the terms and policies outlined in the Le!er of Appointment. Senior Execu"ves enter into Execu"veService Agreements. These agreements outline the key terms of the execu"ve’s employment with the Group, includingremunera"on, term of employment and key du"es. Further informa"on is included in the Remunera"on Report that formspart of the Directors’ Report in the Annual Report to Shareholders.

1.4 Company Secretary Accountable to the Board:

The Company Secretary is accountable directly to the Board on all ma!ers to do with the proper func"oning of the Board.Each Director is able to communicate directly with the Company Secretary and vice versa. The decision to appoint or removea Company Secretary is reserved to the Board.

1.5 Diversity Policy:

The Company maintains a Diversity Policy that sets out the principles and standards of the Company with respect to diversityand sets out the process for achieving diversity in the workplace. The Diversity Policy covers a range of factors including age,gender, marital status, sexual orienta"on, religious affilia"ons, ethnicity, physical limita"ons, cultural background and otherpersonal factors. It involves a commitment to equality and to the trea"ng of one another with respect. It also includesrequirements for the Board to establish measurable objec"ves for achieving diversity and for the Board to assess both theobjec"ves and the Company’s progress in achieving them. The Diversity Policy is on the Company’s website. The Board hasestablished the following objec"ves in rela"on to gender diversity. The aim is to achieve these objec"ves over "me asdirector and senior execu"ve posi"ons become vacant and appropriately skilled candidates are available. “Senior Execu"vePosi"ons” is defined as Key Management Personnel in execu"ve posi"ons.

Actual Actual Company (at 31 Dec 2014) (at Dec 2013) Objec"veNumber % Number % Number %

Number of women employees in the whole organisa"on 14 30 9 33 19 40Number of women in senior execu"ve posi"ons 0 0 0 0 1 20Number of women on the board 0 0 0 0 1 20

1.6 & 1.7 Performance Review of Board & Senior Execu"ves:

The Board undertakes an annual ‘selfappraisal’ ques"onnaire which looks at the effec"veness of the Board as a whole andthe effec"veness of individual directors. The appraisal for the 12 months ending 31 December 2014 was completed by theBoard in March 2015.


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The process for evalua"ng the performance of senior execu"ves is outlined the Remunera"on Report which forms part ofthe Directors’ Report.

A performance assessment for senior execu"ves last took place in March 2015 in connec"on with the Board’s considera"onof the STI payment for 2014. The Board also regularly undertakes discussion about Board composi"on.

PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUERecommenda"ons 2.12.6

2.1 Composi"on of Board & Commi!ees:

The Board has a Remunera"on & Nomina"on Commi!ee that, with the Board, seeks to ensure that at any "me, its size andmembership represents an appropriate balance of knowledge and experience and its size is conducive to effec"ve discussionand decisionmaking. The Board is responsible for iden"fying new directors and succession planning, and has the op"on touse consultants where necessary. Directors’ qualifica"ons, experience, exper"se and a!endance at Board mee"ngs areoutlined in the Directors’ Report. The Board and Commi!ees operate in accordance with the principles set out in the BoardCharter and the charters of each Commi!ee, copies of which are available on the Company’s website. The Charters includedetails of the Board’s composi"on and responsibili"es.

The Board also delegates some responsibili"es regarding Board composi"on to the Remunera"on & Nomina"on Commi!ee,which is made up nonexecu"ve Directors only. However, due to the size of the Company and Board, the nomina"onresponsibili"es are o&en carried out by the full Board. When a vacancy exists, through whatever cause, where is it consideredthat the Board would benefit from the services of a new director with par"cular skills, the Board considers candidates withthe appropriate exper"se and experience. In so ac"ng, the full Board follows the Remunera"on & Nomina"on Commi!eeCharter, which is on the Company’s website.

Details regarding mee"ngs of the Board and its Commi!ee during 2014 are outlined in the Director’s Report.

2.2 Board Skills Matrix:

The Company maintains a Board skills matrix which is included below. The Board has established two Commi!ees to assistin the execu"on of its du"es and to allow detailed considera"on of issues. These Commi!ees are the Remunera"on &Nomina"on Commi!ee and the Audit & Risk Management Commi!ee. Minutes of these commi!ee mee"ngs are tabled atBoard mee"ngs and ma!ers determined by the commi!ees are submi!ed as recommenda"ons for Board decisions. Thecomposi"on and role of the Audit & Risk Management Commi!ee is detailed in Principle 4. The composi"on and role of theRemunera"on Commi!ee is detailed in Principle 8.

BOARD SKILLS MATRIXEXPERIENCE & SKILLS NUMBER OF DIRECTORS (out of 7)Accoun"ng/Audit 5Analyst/Research 4Finance/Banking 5Governance/Legal 5Independent 4Industry Experience 7Marke"ng/Coms 6Public/Listed Co’s 7Senior Management 7Remunera"on/HR 5Risk & OHS 6Technical – O&G 3US Shale 3

2.3, 2.4 & 2.5 Independence of Directors:

The Chairman of the Company is a nonexecu"ve Director and the Chairman and Managing Director are independent ofoneanother. The majority of the Board are nonexecu"ve Directors albeit that two of the Directors are affiliated with asubstan"al shareholder of the Company. The term and number of securi"es held by Directors and affiliates of Directors areoutlined in the Directors’ Report. The Company’s cons"tu"on specifies that all nonexecu"ve Directors re"re from officeno later than the third annual general mee"ng following their last elec"on and that no less than a third of the Directorsoffer themselves for reelec"on by rota"on at each Annual General Mee"ng.


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2.6 Induc"on & Development of Directors:

On appointment, new Directors receive and sign a Le!er of Appointment that sets out the terms and policies that apply tothat person’s role as a Director of the Company. The new Director is required to sign the Le!er of Appointment pursuantto which they agree to the terms outlined in the Le!er of Appointment. New Directors also enter into a Deed of Indemnity,Access and Insurance, pursuant to which the Company agrees to indemnify and insure them to the extent allowable by law.

PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY

3.1 Code of Conduct:

The Company has a Code of Conduct that has been endorsed by the Board and applies to all directors and employees. TheCode of Conduct is essen"ally a statement of the principles and standards that the Company is encouraged to strive towardsin all its dealings. The Code requires that at all "mes all Company personnel act with integrity, objec"vity and in compliancewith the le!er and the spirit of the law, and Company policies. The Company also has a Security Trading Policy, requiringCompany employees not to undertake shortterm specula"ve trading and prohibi"ng trading around financial releases. Thedirectors are sa"sfied that the Company has complied with its policies on ethical standards, including trading in securi"es.Copies of the Code of Conduct and Securi"es Trading Policy are available on the Company’s website or on request from theCompany Secretary.

PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING

4.1 Audit & Risk Management Commi!ee:

The Board has an Audit & Risk Management Commi!ee, which meets at least twice a year with addi"onal mee"ngs calledas required. The Audit & Risk Management Commi!ee consists en"rely of nonexecu"ve Directors and is chaired by a nonexecu"ve Director. During the period the Commi!ee consisted of following nonexecu"ve Directors:• Robert Sco! (Nonexecu"ve Director)• Dr Christopher Rowland (Nonexecu"ve Director)

Details of these directors’ qualifica"ons and a!endance at Audit & Risk Management Commi!ee mee"ngs are set out in theDirectors’ Report. All members of the Audit & Risk Management Commi!ee are financially literate and have an appropriateunderstanding of the industry in which the group operates.

The Audit & Risk Management Commi!ee operates in accordance with its charter which is available on the Company’swebsite. The main responsibility of the commi!ee is to assist the Board in the effec"ve discharge of its responsibili"es forfinancial repor"ng, risk management, internal controls and external audit.

Directors are not provided with any addi"onal remunera"on in respect of their Audit & Risk Management Commi!eemembership, other than the Chair of the Audit & Risk Management Commi!ee who receives an addi"onal $10,000 perannum compensa"on, given the extensive work around financial repor"ng.

4.2 Declara"ons from CEO and CFO:

In connec"on with the Board’s approval of the Company’s annual financial statements, the Managing Director/CEO and theCFO provide a declara"on that, in their opinion, the financial records of the en"ty have been properly maintained and thatthe financial statements comply with the appropriate accoun"ng standards and give a true and accurate view of the financialposi"on of the en"ty. In rela"on to the 12 months to 31 December 2014, the Chief Execu"ve Officer and Chief Finance &Risk Officer made the following cer"fica"ons:

• That the Company’s financial reports are complete and present a true and fair view, in all material respects, of thefinancial condi"on and opera"onal results of the Company and group and are in accordance with relevant accoun"ngstandards; and

• That the above statement is founded on a sound system of risk management and internal compliance and controlwhich implements the policies adopted by the board and that the Company’s risk management and internalcompliance and control is opera"ng efficiently and effec"vely in all material respects in rela"on to financial repor"ngrisks.

4.3 A!endance of Auditor at AGM:

In twelve months to 31 December 2014, BDO (Audit) WA Pty Ltd served as the Company’s external auditor. A representa"vefrom BDO (Audit) WA Pty Ltd will a!end the AGM and be available to answer shareholder ques"ons about the conduct ofthe audit and the prepara"on and content of the audit report for the period.


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PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE

5.1 Policy for Con"nuous Disclosure:

The Company complies with its con"nuous disclosure obliga"ons. Informa"on concerning the Group that a reasonableperson would expect to have a material effect on the price of the Company’s securi"es is disclosed pursuant to lis"ng rulesand applicable laws. The Company maintains a Con"nuous Disclosure Policy which is on the Company’s website. The policysets out the Company’s disclosure prac"ces and policies and the obliga"ons of stakeholders to ensure that the Companysa"sfies its con"nuous disclosure obliga"ons. The Chairman, Managing Director and Company Secretary are all responsiblefor communica"ons with the ASX. This includes responsibility for ensuring compliance with the con"nuous disclosurerequirements in the ASX Lis"ng Rules and overseeing and coordina"ng informa"on disclosure as soon as prac"cable. Thepolicy also sets out the procedure for disclosure.

PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS

6.1 Company Informa"on & Governance Prac"ces on Website:

The Company seeks to communicate effec"vely with shareholders, providing access to balanced and straigh(orwardinforma"on about the Company and its opera"ons. This informa"on is shared through releases to the ASX, throughelectronic means such as emails, and via postal means in response to direct requests, as well as through informa"on postedon the Company’s website. The Company’s website enables shareholders and interested members of the public tounderstand the Company’s opera"ons, to consider Company strategies and policies, and review regular financial reports.Informa"on disclosed to the ASX is generally posted on the Company’s website as soon as prac"cable. Historical Companyannouncements and reports are available on the ASX pla(orm or the Company’s website. Informa"on on CorporateGovernance, including access to Policies and Charters, is available on the Company website. The Governance sec"on(including all policies) is accessed by clicking on “Shareh

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