Asx Release Independent Expert's Report

Roc Oil Company Limited (ROC) 16 June 2014 ASX RELEASE INDEPENDENT EXPERT'S REPORT ROC recently commissioned Grant Samuel & Associates Pty Ltd to prepare an Independent Expert's Report on the proposed merger with Horizon Oil. The Independent Expert has concluded that the merger is in the best interests of ROC shareholders. ROC shareholders will have recently received a Notice of an Extraordinary General Meeting to be held on 11 July 2014 (EGM). The meeting has been requested by fund manager Allan Gray to consider a resolution to change ROC’s Constitution and to frustrate the Merger. The Board's view is that this is clearly not in the best interests of ROC shareholders. ROC's directors unanimously recommend that ROC shareholders VOTE AGAINST the resolution proposed at the EGM enabling the merger with Horizon Oil to proceed. A copy of the Independent Expert's Report and a summary prepared by Grant Samuel are attached to this announcement. Copies of these documents are also available on ROC's website at http://www.rocoil.com.au/Investor--Media-Centre/Announcements/. Alan Linn For further information please contact: Executive Director Renee Jacob & Chief Executive Officer Group Manager Investor Relations & Corporate Affairs Tel: +61-2-8023-2096 Email: [email protected] GRANT SAMUEL & ASSOCIATES LEVEL 6 1 COLLINS STREET MELBOURNE VIC 3000 T: +61 3 9949 8800 / F: +61 3 9949 8838 www.grantsamuel.com.au 15 June 2014 The Directors Roc Oil Company Limited Level 18, 321 Kent Street SYDNEY NSW 2000 Dear Directors Proposed Merger with Horizon Oil Limited 1 Introduction On 29 April 2014, Roc Oil Company Limited (“ROC”) and Horizon Oil Limited (“Horizon”) announced that they had reached agreement for a “merger of equals” (“Merger”), to be effected via a scheme of arrangement between Horizon and its shareholders (“Scheme”). Under the Scheme, Horizon shareholders will receive 0.724 ROC shares for each Horizon share held. As a result, Horizon shareholders will hold approximately 58% of the shares in the merged company (“New ROC”), while ROC shareholders will hold the remaining 42%. The Scheme requires Horizon shareholder approval. ROC and Horizon are Australian oil and gas companies, with assets across a range of countries including the People’s Republic of China (“China”), Papua New Guinea (“PNG”), Malaysia and New Zealand. Shares in ROC and Horizon are listed on the Australian Securities Exchange (“ASX”). Immediately before the announcement of the Merger, ROC had a market capitalisation of $315 million, while Horizon’s market capitalisation was $480 million. ROC’s major assets are interests in producing Beibu Gulf fields, offshore China (“Beibu Gulf Joint Venture”); interests in producing Bohai Bay fields, offshore China (“Zhao Dong Joint Venture”); and certain Malaysian interests. Horizon’s major assets are interests in the Beibu Gulf Joint Venture; an interest in the producing Maari/Manaia oilfields in the offshore Taranaki Basin, New Zealand; and exploration and development projects in the Foreland Basin in western PNG. There is no statutory or other regulatory requirement for ROC to commission an expert’s report in relation to the Merger. Nevertheless, the Directors of ROC have engaged Grant Samuel & Associates Pty Limited (“Grant Samuel”) to prepare an independent expert’s report setting out whether, in its opinion, the Merger is in the best interests of ROC shareholders. A copy of the report is to be released to the ASX and made available on ROC’s website. It will also be available on request to ROC shareholders. This letter contains a summary of Grant Samuel’s opinion and main conclusions. In this letter, dollar amounts relate to United States dollars unless otherwise specified. 2 Summary of Opinion In Grant Samuel’s opinion, the terms of the Merger are fair to ROC shareholders. The Merger benefits are collectively significant and outweigh the disadvantages. Accordingly, the Merger is in the best interests of ROC shareholders. On the basis of sharemarket values and Grant Samuel’s assessment of the full underlying values of ROC and Horizon, the aggregate interest of ROC shareholders in New ROC will be approximately proportionate to ROC’s contribution of value to the merged company. The terms of the Merger are therefore fair to ROC shareholders. GRANT SAMUEL & ASSOCIATES PTY LIMITED ABN 28 050 036 372 AFS LICENCE NO 240985 It should be recognised that estimates of value of the assets of ROC and Horizon are inherently uncertain. Estimates of value of oil and gas assets (and particularly development and exploration assets) can change relatively quickly, potentially by material amounts, and are dependent upon such factors as future oil prices, development progress and appraisal and exploration success. In particular, Horizon’s PNG development assets represent a material proportion of Horizon’s overall value. A relatively wide range of development outcomes (and therefore values) for these assets is credible. Judgements regarding the current value of these assets are subjective. Relative to Horizon, the value of ROC is less sensitive to movements in oil prices, as ROC held significant cash at 31 December 2013 (representing approximately 18% of its market capitalisation prior to announcement of the Merger) while Horizon had net debt. Similarly, ROC is probably less exposed to changes in overall market sentiment towards the oil and gas sector. Accordingly, while Grant Samuel believes that the terms of the Merger are fair to ROC shareholders, this conclusion could change for different market conditions. In particular, the Merger terms would become less attractive for ROC shareholders if oil prices were to fall materially or if the PNG investment environment was to significantly deteriorate. The Merger offers a number of benefits for ROC shareholders. New ROC will be a much larger company than ROC on a standalone basis and its shares should enjoy significantly greater liquidity. New ROC should be able to access both equity and debt capital on more attractive terms than those available to ROC on a standalone basis. New ROC will have a broader array of assets within a geographically more diversified asset portfolio (although some shareholders may prefer to achieve this diversification directly through their own investment decisions). While merger synergies are not expected to be material, it is likely that some corporate cost reductions will be achieved. Importantly, the Merger will provide ROC with significant growth options. ROC on a standalone basis has relatively limited opportunities for growth (notwithstanding its recent farm in to a production sharing contract offshore Malaysia). Its asset portfolio largely consists of producing assets that are approaching or in production decline. By comparison, Horizon’s PNG assets have the potential to deliver substantial production growth in the medium term and offer considerable “blue sky” upside beyond that. More generally, the size and enhanced financial flexibility of New ROC should give it the capacity to consider larger and potentially riskier acquisitions, developments or other growth initiatives than would have been appropriate for ROC on a standalone basis. All these factors suggest that there is a realistic prospect that the Merger will result in a market re- rating of New ROC. In this regard, ROC shares are trading at prices approximately 25% higher than immediately before the announcement of the Merger, while the combined market capitalisation of ROC and Horizon has grown by around 18%1 since the announcement of the Merger. While the potential for a market re-rating is generally difficult to quantify, the share price performance of both ROC and Horizon since the announcement of the Merger suggests that the re- rating opportunity is significant. ROC (and Horizon) shareholders would stand to lose the recent share price appreciation if the Merger did not proceed. Moreover, ROC shareholders will not give up the opportunity to realise a full premium for control at some later stage. While ROC shareholders will in aggregate represent a minority (42%) in New ROC, the Merger will not result in passing of control in the sense of the acquisition of a controlling shareholding by any single shareholder. The share register of New ROC will arguably be more open than the current ROC register, with no shareholder holding more than 14%2 of New ROC. ROC shareholders will retain an opportunity to realise a full premium through a subsequent change of control transaction for New ROC. On one view the prospects of such a transaction should be enhanced, given the upside potential, ultimate scale and corporate appeal of the PNG assets. 1 Based on the Horizon share price on 22 April 2014. 2 Based on substantial shareholder notices to 13 June 2014. 2 ROC shareholders should understand that the Merger will change the investment characteristics of their holdings. In essence, relative to ROC on a standalone basis, New ROC will have greater growth opportunities but will face additional development and other risks. In the short to medium term at least, New ROC is likely to have lower free cash flows, given the need to fund the development of its PNG assets, although successful development of the PNG assets would deliver material growth in earnings and free cash flows in the longer term. The market response to the Merger announcement and Grant Samuel’s valuation analysis suggests that the net effect of these changes is broadly neutral or potentially marginally positive from a short term value perspective. However, it would clearly be open to investors with different risk appetites or a focus on short term earnings versus longer term growth to take a different view on the net benefit to ROC shareholders. In Grant Samuel’s opinion, the Merger benefits are collectively significant and outweigh the disadvantages. The Merger is in the best interests of ROC shareholders. 3 Key Conclusions . The Merger is a “merger of equals”.

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