Carnarvon Petroleum : Phoenix South-2 Well Update

Phoenix South-2 Well Update 16 January 2017 Highlights

• Phoenix South-2 well drilling rig has moved off location
• The well discovered gas and condensate as predicted near the top of the primary Caley target
• Elevated formation pressures and associated hydrocarbons prevented well evaluation to the extent planned

Carnarvon Petroleum Limited ("Carnarvon") (ASX:CVN) is pleased to inform shareholders that operations at the Phoenix South-2 well have been safely completed and the rig has now left the drilling location.

The well drilled an estimated 39 metre hydrocarbon-bearing zone between approximately 5,176 and 5,215 metres with significant gas influx and elevated reservoir pore pressures. The well was unable to assess as much as 185 metres of additional potential hydrocarbon bearing Caley reservoir beneath 5,215 metres due to the higher than anticipated pressures being encountered.

The higher formation pressures encountered typically support both larger volumes and higher gas and condensate flows rates over a given reservoir. An update on volume estimates will be provided once Carnarvon has had an opportunity to assess all of the information obtained from the well. These results are expected to have a positive impact on volumes assessments in the Phoenix South Caley Sandstone.

The joint venture will also assess the results of this well for the purpose of considering the future operations in this area, including quantifying the resources identified in the Phoenix South Barret and Caley Sandstone formations. Unfortunately, the subsurface conditions in this well did not allow for the well to be suspended in a way that would allow for re-entry at a later date.

The Phoenix South-2 well is located within the WA-435-P exploration permit in the North-West Shelf of Australia. The equity interest holders are:

Carnarvon Petroleum 20%

Quadrant Energy (Operator) 80%

Yours faithfully

Adrian Cook Managing Director Carnarvon Petroleum

Shareholder enquiries: Media enquires:

Mr Thomson Naude Mr Tony Dawe

Company Secretary Professional Public Relations

Phone: [phone] (08) 9388 0944 / 0405 989 743

Email: [e-mail] [e-mail]

This document may contain forward-looking information. Forward-looking information is generally identifiable by the terminology used, such as "expect", "believe", "estimate", "should", "anticipate" and "potential" or other similar wording. Forward-looking information in this document includes, but is not limited to, references to: well drilling programs and drilling plans, estimates of reserves and potentially recoverable resources, and information on future production and project start-ups. By their very nature, the forward-looking statements contained in this news release require Carnarvon and its management to make assumptions that may not materialize or that may not be accurate. The forward-looking information contained in this news release is subject to known and unknown risks and uncertainties and other factors, which could cause actual results, expectations, achievements or performance to differ materially, including without limitation: imprecision of reserve estimates and estimates of recoverable quantities of oil, changes in project schedules, operating and reservoir performance, the effects of weather and climate change, the results of exploration and development drilling and related activities, demand for oil and gas, commercial negotiations, other technical and economic factors or revisions and other factors, many of which are beyond the control of Carnarvon. Although Carnarvon believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct.

Figure 1: Stratigraphic column encountered by the Phoenix South-2 well with major formations outlined.

2014 Oil Discovery in Phoenix South-1

2016 Gas & Condensate Discovery in Phoenix South-2

2016 Gas & Condensate Discovery in Roc-1

2016 Gas & Condensate Successful Well Test in Roc-2

Figure 2 - Location of the Phoenix South-2 well

Phoenix South-2

Figure 3: Caley depth map

Phoenix South-2