Ann: Market Update, page-2

Great update, at least we finished in the green considering that DLS just stated that Capex is down massively in FY16, put they are still going to be drilling 22 wells, plus be developing the Western Flank assets (which will ensure production levels stay high for many years, not just 1, plus the wet gas area.

Many of the wells in FY16 are free carry's too, which is especially nice. Also interesting to note, that DLS has a new partner in PEL570, Sundance energy, which just bought out NSEs share (including liabilities). We have Santos and BPT drilling for DLS and shared costs everywhere else.

What I think is most important, is that if DLS is able to produce at the middle of Guidance, 3mmbo, and keep costs relatively similar to this year (which should be doable as costs are going down throughout the sector), then DLS is looking to make approx $240 million in revenue, with costs of (being conservative of AUD $40 a barrel) and they receive AUD $80 (currently receiving $82) then DLS is looking to make over $120 million in free cashflow. Which means they will easily cover expenditure, plus depending on their total capex, might mean they will end up with upwards of $40 million in cash (or a minimum of $10 million extra).

A great position to be in considering the fall in the POO. Most companies are cutting back masively, DLS is without doubt reigning in expenditure, but not to the same extent SXY for example has done.

DLS already has quite a lot of put options for its oil production to ensure that FY16 should be a very secure year revenue wise, I think they will probably add to their hedging (downside protection strategy in the near term).