16 February 2017

88 ENERGY LIMITED

ASX LODGEMENT OF ANNUAL REPORT

88 Energy Limited (ASX:88E; AIM:88E)("88 Energy" or "Company") advises that a copy of the Company's Annual Report for the year ended 31 December 2016 has been lodged on the ASX and is also available on the Company's website at www.88energy.com. The Annual Report was sent to shareholders today.

Set out below is the Chairman's Statement as included in the Company's Annual Report. 

Also set out below is a summary of the Company's audited financial information for the year ended 31 December 2016 as extracted from the Annual Report, being:

Consolidated Statement of Comprehensive Income;

Consolidated Statement of Financial Position;

Consolidated Statement of Changes in Equity; and

Consolidated Statement of Cash Flows.

CHAIRMAN'S STATEMENT

Dear Shareholders

It is a pleasure to present my Chairman's Report for the 2016 financial year.

2016 marks only the second year in which your Company has traded under the 88 Energy ("88E") banner.  I am pleased to report some significant milestones have been achieved as 88E progresses along the pathway leading to appraisal of Project Icewine on Alaska's North Slope.  These milestones are detailed in the Operations Report.

Measuring success for a junior explorer is a complex process. Year on Year the market capitalisation of 88E has grown from around $25 million to $188 million and the Company has been cited as the best performing oil and gas stock based on share price appreciation on the ASX during this period.

As we move into the appraisal drilling phase we do so with a strong balance sheet and high level of project equity providing excellent leverage to our shareholders in the success case. This begs the question "what are the hallmarks of a successful junior explorer?" With over 3 decades in the industry I am well placed to address this question.

Geologists love to base their exploration models on successful analogues just as we have done in drawing comparisons to the Eagle Ford and the Haynesville shales Texas, USA.  This makes good sense, however we can look beyond the geological modelling and seek to identify what constitutes a successful analogue at the entity level. I have always considered Hardman Resources (HDR) as the flagship analogue when measuring success in the junior oil space.

Some of you will be familiar with its history: this tiny oil explorer went from a market capitalisation of $10 million dollars around the turn of the century to $1.5 billion dollars in 2006 with accompanying share price appreciation from 4 cents to $2.36.   Interestingly, the oil price at the time of its maiden offshore discovery was a mere US$28.80 per barrel.

Leaving aside the fundamental geology, the key attributes of this historical success story included; leadership with both vision and drive, first mover advantage, attractive regime, meaningful prospect volumes, high project equity over oil prone play type, operatorship, dual ASX and AIM listing, strong financial credentials and farm out capability.

It is my conviction that 88E has many, if not all of these same attributes; in particular the strong leadership capabilities that have been exhibited to date by our Managing Director, David Wall.  We are clearly the first mover over this unconventional play type on Alaska's North Slope; our potential has been independently evaluated in excess of a billion barrels; we control the play; enjoy high project equity and acreage along with operatorship; and our balance sheet is strong.

The science behind Project Icewine was originated by Paul Basinski, a geoscientist with an enviable track record in unconventional oil exploration.  88E is backing his proposition that Alaska hosts vast undiscovered potential in an unconventional play targeting the HRZ shale which shares a common source rock with the Giant Prudhoe Bay oil field, the largest conventional field ever discovered in North America. The Project is located in a prolific oil producing region where 88E has assembled a land bank that would befit an oil major, many of whom are already engaged in successful conventional oil exploration in Alaska, as recent discoveries in the region attest.

Alaska is a supportive regime that encourages exploration, offering rebates up to 85 percent for every dollar spent prior to 2016; an incentive that was not only attractive to 88 Energy but one backed by Bank of America (BOA). This has enabled 88E to maintain leverage without the larger equity dilution normally associated with funding a program of this magnitude. Our strong acreage position is further enhanced due to the proximity of the all-weather Dalton Highway and the ability to connect into the trans-Alaska pipeline that can handle up to 2.1 million barrels per day and has considerable spare capacity.

The funding and execution of Project Icewine is being overseen by our Managing Director, David Wall, with the assistance of a small dedicated team including our Exploration Manager Elizabeth Pattillo, our Alaskan based Operations Manager, Erik Opstad and the full support of my fellow Directors. To date, the results speak for themselves and back up the early prognosis that formed the basis of our original investment decision. I would also like to welcome our new Chief Financial Officer, Ashley Gilbert, to the team, a Chartered Accountant with more than 20 years' experience in commerce and significant experience in the oil and gas sector.

The process of evaluation is ongoing and not without considerable risk; however, we look to the future with measured optimism as we unlock both the conventional and unconventional potential of our Alaskan exploration acreage.  One only needs to compare this program with better known shale plays in Texas, like the Eagle Ford and Haynesville, to gain an appreciation of the impact that successful exploration can have on 88E as oil prices recover.

Before closing I would like to thank the Department of Natural Resources, the Alaska Oil and Gas Conservation Commission; the North Slope Borough and other regulatory agencies that have facilitated our exploration effort in the State.

My fellow Directors and I acknowledge David and his staff for their sterling efforts in managing 88E's exciting Alaskan program on a tight budget and timeframe. Their efforts have resulted in 88E turning in the best performance of a junior oil explorer on the ASX in 2016.  Indeed, there is little more 88E could have done in the lead up to the appraisal program than what has already been achieved. We should recognise this point as we move forward to the drilling of Icewine #2.

In turn, this progress would not be possible without your support as shareholders in what has been a challenging environment.  Our dual listing on both ASX and AIM has garnered a wide investor base and we have been ably supported by our brokers and advisers including Hartleys, Cenkos and Patersons.

We look forward to a successful 2017 appraisal program at Project Icewine.

Yours faithfully,

Michael Evans
Non-Executive Chairman

 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER CONSOLIDATED INCOME

The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be
read in conjunction with the notes to the financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The Consolidated Statement of Financial Position should be
read in conjunction with the notes to the financial statements.