Ann: Phoenix South-3 Drilling Update, page-2

Carnarvon Petroleum Limited (“Carnarvon”) (ASX:CVN) is pleased to provide the following update on the drilling of the Phoenix South-3 (“PS-3”). Progress The 7-5/8” liner has been set and cemented in place down to around 5,205 metres Measured Depth (”MD”) and the well has commenced drilling ahead. Current Operations The rig is currently drilling ahead at approximately 5,210 metres MD. The primary Caley Member is anticipated to be encountered in this section of the well. Forward Plan The well will continue drilling ahead to a depth of approximately 5,500 metres MD. Controlled Drilling through Reservoir section The previously drilled Phoenix South-2 (“PS-2”) well was unable to fully evaluate the Caley Member due to high pressures encountered in that well. The PS3 well plan and its associated procedures employ controlled drilling operations prior to and during the drilling of the reservoir section. As a consequence, drilling progress will be slower than that previously experienced in the other wells in the Phoenix project. Well Objective The primary objective for the Phoenix South-3 well is to evaluate the gas and condensate potential of the Caley Member within a large, faulted anti-clinal closure that was partially penetrated with the Phoenix South-2 well. Phoenix South-2 encountered gas and condensate in the Caley Member but was unable to drill through and evaluate the formation. The Phoenix South-3 well has been optimally designed to penetrate and evaluate the hydrocarbon bearing formations of the Caley Member. Phoenix South-3 is located around 560 metres North-North East of the Phoenix South-2 well. The well will target a closure that is estimated by Carnarvon to contain a gross mean recoverable prospective resource of 489 Bscf of gas and 57 million barrels of associated condensate (being 143 million barrels of oil equivalent (“boe”), gross, Pmean) – Refer to ASX Announcement on 28 March 2017. Prospective Resources are the estimated quantities of petroleum that may potentially be recovered by the application of a future development project and may relate to undiscovered accumulations. These prospective resource estimates have an associated risk of discovery and risk of development. Further exploration and appraisal (including this well) is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.