Peako : Quarterly Activity Report 31 March 2016

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26 April 2016‌

ASX Limited Level 4

Rialto Tower North 525 Collins Street

MELBOURNE VIC 3000

ASX Code: PKO

QUARTERLY ACTIVITIES REPORT

31 March 2016

PROJECTS SC6 (Cadlao) - Cadlao Oilfield Re-development Project, the Philippines

Peako Limited (Peako)'s interests in relation to the SC6 Cadlao Oilfield re-development project are held via its subsidiary Peak Oil & Gas (Australia) Pty Ltd (Peak) and are as follows:

1. A 25% Cadlao joint venture interest (held in trust by Cadlao Development Company Limited (Cadco)) for Peak or, alternatively, an entitlement to receive $6.7 million as consideration for the buyback of the 25% interest (see Cadco Buyback Right on page 4); and

2. A prospective indirect economic interest held by way of a 40% shareholding held by our subsidiary, Energy Best Limited (EBL), in VenturOil Philippines Inc (VenturOil) (itself a 20% interest holder in the Cadlao Joint Venture) and a 5% interest in the Service Contract SC6 Cadlao held by VenturOil in trust for EBL. The 40% shareholding and subsequent associated funding obligation was intended to provide EBL with 75% dividend rights in respect to its 40% shareholding.

3. An aggregate 80% interest in overriding royalty interests relating to 3.3% of production held by Peak Royalties Limited

4. A loan receivable from VenturOil for US$736,188

SC6 Cadlao - project history and overview

The SC-6 Service Contract, located in the Palawan Basin, offshore the Philippines, was originally granted on 1 September 1973. The Cadlao Oil Field, which is located within the SC6 contract area, was discovered by Amoco in 1977. Between 1981 and 1991, 11.1 MMBBLs of oil was produced from two wells, based on sparse 2D seismic. The field was shut-in in 1991 in response to declining production, low oil price and escalating costs.

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In 1996, 3D seismic data was acquired over the permit as part of a regional 'spec' 3D seismic survey. Interpretation of this seismic data identified additional 2P reserves of 6MMBBL (Gaffney Cline & Associates estimate) up-dip from the Amoco wells.

A 100% interest in the Cadlao permit acreage was secured by Blade Petroleum Philippines Ltd (BPPL) (now called Cadco) from local interests in 2007 and 2008. BPPL assumed operatorship and acquired and remapped the 3D seismic recorded earlier to define up-dip structural potential for the field. BPPL subsequently transferred a 20% interest in SC6 Cadlao to VenturOil.

Figure 1 SC6 Location Map

The proposed Cadlao oil project is a redevelopment project in shallow water (c.20m water depth). It is intended to be developed via drilling and production from a jack-up drilling rig with export of crude to a moored vessel.

Figure 2 Cadlao Depth Map

SC6 Cadlao -Peak's interests and involvements

In 2010, Peak entered a Farmin Agreement with BPPL, pursuant to which Peak would earn a 50% interest in SC6 Cadlao. An initial 25% was earned by satisfaction of certain conditions precedent and is held on trust for Peak by BPPL (now named Cadco). The further 25% was to be earned upon Peak securing funding for the development. In 2012, BPPL sought to terminate the Farmin agreement for noncompliance by Peak with the funding obligation provisions of the Farmin agreement. Peak disputed the validity of the termination and litigation and arbitration proceedings ensued. Arbitration proceedings are currently in abeyance. This interest is subject to a "Buy-back Right" - see below.

Prior to 2012, Peak also acquired an aggregate 80% interest in overriding royalty interests relating to 3.3% of production.

Peak, through a subsidiary, also acquired a prospective economic interest in SC6 Cadlao through a shareholding in VenturOil. The interest in VenturOil was effected through the acquisition of EBL, a 40% shareholder in VenturOil, from Clove Capital Partners Limited. Peak's subsidiary, Peak Singapore, is obliged to pay further consideration of US$2.8 million to Clove Capital Partners from the first two oil liftings, provided that Peak Singapore retains its economic interest in the Cadlao Project via VenturOil, unless it has lost that interest by virtue of gross negligence.

A subsequent agreement was entered into between EBL and VenturOil relating to the funding of VenturOil's 20% interest. This involved a pre-condition requiring a variation allowing EBL's 40% shareholding in VenturOil to provide 75% dividend rights in lieu of 40% dividend rights in return for which EBL is required to fund VenturOil's 20% share of development costs of the Cadlao Project. VenturOil is obligated to reimburse these costs to Cadco following the "spudding" of the first development well.

EBL also has the right to a 5% interest in SC6 Cadlao, held in trust for it by VenturOil, to be carved out of VenturOil's 20% interest.

In addition, Peak and its subsidiaries have lent VenturOil US$736,188 (A$954,672) as shareholder loans. There is uncertainty regarding the practical ability of Peak to recover these funds.

In February 2015, VenturOil claimed to terminate unspecified agreements between VenturOil and Peak on the basis that Peak is in breach of non binding "pre-funding obligations" in favour of VenturOil. Peak is of the firm opinion that neither it, nor any subsidiary of it, is in breach of any obligation under any binding agreement with either VenturOil or its related entity, Figurado Energy Investment Holdings, and that there are no grounds for termination of any binding agreement.

Cadco Buyback Right

As a result of the termination of the farmin agreement with BPPL (now Cadco), Peak has a right to receive buy-back funds of $6.7million from Cadco. In May 2012, BPPL (now Cadco) gave notice to Peak of termination of the farmin agreement and in so doing, exercised the "buy-back" remedy under the farmin agreement. Pursuant to the farmin agreement, that remedy is for Cadco to pay the "Buy-back Price" ($6.7 million) to Peak to buy back Peak's 25% working interest, held in trust by BPPL.

Peak has previously agreed terms for settlement of the Buyback Right with Cadco, with a final form of settlement agreement having been negotiated on a number of occasions, and in July 2014 a settlement agreement was executed. Cadco failed to make payment of the settlement amount under the settlement agreement. Peak accordingly recommenced arbitration action and is presently considering its options in relation to recovery actions in relation to the Cadco Buy-back Price.

SC6 Cadlao Project Status

Following the termination of the Peak farmin, in 2012 BPPL entered into funding agreements with Viking Energy Philippines Limited (Viking) at the corporate level, with Viking joining Blade Petroleum Limited (Blade) as a shareholder in BPPL. BPPL then changed its name to Cadlao Development Company Limited (Cadco). Cadco assumed Operatorship of the Joint Venture and Viking assumed funding responsibility. Project funding from Viking has not eventuated and Peak understands that the ownership and control of Cadco is now subject to material dispute between Blade and Viking, neither in any way related to Peak.

Given the multi-dispute nature of both the Cadco interest and the VenturOil interest, Peak is presently not receiving copies of Department of Energy communication relating to SC6 Cadlao.

Peako has appointed SyCip Salazar Hernandez & Gatmaitan as Filipino counsel to advise and assist in relation to the VenturOil interest.

During the quarter Peako commenced cooperative discussions with joint venture participants in an effort to resolve the multi-layered disputes in relation to SC6.