0001570931-16-000070.txt : 20160701 0001570931-16-000070.hdr.sgml : 20160701 20160630183243 ACCESSION NUMBER: 0001570931-16-000070 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 20160331 FILED AS OF DATE: 20160701 DATE AS OF CHANGE: 20160630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATION ENERGY INC CENTRAL INDEX KEY: 0001081183 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 592887569 STATE OF INCORPORATION: WY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30193 FILM NUMBER: 161744289 BUSINESS ADDRESS: STREET 1: 1500 WEST 16TH AVE STREET 2: SUITE F CITY: VANCOUVER STATE: A1 ZIP: V6J 2L6 BUSINESS PHONE: (604) 331-3399 MAIL ADDRESS: STREET 1: 1500 WEST 16TH AVE STREET 2: SUITE F CITY: VANCOUVER STATE: A1 ZIP: V6J 2L6 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL ENERGY INC DATE OF NAME CHANGE: 20000330 FORMER COMPANY: FORMER CONFORMED NAME: EXCALIBUR CONTRACTING INC DATE OF NAME CHANGE: 20000329 10-K 1 negy-2016form10k_final.htm FORM 10-K negy-2016form10k_final.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2016

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to [ ]

Commission file number 000-30193

NATION ENERGY INC.

(Exact name of registrant as specified in its charter)

Wyoming		59-2887569
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

RPO Box 60610 Granville Park

Vancouver, British Columbia, Canada

V6H 4B9

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number:(604) 331-3399

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

None

Name of each exchange on which registered

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, with no par value

(Title of class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X].

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [ ]; No [X].

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K. [ ]

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

(Do not check if a smaller reporting company)

Smaller reporting company [X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ X ] No [ ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1,835,800 based on a price of $0.40 per share, being the price at which the common equity was last sold on September 30, 2015.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 150,020,000 common shares issued and outstanding as of June 29, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

PART I

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology.

The material assumptions supporting these forward-looking statements include, among other things:

· our ability to obtain necessary financing on acceptable terms;

· retention of skilled personnel;

· the timely receipt of required regulatory approvals;

· continuation of current tax and regulatory regimes;

· current exchange and interest rates; and

· general economic and financial market conditions.

Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

· our ability to establish or find resources or reserves;

· liabilities inherent in natural gas and crude oil operations;

· uncertainties associated with estimating natural gas and crude oil resources or reserves;

· geological, technical, drilling and processing problems;

· competition for, among other things, capital, resources, undeveloped lands and skilled personnel;

conflicts of interest between Paltar Petroleum Limited and our company, including those that arise as the result of those certain earning agreements dated effective May 31, 2016, and those that arise as the result of our having officers and directors in common;

· assessments of the acquisitions;

· risks related to commodity price fluctuations;

· the uncertainty of profitability based upon our history of losses;

· risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;

· risks related to environmental regulation and liability;

· risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

· risks related to tax assessments;

· political and regulatory risks associated with oil and gas exploration;

· other risks and uncertainties related to our prospects, properties and business strategy; and

· our company is categorized as a “shell company” as that term is used in the Securities and Exchange Commission’s rules.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performances or achievements. Except as required by applicable law, including the securities laws of the United States and Canada, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with the United States Generally Accepted Accounting Principles.

As used in this annual report, the terms "we", "us", "our", and "Nation Energy" mean Nation Energy Inc., unless otherwise indicated.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

ITEM 1. BUSINESS

We were formed under the laws of the State of Florida on April 19, 1988 under the name Excalibur Contracting, Inc. and from that date until September 1998, we conducted no business and existed as a shell corporation. After the restatement of our Articles of Incorporation on September 16, 1998, our main focus was the procurement of mineral leasehold interests, primarily for oil and gas exploitation rights. We reincorporated as a Delaware corporation on February 2, 2000 and changed our name to Nation Energy, Inc. on February 15, 2000. Following the change in our focus, we commenced corporate strategic development and explored potential oil and gas projects. On June 13, 2003 we moved our state of domicile from the state of Delaware to the State of Wyoming. We accomplished this re-domicile by merging with our wholly-owned Wyoming subsidiary.

Our Current Business

Following the sale of all of our oil and gas operations effective June 1, 2008, we began to actively seek new oil and gas opportunities. On October 11, 2013, we entered into a letter agreement with Paltar Petroleum Limited, an Australian company, pursuant to which we agreed to acquire four exploration and development permits and twenty-nine applications for exploration and development permits in respect of prospective acreage located in northern Australia. On March 31, 2014, we amended this letter agreement and, on November 27, 2014, we amended and restated the letter agreement to add additional exploration properties and provide for new closing terms. On June 13, 2015, we entered into a second amended and restated agreement, replacing in its entirety the amended and restated agreement dated November 27, 2014. On August 28, 2015, we entered into a third amended and restated agreement, replacing in its entirety the second amended restated agreement dated June 13, 2015. Also on August 30, 2015, and pursuant to the terms of the third amended and restated letter agreement (the “Agreement”), Paltar or its wholly-owned subsidiary, Officer Petroleum Pty Ltd (“Officer”), and our wholly-owned subsidiary, Nation Energy (Australia) Pty Ltd., entered into seven separate earning agreements and an option agreement. Effective December 17, 2015, the Company entered into a first amendment to the third amended and restated agreement to extend the time allowed for certain actions contemplated in the third amended and restated agreement and to provide further information concerning the additional earning agreements as such term is defined in the third amended and restated agreement. Also effective December 17, 2015, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement and to extend the deadline for cash payments under the earning agreements. Effective February 8, 2016, the Company entered into a second amendment to the third amended and restated agreement to extend again the time allowed for certain actions contemplated in the third amended and restated agreement. Also effective February 8, 2016, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement. Effective February 12, 2016, the Company entered into an amendment to the option agreement to change the purchase price for the assets subject to the option. Effective May 31, 2016, the Company entered into a third amendment to the third amended and restated agreement to revise the payment of consideration by Nation contemplated in the third amended and restated agreement. Also effective May 31, 2016, the seven earning agreements were amended to make compatible changes in consideration payable by Nation Australia and Nation contemplated by the third amended and restated agreement, and the option agreement was terminated.

On June 19, 2015, we registered a wholly-owned subsidiary in Australia, Nation Energy (Australia) PTY Ltd. (“Nation Australia”).

On July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation GP, LLC (“Nation GP”), a Delaware limited liability company.

On July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation SLP, LLC (“Nation SLP”), a Delaware limited liability company.

On July 8, 2015, we formed Paltar Nation Limited Partnership (“Paltar Nation”), a Delaware limited partnership between Nation GP, as the general partner of the partnership and Nation SL as the limited partner.

Paltar Nation is a Delaware limited partnership with Nation GP, LLC, a Delaware limited liability company, as the general partner, and Nation SLP, LLC, a Delaware limited liability company, as a limited partner (which is currently a sole limited partner of Paltar Nation). Nation Energy Inc. owns 100% of the membership interests in Nation GP, LLC and Nation SLP, LLC.

Nation Energy Inc. formed Paltar Nation for the purpose of funding exploration expenditures required to be provided by the wholly-owned subsidiary of Nation Energy Inc., Nation Energy (Australia) Pty Ltd., which is expected to become a wholly-owned subsidiary of Paltar Nation, to explore and develop all or a portion of 775,292 acres of certain Australian exploration permits.

Pursuant to the first amendment of the third amended and restated agreement, Paltar farmed out three specific graticular blocks in each of the six petroleum exploration permits identified in the Agreement and it caused Officer Petroleum Pty Ltd., a wholly-owned Australian subsidiary of Paltar, to farm out forty blocks in Exploration Permit 468 (“EP 468”). In addition, Paltar agreed to enter into additional earning agreements with Nation Australia on December 31, 2015 (or such other date as the parties mutually agree), in which it will farm out to Nation Australia six additional graticular blocks selected by Nation in EP136, three additional blocks in each of EP143 and EP231, eight additional blocks in EP234 and seven additional blocks in EP237 in exchange for the consideration specified in each additional earning agreement.

Each of the seven initial earning agreements, all of which are dated August 30, 2015, (six of which are further amended by the Master Amendment to Six Earning Agreements dated December 28, 2015 but effective as of December 17, 2015 and by the Second Master Amendment to Six Earning Agreements dated February 9, 2016 but effective as of February 8, 2016, and one of which is amended by the First Amendment to EP 468 Earning Agreement dated December 28, 2015 but effective as of December 17, 2015 and by the Second Amendment to EP 468 Earning Agreement dated February 9, 2016 but effective as of February 8, 2016) granted certain rights and imposed certain obligations on Nation Australia in respect of the blocks of land described. In the aggregate, these blocks of land comprise 1,003,400 acres of the 8,936,800 acres covered by the seven Exploration Permits. Each of the seven earning agreements follows one of two negotiated templates (depending on whether the underlying interest in the Exploration Permit is 100% owned by Paltar), with variations in the applicable standard form driven by the specific circumstances affecting each Exploration Permit. Each earning agreement contains general terms and conditions, a description of the area covered a list of the encumbrances affecting the area, an amount of money to be paid by Nation Australia on or before March 31, 2016 (since amended to a later date), and a commitment to pay 100% of the costs under applicable work programs and budgets. Paltar will act as the operator subject to overall supervision by an Operating Committee comprised of one representative from each of Paltar and Nation Australia. With respect to the earning agreements covering the Exploration Permits for which Paltar does not own a 100% interest, ownership of the Exploration Permits remains with Paltar during the term of the earning agreements, but if Paltar discovers a commercially exploitable accumulation of petroleum on any affected block it must transfer any production license granted in respect of that discovery to Nation Australia, insofar as it covers blocks subject to the earning agreement. In connection with such transfer, Paltar is permitted to retain for itself an overriding royalty equal to the difference between 25% and all existing royalty burdens applicable to the production license. With respect to the earning agreements covering the Exploration Permits for which Paltar owns a 100% interest, upon Nation Australia spending at least the Earning Amount specified therein in expenditure before the end of the Earning Period also specified therein, Nation Australia will acquire a beneficial interest of 25% in the underlying Exploration Permit and any production license granted in connection therewith. If a 25% interest in a production license is acquired by Nation Australia pursuant to these earning agreements, Nation Australia may, at its option for a period of ninety days thereafter, acquire the remaining 75% interest held by Paltar in exchange for the grant of an overriding royalty equal to the difference between 25% and all existing royalty burdens applicable to the production license.

In addition to the seven initial earning agreements, the parties entered into an option agreement dated August 30, 2015, pursuant to which Paltar granted to Nation an option to purchase, exercisable until August 30, 2016, interests in Exploration Permits EP136, EP143, EP231, EP232, EP 234 and EP237, all related business, financial, technical, geophysical, geological, geochemical and environmental information and data that Paltar has the legal right to convey, certain Applications for exploration permits, and all of the issued and outstanding shares of Officer (collectively, the “Assets”) for a purchase price of AUD$10,000,000 (approximately $7,223,844 at current exchange rates). The option agreement was amended effective February 12, 2016, to change the purchase price to 300,000,000 shares of common stock of the Company. Upon the execution of the May 31, 2016 Earning Agreements, the option agreement was terminated and released by Nation.

The third amended and restated agreement contemplates that, as stated in the May 31, 2016 Earning Agreements, Nation has agreed to issue to Paltar, from the Company’s treasury 900,000,000 common shares at an agreed value of $0.03 cent per share as consideration for the other transactions described in the third amended and restated agreement. All of Nation Energy’s common shares to be issued pursuant to the third amended and restated agreement are to be held in escrow for at least three years. The escrow agent is to be a newly-formed Delaware limited liability company with a board of four managers. David Siegel, and John Hislop are each currently a director of the Company; each have certain rights to appoint managers to the escrow agent’s board of managers, as more specifically set forth in the third amended and restated agreement. Marc Bruner also has rights to appoint managers to the escrow agent’s board of managers, as more specifically set forth in the third amended and restated agreement. Each of Messrs. Siegel and Bruner currently own Paltar equity, while Mr. Hislop has the right to acquire Paltar equity. A fourth director of the Company, who has yet to be identified and appointed and who will not own any Paltar equity, is to serve as the fourth manager of the escrow agent’s board of managers. Each of the four managers will hold one vote and Mr. Bruner, or the manager elected by the board of managers in the event Mr. Bruner no longer serves on the board of managers, will hold a tie-breaking vote in the event of deadlock.

The Agreement also provides that Paltar, which will be the operator under the earning agreements, will have the right of first offer to provide goods, services and work to the blocks subject to the earning agreements on terms that are competitive with and comparable to those customarily available in the open market from arms-length third parties.

On September 15, 2015, Mr. Hislop resigned from the offices of President and Chief Executive Officer of our Company, and he also resigned the position of Chairman of our Board of Directors. Mr. Hislop remains a member of our Board of Directors and our Chief Financial Officer. Also on September 15, 2015, our Board of Directors appointed David N. Siegel as its Chairman and it appointed Marc A. Bruner, one of our Directors, to the office of President and Chief Executive Officer of our Company.

On June 24, 2016, Mr. Bruner resigned effective as of March, 15, 2016, as a member of the Company’s Board of Directors, President and Chief Executive Officer. Also on June 24, 2016, effective as of March 15, 2016, Mr. Hislop resumed the duties of President and Chief Executive Officer on an interim basis.

We currently have no business and operate as a shell company. In addition to our efforts to complete the transactions contemplated in the third amended and restated agreement with Paltar Petroleum, we continue to evaluate the merits of other opportunities in the resource sector.

Competition

The oil and gas industry is intensely competitive. Conducting our business in an environment that is highly competitive and unpredictable we may become involved in an acquisition with more risk or obtain financing on less favourable terms. In seeking out prospective properties, we have encountered intense competition in all aspects of our proposed business as we compete directly with other development companies as well as established international companies. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. Accordingly, these competitors may be able to spend greater amounts on the acquisition of prospective properties and on the exploration and development of such properties. In addition, they may be able to afford greater geological expertise in the exploration and exploitation of mineral and oil and gas properties. This competition could result in our competitors having resource properties of greater quality and attracting prospective investors to finance the development of such properties on more favourable terms.

Compliance with Governmental Regulations

Oil and gas operations are subject to various governmental regulations. Matters subject to regulations include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal and local laws and regulations relating primarily to the protection of human health and the environment. Expenditures related to complying with these laws, and for remediation of existing environmental contamination have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to various interpretations. We are unable to predict the ultimate cost of compliance or its effect on any future operations.

Employees

We have no employees other than our Executives. We anticipate that we will be conducting most of our business through agreements with consultants and third parties. On January 1, 2009, we entered into a written contract with Caravel Management Corp., to provide office rent, reception, compliance and accounting services for $7,865 per month. The agreement commenced on January 1, 2009 and continues on a month to month basis unless terminated by the parties. The agreement may be terminated by either party upon 30 days’ notice. One year following the effective date of the agreement, the monthly fee increased by 3% subject to any required regulatory or stock exchange approval. The agreement was amended effective November 1, 2010 to reduce the fees for administrative services to $3,500 per month. There have been no further amendments entered into since November 2010.

We currently have a compensation arrangement with Carmen J. Lotito, our Vice President, to provide operational and management services for $20,000 per month, on a month-to-month agreement. We presently have no other employment or consulting agreements.

Environment

Our prior oil and gas business was subject to laws and regulations that controlled the discharge of materials into the environment and the proper handling and disposal of waste materials. In operating and owning petroleum interests, we may be liable for damages and the costs of removing hydrocarbon spills for which we are held responsible. Laws relating to the protection of the environment have in many jurisdictions become more stringent in recent years and may, in certain circumstances, impose strict liability, rendering our company liable for environmental damage without regard to actual negligence or fault. Such laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts of our company. We believe that we have complied in all material respects with applicable environmental laws and regulations.

ITEM 1A. RISK FACTORS

Much of the information included in this annual report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our past or future business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgement regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements".

Our shares of common stock are considered speculative while we continue our search for a new business opportunity. Prospective investors should consider carefully the risk factors set out below.

We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.

We had a working capital deficit of $11,177,610 as of March 31, 2016. Accordingly, we will require additional funds, either from equity or debt financing, to maintain our daily operations and to continue to evaluate joint venture opportunities. Obtaining additional financing is subject to a number of factors, including market prices, investor acceptance of any venture we may acquire in the future and investor sentiment. If we are unable to raise additional funds when required, we may be forced to delay our plan of operation and our entire business may fail.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of our development. Any profitability in the future will be dependent upon acquiring a new business opportunity. In September 2008, we closed the sale of all of our oil and gas assets in the Smoky Hill area of Alberta. The sale was effective June 1, 2008. We are now actively looking for a new business opportunity, primarily in the resource sector. As discussed in Our Current Business, above, we identified one such opportunity in Australia, which we have been pursuing for the last few years. Since 2013, we have focused all of our effort on refining this opportunity in Australia and moving it forward with the intent to eventually explore the acreage involved, which is located in Northern and Western Australia, for oil and gas, and to exploit any resource that we find. Also as discussed in Our Current Business, above, we have recently signed a series of earning agreements and an option agreement with respect to this opportunity, and we are now considering our next steps in progressing this opportunity. We intend to focus all of our attention and resources on this opportunity for the near term, though we can offer no assurance that we will have any success in our efforts to progress it or, if we do, that we will discover any oil or gas in commercially exploitable quantities.

The company is categorized as a “shell company” as that term is used in the Securities and Exchange Commission’s rules.

The Securities and Exchange Commission’s rules prohibit the use of Form S-8 by a shell company, and require a shell company to file a Form 8-K to report the same type of information that would be required if it were filing to register a class of securities under the Exchange Act whenever the shell company is reporting the event that caused it to cease being a shell company. Being a shell company may adversely impact our ability to offer our stock to officers, directors and consultants, and thereby make it more difficult to attract and retain qualified individuals to perform services for the company, and will likely increase the costs of registration compliance following the completion of a business combination.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Any reduction in our ability to raise equity capital in the future could have a significant negative effect on our business plans and our ability to develop new products. If our stock price declines, we may not be able to raise additional capital sufficient to acquire new business.

Our accounts are subject to currency fluctuations which may materially affect our financial position and results of operations.

As a result of maintaining some of our accounts in Canadian currency; we are subject to foreign exchange fluctuations. Such fluctuations may materially affect our financial position and results of operations. We do not engage in currency hedging activities.

We may not be able to manage the significant strains that future growth may place on our administration infrastructure, systems and controls.

In the event we are able to acquire a new joint venture and experience any rapid expansion over current levels, we could experience rapid growth in revenues, personnel, complexity of administration and in other areas. There can be no assurance that we will be able to manage the significant strains that future growth may place on our administrative infrastructure, systems, and controls. If we are unable to manage future growth effectively, our business, operating results and financial condition may be materially adversely affected.

The loss of any member of our Board of Directors would have an adverse impact on future development and could impair our ability to succeed.

We are dependent on our ability to hire and retain highly skilled and qualified personnel. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain qualified personnel on acceptable terms. We do not have key man insurance on our employee. The loss of the services of any member of our Board of Directors could have a material adverse effect on our operations or financial condition.

Our management currently engages in other oil and gas businesses and, as a result, conflicts could arise.

In addition to their interest in our company, our management currently engages, and intends to engage in the future, in the oil and gas business independently of our company. As a result, conflicts of interest between us and the management of our company might arise.

Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations which may limit a stockholder’s ability to buy and sell our stock.

The U.S. Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and sales person compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Since our shares are thinly traded, and trading on the OTCQB may be limited and sporadic because it is not an exchange, stockholders may have difficulty reselling their shares or liquidating their investments.

Our shares of common stock are currently quoted for trading on the OTCQB operated by the OTC Markets Group Inc. The trading price of our shares of common stock has been subject to wide fluctuations. Trading prices of our shares of common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by shares of our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of the shares of our common stock, regardless of our operating performance.

In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

Our By-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment on transactions, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgement in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 5,000,000,000 shares of common stock with no par value. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Our By-laws do not contain anti-takeover provisions which could result in a change of our management and directors if there is a take-over of our company.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

Some of our directors and officers are not residents of the United States and, as a result, investors may find it difficult to enforce, within the United States, any judgments obtained against our company or a particular director or officer.

Risks Relating to the Industry

Exploration for economic reserves of oil and gas is subject to risk and there can be no assurance that we will establish commercial discoveries.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. While the rewards to an investor can be substantial if an economically viable discovery is made, few of the properties that are explored are ultimately developed into producing oil and/or gas wells. There can be no assurance that we will establish commercial discoveries.

Financial success depends on our ability to acquire our reserves in the future.

Our future success depends upon our ability to find, develop and acquire oil and natural gas reserves that are profitable. Oil and natural gas are depleting assets, and production from oil and natural gas from properties declines as reserves are depleted with the rate of decline depending on reservoir characteristics. If we are unable to conduct future successful exploration or development activities or acquire properties containing proved reserves our cash flows will be adversely affected. Acquiring reserves through exploration, development activities or acquisitions will require significant capital which may not be available to us.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring desirable oil and gas leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staff. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any project work will be completed. Acreage may not become available or if it is available for leasing we may not be successful in acquiring the leases.

The marketability of natural resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us.

Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement of our operations.

In general, our exploration and production activities have been in the past and will continue to be subject to certain federal and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations did not have a material effect on our operations or financial condition to date. Legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements have not appeared to affect us any differently or to any greater or lesser extent than other companies in the industry. We believe that our operations to date have complied, in all material respects, with all applicable environmental regulations. In the past, our operating partners have maintained insurance coverage customary to the industry; however, we are not fully insured against all environmental risks.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labour disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

The laws, regulations, policies or current administrative practices of any governmental body, organization or regulatory agency in the United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on its business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on our company. Any or all of these situations may have a negative impact on our ability to operate and/or become profitable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our principal mailing address is RPO Box 60610 Granville Park, Vancouver, British Columbia, Canada, V6H 4B9. Our executive office is located at 1500 West 16^th Avenue, Vancouver, British Columbia, Canada V6J 2L6. We occupy the Vancouver premises on a proportional cost basis for office rent and administration services and expenses, on a month to month basis. We currently have a management services agreement in effect that among other administration and office services and supplies provides for office space. Effective November 1, 2010, the monthly fee was, and continues to be, $3,500 per month.

In addition to the Vancouver, British Columbia, Canada offices, we maintain offices in Colorado, at 1555 Blake Street, Suite 1002, Denver, Colorado 80202. We occupy the Denver premises on a month to month basis. Effective July 1, 2015 the monthly fee was, and continues to be, $5,000 per month.

ITEM 3. LEGAL PROCEEDINGS

We know of no material, active or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceedings or pending litigation where such claim or action involves damages for more than 10% of our current assets. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders are an adverse party or have a material interest adverse to us.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Securities

Our common stock is quoted for trading on the OTCQB operated by the OTC Markets Group Inc. under the symbol "NEGY". The following quotations (obtained from Stockwatch) reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low prices of our common stock for the periods indicated below are as follows:

Quarter Ended	High	Low
March 31, 2016	$0.210	$0.210
December 31, 2015	$0.450	$0.450
September 30, 2015	$0.400	$0.400
June 30, 2015	$0.350	$0.350
March 31, 2015	$0.200	$0.200
December 31, 2014	$0.022	$0.022
September 30, 2014	$0.020	$0.020
June 30, 2014	$0.015	$0.015

Our shares of common stock are issued in registered form. Interwest Transfer Co., Inc., of 1981 Murray Holladay Road, Suite 100, P.O. Box 17136, Salt Lake City, UT 84117 (Telephone: 801.272.9294, facsimile: 801.277.3147) is the registrar and transfer agent for our shares of common stock.

Holders of our Common Stock

As of June 29, 2015, we had 150,020,000 shares of common stock outstanding and approximately 18 stockholders of record. This number of stockholders does not include stockholders who hold our securities in street name.

Recent Sales of Unregistered Securities

Since the beginning of our fiscal year ended March 31, 2016, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

Dividend Policy

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our future dividend policy will be determined from time to time by our board of directors.

Securities Authorized for Issuance under Equity Compensation Plans

We adopted our current stock option plan, entitled the 1999 Stock Option and Incentive Plan, on May 6, 1999 which was subsequently approved by over 50% of the shares of common stock held by stockholders of our company. The plan authorized up to 2,500,000 shares of our common stock to be granted as incentive options. The following table provides a summary of the number of options granted under our stock option plan, the weighted average exercise price and the number of options remaining available for issuance as at March 31, 2016.

Plan Category	Number of Common Shares to be issued upon exercise of outstanding options	Weighted-Average exercise price of outstanding options	Number of options remaining available for further issuance
1999 Stock Option and Incentive Plan (an equity compensation plan approved by security holders)	Nil	N/A	2,500,000

Purchases of Equity Securities by the Issuer and Affiliated Purchases

We did not purchase any of our shares of common stock or other securities during our fiscal year ended March 31, 2016.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

ITEM 7. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report, particularly in the section entitled "Item 1A. Risk Factors".

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Plan of Operation

On June 19, 2015, we registered a wholly-owned subsidiary in Australia, Nation Energy (Australia) PTY Ltd. (“Nation Australia”).

On July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation GP, LLC (“Nation GP”), a Delaware limited liability company.

On July 6, 2015, we registered a wholly-owned subsidiary in Delaware, USA, Nation SLP, LLC (“Nation SLP”), a Delaware limited liability company.

Each of the seven initial earning agreements, all of which are dated August 30, 2015, (six of which are further amended by the Master Amendment to Six Earning Agreements dated December 28, 2015 but effective as of December 17, 2015 and by the Second Master Amendment to Six Earning Agreements dated February 9, 2016 but effective as of February 8, 2016, and one of which is amended by the First Amendment to EP 468 Earning Agreement dated December 28, 2015 but effective as of December 17, 2015 and by the Second Amendment to EP 468 Earning Agreement dated February 9, 2016 but effective as of February 8, 2016) granted certain rights and imposes certain obligations on Nation Australia in respect of the blocks of land described. In the aggregate, these blocks of land comprise 1,003,400 acres of the 8,936,800 acres covered by the seven Exploration Permits. Each of the seven earning agreements follows one of two negotiated templates (depending on whether the underlying interest in the Exploration Permit is 100% owned by Paltar), with variations in the applicable standard form driven by the specific circumstances affecting each Exploration Permit. Each earning agreement contains general terms and conditions, a description of the area covered a list of the encumbrances affecting the area, an amount of money to be paid by Nation Australia on or before March 31, 2016 (since amended to a later date), and a commitment to pay 100% of the costs under applicable work programs and budgets. Paltar will act as the operator subject to overall supervision by an Operating Committee comprised of one representative from each of Paltar and Nation Australia. With respect to the earning agreements covering the Exploration Permits for which Paltar does not own a 100% interest, ownership of the Exploration Permits remains with Paltar during the term of the earning agreements, but if Paltar discovers a commercially exploitable accumulation of petroleum on any affected block it must transfer any production license granted in respect of that discovery to Nation Australia, insofar as it covers blocks subject to the earning agreement. In connection with such transfer, Paltar is permitted to retain for itself an overriding royalty equal to the difference between 25% and all existing royalty burdens applicable to the production license. With respect to the earning agreements covering the Exploration Permits for which Paltar owns a 100% interest, upon Nation Australia spending at least the Earning Amount specified therein in expenditure before the end of the Earning Period also specified therein, Nation Australia will acquire a beneficial interest of 25% in the underlying Exploration Permit and any production license granted in connection therewith. If a 25% interest in a production license is acquired by Nation Australia pursuant to these earning agreements, Nation Australia may, at its option for a period of ninety days thereafter, acquire the remaining 75% interest held by Paltar in exchange for the grant of an overriding royalty equal to the difference between 25% and all existing royalty burdens applicable to the production license.

Effective May 31, 2016, all of the earning agreements were amended and revised to consolidate and clarify terms of consideration thereunder (the “May 31, 2016 Earning Agreements”). Upon execution, Nation Australia issued to Paltar a promissory note in the principal amount of AUD$24,322,501, with payment guaranteed by Nation. As additional consideration, seven days after delivery to Nation of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation under applicable SEC regulations, Nation will issue 900,000,000 of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated August 30, 2015, as subsequently amended. The May 31, 2016 Earning Agreements have the same terms as stated above regarding work programs, overriding royalty, and the option to acquire more interest. In addition to the seven initial earning agreements, the parties entered into an option agreement dated August 30, 2015, pursuant to which Paltar granted to Nation an option to purchase, exercisable until August 30, 2016, interests in Exploration Permits EP136, EP143, EP231, EP232, EP 234 and EP237, all related business, financial, technical, geophysical, geological, geochemical and environmental information and data that Paltar has the legal right to convey, certain Applications for exploration permits, and all of the issued and outstanding shares of Officer (collectively, the “Assets”) for a purchase price of AUD$10,000,000 (approximately $7,223,844 at current exchange rates). The option agreement was amended effective February 12, 2016, to change the purchase price to 300,000,000 shares of common stock of the Company. Effective May 31, 2016, Nation terminated the option agreement, upon the execution of the May 31, 2016 Earning Agreements and related third amendment to the amended and restated agreement.

The third amended and restated agreement contemplates that, as stated in the May 31, 2016 Earning Agreements, Nation has agreed to issue to Paltar, from the Company’s treasury 900,000,000 common shares at an agreed value of $0.03 cent per share as consideration for the other transactions described in the third amended and restated agreement. All of Nation Energy’s common shares to be issued pursuant to the third amended and restated agreement are to be held in escrow for at least three years. The escrow agent is to be a newly-formed Delaware limited liability company with a board of four managers. David Siegel and John Hislop are each currently a director of the Company; each have certain rights to appoint managers to the escrow agent’s board of managers, as more specifically set forth in the third amended and restated agreement. Marc Bruner also has rights to appoint managers to the escrow agent’s board of managers, as more specifically set forth in the third amended and restated agreement. Each of Messrs. Siegel and Bruner currently own Paltar equity, while Mr. Hislop has the right to acquire Paltar equity. A fourth director of the Company, who has yet to be identified and appointed and who will not own any Paltar equity, is to serve as the fourth manager of the escrow agent’s board of managers. Each of the four managers will hold one vote and Mr. Bruner, or the manager elected by the board of managers in the event Mr. Bruner no longer serves on the board of managers, will hold a tie-breaking vote in the event of deadlock.

On September 15, 2015, Mr. Hislop resigned from the offices of President and Chief Executive Officer of our Company, and, despite maintaining a seat on the Board, he resigned the position of Chairman of our Board of Directors. Also on September 15, 2015, our Board of Directors appointed David N. Siegel as its Chairman and it appointed Marc A. Bruner, one of our Directors, to the office of President and Chief Executive Officer of our Company.

Cash Requirements

Over the next twelve months, we intend to use funds to evaluate new business acquisitions, as follows:

Estimated Funding Required During the Next Twelve Months

Planned Work Permit Expenditures		$30,000,000

General and Administrative	2,000,000

Professional Fees	1,500,000

Total	$33,500,000

We have suffered recurring losses from operations. The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. Management's plan in this regard is to raise additional capital through a debt or an equity offering. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses noted above, in their report on the annual financial statements for the year ended March 31, 2016, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

The continuation of our business is dependent upon obtaining further financing, a successful program of exploration, and, finally achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Disclosure of Outstanding Share Data

As of the date of this annual report, we had 150,020,000 shares of common stock issued and outstanding. We do not have any warrants, options or shares of any other class issued and outstanding as of the date of this annual report.

RESULTS OF OPERATIONS – Years Ended March 31, 2016 and 2015

The following summary of our results of operations should be read in conjunction with our financial statements for the year ended March 31, 2016, which are included herein.

Our operating results for the year ended March 31, 2016 and 2015 and the changes between those periods for the respective items are summarized as follows:

	Year Ended March 31, 2016	Year Ended March 31, 2015	Difference Increase%
General and administrative	$1,157,753	$136,803	746%
Interest expense	$105,468	$182,961	(42%)
(Loss) on extinguishment of debt	$(3,350,000)	$Nil	(100%)
Net (loss)	$(4,613,220)	$(319,764)	(1,343%)

We generated a net (loss) of $(4,613,220) for the year ended March 31, 2016 compared to a net (loss) of $(319,764) for the year ended March 31, 2015. The increase in net loss was primarily due to the loss on the extinguishment of debt of $3,350,000 resulting from the closing of the debt settlement agreement and the issuance of 134,000,000 shares to Mr. Hislop. The debt settlement and subscription agreement settled a debt to Mr. Hislop equal to $1,340,000. The shares were valued at $4,690,000 ($0.035 per share based upon market price). The Company recorded a loss on extinguishment of debt of $3,350,000. Net (loss) per common share for the year ended March 31, 2016 was ($0.030) compared to ($0.009) per common share for the year ended March 31, 2015. General and administrative expenses increased to $1,157,753 during the year ended March 31, 2016 from $136,803 during the year ended March 31, 2015.

The increase was primarily due to increased legal fees associated with the Paltar Letter Agreement and the subsequent amendments and for travel expenses related to promoting the Company. The Company also accrued $180,000 in consulting and management fees for Mr. Lotito in the year ended March 31, 2016 compared to $Nil in the previous year.

Interest expense for fiscal 2016 totalled $105,468 compared to $182,961 for fiscal 2015. The decrease was partially due to the debt settlement agreement described above, which reduced the related party debt.

We reported a foreign currency translation gain of $45,713 in fiscal 2016 compared to a gain of $172,132 in fiscal 2015. Our loan and accrued interest are incurred and calculated in Canadian dollars while the reporting currency is the US dollar. The value of the Canadian dollar in the fiscal year ended March 31, 2016 decreased resulting in a smaller gain on translation compared to consistent and higher values of the Canadian dollar during the prior fiscal periods.

The major components of our general and administrative expenses for the year are outlined in the table below:

	Year Ended March 31, 2016	Year Ended March 31, 2015	Difference Increase/(Decrease) %
Administration fees	$42,000	$42,000	0%
Office & MIS	$62,915	$710	8,757%
Consulting fees	$302,970	$0	100%
Legal fees	$694,757	$47,759	1,355%
Transfer Agent & Filing Fees	$15,511	$17,624	(12%)
Accounting	$39,600	$28,710	38%
Total Expenses	$1,157,753	$136,803	746%

General and administrative expenses increased to $1,157,753 in fiscal 2016 from $136,803 in fiscal 2015. This was primarily due to increased legal fees and consulting fees incurred in 2016 in regards to our agreement with Paltar and fund raising activities of the Company. General and administrative expenses included administration fees of $42,000 in fiscal 2016 and fiscal 2015. Office expenses and management information system fees increased to $62,915 in fiscal 2016 from $710. The increase was primarily due to travel expenses incurred promoting the Company of $14,316 compared to $Nil in 2015 and rent for the Denver office of $45,000 in fiscal 2016 compared to $Nil in 2015. The Company incurred consulting fees of $302,970 in 2016 relating to investment bankers and the transaction with Paltar totalling $122,970 compared to $Nil in 2015. The Company also accrued $180,000 in consulting and management fees for Mr. Lotito in the year ended March 31, 2016 compared to $Nil in the previous year. Legal fees increased to $694,757 in fiscal 2016 from $47,759 in the prior fiscal year mainly due to legal fees associated with the Paltar agreement. Transfer agent fees decreased to $15,511 in fiscal 2016 from $17,624 in fiscal 2015. Accounting fees increased to $39,600 for the year ended March 31, 2016 from $28,710 in the prior year ended March 31, 2015. The increase in fiscal 2016 is primarily due to increased activity in the Company.

Liquidity and Financial Condition

Working Capital

	Year Ended March 31, 2016	Year Ended March 31, 2015
Current Assets	$1,334	$47,479
Current Liabilities	$11,178,944	$1,659,674
Working Capital (Deficiency)	$(11,177,610)	$(1,612,195)

Cash Flows

	Year Ended March 31, 2016	Year Ended March 31, 2015
Cash flows (used in) Operating Activities	$(998,295)	$(239,915)
Cash flows provided by Investing Activities	$Nil	$Nil
Cash flows provided by Financing Activities	$921,804	$112,513
Effect of exchange rate changes on cash	$30,346	$172,132
Net Increase (decrease) in cash	$(46,145)	$44,730

Operating Activities

Net cash (used in) operating activities was $(998,295) in the year ended March 31, 2016 compared with net cash (used in) operating activities of $(239,915) in the same period in 2015. The increase in cash (used in) operating activities is mainly attributed to an increase in the net (loss) for the current year of ($4,613,220) from a net loss of $(319,764) in fiscal 2015.

Investing Activities

Net cash provided by investing activities amounted to $Nil for both years.

Financing Activities

Net cash provided by financing activities was $921,804 in the year ended March 31, 2016 compared to net cash provided by financing activities of $112,513 in the year ended March 31, 2015. All activities derive from loan proceeds from related parties and third parties. The effect of exchange rate changes on cash was a gain of $30,346 in the year ended March 31, 2016 compared to $172,132 for the year ended March 31, 2015. Some of our loans and accrued interest are incurred and calculated in Canadian dollars while the reporting currency is the US dollar. The value of the Canadian dollar in the fiscal year ended March 31, 2016 decreased resulting in a smaller gain on translation compared to consistent and higher values of the Canadian dollar during the prior fiscal periods.

Loans Payable

We entered into loan agreements with Caravel and John Hislop in 2003 and 2004 to fund operations. Caravel is a private management company that is wholly-owned by John Hislop, our chief financial officer and director. The terms of these loan agreements provided that any principal amount outstanding is payable upon demand and bears interest at 15% per annum, payable quarterly. On March 31, 2006, we consolidated and restructured the loans. As part of the restructuring, we borrowed an additional C$250,000 (US $203,932). The new loan bore interest at 15% per annum, calculated and compounded monthly and payable quarterly. Any principal amount outstanding under the loan was payable upon demand. The loan was payable in Canadian dollars and was secured by a Promissory Note. As of July 28, 2015, the principal balance of the loan and accrued interest payable totalling $1,108,165 were settled in full as part of the debt settlement agreement described below.

On July 18, 2014, we entered into a promissory note with an officer and director, John Hislop for US$50,000. The loan bore interest calculated quarterly, not in advance, at a rate of 15% per annum. The note was payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective July 18, 2014. As of July 28, 2015, the principal balance of the loan and accrued interest payable totalling $ 57,726 were settled in full as part of the debt settlement agreement described below.

On September 2, 2014, we entered into a promissory note with an officer and director, John Hislop for C$20,000 (US$16,012). The loan bore interest calculated quarterly, not in advance, at a rate of 15% per annum. The note was payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective September 2, 2014. As of July 28 2015, the principal balance of the loan and accrued interest payable totalling $17,690 were settled in full as part of the debt settlement agreement described below.

On January 29, 2015, we entered into a promissory note with an officer and director, John Hislop (“Lender”) for C$50,000 (US$40,030). The loan bore interest calculated quarterly, not in advance, at a rate of 15% per annum. The note was payable upon demand by the Lender, both before and after each of maturity, default and judgement commencing effective January 29, 2015. As of July 28, 2015, the principal balance of the loan and accrued interest payable totalling $41,612 were settled in full as part of the debt settlement agreement described below.

On April 21, 2015, we entered into a debt settlement and subscription agreement with our chief financial officer and director, John Hislop whereby we agreed to settle a portion of the indebtedness, in the amount of $1,340,000, by allotting and issuing to John Hislop 134,000,000 shares of our common stock at a deemed price of $0.01 per share. On April 24, 2015, we announced that we had issued 134,000,000 shares of our common stock at a deemed price of $0.01 per share to Mr. Hislop. However, due to a technical flaw in the process of adopting the amendment to our Articles of Incorporation (announced on February 3, 2014), we were only authorized to issue 100,000,000 shares of our common stock on April 23, 2015, and the issuance to Mr. Hislop on April 23, 2015, was therefore void. On June 29, 2015, we sent to our shareholders a proxy statement for a shareholder meeting to be held July 22, 2015, at which meeting we proposed to rectify the technical flaw in our earlier effort to increase our authorized capital. On July 28, 2015, we closed the debt settlement agreement and reissued the 134,000,000 shares to Mr. Hislop pursuant to the debt settlement and subscription agreement which settled a debt to Mr. Hislop equal to $1,340,000 immediately following shareholder approval of the increase in our authorized capital on July 23, 2015. The shares were valued at $4,690,000 ($0.035 per share based upon market price). The Company recorded a loss on extinguishment of debt of $3,350,000.

As of August 4, 2015, Paltar Nation Limited Partnership (“Paltar Nation”) entered into a secured convertible note purchase agreement with David N. Siegel Dynasty Trust dated November 16, 2015 (the “2015 Secured Note Purchase Agreement”), pursuant to which Paltar Nation issued a secured convertible promissory note in the principal amount of $584,000 in consideration for $584,000. The secured convertible promissory note bears interest at the rate of 10% per annum (15% per annum on and after the maturity date or an Event of Default (as defined below)) and matures on August 4, 2016. The entire unpaid principal sum of the secured convertible promissory note will become immediately due and payable upon a material breach by (a) Paltar Nation of the note, another note or the 2015 Secured Note Purchase Agreement, or (b) Wotan Group Limited, an Australian limited company, of the Wotan Pledge, described below, in each case that is not cured within 30 days of such breach (referred to as an “Event of Default”).

The 2015 Secured Note Purchase Agreement also contemplates sales of additional secured convertible promissory notes up to an aggregate maximum of $5,000,000 (including the initial $584,000 sale to David N. Siegel Dynasty Trust dated November 16, 2015). The secured convertible promissory note issued to Michael B. Cox, described below, has been issued pursuant to the 2015 Secured Note Purchase Agreement.

Upon a sale of Paltar Nation’s limited partnership interests (“Interests”) in a single transaction or a series of related transactions yielding gross cash proceeds to Paltar Nation of at least $20,000,000 (including $584,000 from the sale of the secured convertible promissory note to David N. Siegel Dynasty Trust dated November 16, 2015 and including $100,000 from the sale of the secured convertible promissory note to Michael B. Cox) on or before the maturity dates of the notes (the “Qualified Financing”), the principal and any accrued but unpaid interest under the notes will automatically be converted into Interests. The Interests to be issued to David N. Siegel Dynasty Trust dated November 16, 2015 upon conversion will be equal to the quotient obtained by dividing (i) the entire principal amount of the note plus any accrued but unpaid interest under the note by (ii) 80.00% of the per-Interest price of the Interests sold to persons other than David N. Siegel Dynasty Trust dated November 16, 2015 and other holders of the notes, if any, in the Qualified Financing.

In connection with the secured convertible note purchase agreement, Paltar Nation entered into a pledge agreement dated as of August 4, 2015 with Wotan Group Limited (the “Wotan Pledge”), pursuant to which Wotan Group Limited pledged to each of David N. Siegel Dynasty Trust dated November 16, 2015 and any future secured noteholders pursuant to the 2015 Secured Note Purchase Agreement (of which Michael B. Cox is one) a continuing first priority security interest in a number of Wotan Group Limited’s shares of Paltar Petroleum Limited equal to five multiplied by the sum of the aggregate outstanding principal amounts owed under each noteholder’s respective note and Paltar Nation agreed to pay a commitment fee to Wotan Group Limited equal to $250,000 from the proceeds of the secured convertible promissory notes upon the receipt by Paltar Nation of proceeds from the sale of such notes equal to or greater than $2,500,000 in the aggregate and an additional commitment fee of $250,000 upon conversion of all of such notes.

As of March 31, 2016, the principal balance of the loan was $584,000 and accrued interest payable of $38,400.

On August 5, 2015, we entered into a promissory note with an officer and director, John Hislop for C$10,000 (US$7,623). The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective August 5, 2015. The principal sum and all accrued and unpaid interest will become due and payable on August 5, 2017. As of March 31, 2016, the principal balance of the loan was $7,700 and accrued interest payable of $8,456.

On August 25, 2015, we entered into a promissory note with an officer and director, John Hislop for $10,000. The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective August 25, 2015. The principal sum and all accrued and unpaid interest will become due and payable on August 25, 2017. As of March 31, 2016, the principal balance of the loan was $10,000 and accrued interest payable of $896.

On September 10, 2015, we entered into a promissory note with an officer and director, John Hislop for C$6,000 (US$4,528). The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective September 10, 2015. The principal sum and all accrued and unpaid interest will become due and payable on September 10, 2017. As of March 31, 2016, the principal balance of the loan was $4,620 and accrued interest payable of $385.

On September 24, 2015, we entered into a promissory note with an officer and director, John Hislop for $5,000. The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective September 24, 2015. The principal sum and all accrued and unpaid interest will become due and payable on September 24, 2017. As of March 31, 2016, the principal balance of the loan was $5,000 and accrued interest payable of $386.

On September 30, 2015, Paltar Nation entered into a promissory note with a director, David N. Siegel Dynasty Trust dated November 16, 2015 for $14,210. The loan bears interest at a rate of 10% per annum from the disbursement date of the funds. The principal sum and all accrued and unpaid interest will become due and payable on September 30, 2016. As of March 31, 2016, the principal balance of the loan was $14,210 and accrued interest payable of $907.

On October 29, 2015, the Company entered into a promissory note with a related party, John Hislop for $7,960. The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum. The note is payable upon demand by Mr. Hislop, both before and after each of maturity, default and judgement commencing effective October 29, 2015. The principal sum and all accrued and unpaid interest will become due and payable on October 29, 2022. As of March 31, 2016, the principal balance of the loan was $7,960 and accrued interest payable of $507.

On November 27, 2015, pursuant to the 2015 Secured Note Purchase Agreement, Paltar Nation issued a secured convertible promissory note to Michael B. Cox in the principal amount of $100,000 in consideration for $100,000. The secured convertible promissory note bears interest at the rate of 10% per annum (15% per annum on and after the maturity date or an Event of Default) and matures on November 30, 2016. The entire unpaid principal sum of the secured convertible promissory note will become immediately due and payable upon an Event of Default. The Interests to be issued to Michael B. Cox upon conversion will be equal to the quotient obtained by dividing (i) the entire principal amount of the note plus any accrued but unpaid interest under the note by (ii) 80.00% of the per-Interest price of the Interests sold to persons other than Michael B. Cox and other holders of the notes, if any, in the Qualified Financing. The note is secured by the Wotan Pledge.

As of March 31, 2016, the principal balance of the loan was $100,000 and accrued interest payable of $4,247.

On March 31, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009 for $188,483. The loan bears interest at a rate of 10% per annum from the disbursement date of the funds. The principal sum and all accrued and unpaid interest will become due and payable on March 31, 2017. As of March 31, 2016, the principal balance of the loan was $188,483 and accrued interest payable of $1,698.

Future Financings

As of March 31, 2016, we had cash of $1,334. We currently do not have sufficient funds to acquire and develop any opportunities, including the opportunity presented by our first amendment to the third amended and restated agreement with Paltar Petroleum. Paltar Nation was formed for the purpose of funding exploration expenditures required to be provided by the wholly-owned subsidiary of Nation Energy Inc., Nation Energy (Australia) Pty Ltd., which is expected to become a wholly-owned subsidiary of Paltar Nation, to explore and develop all or a portion of 775,292 acres of certain Australian exploration permits. We also anticipate continuing to rely on shareholder loans or equity sales of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity or arrange for more debt or other financing to fund any future activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

New Accounting Pronouncements

Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements that have been issued to determine their impact, if any, on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, ”Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09. The amendment defers the effective date of ASU No. 2015-14 by one year. The new standard is effective for the Company on December 15, 2018.

In June 2014, the FASB issued ASU No. 2014-10 “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-10 addresses the cost and complexity associated with the incremental reporting requirements for development stage entities, such as start-up companies, without compromising the availability of relevant information and eliminates an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The Company elected to apply ASU 2014-10 effective the quarter ended September 30, 2014. ASU 2014-10 impacts financial statement presentation only and removes the requirement to present additional inception-to-date information.

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. The new standard will be effective for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company will evaluate the going concern considerations in this ASU; however, as of the current period, management believes that is current disclosures meet the requirement under this ASU.

In January 2015, the FASB issued ASU No. 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. This ASU is effective for annual and interim reporting periods beginning after December 15, 2015. ASU No. 2015-01 eliminates the concept of extraordinary items. Management does not anticipate that this accounting pronouncement will have any material future effect on the Company’s consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This ASU is effective for annual and interim reporting periods beginning after December 15, 2015. ASU No 2015-02 amends the analysis required by a reporting entity to determine if it should consolidate certain types of legal entities. Management does not anticipate that this accounting pronouncement will have any material future effect on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. This ASU is effective for annual and interim periods beginning after December 15, 2015. ASU No. 2015-03 changes the presentation of debt issuance costs in financial statements. Management does not anticipate that this accounting pronouncement will have a material future effect on the Company’s consolidated financial statements.

Application of Critical Accounting Policies

The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the critical accounting policies summarized below:

Estimates

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable, and accounts payable to a related party. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Revenue Recognition

Oil and natural gas revenues were recorded using the sales method whereby our company recognized oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured. Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards. Operating costs and taxes are recognized in the same period of which revenue is earned.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”).

The following audited financial statements are filed as part of this annual report:

Report of Independent Registered Public Accounting Firm, June 29, 2016 – SingerLewak, LLP

Report of Independent Registered Public Accounting Firm, June 3, 2015 – StarkSchenkein, LLP

Condensed Consolidated Balance Sheets at March 31, 2016 and 2015

Condensed Consolidated Statements of Operations and Comprehensive Loss for the years ended March 31, 2016 and 2015

Condensed Consolidated Statements of Changes in Stockholders' Deficit for the years ended March 31, 2016 and 2015

Condensed Consolidated Statements of Cash Flows for the years ended March 31, 2016 and 2015

Notes to the Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Nation Energy, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Nation Energy, Inc. and subsidiaries as of March 31, 2016, and the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated 2016 financial statements referred to above present fairly, in all material respects, the financial position of Nation Energy, Inc. and subsidiaries as of March 31, 2016, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has no current source of operating revenues, and needs to secure financing to remain a going concern. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/SingerLewak, LLP

Denver, CO
June 30, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Nation Energy, Inc.

We have audited the accompanying balance sheets of Nation Energy, Inc., as of March 31, 2015 and 2014, and the related statements of operations, stockholders' (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nation Energy, Inc., as of March 31, 2015 and 2014, and the results of its operations, stockholders' (deficit), and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has no current source of operating revenues, and needs to secure financing to remain a going concern. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ StarkSchenkein, LLP

Denver, Colorado
June 3, 2015

Nation Energy, Inc.
Condensed Consolidated Balance Sheets


	March 31,	March 31,
	2016	2015

ASSETS
Current assets:
Cash	$ 1,334	$ 47,479
Total current assets	1,334	47,479

Non-current assets:
Petroleum and natural gas interests	29,559,563	-
Total non-current assets	29,559,563	$ -

Total assets	$ 29,560,897	$ 47,479


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$ 9,710,946	$ 12,282
Accounts payable and accrued expenses - related party	497,842	774,456
Loans payable - related party, current	827,698	872,936
Loans payable - current	104,247	-
Total current liabilities	11,140,733	1,659,674

Long term liabilites
Loans payable - related party, noncurrent	38,211	112,977
	11,178,944	1,772,651
Stockholders' equity (deficit)
Common stock, no par value; 5,000,000,000	$ 1,356,020	$ 16,020
shares authorized; 150,020,000 (2016) and 16,020,000
(2015) shares issued and outstanding
Obligation to issue shares	20,000,000	-

Additional paid-in capital	10,218,380	6,868,380
Accumulated (deficit) prior to the development stage	(6,839,714)	(6,839,714)
Accumulated (deficit) during the development stage	(6,398,445)	(1,785,225)
Accumulated comprehensive income:
Foreign currency translation income	45,713	15,367
Total stockholders' equity (deficit)	18,381,953	(1,725,172)

Total liabilities and stockholders' equity (deficit)	$ 29,560,897	$ 47,479

The accompanying notes are an integral part of these financial statements

Nation Energy, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended March 31, 2016 and 2015


	For the Years Ended
	March 31,	March 31,
	2016	2015

Revenue:	$ -	$ -
Direct expenses:
Royalties	-	-
Operating	-	-

Operating income	-	-


General and administrative expenses	1,157,753	136,803


Income (loss) before other income (expense)	(1,157,753)	(136,803)

Other income (expense):
(Loss) on extinguishment of debt	(3,350,000)	-
Interest (expense)	(105,468)	(182,961)
Total other income (loss)	(3,455,468)	(182,961)

Net loss	(4,613,220)	(319,764)

Foreign currency translation gain (loss)	45,713	172,132

Comprehensive loss	$ (4,567,508)	$ (147,632)

Per share information:
Weighted average number of
common shares outstanding
- basic and diluted	150,020,000	16,020,000

Net loss per common
share - basic and diluted	$ (0.030)	$ (0.009)


The accompanying notes are an integral part of these financial statements

Nation Energy, Inc.
Condensed Consolidated Statement of Changes in Stockholders' Equity Deficit

For the Years Ended March 31, 2016 and 2015


						Accumulated	Accumulated
						(Deficit)	(Deficit)
	Common Stock		Additional	Obligation	Accumulated	Prior to the	During the	Total
	Number of		Paid-in	to issue	Comprehensive	Development	Development	Stockholders' Equity
	Shares	Amount	Capital	Shares	Income (loss)	Stage	Stage	(Deficit)
Balance at March 31, 2013	16,020,000	16,020	6,868,380		(245,036)	(6,839,714)	(1,214,152)	(1,414,502)
Comprehensive income					88,272			88,272
Net loss							(251,309)	(251,309)
Balance at March 31, 2014	16,020,000	16,020	6,868,380		(156,765)	(6,839,714)	(1,465,461)	(1,577,540)
Comprehensive income					172,132			172,132
Net loss							(319,764)	(319,764)
Balance at March 31, 2015	16,020,000	16,020	6,868,380		15,367	(6,839,714)	(1,785,225)	(1,725,172)
Comprehensive income					30,345			30,345
Share issuance, debt settlement	134,000,000	1,340,000	3,350,000					4,690,000
Shares for exploration permits				20,000,000				20,000,000
Net loss							(4,613,220)	(4,613,220)
Balance at March 31, 2016	150,020,000	1,356,020	10,218,380	20,000,000	45,712	(6,839,714)	(6,398,445)	18,381,953
The accompanying notes are an integral part of these financial statements

Nation Energy, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years March 31, 2016 and 2015



	For the Years Ended
	March 31,	March 31,
	2016	2015

Cash flows from operating activities:
Net (loss)	$ (4,613,220)	$ (319,764)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Loss on extinguishment of debt	3,350,000	-
Changes in working capital:
Increase in accounts payable	894,741	2,182
Increase (decrease) in accounts payable -
related party	(629,815)	77,667
Net cash (used in) operating activities	(998,295)	(239,915)


Cash flows from investing activities:
Net cash provided by investing activities	-	-

Cash flows from financing activities:
Proceeds from loan payable - related party	821,804	112,513
Proceeds from loan payable	100,000	-
Net cash provided by financing activities	921,804	112,513

Effect of currency rate change gain	30,346	172,132

Net increase (decrease) in cash	(46,145)	44,730

Beginning balance, cash	47,479	2,749

Ending balance, cash	$ 1,334	$ 47,479

Non-cash investing and financing activities:
Share issuance for debt settlement	$ 1,340,000	-
Obligation to issue shares	20,000,000	-
Petroleum and natural gas interests	29,559,563	-

The accompanying notes are an integral part of these financial statements

Nation Energy Inc.

Notes to Financial Statements

March 31, 2016 and 2015

Note 1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN

Nation Energy Inc. (the “Company”), was incorporated on April 19, 1988, in the State of Florida as Excalibur Contracting, Inc. The Company was reincorporated as a Delaware corporation and changed its name to Nation Energy, Inc. in February 2000. On June 13, 2003, the Company reincorporated as a Wyoming corporation. The Company was an oil and gas exploration, development and production company with properties located in Alberta Canada. Effective June 1, 2008, the Company sold all of its oil and gas properties in the Smoky Hill area of Alberta and is currently reviewing other prospects. Following the sale of all of our oil and gas operations effective June 1, 2008, we began to actively seek new oil and gas opportunities. On October 11, 2013, we entered into a letter agreement with Paltar Petroleum Limited, an Australian company, pursuant to which we agreed to acquire four exploration and development permits and twenty-nine applications for exploration and development permits in respect of prospective acreage located in northern Australia. On March 31, 2014, we amended this letter agreement and, on November 27, 2014, we amended and restated the letter agreement to add additional exploration properties and provide for new closing terms. On June 13, 2015, we entered into a second amended and restated agreement, replacing in its entirety the amended and restated agreement dated November 27, 2014. On August 28, 2015, we entered into a third amended and restated agreement, replacing in its entirety the second amended restated agreement dated June 13, 2015. Also on August 30, 2015, and pursuant to the terms of the third amended and restated letter agreement (the “Agreement”), Paltar or its wholly-owned subsidiary, Officer Petroleum Pty Ltd (“Officer”), and our wholly-owned subsidiary, Nation Energy (Australia) Pty Ltd., entered into seven separate earning agreements and an option agreement. Effective December 17, 2015, the Company entered into a first amendment to the third amended and restated agreement to extend the time allowed for certain actions contemplated in the third amended and restated agreement and to provide further information concerning the additional earning agreements as such term is defined in the third amended and restated agreement. Also effective December 17, 2015, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement and to extend the deadline for cash payments under the earning agreements. Effective February 8, 2016, the Company entered into a second amendment to the third amended and restated agreement to extend again the time allowed for certain actions contemplated in the third amended and restated agreement. Also effective February 8, 2016, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement. Effective February 12, 2016, the Company entered into an amendment to the option agreement to change the purchase price for the assets subject to the option. Effective May 31, 2016, the Company entered into a third amendment to the third amended and restated agreement to revise the payment of consideration by Nation contemplated in the third amended and restated agreement. Also effective May 31, 2016, the seven earning agreements were amended to make compatible changes in consideration payable by Nation Australia and Nation contemplated by the third amended and restated agreement, and the option agreement was terminated. (see Note 3 for further details). To implement any new business plan, significant financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop a new business venture.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has incurred losses since inception of ($13,238,159) has both a working capital and a stockholders’ deficit of ($11,177,610) and is reliant on raising capital to implement its business plan.

The Company is currently in the development stage as defined by Accounting Standards Codification subtopic 915-10 “Development Stage Entities” (“ASC 915-10”). Upon the sale of all of its oil and gas assets, the Company re-entered the exploration stage. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception through June 1, 2008, the Company has accumulated a deficit of ($6,839,714) and a deficit accumulated during the development stage of ($6,398,445).

The Company’s ability to continue as a going concern is contingent upon being able to secure financing and attain sustained profitable operations. The Company is pursuing financing for its operations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Certain prior year amounts have been reclassified for comparative purposes.

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The exact results experienced by the Company may differ materially and adversely from the Company’s estimates.

Foreign Currency Translation

The Company’s reporting currency is the United States dollar. The functional currency of the Company is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in other comprehensive income.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and loans payable. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Net Income (Loss) Per Common Share

Basic earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During the periods when they are anti-dilutive, common stock equivalents, if any, are not considered in the computation.

Impairment of Exploration Costs

Assets that are not subject to amortization are tested for impairment at least annually. In assessing whether it is more likely than not an asset is impaired, the Company assess all relevant events and circumstances that could affect the significant inputs used to determine the fair value of the asset. Some examples of such events and circumstances are cost factors that could have a negative effect on cash flows, financial performance of the asset, legal and other regulatory factors, changes in management, industry and market considerations and general economic conditions.

Oil and Gas Properties

The Company followed the full cost method of accounting for oil and gas operations whereby all costs associated with the acquisition, exploration for and development of oil and gas reserves, whether productive or unproductive, were capitalized. Such expenditures included land acquisition costs, drilling, exploratory dry holes, geological and geophysical costs not associated with a specific unevaluated property, completion and costs of well equipment. Internal costs were capitalized only if they were directly identified with acquisition, exploration, or development activities. The Company did not capitalize any internal costs.

On June 1, 2008, the Company sold its oil and gas properties, which were located in the Smoky Hill Area of Alberta, Canada. From that date the Company is considered a shell company (see Note 3).

Other Comprehensive Income (Loss)

For the years ended March 31, 2016 and 2015, the only components of comprehensive loss were foreign currency translation adjustments.

Stock-Based Compensation

The Company has a stock based compensation plan whereby stock options are granted in accordance with the policies of regulatory authorities. The Company accounts for stock-based compensation in accordance with ASC Subtopic 718 “Compensation – Stock Compensation”. (“ASC 718”) ASC 718-10 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. This ASC establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. It also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based transactions. There was no material effect on the financial statements.

Revenue Recognition

Recent Pronouncements

Note 3. Oil and Gas Properties

On September 18, 2008, Nation and Netco Energy, Inc. (“Netco”), entered into a sales and purchase agreement to sell their assets in the Smoky Area of Alberta for total net proceeds of C$1,600,000. The agreement was effective June 1, 2008. The sale of the oil and gas assets closed September 18, 2008, with a second closing in April 2009, for total net proceeds to Nation of C$1,102,939 (US $1,029,385) from Encana, plus C$160,000 (US$ 129,324) from Netco. In April 2009, the Company received its final payment from Encana pursuant to the sale of its oil and gas properties, of C$150,894 (US$ 88,689). The Company is now considered a shell company.

On October 11, 2013, the Company entered into a letter agreement with Paltar Petroleum Limited (“Paltar”), an Australian company, pursuant to which the Company agreed to acquire four exploration and development permits and twenty-nine applications for exploration and development permits in respect of prospective acreage located in northern Australia. On March 31, 2014, the Company amended this letter agreement and, on November 27, 2014 and April 29, 2015, the parties amended and restated the letter agreement to add additional exploration properties and provide for new closing terms and to extend the closing date and maturity dates of certain promissory notes, respectively. On June 13, 2015, the parties entered into a second amended and restated agreement, replacing in its entirety the amended and restated agreement dated November 27, 2014. On August 30, 2015, the Company entered into a third amended and restated agreement, replacing in its entirety the second amended restated agreement dated June 13, 2015. Also on August 30, 2015, and pursuant to the terms of the third amended and restated letter agreement, Paltar or its wholly-owned subsidiary, Officer Petroleum Pty Ltd (“Officer”), and the Company’s wholly-owned subsidiary, Nation Energy (Australia) Pty Ltd., entered into seven separate earning agreements. And also on August 30, 2015, the Company and Paltar entered into an option agreement, pursuant to which the Company may acquire exploration permits and related assets in respect of prospective acreage in Australia. Effective December 17, 2015, the Company entered into a first amendment to the third amended and restated agreement to extend the time allowed for certain actions contemplated in the third amended and restated agreement and to provide further information concerning the additional earning agreements as such term is defined in the third amended and restated agreement. Also effective December 17, 2015, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement and to extend the deadline for cash payments under the earning agreements. Effective February 8, 2016, the Company entered into a second amendment to the third amended and restated agreement to extend again the time allowed for certain actions contemplated in the third amended and restated agreement. Also effective February 8, 2016, the seven earning agreements were amended to make compatible extensions of time for actions contemplated by the third amended and restated agreement. Effective February 12, 2016, the Company entered into an amendment to the option agreement to change the purchase price for the assets subject to the option. Effective May 31, 2016, the Company entered into a third amendment to the third amended and restated agreement to revise the payment of consideration by Nation contemplated in the third amended and restated agreement. Also effective May 31, 2016, the seven earning agreements were amended to make compatible changes in consideration payable by Nation Australia and Nation contemplated by the third amended and restated agreement, and the option agreement was terminated. To implement any new business plan, significant financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop a new business venture.

Note 4. Stockholders’ Equity (Deficit)

Equity Incentive Plan

On May 6, 1999 the Board of Directors adopted a stock option plan (“The Plan”) which was subsequently approved by over 50% of our shareholders. The Plan allows for the issuance of incentive stock options to employees, consultants, directors, and others providing service of special significance to our company. The Plan is administered by the Board of Directors. The Plan provides for the issuance of up to 2,500,000 options. The exercise price of each option shall be determined by the Board or by the CEO with reference to such factors as current fair market value of the common stock, net book value per share, other remuneration already being received by the optionee. No option may be exercised more than five years from the date of grant and they vest on the date granted. The Plan does not have an expiry date.

At March 31, 2016 and 2015, there were no options outstanding.

Note 5. Income Taxes

The Company accounts for income taxes under the liability method, which provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

The provision (benefit) for income taxes consists of the following components:

		March 31,
		2016		2015
Current	$	---	$	---
Deferred	$	---	$	---

The tax effects of temporary differences and carry forwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:

		March 31,
		2016		2015
Deferred tax assets:
Net operating loss carryforwards	$	3,360,000	$	1,957,000
Less valuation allowance		(3,360,000)		(1,957,000)
	$	---	$	---

A reconciliation of the statutory U.S. federal rate and effective rates is as follows:

Statutory U.S. federal rate	34.00%
State income taxes	--- %
Total	34.00%

The Company’s provision for income taxes differs from applying the statutory United States federal income tax rate to income before income. The primary differences result from net operating losses.

Net operating loss carry-forwards of approximately $3,360,000 will expire through 2034. The deferred tax asset has been fully reserved at March 31, 2016. The change in the valuation allowance during the year ended March 31, 2016 was $1,403,000.

In December 2013, the Company received a letter from the Department of the Treasury, Internal Revenue Service (“IRS”) charging a penalty of $10,000 under Section 6038A of the Internal Revenue Code for failure to provide information with respect to certain foreign-owned US Corporations on Form 5472. In January 2014, the Company responded to the IRS and requested an abatement of the penalties assessed. In April 2014, the Company received another letter from the IRS requesting additional information in order to consider our request for penalty adjustment. No accrual was made at March 31, 2016 and, to date, this matter remains unresolved.

Note 6. Related Party Transactions

(a) Administrative Services Agreement

During March 2002, the Company entered into a verbal agreement with a related party, Caravel Management Corp. (“Caravel”), in which Caravel will provide administrative services on a month-to-month basis. On January 1, 2009, the Company entered into a written agreement revising the previous verbal agreement with Caravel. The agreement provides for administrative services, office rent and supplies for $7,865 per month. Subsequently, effective November 1, 2010 the Company revised its agreement with Caravel to provide administrative services for $3,500 per month. In addition to administrative services, the agreement also provides for office rent and supplies. Total expenses recognized under this agreement were $42,000 for the years ended March 31, 2016 and 2015.

We currently have a compensation arrangement with Carmen J. Lotito, our Vice President, to provide operational and management services for $20,000 per month, on a month-to-month agreement.

(b) Loans Payable – Related Party

In connection with the secured convertible note purchase agreement, Paltar Nation entered into a pledge agreement dated as of August 4, 2015 with Wotan Group Limited (the “Wotan Pledge”), pursuant to which Wotan Group Limited pledged to each of David N. Siegel Dynasty Trust dated November 16, 2015 and any future secured noteholders pursuant to the 2015 Secured Note Purchase Agreement a continuing first priority security interest in a number of Wotan Group Limited’s shares of Paltar Petroleum Limited equal to five multiplied by the sum of the aggregate outstanding principal amounts owed under each noteholder’s respective note and Paltar Nation agreed to pay a commitment fee to Wotan Group Limited equal to $250,000 from the proceeds of the secured convertible promissory notes upon the receipt by Paltar Nation of proceeds from the sale of such notes equal to or greater than $2,500,000 in the aggregate and an additional commitment fee of $250,000 upon conversion of all of such notes.

As of March 31, 2016, the principal balance of the loan was $584,000 and accrued interest payable of $38,400.

On March 31, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009for $188,483. The loan bears interest at a rate of 10% per annum from the disbursement date of the funds. The principal sum and all accrued and unpaid interest will become due and payable on March 31, 2017. As of March 31, 2016, the principal balance of the loan was $188,483 and accrued interest payable of $1,698.

Note 7. Loss on Extinguishment of Debt

Note 8. Subsequent Events

On April 8, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009for $25,000. The loan will bear interest at a rate of 10% per annum. The principal sum and all accrued and unpaid interest will become due and payable on April 8, 2017.

On May 3, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009for $34,000. The loan will bear interest at a rate of 10% per annum. The principal sum and all accrued and unpaid interest will become due and payable on May 3, 2017.

On May 31, 2016, we entered into a promissory note with an officer and director, John Hislop for $23,100. The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annumboth before and after each of maturity, default and judgement commencing effective May 31, 2016. The principal sum and all accrued and unpaid interest will become due and payable on May 31, 2023.

Effective May 31, 2016, Nation Australia and Paltar amended the seven earning agreements by entering into the May 31, 2016 Earning Agreements.

Effective May 31, 2016, Nation Australia issued to Paltar a promissory note in the principal amount of AUD$24,322,501, with payment guaranteed by Nation.

Effective May 31, 2016, Nation and Paltar entered into the third amendment to the third amended and restated agreement.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures and remediation

As required by Rule 13a-15 under the Securities Exchange Act of 1934, in connection with this annual report on Form 10-K, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as of March 31, 2016, including the remedial actions discussed below, we have concluded that, as of March 31, 2016, our disclosure controls and procedures were ineffective as discussed in greater detail below. As of the date of this filing, we are still in the process of remediating such material weaknesses in our internal controls and procedures.

Management’s annual report on internal control over financial reporting

Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as of March 31, 2016.

Based on its evaluation under the framework in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of March 31, 2016, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Limitations on Effectiveness of Controls

Our Chief Executive Officer and Chief Financial Officer does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Material Weaknesses Identified

In connection with the preparation of our financial statements for the year ended March 31, 2016, certain significant deficiencies in internal control became evident to management that represent material weaknesses, including:

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended March 31, 2016, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statement. This creates certain incompatible duties and lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement of our interim or annual financial statements that would not be prevented or detected; and

ii. Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.

Plan for Remediation of Material Weaknesses

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts as part of our year-end 2016 assessment of the effectiveness of our internal control over financial reporting.

Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:

1. We intend to continue to update the documentation of our corporate governance and internal control processes, including formal risk assessment of our financial reporting processes.

It should be noted that a control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal year ended March 31, 2016 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Name	Position Held with our Company	Age	Date First Elected or Appointed
John R. Hislop	Chief Executive Officer, Chief Financial Officer, President and Director	63	June 4, 1999 and March 15, 2016
Carmen J. Lotito	Vice-President	72	July 22, 2015
David N. Siegel	Chairman of the Board, and Director	54	July 22, 2015
Darrel J. Causbrook	Director	60	July 22, 2015

Summary Background

The following is a brief account of the education and business experience during the past five years of each director and executive officer, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

John R. Hislop, chief executive officer, president, chief financial officer, and director

Mr. Hislop was the President and Chief Executive Officer of our company since October 22, 2003 and the Chairman, Chief Financial Officer, Secretary and a Director of our company since June 1999. On September 21, 2015, Mr. Hislop resigned from the positions of President, Chief Executive Officer and Chairman of the Board of Directors and, effective as of March 15, 2016, resumed his duties as our President and Chief Executive Officer on an interim basis. Mr. Hislop remains as the Company’s Chief Financial Officer and Director. Since 1990, Mr. Hislop has been working as an independent financial consultant and has served as an officer and director of various emerging growth companies. Mr. Hislop is currently serving as a Director and/or Officer on the following company: Director of XXL Energy Corp. (formerly Exxel Energy Corp.) since October 15, 2001, Chairman of the Board of XXL Energy Corp. (formerly Exxel Energy Corp.) since July 27, 2006, President and Chief Executive Officer of XXL Energy Corp. (formerly Exxel Energy Corp.) since December 31, 2008. In the past five years, Mr. Hislop has also served as a director of the following companies: formerly a Director of Patriot Petroleum Corp. from April 7, 1999 to February 16, 2011 (Mr. Hislop also served as President and Chief Executive Officer of Patriot Petroleum Corp. from October 22, 2003 to November 26, 2010); and formerly a Director of Q Investments Ltd., (formerly Cubix Investments Ltd.), an investment holding company for various public oil and gas companies, from February 1994 to December 2014. Mr. Hislop trained as a Chartered Accountant with Ernst & Young and has a bachelor of Commerce in Finance from the University of British Columbia.

Carmen J. Lotito, vice-president

Mr. Lotito has served as a consultant to Paltar Petroleum Limited from June 2011 to the present. Mr. Lotito serves as a member of the Board of Directors and a member of its Audit and Compensation Committees of Petrohunter Energy Corporation from inception February, 2006 to the present.

Mr. Lotito served as a member of the Board of Directors of Sweetpea Petroleum Pty Ltd (a Petrohunter Energy Corporation wholly-owned Australian subsidiary) from November, 2005 to December 2014. Mr. Lotito served as its Chief Financial Officer of Petrohunter Energy Corporation from February, 2006 through October, 2007 and as its Executive Vice President of Business Development from October 2007 through June, 2009. Mr. Lotito served as Chief Financial Officer of GSL Energy, Inc from April, 2005 to January, 2006.

Mr. Lotito served as a consultant and Its Executive Vice President of Business Development of Falcon Oil & Gas Ltd from April 1, 2005 to December, 2010. He also served as a vice president and member of the Board of Directors of the following Falcon Oil & Gas Ltd operating subsidiaries: Falcon Oil & Gas USA, Inc, a Colorado Company, TXM Oil and Gas Exploration Kft., a Hungarian limited liability company doing business as TXM Energy, LLC, TXM Marketing Trading & Service, LLC, a Hungarian limited liability company, FOG-TXM Kft., a Hungarian limited liability company, JVX Energy S.R. L., a Romanian limited liability company and Falcon Oil & Gas Australia Pty. Ltd from April 1, 2005 to December, 2010.

Mr. Lotito served as a consultant and a member of the Board of Directors of Gasco Energy, Inc including Chairman of the Audit and Compensation Committees from November, 1999 to April, 2011. He served as Chief Financial Officer and a Director of Galaxy Energy Corporation and its subsidiary Dolphin Energy Corporation from April, 2004 to March, 2005.

Mr Lotito was employed by Pannell, Kerr Forester, a national public accounting firm from March,1965 to June, 1975 as a senior accountant in audit and SEC accounting practice. Mr. Lotito earned a B.S degree in business and accounting from the Marshall School of Business at the University of Southern California in1967.

David N. Siegel, chairman of the board of directors, and director

Mr. Siegel was CEO of Frontier Airlines from January 2012 to May of 2015. From June of 2010 until December of 2011, Mr. Siegel was managing partner of Hyannis Port Capital, Inc. Mr. Siegel served as chairman and chief executive officer of XOJET, Inc., a TPG Growth backed private aviation company, from October of 2008 to May of 2010. From June of 2004 to September of 2008, Mr. Siegel served as chairman and chief executive officer of Gategroup, A.G., a Zurich based global company, which Mr. Siegel transformed from its core airline catering business to become a complete above-the-wing solutions provider. At Gategroup, Mr. Siegel stepped down as Chairman in April 2009, and remained an ordinary board member until April 2014. Mr. Siegel recently served as a board member of URS Corporation (NYSE: URS) and for the past eight years has served on the Advisory Board of Trilantic Capital Partners, formerly Lehman Brothers Private Equity. Mr. Siegel earned a master’s degree in business administration from Harvard Business School, with first-year honors, and a Bachelor of Science degree, magna cum laude, in applied mathematics-economics from Brown University.

Darrel J. Causbrook, director

Darrel Causbrook is a Chartered Accountant with over 30 years of experience in the accountancy profession, having worked for both large and mid-sized accounting firms. Over 10 years ago, Darrel established his own accounting practice (Causbrook and Associates), providing business and strategic advice to a variety of industries. Darrel’s professional interest includes financial reporting and corporate governance.

He holds a Bachelor of Commerce Degree from the University of Wollongong (1982), is a Fellow of Institute of Chartered Accountants in Australia, Fellow of CPA Australia and Fellow of the Taxation Institute of Australia and is a member of Australian Institute of Company Directors.

Term of Office

The directors serve until their successors are elected by the shareholders. Vacancies on the Board of Directors may be filled by appointment of the majority of the continuing directors. The executive officers serve at the discretion of the Board of Directors.

Family Relationships

None.

Involvement in Certain Legal Proceedings

Our directors and executive officers have not been involved in any of the following events during the past ten years:

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4. being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

5. being the subject of, or party to, any federal or state judicial or administrative order, judgment, decree, or finding not subsequently reversed, suspended or vacated relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

6. being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a) (26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a) (29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Committees of the Board

We currently have an audit committee consisting of all of our directors. Our board of directors does not have any other committees.

Audit Committee

We are a reporting issuer in the Province of British Columbia and National Instrument 52-110 Audit Committees of the Canadian Securities Administrators requires our company, as a venture issuer, to disclose annually in our annual report certain information concerning the constitution of our audit committee and our relationship with our independent auditor.

Our audit committee consists of each of our directors, Mr. Hislop, Mr. Siegel and Mr. Causbrook. Because Mr. Hislop is an executive officer of our company, he is not independent.

Our board of directors has determined that it does not have an audit committee member who qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that each of the members of the Audit Committee are financially literate and are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have generated minimum revenues to date.

Since the commencement of our company’s most recently completed financial year, our company has not relied on the exemptions contained in sections 2.4 or 8 of National Instrument 52-110. Section 2.4 (De Minimis Non-audit Services) provides an exemption from the requirement that the audit committee must pre-approve all non-audit services to be provided by the auditor, where the total amount of fees relates to the non-audit services are not expected to exceed 5% of the total fees payable to the auditor in the fiscal year in which the non-audit services were provided. Section 8 (Exemptions) permits a company to apply to a securities regulatory authority for an exemption from the requirements of National Instrument 52-110 in whole or in part. We are relying on the exemption provided by section 6.1 of NI 52-110 which provides that we, as a venture issuer, are not required to comply with Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of NI 52-110.

The audit committee has adopted specific policies and procedures for the engagement of non-audit services as set out in the Audit Committee Charter of our company. In meeting its responsibilities, the Audit Committee is expected to select the independent accountants, considering independence and effectiveness, approve all audit and non-audit services in advance of the provision of such services and the fees and other compensation to be paid to the independent accountants, and oversee the services rendered by the independent accountants (including the resolution of disagreements between management and the independent accountants regarding preparation of financial statements) for the purpose of preparing or issuing an audit report or related work. In addition, the Audit Committee is expected to periodically review and discuss with the independent accountants all significant relationships the independent accountants have with our company to determine the independence of the independent accountants, including a review of service fees for audit and non-audit services.

Our Audit Committee Charter was filed with the Securities and Exchange Commission as Exhibit 99.1 to our annual report on Form 10K filed on February 9, 2011.

Code of Ethics

Effective July 13, 2004, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company's officers including our president (being our principal executive officer) and our company's chief financial officer (being our principal financial and accounting officer), contractors, consultants and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

(3) compliance with applicable governmental laws, rules and regulations;

(4) the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

(5) accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel shall be accorded full access to our president and secretary with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company's personnel are to be accorded full access to our company's board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our company officers.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's president or secretary. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president or secretary, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics was filed with the Securities and Exchange Commission as Exhibit 14.1 to our annual report on Form 10-KSB filed on July 15, 2004. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Nation Energy Inc., RPO Box 60610 Granville Park, Vancouver, British Columbia, V6H 4B9.

Stockholder Communications with Our Board of Directors

We do not have a formal procedure for stockholder communication with our board of directors. In general, our board and executive officer are accessible by telephone or mail. During the year ended March 31, 2016 there were no material changes to the procedures by which security holders may recommend nominees to our board of directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.

To the best of our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended March 31, 2016, all filing requirements applicable to our executive officers, directors and greater than 10% shareholders were complied with other than as disclosed in the table below:

Name	Number of Late Reports	Number of Transactions Not Reported on a Timely Basis	Failure to File Requested Forms
Carmen J. Lotito	1	Nil	Nil
Marc A. Bruner	1	Nil	Nil
Darrel Causbrook	Nil	Nil	1

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to our chief financial officer and director during the last two fiscal years. No other officers or directors received annual compensation in excess of $100,000 during the last complete fiscal year.

SUMMARY COMPENSATION TABLE - YEARS ENDED MARCH 31, 2016 AND 2015

Name and Principal Position

Year

Salary

Bonus

Stock Awards

Option Awards

Non-Equity Incentive Plan Compensation

Nonqualified Deferred Compensation Earnings

All Other Compensation

Total

John Hislop

President, Chief Executive Officer, Secretary, Chief Financial Officer and Director

2016

2015

Nil

$42,000⁽¹⁾

$42,000

Carmen J. Lotito

Vice-President

2016

2015

Nil

$180,000⁽²⁾

Nil

$180,000

Nil

⁽¹⁾Effective November 1, 2010 the Company signed a management agreement for $3,500 per month. This arrangement was between our company and Caravel Management Corp., a private management company owned by Mr. Hislop.

⁽²⁾We currently have a compensation arrangement with Carmen J. Lotito, our Vice President, to provide operational and management services for $20,000 per month, on a month-to-month agreement.

Employment or Consulting Agreements

Other than as described below, we have not entered into any employment or consulting agreements with any of our current officers or directors.

On January 1, 2009, we entered into a written contract with Caravel Management Corp., to provide office rent, reception, compliance and accounting services for $7,865 per month. The agreement commenced on January 1, 2009 and continues on a month to month basis unless terminated by the parties. The agreement may be terminated by either party upon 30 days’ notice. Subsequently, we amended our agreement with Caravel Management Corp. to provide administrative services for $3,500 per month, effective November 1, 2010.

We currently have a compensation arrangement with Carmen J. Lotito, our Vice President, to provide operational and management services for $20,000 per month, on a month-to-month agreement.

Long-Term Incentive Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

We have no compensatory plan or arrangement with respect to any officer that results or will result in the payment of compensation in any form from the resignation, retirement or any other termination of employment of such officer's employment with our company, from a change in control of our company or a change in such officer's responsibilities following a change in control.

Outstanding Equity Awards at Fiscal Year-End

None of our named executive officers held any unexercised options or stock awards that had not vested or equity incentive plan awards as of March 31, 2016.

Directors Compensation

We reimburse our directors for expenses incurred in connection with attending board meetings but did not pay director's fees or other cash compensation for services rendered as a director in the year ended March 31, 2016.

We have no standard arrangement pursuant to which our directors are compensated for their services in their capacity as directors except for the granting from time to time of incentive stock options. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

As of June 29, 2016, there were 150,020,000 shares of our common stock outstanding. The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of that date by (i) each of our directors, (ii) each of our executive officers, and (iii) all of our directors and executive officers as a group. Except as set forth in the table below, there is no person known to us who beneficially owns more than 5% of our common stock.

Title of Class	Name & Address of Beneficial Owner	Amount and Nature of Beneficial Ownership⁽¹⁾	Percent of Class⁽¹⁾⁽²⁾
Common	John Hislop P.O. Box 7814 Ringwood, UK BH24 9FF	145,403,500Direct	96.92%
Common	All Directors and Officers as a class	145,403,500	96.92%
5% Stockholders
Common	John Hislop P.O. Box 7814 Ringwood, UK BH24 9FF	145,403,500Direct	96.92%

Notes:

(1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

(2) The percentage of class is based on 150,020,000 shares of common stock issued and outstanding as of June 29, 2016.

Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Except as otherwise indicated below, since April 1, 2013, there has been no transaction, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any of the following persons had or will have a direct or indirect material interest:

	(i)	Any of our directors or officers;
	(ii)	Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and
	(iii)	Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

We receive administrative services and back office support under a formal written management services agreement with Caravel Management Corp. Caravel is a private management company that is wholly-owned by John Hislop, our chairman, president, chief executive officer, secretary and chief financial officer. Effective November 1, 2010, the company revised its agreement with Caravel to provide management services for $3,500 per month. The agreement with Caravel is on a month to month basis. In addition to administrative services, the agreement also provides for office rent and supplies. Total expenses recognized under this agreement for the years ended March 31, 2016 and 2015 were $42,000 both years.

In connection with the secured convertible note purchase agreement, Paltar Nation entered into a pledge agreement dated as of August 4, 2015 with Wotan Group Limited (the “Wotan Pledge”), pursuant to which Wotan Group Limited pledged to each of David N. Siegel Dynasty Trust dated November 16, 2015 and any future secured noteholders pursuant to the 2015 Secured Note Purchase Agreement a continuing first priority security interest in a number of Wotan Group Limited’s shares of Paltar Petroleum Limited equal to five multiplied by the sum of the aggregate outstanding principal amounts owed under each noteholder’s respective note and Paltar Nation agreed to pay a commitment fee to Wotan Group Limited equal to $250,000 from the proceeds of the secured convertible promissory notes upon the receipt by Paltar Nation of proceeds from the sale of such notes equal to or greater than $2,500,000 in the aggregate and an additional commitment fee of $250,000 upon conversion of all of such notes.

As of March 31, 2016, the principal balance of the loan was $584,000 and accrued interest payable of $38,400.

On April 8, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009 for $25,000. The loan will bear interest at a rate of 10% per annum. The principal sum and all accrued and unpaid interest will become due and payable on April 8, 2017.

On May 3, 2016, Paltar Nation entered into a promissory note with a director, David N. Siegel Revocable Trust 2009 for $34,000. The loan will bear interest at a rate of 10% per annum. The principal sum and all accrued and unpaid interest will become due and payable on May 3, 2017.

On May 31, 2016, the Company entered into a promissory note with a related party, John Hislop for $23,100. The loan bears interest calculated quarterly, not in advance, at a rate of 15% per annum, both before and after each of maturity, default and judgement commencing effective May 31, 2016. The principal sum and all accrued and unpaid interest will become due and payable on May 31, 2023.

We currently have a compensation arrangement with Carmen J. Lotito, our Vice President, to provide operational and management services for $20,000 per month, on a month-to-month agreement.

National Instrument 58-101

We are a reporting issuer in the Province of British Columbia. National Instrument 58-101 Disclosure of Corporate Governance Practices of the Canadian Securities Administrators requires our company, as a venture issuer, to disclose annually in our annual report certain information concerning corporate governance disclosure.

Board of Directors

Our board of directors consists of John Hislop, David Siegel and Darrel Causbrook. Our common stock is quoted on the OTCQB operated by the OTC Markets Group, which does not impose any director independence requirements. Under NASDAQ Marketplace Rule 5605(a)(2), a director is not considered to be independent if he is also an executive officer or is, or at any time during the past three years was, employee of the company. Under this rule, Mr. Hislop is not independent because he is our executive officer.

Orientation and Continuing Education

We have an informal process to orient and educate new recruits to the board regarding their role of the board, our committees and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.

The board does not provide continuing education for its directors. Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as directors.

Nomination of Directors

The board is responsible for identifying new director nominees. In identifying candidates for membership on the board, the board takes into account all factors it considers appropriate, which may include strength of character, mature judgement, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the board. As part of the process, the board, together with management, is responsible for conducting background searches, and is empowered to retain search firms to assist in the nominations process. Once candidates have gone through a screening process and met with a number of the existing directors, they are formally put forward as nominees for approval by the board.

Compensation

The board is responsible for determining compensation for the directors and chief executive officers of our company to ensure it reflects the responsibilities and risks of being a director or chief executive officer, as applicable, of a public company.

Assessments

The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs. However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

Our company booked the following aggregate fees billed by SingerLewak, LLP for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K for the fiscal years ended March 31, 2016 and 2015 and for the review of quarterly financial statements included in our Quarterly Reports were as follows:

	Year Ended March 31, 2016	Year Ended March 31, 2015
Audit Fees*	$36,500	$25,500
Audit Related Fees	$Nil	$Nil
Tax Fees	$2,100	$2,250
All Other Fees	$1,000	$960
Total	$39,600	$28,710

In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year along with reviews of interim quarterly financial statements. “Audit-related-fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors

The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors before the respective services were rendered.

The board of directors has considered the nature and amount of fees billed by SingerLewak LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining SingerLewak LLP as auditors.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibits Required by Item 601 of Regulation S-K

Exhibit Number and Description

(3) Articles of Incorporation/Bylaws

3.1 Certificate of Merger (Delaware) effective June 12, 2003 (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on August 19, 2003)

3.2 Certificate of Merger (Wyoming) effective June 13, 2003 (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on August 19, 2003)

3.3 Amended & Restated Bylaws (Wyoming) (incorporated by reference from our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2003)

3.4 Certificate of Incorporation (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on August 13, 2010)

3.5 Amended and Restated Articles of Incorporation filed with the Secretary of State of the State of Wyoming on August 3, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 12, 2015).

(10) Material Contracts

10.1 1999 Stock Option Plan (incorporated by reference from our Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on March 31, 2000).

10.2 Demand Promissory Note issued to Caravel Management Corp. and John Hislop, dated March 31, 2006 (incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 13, 2010).

10.3 Management Services Agreement dated November 1, 2010 between Nation Energy Inc. and Caravel Management Corp. (incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 2, 2010).

10.4 Letter Agreement with Paltar Petroleum Limited (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2013).

10.5 First Amendment to Letter Agreement dated October 11, 2013 with Paltar Petroleum Limited (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2014).

10.6 Promissory Note issued to John Hislop, dated July 18, 2014 (incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 4, 2015).

10.7 Promissory Note issued to John Hislop, dated September 2, 2014 (incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 4, 2015).

10.8 Amended and Restated Agreement with Paltar Petroleum Limited (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on December 1, 2014).

10.9 Debt Settlement Agreement with John Hislop dated April 21, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2015).

10.10 Promissory Note issued to John Hislop, dated January 29, 2015 (incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 4, 2015).

10.11 Second Amended and Restated Agreement with Paltar Petroleum Limited dated June 13, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 18, 2015).

10.12 Third Amended and Restated Agreement with Paltar Petroleum Limited dated August 30, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.13 Option Agreement dated August 30, 2015 Agreement with Paltar Petroleum Limited (ACN 149 987 459) dated August 30, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.14 EP 136 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.15 EP 143 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.16 EP 231 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.17 EP 232 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.18 EP 234 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.19 EP 237 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.20 EP 468 Earning Agreement dated August 30, 2015 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Officer Petroleum Pty Ltd. (ACN 142 330 738) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2015).

10.21 Secured Convertible Promissory Note issued to David N. Siegel Dynasty Trust dated November 16, 2015 dated August 4, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 10, 2015).

10.22 Promissory Note issued to John Hislop, dated August 5, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2015).

10.23 Promissory Note issued to John Hislop, dated August 25, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2015).

10.24 Promissory Note issued to John Hislop, dated September 10, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2015).

10.25 Promissory Note issued to John Hislop, dated September 24, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2015).

10.26 First Amendment to Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149 987 459) effective December 17, 2015 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2016).

10.27 Master Amendment to Six Earning Agreements dated effective December 17, 2015 between Paltar Petroleum Limited (ACN 149 987 459) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2016).

10.28 First Amendment to EP 468 Earning Agreement dated effective December 17, 2015 between Officer Petroleum Pty Ltd (ACN 142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2016).

10.29 Second Amendment to Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149 987 459) effective February 8, 2016 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2016).

10.30 Second Master Amendment to Six Earning Agreements dated effective February 8, 2016 between Paltar Petroleum Limited (ACN 149 987 459) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2016).

10.31 Second Amendment to EP 468 Earning Agreement dated effective February 8, 2016 between Officer Petroleum Pty Ltd (ACN 142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2016).

10.32 Amendment to Option Agreement with Paltar Petroleum Limited (ACN 149 987 459) effective February 12, 2016 (incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 16, 2016).

10.33 Promissory Note issued to John Hislop, dated October 29, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 16, 2016).

10.34 Promissory Note issued to Michael B. Cox, dated November 27, 2015 (incorporated by reference from our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 16, 2016).

10.35* Promissory Note issued to David N. Siegel Dynasty Trust dated November 16, 2015, dated September 30, 2015.

10.36* Promissory Note issued to David N. Siegel Revocable Trust 2009, dated March 31, 2016.

10.37* Promissory Note issued to David N. Siegel Revocable Trust 2009, dated April 8, 2016.

10.38* Promissory Note issued to David N. Siegel Revocable Trust 2009, dated May 3, 2016.

10.39* Promissory Note issued to John Hislop, dated May 31, 2016.

10.40* EP 136 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.41* EP 143 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.42* EP 231 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.43* EP 232 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.44* EP 234 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.45* EP 237 Final Earning Agreement dated May 31, 2016 between Nation Energy (Australia) Pty Ltd. (ACN 606 533 046) and Paltar Petroleum Limited (ACN 149 987 459).

10.46* EP 468 Final Earning Agreement dated effective May 31, 2016 between Officer Petroleum Pty Ltd (ACN 142 330 738) and Nation Energy (Australia) Pty Ltd. (ACN 606 533 046).

10.47* Third Amendment to Third Amended and Restated Agreement with Paltar Petroleum Limited (ACN 149 987 459), effective May 31, 2016.

10.48* Promissory Note issued from Nation Australia to Paltar Petroleum dated May 31, 2016.

10.49* Management Services Agreement dated June 25, 2016, but effective July 22, 2015, between Nation Energy (Australia) Pty Ltd. and Carmen J. Lotito.

(14) Code of Ethics

14.1 Code of Business Conduct and Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on July 15, 2004).

(31) Section 302 Certifications

31.1* Section 302 Certification of Principal Executive Officer and Principal Financial Officer under Sarbanes-Oxley Act of 2002

(32) Section 906 Certifications

32.1* Section 906 Certification of Principal Executive Officer and Principal Financial Officer under Sarbanes-Oxley Act of 2002

(99) Additional Exhibits

99.1 Audit Committee Charter (incorporated by reference from our Annual Report on Form 10K filed with the Securities and Exchange Commission on February 9, 2011)

99.2* Statement regarding temporary hardship exemption under Rule 201 of Regulation S-T

*Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATION ENERGY INC.

By: /s/ John R. Hislop

John Hislop
President, Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Date: June 29, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ John R. Hislop

John Hislop
President, Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Date: June 29, 2016

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NATION ENERGY INC.

Suite F - 1500 West 16th Avenue

Vancouver BC V6H 4B9 Canada

May 31, 2016

TO:                  Paltar Petroleum Limited

1555 Blake Street, Suite 1002

Denver, Colorado 80202

Attention:         Mr. Marc A. Bruner

Dear Sirs:

RE:      Third Amendment to Third Amended and Restated Agreement

By this letter, effective as of May 31, 2016, Nation Energy Inc. (“Nation”) and Paltar Petroleum Limited (“Paltar”) amend their Third Amended and Restated Agreement dated August 30, 2015 and amended by the First Amendment to Third Amended and Restated Agreement dated effective December 17, 2015 and further amended by the Second Amendment to Third Amended and Restated Agreement dated effective February 8, 2016 (as amended the “Agreement”), principally to extend the time allowed for certain actions contemplated in the Agreement. Capitalized terms not specifically defined in this Third Amendment to Third Amended and Restated Agreement (the “Amendment”) shall have the meaning accorded them in the Agreement. All dollar amounts in this Agreement are expressed in Australian dollars. Marc A. Bruner (“Bruner”) and John R. Hislop (“Hislop”), as major shareholders (indirectly or directly) of Paltar and Nation, respectively, agree to the terms of this Amendment.

Nation and Paltar amend the Agreement as follows:

1.                  The first sentence of Item 1 of the Agreement is hereby amended in its entirety as follows:

Effective May 31, 2016 (the “Earn-In Closing Date”) and under seven separate earning agreements (the “Earning Agreements”), Paltar will farm out certain interests in exploration permits EP 136, EP 143, EP 231, EP 232, EP 234, and EP 237 and will cause Officer to farm out interests in EP 468 (collectively, the “Nation Blocks”) to Nation Energy (Australia) Pty Ltd, an Australian limited company and wholly owned subsidiary of Nation (“Nation Australia”), in exchange for the consideration specified in each Earning Agreement.

2.                  Item 2 of the Agreement is deleted in its entirety and replaced with the words “[Reserved].”

3.                  Item 3 of the Agreement is hereby amended in its entirety as follows:

Within seven (7) days after delivery to Nation of Paltar’s audited financials as set forth in Item 18(d) of this Agreement, Nation shall issue an aggregate of 900,000,000 Nation common shares (the “Earning Agreement Shares”) to Paltar, with an agreed upon value of US$0.03 per share.

4.                  Item 4 of the Agreement is hereby amended in its entirety as follows:

Effective as of the Earn-In Closing Date, the option agreement previously executed on August 30, 2015 between Paltar and Nation , as amended (the “Option Agreement”), is terminated and of no further effect, except that: (i) Nation still retains the right to acquire the Assets and Applications (as each are defined in the Option Agreement) to the extent such acquisition is not provided for by the Earning Agreements, (ii) the consideration for the acquisition specified in (i) will be satisfied by the consideration paid under the Earning Agreements and as may be set forth in this Agreement, (iii) the representations, warranties and covenants made by Paltar in the Option Agreement are hereby adopted into this Item 4 of this Agreement, and (iv) Paltar and Nation shall subsequently agree on any closing procedures in the event the acquisition specified in this Item 4 is to occur.

5.                  Item 5 of the Agreement is deleted in its entirety and replaced with the words “[Reserved].”

6.                  Item 18(b) of the Agreement is hereby amended in its entirety as follows:

(b) Within 60 days after the issuance of the Earning Agreement Shares, Nation shall file a registration statement with the SEC seeking registration under the Securities Act of 1933 of as many of the approximately 1.05 billion shares of common stock of Nation (on a pro rata basis) anticipated then to be beneficially owned by Hislop and Paltar as may be permitted by the SEC. As soon as practicable after the Earn-In Closing Date the parties may, at the request of Hislop or Paltar, as applicable, negotiate and sign a Registration Rights agreement with Hislop or Paltar, or both, as applicable, which sets out these rights and provides for penalties if registration does not occur as contemplated;

7.                  Item 18(d) of the Agreement is hereby amended in its entirety as follows:

(d) As soon as practicable after May 31, 2016, Paltar shall deliver to Nation consolidated financial statements for Paltar’s three most recently completed fiscal years audited pursuant to Australian generally accepted accounting principles, together with such additional fiscal period financial statements as may be required under SEC regulations; and

8.                  Item 11 of the Agreement is hereby amended by replacing the phrase “alternatively, in the event that an Exchange Transaction is not consummated on or prior to December 16, 2015 and the Earning Agreement Shares are issued on February 19, 2016” in 11(B) with the phrase “upon the issuance of the Earning Agreement Shares”.

9.                  The Agreement is hereby amended generally by replacing the term “Exchange Transaction” with “Transactions” except for the first instance of Exchange Transaction in the introductory paragraph.

No changes or amendments other than those expressly set forth above are being made in the Agreement. Nation and Paltar confirm and ratify the validity and current effectiveness of the Agreement, as amended by this Amendment.

[Remainder of page intentionally left blank]

If the foregoing correctly sets out our agreed amendments, please execute this letter in the space provided.

NATION ENERGY INC.                                                       PALTAR PETROLEUM LIMITED

Per:     /s/ John R. Hislop                                                        Per:     /s/ Marc A. Bruner

        Authorized Signatory

        John R. Hislop, CEO & President                                                        Authorized Signatory

AGREED TO AND ACCEPTED,

                                                            )

/s/ Zachary M. Bruner                          )

Witness Signature                                )

                                                            )

Zachary M. Bruner                              )           /s/ Marc A. Bruner

Name                                                   )           MARC A. BRUNER

                                                            )

Blavenweg 29, Metzerlen,                   )

Switzerland 4116                                )

Address                                               )

                                                            )

                                                            )

/s/David W. Peat                                  )

Witness Signature                                )

                                                            )

David W. Peat                                      )           /s/ John R. Hislop

Name                                                   )           JOHN R. HISLOP

241295 Simpson Loan                         )

Edinburgh, Scotland                            )

Address                                               )

EX-10.48 7 sjdocs-7219411v1nation_energ.htm sjdocs-7219411v1nation_energ.htm - Generated by SEC Publisher for SEC Filing

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO NATION ENERGY INC. THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

PROMISSORY NOTE

AUD$24,322,501.00

Dated: May 31, 2016
                                                                                                                       Denver, Colorado

For value received, NATION ENERGY (AUSTRALIA) PTY LTD, an Australian limited company (the “Company”), promises to pay to PALTAR PETROLEUM LIMITED, an Australian limited company (the “Holder”), the principal sum of Twenty-Four Million Three Hundred Twenty-Two Thousand Five Hundred One and no/100 Australian Dollars (AUD$24,322,501.00). Interest shall accrue from the date of this Promissory Note (this “Note”) on the unpaid principal amount hereunder at a rate equal to 5.00% per annum; provided, that on and after the Maturity Date (as defined below) or an Event of Default (as defined below), interest shall accrue from and after such date on the unpaid principal and all accrued but unpaid interest of this Note at a rate equal to 10.00% per annum. This note is the promissory note referenced in those certain Earning Agreements dated effective May 31 ,2016 between the Company and the Holder and between the Company and Officer Petroleum Pty Ltd. (the “Earning Agreements”). This Note is subject to the following terms and conditions:

1.            Maturity. Subject to prepayment as set forth in Section 2, all principal and any accrued but unpaid interest under this Note shall be due and payable on May 31, 2019 (the “Maturity Date”). Interest shall accrue on this Note and shall be due and payable in full on the Maturity Date. Notwithstanding the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon a material breach by the Company of this Note that is not cured within thirty (30) days of such breach (an “Event of Default”).

2.            Payment. All payments hereunder shall be made in lawful money of the Commonwealth of Australia at the Holder’s address on the signature page attached hereto or at such other place as the Holder hereof may from time to time designate in writing to the Company.

3.            Prepayment. The Company may prepay this Note at any time. In the event that Paltar Nation Limited Partnership receives financing in 2016 of at least USD$80,000,000 (the “LP Financing”), the Company must make payments of principal on this Note, to the extent of outstanding principal at such applicable time(s), in the amounts and at the times as follows: (a) in the event that Parent (defined below), and/or Nation SLP, LLC receive payments in 2016 totaling at least USD$15,000,000 related to the funds received in the LP Financing, the Company shall pay to the Holder a principal payment of the Australian dollar equivalent of USD$10,000,000 within 10 business days of receiving such funds, and (b) in the event that Parent and/or Nation SLP, LLC receive payments in 2017 totaling at least USD$10,000,000 related to the funds received in the LP Financing or a similar subsequent financing, the Company shall pay to the Holder a principal payment of the Australian dollar equivalent of USD$5,000,000 within 10 business days of receiving such funds.

4.            Guaranty. The Company’s obligations under this Note are hereby guaranteed as to prompt payment and performance by Nation Energy, Inc., a Wyoming corporation (“Parent”). Parent is currently the sole shareholder of the Company.

5.            Holder Covenant. Holder hereby covenants that, when Holder receives any payment under this Note, to the extent Holder has outstanding payment obligations to third parties for services performed or goods provided in the exploration blocks that are the subject of the Earning Agreements, Holder shall use the funds received as payment under this Note to pay, to the fullest extent possible, such outstanding payment obligations.

6.            Transfer; Successors and Assigns. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the Company and the Holder. Notwithstanding the foregoing, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Company. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note (or an indemnity agreement if the Note is lost, stolen or destroyed) for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note. The Company cannot assign this Note or its obligations or rights hereunder without the approval of the Holder.

7.            Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the Company and the Holder shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

8.            Notices. All notices and other communications given or made pursuant to this Note shall be in writing and shall be deemed effectively given upon: (a) personal delivery to the party to be notified, (b) when sent, if received by electronic mail or facsimile during normal business hours of the recipient, and if not received during normal business hours, then on the recipient’s next business day, (c) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) three (3) business days after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature pages to the Purchase Agreement, or as subsequently modified by written notice.

9.            Amendments and Waivers. Any term of this Note may be amended only with the written consent of the Company and the Holder.

10.          Entire Agreement. This Note, and the documents referred to herein and therein, constitute the entire agreement between the Company and the Holder pertaining to the subject matter hereof and thereof, and any and all other written or oral agreements existing between the Company and the Holder are expressly canceled.

11.          Interest Rate Limitation. Notwithstanding anything to the contrary contained in this Note, the interest paid or agreed to be paid under the Earning Agreements shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Holder shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal remaining owed under this Note or, if it exceeds such unpaid principal, refunded to the Company. In determining whether the interest contracted for, charged, or received by the Holder exceeds the Maximum Rate, the Holder may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of this Note.

12.          Loss of Note. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Note, the Company shall execute and deliver, in lieu of this Note, a new Note executed in the same manner as this Note, in the same principal amount as the unpaid principal amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties have executed this Promissory Note as of the date first set forth above.

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ John R. Hislop

/s/ Darrel Causbrook

Director

John R. Hislop

Director

Darrel Causbrook

Print name

Print name

Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

GUARANTOR:

nation ENERGY INC.

By:   /s/ Carmen J. Lotito

                           (Signature)

Name: Carmen J. Lotito

Title:     Vice President

HOLDER’S ADDRESS:

Paltar Petroleum Limited

Level 10, 32 Martin Place

Sydney, New South Wales 2000

[Signature Page to Promissory Note]

EX-10.49 8 sjdocs-7219423v2lotito_servi.htm sjdocs-7219423v2lotito_servi.htm - Generated by SEC Publisher for SEC Filing

MANAGEMENT SERVICES AGREEMENT

THIS MANAGEMENT SERVICES AGREEMENT (this “Agreement”), dated June 25, 2016 but effective as of July 22, 2015, is made by and between Nation Energy (Australia) Pty Ltd, an Australian limited company (the “Company”), and Carmen J. Lotito, a resident of Colorado (the “Advisor”).

WHEREAS, on the terms and subject to the conditions contained in this Agreement, the Company desires to obtain certain operational, management and consulting services from the Advisor and the Advisor desires to perform such services for the Company.

NOW, THEREFORE, in consideration of the premises and the respective mutual agreements, covenants, representations and warranties contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.     Engagement of Advisor. The Company appoints the Advisor and the Advisor accepts appointment on the terms and conditions provided in this Agreement as advisor to the Company, its direct and indirect subsidiaries and its direct and indirect affiliates (collectively, the “Nation Group”), including any other corporations or other entities hereafter formed or acquired by any member of the Nation Group to engage in any business. The parties expressly acknowledge that the Advisor is also an officer of the Company. Additionally, the parties expressly acknowledge that the Advisor may be elected or appointed to director, manager or officer positions of other companies in the Nation Group. It is understood that the Advisor’s rights and obligations hereunder shall be independent of the Advisor’s director, manager or officer positions with the Company or other members of the Nation Group.

2.     Services of the Advisor. Subject to any limitations imposed by applicable law or regulation, the Advisor shall render or cause to be rendered operational, management, consulting, accounting and financial services to the Company and the other members of the Nation Group as requested from time to time by the Board of Directors of the Company (the “Board”) and agreed to by the Advisor, which services may include advice and assistance concerning any and all aspects of the operations, planning and financing of the Company and the other members of the Nation Group and conducting relations on behalf of the Company or the other members of the Nation Group with accountants, attorneys, financial advisors and other professionals. The Advisor shall provide and devote to the performance of this Agreement such time and resources of the Advisor as the Advisor shall deem appropriate to the furnishing of the services hereunder. In addition, the Advisor shall, as requested by the Board and agreed to by the Advisor, render advice and expertise in connection with any acquisitions or dispositions undertaken by the Company or the other members of the Nation Group.

3.     Reimbursement of Expenses; Independent Contractor. All obligations or expenses incurred by the Advisor in the performance of his duties under this Agreement shall be for the account of, on behalf of, and at the expense of the Company, and all such expenses shall be promptly reimbursed by the Company. The Advisor shall not be obligated to make any advance to or for the account of the Company or any other member of the Nation Group or to pay any sums, except out of funds held in accounts maintained by the Company or any other member of the Nation Group, nor shall the Advisor be obligated to incur any liability or obligation for the account of the Company or any other member of the Nation Group. The Company shall reimburse the Advisor by wire transfer of immediately available funds for any amount paid by the Advisor, which shall be in addition to any other amount payable to the Advisor under this Agreement. The Advisor shall be an independent contractor, and nothing in this Agreement shall be deemed or construed to (i) create a partnership or joint venture between the Company or any other member of the Nation Group and the Advisor, (ii) cause the Advisor to be responsible in any way for the debts, liabilities or obligations of the Company or any other party, or (iii) cause the Advisor to be an officer, employee or agent of the Company or any other member of the Nation Group.

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4.     Other Activities of the Advisor; Investment Opportunities. The Company acknowledges and agrees that the Advisor shall not be required to devote full time and business efforts to the duties of the Advisor specified in this Agreement, but instead shall devote only so much of such time and efforts as the Advisor reasonably deems necessary. The Company further acknowledges and agrees that the Advisor is engaged in the business of investing in, acquiring and/or managing businesses for his own account, and for the account of other unaffiliated parties, and understands that the Advisor plans to continue to be engaged in such business (and other business or investment activities) during the term of this Agreement. The Advisor makes no representations or warranties, express or implied, in respect of the services to be provided by the Advisor. Except as the Advisor may otherwise agree in writing after the date hereof: (a) the Advisor shall have the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly (i) engage in the same or similar business activities or lines of business as the members of the Nation Group or (ii) do business with any client or customer of the members of the Nation Group; (b) the Advisor shall not be liable to any member of the Nation Group for breach of any duty (contractual or otherwise) by reason of any such activities or of the Advisor’s participation therein; and (c) in the event that the Advisor acquires knowledge from a third party (not of the Nation Group) of a potential transaction or matter that may be a corporate opportunity for any member of the Nation Group, on the one hand, and the Advisor, on the other hand, or any other person or entity, the Advisor shall not have any duty (contractual or otherwise) to communicate or present such corporate opportunity to the Company or any other member of the Nation Group, and, notwithstanding any provision of this Agreement to the contrary, the Advisor shall not be liable to any member of the Nation Group for breach of any duty (contractual or otherwise) by reason of the fact that the Advisor directly or indirectly pursues or acquires such opportunity for himself, directs such opportunity to another person or entity, or does not present such opportunity to any member of the Nation Group. In no event will any the Advisor be liable to any member of the Nation Group for any indirect, special, incidental or consequential damages, including lost profits or savings, whether or not such damages are foreseeable, or in respect of any liabilities relating to any third party claims (whether based in contract, tort or otherwise) other than for claims relating to the services which may be provided by the Advisor hereunder (subject to Section 7 hereof).

5.     Compensation of the Advisor.

(a)     In consideration of the services to be rendered hereunder, the Company will pay to the Advisor a monthly fee in cash in the amount of Twenty Thousand Dollars ($20,000) (the “Consulting Fee”), payable in advance on the first (1^st) business day of each calendar month. The payment by the Company of the Consulting Fee hereunder is subject to any applicable restrictions contained in any Company debt financing agreements. If any such restrictions prohibit the payment of any installment of the Consulting Fee, such Consulting Fee installment shall accrue and the Company shall make such installment payment as soon as it is permitted to do so under such restrictions, plus pay interest thereon from the due date of such installment before giving effect to such restriction to the date of payment at an interest rate of 10% per annum. If the Company or other members of the Nation Group acquire or enter into any additional business operations after the date of this Agreement (each, an “Additional Business”), the Board and the Advisor will, prior to the acquisition or prior to entering into the business operations, in good faith, determine whether and to what extent the Consulting Fee should be increased as a result thereof. Any increase will be evidenced by a written supplement to this Agreement signed by the Company and the Advisor.

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(b)     Any payment pursuant to this Section 5 shall be made in cash by wire transfer(s) of immediately available funds to or among one or more accounts as designated from time to time by the Advisor to the Company in writing.

6.     Term. This Agreement shall commence effective as of the effective date hereof and shall remain in effect on a month-to-month basis. The Advisor may terminate this Agreement at any time upon written notice to the Company, such termination to be effective upon the Company’s receipt of such written notice. The Company may terminate this Agreement by giving written notice to the advisor at least one calendar month in advance of the termination date. No termination of this Agreement, whether pursuant to this Section 6 or otherwise, shall affect the Company’s obligations with respect to the fees, costs and expenses incurred by the Advisor in rendering services hereunder and not reimbursed by the Company as of the effective date of such termination. In addition, the provisions of Sections 7, 8, and 17 shall survive the termination of this Agreement and remain binding and in effect.

7.     Liability. The Advisor shall not be liable for any mistakes of fact, errors of judgment, or losses sustained by the Company or any of its subsidiaries or affiliates, or for any acts or omissions of any kind (including acts or omissions of the Advisor), except to the extent caused by intentional misconduct of the Advisor as finally determined by a court of competent jurisdiction.

8.     Indemnification of the Advisor. The Company and the other members of the Nation Group hereby agree to jointly and severally indemnify and hold harmless the Advisor from and against all losses, claims, liabilities, suits, costs, damages and expenses (including attorneys’ fees) arising from his performance of services hereunder. The Company and the other members of the Nation Group further agree to reimburse the Advisor on a monthly basis for any cost of defending any action or investigation (including attorneys’ fees and expenses), subject to an undertaking from the Advisor to repay the Company if the Advisor is determined not to be entitled to such indemnity.

9.     Assignment. Without the consent of the Advisor, the Company shall not assign, transfer or convey any of its rights, duties or interest under this Agreement, nor shall it delegate any of the obligations or duties required to be kept or performed by it hereunder. The Advisor shall not assign, transfer or convey any of his rights, duties or interest under this Agreement, nor shall he delegate any of his obligations or duties required to be kept or performed under this Agreement.

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10.     Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.

11.     No Waiver. The failure by any party to exercise any right, remedy or elections herein contained or permitted by law shall not constitute or be construed as a waiver or relinquishment for the future exercise of such right, remedy or election, but the same shall continue and remain in full force and effect. All rights and remedies that any party may have at law, in equity or otherwise upon breach of any term or condition of this Agreement, shall be distinct, separate and cumulative rights and remedies and no one of them, whether exercised or not, shall be deemed to be in exclusion of any other right or remedy.

12.     Amendment. The provisions of this Agreement may be amended or modified only with the prior written consent of the Company and the Advisor.

13.     Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the matters herein contained and any agreement hereafter made shall be ineffective to effect any change or modification, in whole or in party, unless such agreement is in writing and signed by the party against whom enforcement of the change or modification is sought.

14.     Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Colorado, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado.

15.     Successors. This Agreement and all the obligations and benefits hereunder shall inure to the successors and permitted assigns of the parties.

16.     Counterparts. This Agreement may be executed in multiple counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.

17.     Confidentiality. The Company may not disclose the terms of this Agreement except as may be required by applicable law or the rules of any exchange on which the Company’s or its affiliates’ securities are traded.

{Signatures on following page}

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IN WITNESS WHEREOF, the parties hereto have caused this Management Services Agreement to be executed and delivered as of the date first above written.

NATION ENERGY (AUSTRALIA) PTY LTD

By:   /s/ John R. Hislop

Name: John R. Hislop

Title:    CFO and Vice President

     /s/ Carmen J. Lotito

Carmen J. Lotito

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EX-10.41 9 sjdocs-7222058v1final_ep143e.htm sjdocs-7222058v1final_ep143e.htm - Generated by SEC Publisher for SEC Filing

EP 143 Final Earning Agreement

(Amending and Restating the Original EP 143 Earning Agreement)

Paltar Petroleum Limited (ACN 149 987 459)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.            Operator........................................................................................................................... 3

4.            Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 12

6.            Production Licences....................................................................................................... 13

7.            Default........................................................................................................................... 15

8.            Relinquishments and renewals....................................................................................... 16

9.            Transfer of interest or rights........................................................................................... 17

10.         Withdrawal from Agreement..................................................................................................... 18

11.         Relationship of Parties and Tax...................................................................................... 19

12.         Confidential Information............................................................................................... 20

13.         Force majeure................................................................................................................ 21

14.         Notices........................................................................................................................... 22

15.         Applicable law and arbitration....................................................................................... 24

16.         Term.............................................................................................................................. 24

17.         General provisions......................................................................................................... 25

18.         Definitions..................................................................................................................... 27

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 4 and 5

Annex 1:      Accounting Procedure

EP 143 Final Earning Agreement

(Amending and Restating the Original EP 143 Earning Agreement)

Dated 31 May 2016

Parties

Paltar Petroleum Limited (ACN 149 987 459) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Paltar)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Paltar and Sweetpea each own an undivided 50% interest in the Permit.

B.                 Paltar and Sweetpea associated themselves under the JVOA as an unincorporated joint venture to conduct petroleum exploration on lands covered by the Permit and certain other permits granted under the Petroleum Act.

C.                 Under the JVOA, Paltar has the right to designate a specific Block covered by the Permit, which will then cause that designated Block and all diagonally contiguous Blocks in a checkerboard pattern within the Permit to be allocated to Paltar.

D.                Under the Petroleum Act, Paltar may apply for a Production Licence covering one or more of the Blocks allocated to it after discovering a commercially exploitable accumulation of petroleum.

E.                 The Parties entered into the EP 143 Earning Agreement dated 30 August 2015 (as amended by a Master Amendment dated 17 December 2015 and a Second Master Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Paltar to earn interests in any Production Licenses that might be earned covering certain Blocks in EP 143. The cash consideration and share consideration required by this Original Earning Agreement have not yet been paid to Paltar, but the Parties now wish by this Agreement to (i) ratify and confirm the effectiveness of the Original Earning Agreement, (ii) enlarge the time allowed for payment and delivery of the consideration, (iii) combine this Original Earning Agreement with the promised but not yet delivered Additional EP 143 Earning Agreement described in the following recital F, and (iv) ratify, amend, combine, enlarge, and replace the Original Earning Agreement.

F.                  Paltar promised Nation an Additional EP 143 Earning Agreement (the “Additional Earning Agreement”) in the third restated letter agreement dated 30 August 2015, as subsequently amended, which was intended to allow Paltar to earn interests in Production Licenses, if any, that might be earned covering certain Blocks in EP 143 not subject to the Original Earning Agreement. The Additional Earning Agreement was never executed, however, and the Parties now wish by this Agreement to fulfil the promise of an Additional Earning Agreement by combining the Blocks, consideration, and earning procedures in the Original Earning Agreement with those anticipated in the unexecuted Additional Earning Agreement.

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G.                Paltar and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 143 and certain other assets of Paltar. Nation Wyoming has decided to release and terminate this Option, and wishes instead for Nation to enter into an earning agreement covering all of the Paltar Blocks in EP 143 not included under the Earning Agreement or the promised Additional Earning Agreement. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation if one or more Production Licences are issued to Paltar covering one or more of the Paltar Blocks.

Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, combine it with the anticipated Second Earning Agreement, expand it to cover all other Paltar Blocks in the Permit, and restate and replace it as follows:

1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Paltar its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by a Paltar subsidiary, Officer Petroleum Pty Ltd) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$4,807,723. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement and an additional A$4,038,580 as consideration for the right to earn Production Licences in the new Blocks being added under this Agreement.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,430

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shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,145 shares as consideration for the right to earn Production Licences in the new Blocks being added under this Agreement.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Paltar covering any of the Paltar Blocks.

3.                Operator

3.1              Designation of Operator

Paltar is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

3.2              Rights and Duties of Operator

(a)                Subject to the terms and conditions of the JVOA and this Agreement, Paltar shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Paltar Blocks under the overall direction of the Operating Committee. Paltar may employ independent contractors and agents, including Related Bodies Corporate, in such Operations.

(b)               Paltar warrants and represents to Nation that the JVOA and Paltar’s Participating Interest under the JVOA are in good standing and are not subject to any breach, default or other circumstance that will or may result in the JVOA terminating or Paltar’s Participating Interest under the JVOA being surrendered, transferred or assigned or becoming subject to any Encumbrance. Paltar shall:

(i)                 perform all actions necessary to comply with the requirements imposed upon it by the JVOA;

(ii)               take all steps as are necessary or appropriate under the JVOA to:

(A)             maintain its position as Operator under the JVOA and use its positon as Operator under the JVOA to achieve the objectives of this Agreement;

(B)              implement the decisions of the Operating Committee, including by making all decisions and casting all votes under the JVOA consistently with the decisions of the Operating Committee; and

(C)              without limiting clause 5.1(d), and subject to applicable Government requirements, ensure that all Work Programs and Budgets, including the Initial Work Program, and any of Paltar’s Sole Risk Exploration (as those terms are defined in the JVOA) consist of work to be performed on or for the benefit of the Paltar Blocks,

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(iii)             not grant, create or allow the grant or creation of any Encumbrance over Paltar’s Participating Interest as defined in the JVOA without the prior written consent of Nation;

(iv)             not sell, transfer, assign or otherwise dispose of or part with possession of Paltar’s Participating Interest under the JVOA without the prior written consent of Nation;

(v)               immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Paltar’s Participating Interest under the JVOA becoming the subject of an Encumbrance or being surrendered, transferred, assigned or disposed of; and

(vi)             take all steps as are necessary or appropriate to ensure that the application for, grant and transfer of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Paltar shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

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(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Paltar personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.3              Paltar Personnel

(a)                Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.4              Information Supplied by Paltar

(a)                Paltar shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Paltar to a Government.

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(b)               Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c)                Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.5              Settlement of Claims and Lawsuits

(a)                Paltar shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Paltar shall represent Nation and defend or oppose the claim or suit. Paltar may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Paltar shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.6              Limitation on Liability of Paltar

(a)                Except as set out in clause 3.6(c), neither Paltar nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(b)               Except as set out in clause 3.6(c), Nation shall defend and indemnify Paltar and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(c)                Notwithstanding Clauses 3.6(a) and 3.6(b), if any Senior Supervisory Personnel of Paltar or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in Clauses 3.6(a) or 3.6(b), then Paltar shall be liable for such damages, loss, cost, expense and liability.

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(d)               Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.6(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.7              Insurance Obtained by Paltar

(a)                Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Paltar shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Paltar with certificates reflecting such insurance prior to the commencement of their services.

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3.8              Resignation

Subject to clause 3.10, Paltar may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

3.9              Removal

(a)                Paltar shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.10, Paltar shall be removed upon receipt of notice from any Party if:

(i)                 Paltar becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Paltar's assets.

(c)                Subject to clause 3.10, Paltar may be removed by written notice from Nation if Paltar has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.10          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.8 or clause 3.9:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Paltar has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Paltar disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.9(c) and proceedings are initiated pursuant to clause 15.2, Paltar shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

(c)                Paltar, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Paltar, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Paltar as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

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(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Paltar shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Paltar Blocks and to Operations. Upon delivery of the above-described property and data, Paltar shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

3.11          Commingling of Funds

Paltar may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.12          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1              Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Paltar concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2              Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

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4.3              Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

4.4              Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5              Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6              Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

4.7              Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Paltar's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

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(b)               Paltar shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

4.8              Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Paltar alone.

4.9              Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Paltar considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Paltar and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Paltar within five days after receipt of Paltar's notice request that the proposal be decided at a meeting rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(b), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Paltar shall give Nation a confirmation notice stating the tabulation and results of the vote.

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5.                Work Programs and Budgets

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fourth and fifth Permit Years is attached as Schedule 2.

(b)               Work Programs and Budgets for years after the fifth Permit Year will be determined under the JVOA. On or before the first day of May of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget to be proposed under the JVOA; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted as the proposal to be made by Paltar under the JVOA, so long as such proposed Work Program and Budget (i) consists solely of work to be performed on or for the benefit of the Paltar Blocks and (ii) will satisfy all of the Minimum Work Obligations of that Permit Year.

(c)                Each year after the fifth Permit Year, Paltar will initially propose to the Beetaloo Joint Venture Management Committee the Work Program and Budget developed under the preceding clause 5.1(b). If this initial Paltar proposal for a particular year is not adopted by such Management Committee, then Paltar will have sole authority to negotiate, propose, vote, and otherwise act in respect of subsequent proposals in Paltar’s sole discretion. Paltar will not be required to consult or seek the approval of Nation in connection with its actions relating to these subsequent proposals, although it will endeavour to keep Nation informed concerning these proposals and to consider any views that may be expressed by Nation.

(d)               Any approved Work Program and Budget may, subject to the applicable requirements of the JVOA, be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Sole Risk Exploration Work Programs and Budgets

(a)                If less than all of the work initially proposed to the Beetaloo Venture Management Committee is ultimately included in the approved Work Program and Budget by the Beetaloo Venture for that year, then either Paltar or Nation may propose to the Operating Committee that some or all of the omitted work be proposed to the Beetaloo Venture Participants under a Sole Risk Exploration Notice, as that term is defined in the JVOA.

(b)               The Operating Committee decision whether to propose such omitted work to the Beetaloo Venture Participants shall be decided by Nation alone.

(c)                If the Operating Committee decides to propose such omitted work to the Beetaloo Venture Participants, Paltar shall take all action necessary to comply with the Sole Risk Exploration Notice requirements of the JVOA and to cause such work to be timely commenced.

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5.3              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs actually incurred for the third Permit Year, together with the Work Program and Budget costs estimated for the fourth Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for subsequent years will be delivered to Paltar on or before the date which is the 150th day anniversary following the date on which the applicable Permit was granted; and

(iii)             Amounts in addition to the estimated amounts set forth in approved Work Programs and Budgets, whether incurred as a result of cost overruns, unforeseen events, or otherwise, will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

6.                Production Licences

6.1              Decision to Apply

(a)                If a Discovery is made on a Paltar Block, Paltar shall deliver any notice of Discovery required under the Petroleum Legislation and shall as soon as possible submit to the Operating Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence covering such Paltar Block shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Upon the grant of a Production Licence for a Paltar Block and the receipt of all necessary transfers to Paltar from any other party to the JVOA concerning the Paltar Block, Paltar will deliver to Nation registrable transfer forms of Paltar’s entire interest in the Production Licence, insofar as it covers each Paltar Block, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation must deliver to Paltar the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government. Paltar’s interest in the Production Licence shall be transferred to Nation free from any Encumbrance except as set out in clause 6.2(b); provided, that, Paltar shall be entitled to reserve for itself an overriding royalty with respect to all petroleum produced from each Paltar Block covered by the Production Licence with such royalty being equal to the

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difference between 25% and the sum of the existing royalty burdens shown in Schedule 1 applicable to the relevant Paltar Block such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Paltar will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Nation shall be entitled to that Paltar Block and shall assume all the obligations of (and be assigned all the benefits of):

(i)                   the Exploration Agreements that relate to that Paltar Block; and

(ii)                 the royalty burdens set forth in Appendix 1 in relation to that Paltar Block;

and Paltar shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Paltar.

(c)                Upon the grant of a Production Licence for a Paltar Block, Paltar will be deemed to have resigned as Operator with respect to such Paltar Block.

(d)               Upon transfer of a Production Licence to Nation pursuant to this clause 6.2, this Agreement will cease to apply to the Paltar Block covered by that Production Licence.

(e)                Paltar and Nation will, contemporaneously with the reservation of the royalty described in clause 6.2(a), enter into an overriding royalty agreement which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Paltar shall deliver to the Operating Committee within 60 days after the determination a proposed Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Legislation, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

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7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.3(b). Paltar shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Paltar until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Paltar.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses actually incurred for the third Permit Year or to contribute the Work Program Expenses for the fourth or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Paltar Blocks and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the sixth or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Paltar may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Paltar wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either (i) to notify Paltar that it accepts Paltar’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Paltar, it will be deemed to have accepted Paltar’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Paltar effective as of the date Paltar sends notice of its desire to purchase the interest and of the fair market value.

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If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Paltar, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Paltar may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the fourth and fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation’s interest in this Agreement under this clause 7.

8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Paltar to relinquish any portion of the area covered by the Permit, the decision as to the lands to be relinquished will be made under the JVOA. Paltar will use its best endeavors to ensure that the Paltar Blocks will not be relinquished, although it may not be successful.

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8.2              Extension of the Term

Decisions to renew the Permit will be made under the JVOA, and Nation will be bound by the renewal work program and all other consequences of the renewal.

8.3              Surrender of Permit or Licence

If Paltar wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

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(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the fifth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the fifth Permit Year by providing written notice to Paltar at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any Encumbrance, unless Paltar is willing to accept the assignment reflecting the withdrawal subject to any such Encumbrance and any necessary consents are obtained from the holder of such Encumbrance.

10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

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11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Paltar shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

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(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Paltar;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

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(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Paltar and other parties to the JVOA; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that Clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Paltar of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Paltar, immediately deliver to Paltar all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

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(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Paltar maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

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(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Paltar Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

                        e-mail: darrel.causbrook@causbrooks.com.au

Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

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15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the Northern Territory, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until all of the Paltar Blocks are covered by Production Licence; until Nation withdraws from the Agreement under clause 10.

(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after December 31, 2016, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum

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Act. Paltar shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Paltar's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Paltar shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising

26

under this Agreement, Paltar is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

17.10      Gender

Reference to any gender includes a reference to all other genders.

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17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

No clause within this document can be used by any person as defence to any action brought under the Criminal Code or Corporations Act.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Beetaloo Joint Venture Management Committee means the committee formed under clause 6.1 of the JVOA.

Beetaloo Joint Venture Participants means Paltar and Sweetpea.

Blocks means the numbered blocks that each graticular section of the Northern Territory is divided into pursuant to Section 8 of the Petroleum Act and Block is a reference to any one of them.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

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(a)              any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(b)              any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Corporations Act means the Corporations Act 2001 (Cth).

Discovery means the discovery of an accumulation of petroleum whose existence until that moment was unproven by drilling.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Exploration Agreements means the agreement dated 18 July 2012 among Sweetpea, the Native Title Party (as that term is defined in the Exploration Agreement), and Northern Land Council, and any other agreement entered into in accordance with the provisions of the Native Title Act or the Aboriginal Land Rights Act in relation to the Permit.

Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.6(b).

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JVOA means the Joint Venture and Operating Agreement dated 16 September 2011 between Paltar and Sweetpea.

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Northern Territory and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Native Title Claims means either:

(a)               any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(b)             any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of the Northern Territory or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of the Northern Territory including the Northern Territory Aboriginal Sacred Sites Act (NT) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the following activities required for the operation of the Permit in accordance with this Earning Agreement:

(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

30

(c)               preparation, development and carrying out of exploration and appraisal programs on the Paltar Blocks;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs;

but excluding any exploration or appraisal work physically conducted on lands other than the Paltar Blocks.

Operator has the meaning given to it in the 1993 NT Onshore Petroleum Directions.

Paltar Block has the meaning set forth in clause 11.2(b) of the JVOA.

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

Permit means Exploration Permit 143 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Year means a year beginning 28 August and ending the following 27 August.

Petroleum Act means the Petroleum Act 2009 (NT).

Production Licence has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in section 50 of the Corporations Act.

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Sole Risk Exploration Notice means a notice given by a Beetaloo Venture Participant in respect of Sole Risk Exploration under clause 8.1 of the JVOA.

Sweetpea means Sweetpea Petroleum Pty Limited (ACN 074 750 879).

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

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Work Program and Budget means an annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

(e)              except where expressly indicated otherwise, all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

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18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

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Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.      Stock Purchase and Exploration Agreement between MAB Resources LLC and Robert L. Bayless Estate, et al, dated 9 November 2005, as amended

8%

2.      Acquisition and Consulting Agreement between MAB Resources LLC and Petrohunter Energy Corporation dated 1 January 2007 , as amended

4% (after proportionate reduction), decreasing to 3.9% after one million barrels have been produced from EP 136 and 143, and decreasing again to 3.85% after one billion barrels have been produced from lands covered by the two permits

3.      Exploration Agreement among Sweetpea, Native Title Party and Northern Land Council dated 18 July 2012

2%, increasing to 4% after one million barrels have been produced from EP 136 and 143, and increasing again to 5% after one billion barrels have been produced from lands covered by the two permits

4.      Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)

10%

And see clause 6.2(a) of the Agreement for an additional overriding royalty that will be reserved by Paltar when assigning its interest in each Paltar Block covered by a Production Licence, so that the effective net revenue interest in the hands of Nation will be 75% of 100%.

Schedule 2 – Work Program and Budget (all values in $ AUD)

Work to be performed on or for the benefit of the Paltar Blocks:

          Permit Year 4 (28 Aug 2015 to 27 Aug 2016)

                  Begin drilling one horizontal exploration well                             $ 9,217,964

                  Geological and geophysical work                                                       415,848

                  Engineering, Geological and Geophysical Services                                    1,395,447

                                                                                                                        $11,029,259



          Permit Year 5 (28 Aug 2016 to 27 Aug 2017)

                  Complete the horizontal exploration well begun in Permit Year 4           $19,406,240

                  Geological and geophysical work                                                    3,604,016

                  Engineering, Geological and Geophysical Services                                     1,701,650

                                                                                                                      $24,711,906

Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

The permitting, spudding and setting of surface casing of the horizontal well will occur in Permit Year 4.   Completion of the drilling operations and all coring, testing and hydraulic fracturing operations will occur in Permit Year 5.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Northern Territory Department of Mines and Energy (“DME”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 14

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1         General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Paltar or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Paltar shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Paltar shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Paltar in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Paltar shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Paltar shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

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(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A$50,000.00).

1.5.2        Paltar shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Paltar, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Paltar so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Paltar's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Paltar but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Paltar on or before the due date, in the currencies requested or any other currencies acceptable to Paltar at a bank designated by Paltar. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4        Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Paltar be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Paltar may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5       If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Paltar within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Paltar's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Paltar's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Paltar is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Paltar at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Paltar shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Paltar shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Paltar shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Paltar is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Paltar.

1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Paltar during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Paltar for adjustment. Failure on the part of Nation to make claim on Paltar for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Paltar shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Paltar shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

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1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Paltar, shall have the right to audit the Operating Account and records of Paltar relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Paltar's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Paltar for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Paltar prior to the commencement of the audit. Paltar will provide the information in electronic format or hard copy documents, if electronic format is not available. Paltar will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Paltar shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Paltar for its Affiliates.

In addition to the information provided by Paltar under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Paltar relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

(a)      If the Affiliate of Paltar consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Paltar.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)    The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

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If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Paltar will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)    Paltar may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under Clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Paltar within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Paltar, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Paltar does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Paltar is required by law to employ a public accounting firm to audit the Operating Account and records of Paltar relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Paltar as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Paltar shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of Clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Paltar for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Paltar and Nation conducting the audit shall be reflected promptly in the Operating Account by Paltar and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Paltar will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2         Direct Charges

Paltar shall charge the Operating Account with all costs and expenditures incurred by Paltar for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in Clauses 2.7.2 and 2.7.3 which are provided by Paltar’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Petroleum Act when paid by Paltar in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Paltar of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Paltar for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

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Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Paltar's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under Clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Paltar shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Paltar's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Paltar's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

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2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Paltar and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Paltar, of Material purchased or furnished by Paltar, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and licence fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Paltar and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Paltar or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Paltar shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Paltar’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

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2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Paltar shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$50,000.00) as soon as practical after report of the same has been received by Paltar. All losses in excess of fifty thousand Australian dollars (A$50,000.00) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Paltar for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Paltar or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

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2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Paltar for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3         Indirect Charges

3.1              Purpose

Paltar shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Paltar and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Paltar and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Paltar requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under Clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Paltar's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the Year-to-Date indirect charges shall be a percentage of the aggregate Year-to-Date expenditures, calculated on the following scale:

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Annual Expenditures

$0 to A$3,000,000 of expenditures = 5 %

Next A$ 7,000,000 of expenditures = 4 %

Next A$11,000,000 of expenditures = 3 %

Excess above A$11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A$36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4         Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Paltar. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, licence fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

4.2              Materials Furnished by Paltar

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Paltar may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Paltar hall be priced at net cost determined in accordance with clause 4.1 above as if Paltar had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

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4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in Clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Paltar has no control, Paltar may charge the Operating Account for the required Material at Paltar's actual cost incurred procuring such Material, in making it suitable for use, and moving it to the area covered by the Permit, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Paltar) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A$50,000). Nation shall have the right, by so electing and notifying Paltar within seven days (or such shorter period as may be specified by Paltar) after receiving notice from Paltar, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Paltar both as to quality and time of delivery. Such acceptance by Paltar shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Paltar, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Paltar is not required to accept Material furnished in kind by Nation. If Paltar fails to submit proper notification prior to billing Nation for such Material, Paltar shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

4.4              Warranty of Material Furnished by Paltar

Paltar does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Paltar for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Paltar from the manufacturers or their agents.

Section 5         Disposal of Materials

5.1              Disposal

Paltar shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Paltar shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$50,000 or more. When Operations are relieved of Material charged to the Operating Account, Paltar shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Paltar shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Paltar in the disposition of Materials shall be charged to the Operating Account.

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5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Paltar to the Operating Account at the net amount collected by Paltar from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Paltar.

Section 6         Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Paltar of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Paltar shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Paltar, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Paltar provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

EX-10.42 10 sjdocs-7222060v1final_ep231e.htm sjdocs-7222060v1final_ep231e.htm - Generated by SEC Publisher for SEC Filing

EP 231 Final Earning Agreement

(Amending and Restating the Original EP 231 Earning Agreement)

Paltar Petroleum Limited (ACN 149 987 459)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.         Farm-in and Operator....................................................................................................... 3

4.         Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 12

6.            Production Licences....................................................................................................... 14

7.            Default........................................................................................................................... 15

8.            Relinquishments and renewals....................................................................................... 17

9.            Transfer of interest or rights........................................................................................... 17

10.         Withdrawal from Agreement..................................................................................................... 18

11.         Relationship of Parties and Tax...................................................................................... 19

12.         Confidential Information............................................................................................... 21

13.         Force majeure................................................................................................................ 22

14.         Notices........................................................................................................................... 23

15.         Applicable law and arbitration....................................................................................... 24

16.         Term.............................................................................................................................. 24

17.         General provisions......................................................................................................... 25

18.         Definitions..................................................................................................................... 27

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 4 and 5

Annex 1:      Accounting Procedure

EP 231 Final Earning Agreement

(Amending and Restating the Original EP 231 Earning Agreement)

Dated 31 May 2016

Parties

Paltar Petroleum Limited (ACN 149 987 459) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Paltar)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Paltar owns the Permit.

B.                 The Parties entered into the EP 231 Earning Agreement dated 30 August 2015 (as amended by a Master Amendment dated 17 December 2015 and a Second Master Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Paltar to earn interests in the Permit and any Production Licenses that might be earned covering certain Blocks in EP 231. The cash consideration and share consideration required by this Original Earning Agreement have not yet been paid to Paltar, but the Parties now wish by this Agreement to (i) ratify and confirm the effectiveness of the Original Earning Agreement, (ii) enlarge the time allowed for payment and delivery of the consideration, (iii) combine this Original Earning Agreement with the promised but not yet delivered Additional EP 231 Earning Agreement described in the following recital C, and (iv) ratify, amend, combine, enlarge, and replace the Original Earning Agreement.

C.                 Paltar promised Nation an Additional EP 231 Earning Agreement (the “Additional Earning Agreement”) in the third restated letter agreement dated 30 August 2015, as subsequently amended, which was intended to allow Paltar to earn interests in Production Licenses, if any, that might be earned covering certain Blocks in EP 231 not subject to the Original Earning Agreement. The Additional Earning Agreement was never executed, however, and the Parties now wish by this Agreement to fulfil the promise of an Additional Earning Agreement by combining the Blocks, consideration, and earning procedures in the Original Earning Agreement with those anticipated in the unexecuted Additional Earning Agreement.

D.                Paltar and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 231 and certain other assets of Paltar. Nation Wyoming has decided to release and terminate this Option, and wishes instead for Nation to enter into an earning agreement covering the Permit Area. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation in the Permit and any Production Licences issued to Paltar in the Permit Area.

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Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, combine it with the anticipated Second Earning Agreement, expand it to cover the Permit Area, and restate and replace it as follows:

1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Paltar its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by a Paltar subsidiary, Officer Petroleum Pty Ltd) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$1,906,433. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement and an additional A$1,137,290 as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,430 shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,145 shares as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Paltar covering any of the Permit Area.

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3.                Farm-in and Operator

3.1              Nation Interest

On Nation spending at least the Earning Amount in Expenditure on or for the benefit of the Permit Area before the end of the Earning Period (Earning Date), Nation, on giving notice to Paltar verifying the amount of Expenditure Nation has incurred:

(a)                acquires a beneficial interest, to the extent of the Nation interest, in the Permit Area; and

(b)               will have the right to be transferred the Nation Interest in the Permit Area, in such manner and on such terms as do not materially increase the obligations owed the Government in respect of the area then covered by the Permit; and

3.2              Joint Venture Operating Agreement

On or as soon as practicable after the Earning Date the parties shall enter into an exploration joint venture operating agreement in respect of the Permit Area on terms customary for such an agreement in the Australian petroleum industry and under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Permit Area;

(b)               Paltar is the operator of the joint venture;

(c)                Nation shall contribute 100% of the actual Work Program Expenses under the joint venture operating agreement;

(d)               Nation shall not be permitted to withdraw from the joint venture operating agreement until the end of the fifth Permit Year;

(e)                the terms set out in clause 6.1 to 6.3 (inclusive) of this Agreement will be incorporated;

(f)                the terms of the Option in favour of Nation set out clauses 5.3 to 5.7 (inclusive) will be incorporated and, in the event that the Option is exercised by Nation with respect to a Production Licence, then the Production Licence will not form part of the joint venture property under the joint venture operating agreement from the date of exercise of the Option, and

(g)                upon entry into the joint venture operating agreement, the remaining effective clauses of this Agreement will immediately terminate with respect to the Permit Area, subject to any and all accrued rights and liabilities of the parties.

3.3              Designation of Operator

Paltar is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

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3.4              Rights and Duties of Operator

(a)                Paltar shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Permit Area under the overall direction of the Operating Committee. Paltar may employ independent contractors and agents, including Related Bodies Corporate of Paltar, in such Operations.

(b)               Paltar warrants and represents to Nation that the Permit and Paltar’s interest in the Permit is in good standing and is not subject to any breach, default or other circumstance that will or may result in the Permit being surrendered or cancelled or becoming subject to any Encumbrance. Paltar shall:

(i)                 without limiting clause 5.1(c) and subject to applicable Government requirements, ensure that each Work Program and Budget consists of work to be performed on or for the benefit of the Permit Area;

(ii)               not grant, create or allow the grant or creation of any Encumbrance over Paltar’s interest in the Permit without the prior written consent of Nation;

(iii)             not sell, transfer, assign or otherwise dispose of Paltar’s interest in the Permit or part with possession of the Permit without the prior written consent of Nation;

(iv)             immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Paltar’s interest in the Permit becoming the subject of an Encumbrance or being surrendered or cancelled; and

(v)               take all steps as are necessary or appropriate to ensure that the application for, grant and transfer or issue of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Paltar shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

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(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Paltar personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.5              Paltar Personnel

(a)                Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.6              Information Supplied by Paltar

(a)                Paltar shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

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(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Paltar to a Government.

(b)               Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c)                Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.7              Settlement of Claims and Lawsuits

(a)                Paltar shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Paltar shall represent Nation and defend or oppose the claim or suit. Paltar may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Paltar shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.8              Limitation on Liability of Paltar

(a)                Except as set out in clause 3.8(c), neither Paltar nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(b)               Except as set out in clause 3.8(c), Nation shall defend and indemnify Paltar and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental

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to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(c)                Notwithstanding clauses 3.8(a) and 3.8(b), if any Senior Supervisory Personnel of Paltar or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in clauses 3.8(a) or 3.8(b), then Paltar shall be liable for such damages, loss, cost, expense and liability.

(d)               Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.8(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.9              Insurance Obtained by Paltar

(a)                Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Paltar shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

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(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Paltar with certificates reflecting such insurance prior to the commencement of their services.

3.10          Resignation

Subject to clause 3.12, Paltar may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

3.11          Removal

(a)                Paltar shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.12, Paltar shall be removed upon receipt of notice from any Party if:

(i)                 Paltar becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Paltar's assets.

(c)                Subject to clause 3.12, Paltar may be removed by written notice from Nation if Paltar has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.12          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.10 or clause 3.11:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Paltar has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Paltar disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.11(c) and proceedings are initiated pursuant to clause 15.2, Paltar shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

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(c)                Paltar, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Paltar, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Paltar as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Paltar shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Permit Area and to Operations. Upon delivery of the above-described property and data, Paltar shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

3.13          Commingling of Funds

Paltar may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.14          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1              Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Paltar concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2              Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

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4.3              Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

4.4              Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5              Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6              Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

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4.7              Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Paltar's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

(b)               Paltar shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

4.8              Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Paltar alone.

4.9              Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Paltar considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Paltar and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Paltar within five days after receipt of Paltar's notice request that the proposal be decided at a meeting

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rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(a), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Paltar shall give Nation a confirmation notice stating the tabulation and results of the vote.

5.                Work Programs and Budgets; Production Licence Option

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fourth and fifth Permit Years is attached as Schedule 2.

(b)               On or before the first day of June of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted, so long as such proposed Work Program and Budget will satisfy all of the Minimum Work Obligations of that Permit Year.

(c)                Any approved Work Program and Budget may be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs incurred for the third Permit Year, together with the Work Program and Budget costs estimated for the fourth Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for the fifth and subsequent years will be delivered by Nation to Paltar quarterly in advance, based on anticipated cash requirements; and

(iii)             Required amounts in addition to estimated amounts will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

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5.3              Grant of Option

If, after the Earning Date, Nation acquires an undivided 25% interest in a Production Licence pursuant to clause 6.2(a) (the Acquisition Date), Paltar shall grant to Nation, in exchange for $100 and other good and valuable consideration, the sole and exclusive option (Option) to purchase at any time during the period commencing on the Acquisition Date and ending ninety (90) days later (the Option Period) the Paltar Interest in that Production Licence free from Encumbrances, other than those referred to in clause 5.5(b).

5.4              Exercise of Option

The Option may be exercised by Nation at any time during the Option Period by giving notice in writing to Paltar specifying that the Option has been exercised.

5.5              Transfer

(a)                As soon as practicable after the exercise of the Option in accordance with clause 5.4, Paltar will deliver to Nation registrable transfer forms of Paltar’s entire interest in the Production Licence, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation shall deliver to Paltar the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government.

(b)               Upon the effective transfer of Paltar’s entire interest in the Production Licence, Nation shall assume all the obligations (and be assigned all the benefits) of:

(i)                   the Exploration Agreements that relate to the Production Licence; and

(ii)                 the royalty burdens as set forth in Schedule 1 and as provided in clause 5.6(a),

and Paltar shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Paltar.

(c)                Upon the transfer of a Production Licence pursuant to this clause 5.5, this Agreement will cease to apply to the portion of the Permit Area covered by that Production Licence.

5.6              Consideration

(a)                In consideration for the transfer of the Paltar Interest to Nation, upon exercise of the Option, Paltar shall be entitled to an overriding royalty (not subject to proportionate reduction) with respect to all petroleum produced from the portion of the Permit Area covered by the Production Licence equal to the difference between 25% and the sum of the existing royalty burdens shown in Schedule 1, such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden

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set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Paltar will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Paltar and Nation will, as soon as practicable after the exercise of the Option, enter into an overriding royalty agreement under which Paltar holds the overriding royalty described in this clause and which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

5.7              Lapse of Option

In the event that the Option is not exercised within the Option Period then the Option will lapse and the parties shall use their best endeavours to enter a production joint venture operating agreement in respect of such Production Licence under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Production Licence; and

(b)               Nation is the operator of the joint venture; and

which is otherwise on terms standard for the Australian petroleum industry (including provisions for dilution of interests).

6.                Production Licences

6.1              Decision to Apply

(a)                If a Discovery is made in the Permit Area, Paltar shall deliver any Discovery notice required under the Petroleum Act and shall as soon as possible submit to the Operating Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Paltar acknowledges and agrees that, following the Earning Date, if a Production Licence is applied for and issued in respect of any area under the Permit Area in accordance with the terms of this Agreement, (i) Paltar’s undivided interest in such Production Licence will be equal to 75%, subject to the Option granted hereunder pursuant to clause 5.3, and Nation’s undivided interest in such Production Licence will be equal to 25%.

(b)               Upon the issue of a Production Licence, Paltar will be deemed to have resigned as Operator with respect to the Permit Area covered by the Production Licence.

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(c)                Upon the issue of a Production Licence to Nation pursuant to this clause 6.2, each clause of this Agreement, other than clauses 5.3 through 5.7. will cease to apply to the Permit Area covered by that Production Licence.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Paltar shall deliver to the Operating Committee within 60 days after the determination a proposed Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Act, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.2(b). Paltar shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Paltar until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Paltar.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses incurred for the third Permit Year or to contribute the Work Program Expenses for the fourth or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all Encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be

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requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Permit Area and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the sixth or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Paltar may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Paltar wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either to notify Paltar that it accepts Paltar’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Paltar, it will be deemed to have accepted Paltar’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Paltar effective as of the date Paltar sends notice of its desire to purchase the interest and of the fair market value.

If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Paltar, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Paltar may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the fourth and fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation’s interest in this Agreement under this clause 7.

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8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Paltar to relinquish any portion of the Permit Area, Paltar will consult with Nation before selecting the portion to be relinquished; the final decision concerning the relinquishment area will, however, be made by Paltar alone.

8.2              Extension of the Term

Decisions to renew the Permit will be made by the Operating Committee, although the Operating Committee decision whether to renew shall be decided by Nation alone. If the Operating Committee decides to renew, Nation will be bound by the renewal work program and all other consequences of the renewal; if the Operating Committee decides not to renew, Paltar may renew the Permit for its own account, and this Agreement will automatically terminate upon such renewal.

8.3              Surrender of Permit or Licence

If Paltar wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or

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otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the fifth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the fifth permit year by providing written notice to Paltar at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any Encumbrance, unless Paltar is willing to accept the assignment reflecting the withdrawal subject to any such Encumbrance and any necessary consents are obtained from the holder of such Encumbrance.

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10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Paltar shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

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11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

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(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Paltar;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Paltar; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Paltar of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Paltar, immediately deliver to Paltar all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

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12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Paltar maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

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14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Paltar Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

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                        e-mail: darrel.causbrook@causbrooks.com.au

Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the Northern Territory, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until Production Licences covering the entire Permit Area have been issued or until Nation witthdraws from the Agreement under clause 10.

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(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after March 31, 2017, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum Act. Paltar shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Paltar's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the

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business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Paltar shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Paltar is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

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17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

17.10      Gender

Reference to any gender includes a reference to all other genders.

17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

No clause within this document can be used by any person as defence to any action brought under the Criminal Code or Corporations Act.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Acquisition Date has the meaning ascribed thereto in clause 5.3.

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

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(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Blocks means the numbered blocks that each graticular section of the Northern Territory is divided into pursuant to Section 8 of the Petroleum Act and Block is a reference to any one of them.

Commencement Date means the date hereof.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

(a)               any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(b)             any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Corporations Act means the Corporations Act 2001 (Cth).

Discovery means the discovery of an accumulation of petroleum whose existence until that moment was unproven by drilling.

Earning Amount means $6,958,523 of Expenditures, which, for the avoidance of doubt, is an amount separate and apart from the Cash Consideration and the Share Consideration.

Earning Date has the meaning ascribed thereto in clause 3.1.

Earning Period means the period commencing on the Commencement Date and ending March 31, 2017.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Expenditure means expenditure in respect of Operations and other exploration on the Permit Area and includes all amounts spent on keeping the Permit in good standing or fulfilling obligations of Paltar with respect to the Permit.

Exploration Agreement means the agreement dated 27 June 2013 among Paltar, the Native Title Parties (as that term is defined in the Exploration Agreement), and Northern Land Council, and any other agreement entered into in accordance with the provisions of the Native Title Act or the Aboriginal Land Rights Act in relation to the Permit.

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Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.8(b).

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Northern Territory and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Nation Interest means an undivided twenty-five percent (25%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Native Title Claims means either:

(a)               any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(b)             any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of the Northern Territory or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

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Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of the Northern Territory including the Northern Territory Aboriginal Sacred Sites Act (NT) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the following activities required for the operation of the Permit in accordance with this Earning Agreement:

(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

(c)               preparation, development and carrying out of exploration and appraisal programs on the Permit Area;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs.

Operator has the meaning given to it in the 1993 NT Onshore Petroleum Directions.

Option has the meaning ascribed thereto in clause 5.3.

Option Period has the meaning ascribed thereto in clause 5.3.

Paltar Interest means an undivided seventy‑five percent (75%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

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Permit means Exploration Permit 231 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Area means the entire geographic area covered from time to time by the Permit.

Permit Year means a year beginning 5 September and ending the following 4 September.

Petroleum Act means the Petroleum Act 2009 (NT).

Production Licence has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in section 50 of the Corporations Act.

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

Work Program and Budget means an annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

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(e)              except where expressly indicated otherwise, all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

[Signature page follows]

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Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.     Exploration Agreement among Paltar, Native Title Parties and Northern Land Council

2%, increasing to 4% after one million barrels have been produced from EP 231, 232 and 234, and increasing again to 5% after one billion barrels have been produced from lands covered by the three permits

2.     Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)

10%

And see clause 5.6(a) of the Agreement for an additional overriding royalty that will be reserved by Paltar when assigning to Nation the Paltar Interest in any Production Licence, so that the effective net revenue interest in the Production Licence in the hands of Nation will, if Nation exercises its purchase option, be 75% of 100%.



\

Schedule 2 – Work Program and Budget (all values in $ AUD)

      Permit Year 4 (5 Sep 2015 to 4 Sep 2016)

            Drill one vertical exploration well                                                      $ 5,544,640

            Geological and geophysical work                                                             415,848

            Engineering, Geological and Geophysical Services                                 998,035

                                                                                                                       $ 6,958,523

      Permit Year 5 (5 Sep 2016 to 4 Sep 2017)

            Complete well drilled in Permit Year 4 and drill one new vertical well            $ 9,703,120 Geological and geophysical work                                                                                                2,439,642    Engineering, Geological and Geophysical Services                                                                                     998,035

                                                                                                                       $13,140,797

Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

Completion and testing of drill well in Permit Year 4 occurs in Permit Year 5.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Northern Territory Department of Mines and Energy (“DME”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 13

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1          General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Paltar or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Paltar shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Paltar shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Paltar in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Paltar shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Paltar shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

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(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A $50,000.00).

1.5.2        Paltar shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Paltar, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Paltar so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Paltar's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Paltar but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Paltar on or before the due date, in the currencies requested or any other currencies acceptable to Paltar at a bank designated by Paltar. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4        Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Paltar be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Paltar may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5        If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Paltar within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Paltar's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Paltar's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Paltar is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Paltar at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Paltar shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Paltar shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Paltar shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Paltar is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Paltar.

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1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Paltar during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Paltar for adjustment. Failure on the part of Nation to make claim on Paltar for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Paltar shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Paltar shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Paltar, shall have the right to audit the Operating Account and records of Paltar relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Paltar's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Paltar for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Paltar prior to the commencement of the audit. Paltar will provide the information in electronic format or hard copy documents, if electronic format is not available. Paltar will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Paltar shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Paltar for its Affiliates.

In addition to the information provided by Paltar under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Paltar relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

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(a)      If the Affiliate of Paltar consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Paltar.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)     The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Paltar will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)     Paltar may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Paltar within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Paltar, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Paltar does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Paltar is required by law to employ a public accounting firm to audit the Operating Account and records of Paltar relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Paltar as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Paltar shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Paltar for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Paltar and Nation conducting the audit shall be reflected promptly in the Operating Account by Paltar and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Paltar will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2          Direct Charges

Paltar shall charge the Operating Account with all costs and expenditures incurred by Paltar for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in clauses 2.7.2 and 2.7.3 which are provided by Paltar’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

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2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Petroleum Act when paid by Paltar in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Paltar of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Paltar for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Paltar's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Paltar shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

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2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Paltar's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Paltar's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Paltar and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Paltar, of Material purchased or furnished by Paltar, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and Licence fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Paltar and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Paltar or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Paltar shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

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2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Paltar’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Paltar shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$50,000.00) as soon as practical after report of the same has been received by Paltar. All losses in excess of fifty thousand Australian dollars (A$50,000.00) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

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2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Paltar for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Paltar or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Paltar for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3          Indirect Charges

3.1              Purpose

Paltar shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Paltar and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Paltar and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Paltar requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

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3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Paltar's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the Year-to-Date indirect charges shall be a percentage of the aggregate Year-to-Date expenditures, calculated on the following scale:

Annual Expenditures

$0 to A$3,000,000 of expenditures = 5 %

Next A$7,000,000 of expenditures = 4 %

Next A$11,000,000 of expenditures = 3 %

Excess above A$11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A $36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4          Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Paltar. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, Licence fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

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4.2              Materials Furnished by Paltar

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Paltar may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Paltar hall be priced at net cost determined in accordance with clause 4.1 above as if Paltar had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Paltar has no control, Paltar may charge the Operating Account for the required Material at Paltar's actual cost incurred procuring such Material, in making it suitable for use, and moving it to Permit area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Paltar) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A $50,000.00). Nation shall have the right, by so electing and notifying Paltar within seven days (or such shorter period as may be specified by Paltar) after receiving notice from Paltar, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Paltar both as to quality and time of delivery. Such acceptance by Paltar shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Paltar, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Paltar is not required to accept Material furnished in kind by Nation. If Paltar fails to submit proper notification prior to billing Nation for such Material, Paltar shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

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4.4              Warranty of Material Furnished by Paltar

Paltar does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Paltar for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Paltar from the manufacturers or their agents.

Section 5          Disposal of Materials

5.1              Disposal

Paltar shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Paltar shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$50,000 or more. When Operations are relieved of Material charged to the Operating Account, Paltar shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Paltar shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Paltar in the disposition of Materials shall be charged to the Operating Account.

5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Paltar to the Operating Account at the net amount collected by Paltar from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Paltar.

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Section 6          Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Paltar of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Paltar shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Paltar, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Paltar provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

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EP 232 Final Earning Agreement

(Amending and Restating the Original EP 232 Earning Agreement)

Paltar Petroleum Limited (ACN 149 987 459)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.         Farm-in and Operator....................................................................................................... 2

4.         Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 11

6.            Production Licences....................................................................................................... 13

7.            Default........................................................................................................................... 14

8.            Relinquishments and renewals....................................................................................... 16

9.            Transfer of interest or rights........................................................................................... 16

10.         Withdrawal from Agreement..................................................................................................... 17

11.         Relationship of Parties and Tax...................................................................................... 18

12.         Confidential Information............................................................................................... 20

13.         Force majeure................................................................................................................ 21

14.         Notices........................................................................................................................... 22

15.         Applicable law and arbitration....................................................................................... 23

16.         Term.............................................................................................................................. 23

17.         General provisions......................................................................................................... 24

18.         Definitions..................................................................................................................... 26

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 3 and 4

Annex 1:      Accounting Procedure

EP 232 Final Earning Agreement

(Amending and Restating the Original EP 232 Earning Agreement)

Dated 31 May 2016

Parties

Paltar Petroleum Limited (ACN 149 987 459) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Paltar)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Paltar owns the Permit.

B.                 The Parties entered into the EP 232 Earning Agreement dated 30 August 2015 (as amended by a Master Amendment dated 17 December 2015 and a Second Master Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Paltar to earn interests in the Permit and any Production Licenses that might be earned covering certain Blocks in EP 232. The cash consideration and share consideration required by this Original Earning Agreement have not yet been paid to Paltar, but the Parties wish to ratify and confirm the Original Earning Agreement; enlarge the time allowed for payment and delivery of the consideration; and, as more fully explained in the following recital, amend, enlarge, restate and replace the Original Earning Agreement.

C.                 Paltar and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 232 and certain other assets of Paltar. Nation Wyoming has decided to release and terminate the Option, and wishes instead for Nation to amend the Original Earning Agreement so that it covers the entire Permit Area. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation in the Permit and any Production Licences issued to Paltar in the Permit Area.

Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, expand it to cover the Permit Area, and restate and replace it as follows:

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1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Paltar its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by a Paltar subsidiary, Officer Petroleum Pty Ltd) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$769,143. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement, with no additional cash consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,430 shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,145 shares as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Paltar covering any of the Permit Area.

3.                Farm-in and Operator

3.1              Nation Interest

On Nation spending at least the Earning Amount in Expenditure on or for the benefit of the Permit Area before the end of the Earning Period (Earning Date), Nation, on giving notice to Paltar verifying the amount of Expenditure Nation has incurred:

(a)                acquires a beneficial interest, to the extent of the Nation interest, in the Permit Area; and

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(b)               will have the right to be transferred the Nation Interest in the Permit Area, in such manner and on such terms as do not materially increase the obligations owed the Government in respect of the area then covered by the Permit; and

3.2              Joint Venture Operating Agreement

On or as soon as practicable after the Earning Date the parties shall enter into an exploration joint venture operating agreement in respect of the Permit Area on terms customary for such an agreement in the Australian petroleum industry and under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Permit Area;

(b)               Paltar is the operator of the joint venture;

(c)                Nation shall contribute 100% of the actual Work Program Expenses under the joint venture operating agreement;

(d)               Nation shall not be permitted to withdraw from the joint venture operating agreement until the end of the fifth Permit Year;

(e)                the terms set out in clause 6.1 to 6.3 (inclusive) of this Agreement will be incorporated;

(f)                the terms of the Option in favour of Nation set out clauses 5.3 to 5.7 (inclusive) will be incorporated and, in the event that the Option is exercised by Nation with respect to a Production Licence, then the Production Licence will not form part of the joint venture property under the joint venture operating agreement from the date of exercise of the Option, and

(g)                upon entry into the joint venture operating agreement, the remaining effective clauses of this Agreement will immediately terminate with respect to the Permit Area, subject to any and all accrued rights and liabilities of the parties.

3.3              Designation of Operator

Paltar is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

3.4              Rights and Duties of Operator

(a)                Paltar shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Permit Area under the overall direction of the Operating Committee. Paltar may employ independent contractors and agents, including Related Bodies Corporate of Paltar, in such Operations.

(b)               Paltar warrants and represents to Nation that the Permit and Paltar’s interest in the Permit is in good standing and is not subject to any breach, default or other circumstance that will or may result in the Permit being surrendered or cancelled or becoming subject to any Encumbrance. Paltar shall:

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(i)                 without limiting clause 5.1(c) and subject to applicable Government requirements, ensure that each Work Program and Budget consists of work to be performed on or for the benefit of the Permit Area;

(ii)               not grant, create or allow the grant or creation of any Encumbrance over Paltar’s interest in the Permit without the prior written consent of Nation;

(iii)             not sell, transfer, assign or otherwise dispose of Paltar’s interest in the Permit or part with possession of the Permit without the prior written consent of Nation;

(iv)             immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Paltar’s interest in the Permit becoming the subject of an Encumbrance or being surrendered or cancelled; and

(v)               take all steps as are necessary or appropriate to ensure that the application for, grant and transfer or issue of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Paltar shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

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(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Paltar personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.5              Paltar Personnel

(a)                Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.6              Information Supplied by Paltar

(a)                Paltar shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Paltar to a Government.

(b)               Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the

6

preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c)                Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.7              Settlement of Claims and Lawsuits

(a)                Paltar shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Paltar shall represent Nation and defend or oppose the claim or suit. Paltar may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Paltar shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.8              Limitation on Liability of Paltar

(a)                Except as set out in clause 3.8(c), neither Paltar nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(b)               Except as set out in clause 3.8(c), Nation shall defend and indemnify Paltar and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(c)                Notwithstanding clauses 3.8(a) and 3.8(b), if any Senior Supervisory Personnel of Paltar or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in clauses 3.8(a) or 3.8(b), then Paltar shall be liable for such damages, loss, cost, expense and liability.

(d)               Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

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(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.8(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.9              Insurance Obtained by Paltar

(a)                Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Paltar shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Paltar with certificates reflecting such insurance prior to the commencement of their services.

3.10          Resignation

Subject to clause 3.12, Paltar may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

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3.11          Removal

(a)                Paltar shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.12, Paltar shall be removed upon receipt of notice from any Party if:

(i)                 Paltar becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Paltar's assets.

(c)                Subject to clause 3.12, Paltar may be removed by written notice from Nation if Paltar has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.12          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.10 or clause 3.11:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Paltar has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Paltar disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.11(c) and proceedings are initiated pursuant to clause 15.2, Paltar shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

(c)                Paltar, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Paltar, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Paltar as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Paltar shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Permit Area and to Operations. Upon delivery of the above-described property and data, Paltar shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

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3.13          Commingling of Funds

Paltar may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.14          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1              Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Paltar concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2              Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

4.3              Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

4.4              Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

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(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5              Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6              Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

4.7              Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Paltar's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

(b)               Paltar shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

4.8              Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Paltar alone.

4.9              Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

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4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Paltar considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Paltar and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Paltar within five days after receipt of Paltar's notice request that the proposal be decided at a meeting rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(a), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Paltar shall give Nation a confirmation notice stating the tabulation and results of the vote.

5.                Work Programs and Budgets; Production Licence Option

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the third and fourth Permit Years is attached as Schedule 2.

(b)               On or before the first day of July of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted, so long as such proposed Work Program and Budget will satisfy all of the Minimum Work Obligations of that Permit Year.

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(c)                Any approved Work Program and Budget may be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs incurred for the second Permit Year, together with the Work Program and Budget costs estimated for the third Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for the fourth and subsequent years will be delivered by Nation to Paltar quarterly in advance, based on anticipated cash requirements; and

(iii)             Required amounts in addition to estimated amounts will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

5.3              Grant of Option

If, after the Earning Date, Nation acquires an undivided 25% interest in a Production Licence pursuant to clause 6.2(a) (the Acquisition Date), Paltar shall grant to Nation, in exchange for $100 and other good and valuable consideration, the sole and exclusive option (Option) to purchase at any time during the period commencing on the Acquisition Date and ending ninety (90) days later (the Option Period) the Paltar Interest in that Production Licence free from Encumbrances, other than those referred to in clause 5.5(b).

5.4              Exercise of Option

The Option may be exercised by Nation at any time during the Option Period by giving notice in writing to Paltar specifying that the Option has been exercised.

5.5              Transfer

(a)                As soon as practicable after the exercise of the Option in accordance with clause 5.4, Paltar will deliver to Nation registrable transfer forms of Paltar’s entire interest in the Production Licence, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation shall deliver to Paltar the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government.

(b)               Upon the effective transfer of Paltar’s entire interest in the Production Licence, Nation shall assume all the obligations (and be assigned all the benefits) of:

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(i)                   the Exploration Agreements that relate to the Production Licence; and

(ii)                 the royalty burdens as set forth in Schedule 1 and as provided in clause 5.6(a),

and Paltar shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Paltar.

(c)                Upon the transfer of a Production Licence pursuant to this clause 5.5, this Agreement will cease to apply to the portion of the Permit Area covered by that Production Licence.

5.6              Consideration

(a)                In consideration for the transfer of the Paltar Interest to Nation, upon exercise of the Option, Paltar shall be entitled to an overriding royalty (not subject to proportionate reduction) with respect to all petroleum produced from the portion of the Permit Area covered by the Production Licence equal to the difference between 25% and the sum of the existing royalty burdens shown in Schedule 1, such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Paltar will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Paltar and Nation will, as soon as practicable after the exercise of the Option, enter into an overriding royalty agreement under which Paltar holds the overriding royalty described in this clause and which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

5.7              Lapse of Option

In the event that the Option is not exercised within the Option Period then the Option will lapse and the parties shall use their best endeavours to enter a production joint venture operating agreement in respect of such Production Licence under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Production Licence; and

(b)               Nation is the operator of the joint venture; and

which is otherwise on terms standard for the Australian petroleum industry (including provisions for dilution of interests).

6.                Production Licences

6.1              Decision to Apply

(a)                If a Discovery is made in the Permit Area, Paltar shall deliver any Discovery notice required under the Petroleum Act and shall as soon as possible submit to the Operating

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Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Paltar acknowledges and agrees that, following the Earning Date, if a Production Licence is applied for and issued in respect of any area under the Permit Area in accordance with the terms of this Agreement, (i) Paltar’s undivided interest in such Production Licence will be equal to 75%, subject to the Option granted hereunder pursuant to clause 5.3, and Nation’s undivided interest in such Production Licence will be equal to 25%.

(b)               Upon the issue of a Production Licence, Paltar will be deemed to have resigned as Operator with respect to the Permit Area covered by the Production Licence.

(c)                Upon the issue of a Production Licence to Nation pursuant to this clause 6.2, each clause of this Agreement, other than clauses 5.3 through 5.7. will cease to apply to the Permit Area covered by that Production Licence.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Paltar shall deliver to the Operating Committee within 60 days after the determination a proposed Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Act, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.2(b). Paltar shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Paltar until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

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(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Paltar.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses incurred for the second Permit Year or to contribute the Work Program Expenses for the third, fourth or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all Encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Permit Area and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the sixth or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Paltar may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Paltar wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either to notify Paltar that it accepts Paltar’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Paltar, it will be deemed to have accepted Paltar’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Paltar effective as of the date Paltar sends notice of its desire to purchase the interest and of the fair market value.

If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Paltar, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Paltar may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

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7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the third, fourth or fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation’s interest in this Agreement under this clause 7.

8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Paltar to relinquish any portion of the Permit Area, Paltar will consult with Nation before selecting the portion to be relinquished; the final decision concerning the relinquishment area will, however, be made by Paltar alone.

8.2              Extension of the Term

Decisions to renew the Permit will be made by the Operating Committee, although the Operating Committee decision whether to renew shall be decided by Nation alone. If the Operating Committee decides to renew, Nation will be bound by the renewal work program and all other consequences of the renewal; if the Operating Committee decides not to renew, Paltar may renew the Permit for its own account, and this Agreement will automatically terminate upon such renewal.

8.3              Surrender of Permit or Licence

If Paltar wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

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9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the fifth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the fifth permit year by providing written notice to Paltar at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

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(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any Encumbrance, unless Paltar is willing to accept the assignment reflecting the withdrawal subject to any such Encumbrance and any necessary consents are obtained from the holder of such Encumbrance.

10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Paltar shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

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11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

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(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Paltar;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Paltar; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Paltar of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Paltar, immediately deliver to Paltar all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

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12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Paltar maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

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14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Paltar Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

                        e-mail: darrel.causbrook@causbrooks.com.au

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Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the Northern Territory, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until Production Licences covering the entire Permit Area have been issued or until Nation witthdraws from the Agreement under clause 10.

(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the

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person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after March 31, 2017, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum Act. Paltar shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Paltar's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Paltar shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations;

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provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Paltar is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

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17.10      Gender

Reference to any gender includes a reference to all other genders.

17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

No clause within this document can be used by any person as defence to any action brought under the Criminal Code or Corporations Act.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Acquisition Date has the meaning ascribed thereto in clause 5.3.

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Blocks means the numbered blocks that each graticular section of the Northern Territory is divided into pursuant to Section 8 of the Petroleum Act and Block is a reference to any one of them.

Commencement Date means the date hereof.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

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(a)               any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(b)             any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Corporations Act means the Corporations Act 2001 (Cth).

Discovery means the discovery of an accumulation of petroleum whose existence until that moment was unproven by drilling.

Earning Amount means $6,958,523 of Expenditures, which, for the avoidance of doubt, is an amount separate and apart from the Cash Consideration and the Share Consideration.

Earning Date has the meaning ascribed thereto in clause 3.1.

Earning Period means the period commencing on the Commencement Date and ending March 31, 2017.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Expenditure means expenditure in respect of Operations and other exploration on the Permit Area and includes all amounts spent on keeping the Permit in good standing or fulfilling obligations of Paltar with respect to the Permit.

Exploration Agreement means the agreement dated 27 June 2013 among Paltar, the Native Title Parties (as that term is defined in the Exploration Agreement), and Northern Land Council, and any other agreement entered into in accordance with the provisions of the Native Title Act or the Aboriginal Land Rights Act in relation to the Permit.

Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

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(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.8(b).

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Northern Territory and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Nation Interest means an undivided twenty-five percent (25%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Native Title Claims means either:

(a)               any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(b)             any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of the Northern Territory or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of the Northern Territory including the Northern Territory Aboriginal Sacred Sites Act (NT) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the following activities required for the operation of the Permit in accordance with this Earning Agreement:

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(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

(c)               preparation, development and carrying out of exploration and appraisal programs on the Permit Area;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs.

Operator has the meaning given to it in the 1993 NT Onshore Petroleum Directions.

Option has the meaning ascribed thereto in clause 5.3.

Option Period has the meaning ascribed thereto in clause 5.3.

Paltar Interest means an undivided seventy‑five percent (75%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

Permit means Exploration Permit 231 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Area means the entire geographic area covered from time to time by the Permit.

Permit Year means a year beginning 3 October and ending the following 2 October.

Petroleum Act means the Petroleum Act 2009 (NT).

Production Licence has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in section 50 of the Corporations Act.

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

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Work Program and Budget means an annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

(e)              except where expressly indicated otherwise, all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

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18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

[Signature page follows]

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Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.     Exploration Agreement among Paltar, Native Title Parties and Northern Land Council

2%, increasing to 4% after one million barrels have been produced from EP 231, 232 and 234, and increasing again to 5% after one billion barrels have been produced from lands covered by the three permits

2.     Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)

10%

And see clause 5.6(a) of the Agreement for an additional overriding royalty that will be reserved by Paltar when assigning to Nation the Paltar Interest in any Production Licence, so that the effective revenue interest in the Production Licence in the hands of Nation will, if Nation exercises its purchase option, be 75% of 100%.



\

Schedule 2 – Work Program and Budget (all values in $ AUD)

      Permit Year 3 (3 Oct 2015 to 2 Oct 2016)

            Drill one vertical exploration well                                                      $ 5,544,640

            Geological and geophysical work                                                             415,848

            Engineering, Geological and Geophysical Services                                 998,035

                                                                                                                       $ 6,958,523

      Permit Year 4 (3 Oct 2016 to 2 Oct 2017)

            Complete well drilled in Permit Year 3 and drill one new vertical well            $ 9,703,120 Geological and geophysical work                                                                                                2,439,642    Engineering, Geological and Geophysical Services                                                                                     998,035

                                                                                                                       $13,140,797

Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

Completion and testing of drill well in Permit Year 3 occurs in Permit Year 4.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Northern Territory Department of Mines and Energy (“DME”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 13

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1          General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Paltar or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Paltar shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Paltar shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Paltar in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Paltar shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Paltar shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

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(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A $50,000.00).

1.5.2        Paltar shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Paltar, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Paltar so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Paltar's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Paltar but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Paltar on or before the due date, in the currencies requested or any other currencies acceptable to Paltar at a bank designated by Paltar. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4        Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Paltar be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Paltar may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5        If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Paltar within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Paltar's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Paltar's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Paltar is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Paltar at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Paltar shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Paltar shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Paltar shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Paltar is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Paltar.

1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Paltar during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Paltar for adjustment. Failure on the part of Nation to make claim on Paltar for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Paltar shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Paltar shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

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1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Paltar, shall have the right to audit the Operating Account and records of Paltar relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Paltar's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Paltar for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Paltar prior to the commencement of the audit. Paltar will provide the information in electronic format or hard copy documents, if electronic format is not available. Paltar will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Paltar shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Paltar for its Affiliates.

In addition to the information provided by Paltar under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Paltar relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

(a)      If the Affiliate of Paltar consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Paltar.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)     The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

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If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Paltar will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)     Paltar may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Paltar within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Paltar, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Paltar does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Paltar is required by law to employ a public accounting firm to audit the Operating Account and records of Paltar relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Paltar as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Paltar shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Paltar for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Paltar and Nation conducting the audit shall be reflected promptly in the Operating Account by Paltar and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Paltar will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2          Direct Charges

Paltar shall charge the Operating Account with all costs and expenditures incurred by Paltar for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in clauses 2.7.2 and 2.7.3 which are provided by Paltar’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Petroleum Act when paid by Paltar in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Paltar of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Paltar for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

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Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Paltar's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Paltar shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Paltar's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Paltar's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

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2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Paltar and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Paltar, of Material purchased or furnished by Paltar, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and Licence fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Paltar and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Paltar or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Paltar shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Paltar’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

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2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Paltar shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$50,000) as soon as practical after report of the same has been received by Paltar. All losses in excess of fifty thousand Australian dollars (A$50,000) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Paltar for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Paltar or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

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2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Paltar for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3          Indirect Charges

3.1              Purpose

Paltar shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Paltar and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Paltar and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Paltar requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Paltar's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the Year-to-Date indirect charges shall be a percentage of the aggregate Year-to-Date expenditures, calculated on the following scale:

Annual Expenditures

$0 to A$3,000,000 of expenditures = 5 %

Next A$7,000,000 of expenditures = 4 %

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Next A$11,000,000 of expenditures = 3 %

Excess above A$11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A$36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4          Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Paltar. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, Licence fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

4.2              Materials Furnished by Paltar

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Paltar may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Paltar hall be priced at net cost determined in accordance with clause 4.1 above as if Paltar had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

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4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Paltar has no control, Paltar may charge the Operating Account for the required Material at Paltar's actual cost incurred procuring such Material, in making it suitable for use, and moving it to Permit area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Paltar) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A$50,000.00). Nation shall have the right, by so electing and notifying Paltar within seven days (or such shorter period as may be specified by Paltar) after receiving notice from Paltar, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Paltar both as to quality and time of delivery. Such acceptance by Paltar shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Paltar, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Paltar is not required to accept Material furnished in kind by Nation. If Paltar fails to submit proper notification prior to billing Nation for such Material, Paltar shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

4.4              Warranty of Material Furnished by Paltar

Paltar does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Paltar for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Paltar from the manufacturers or their agents.

Section 5          Disposal of Materials

5.1              Disposal

Paltar shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Paltar shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$50,000 or more. When Operations are relieved of Material charged to the Operating Account, Paltar shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Paltar shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Paltar in the disposition of Materials shall be charged to the Operating Account.

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5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Paltar to the Operating Account at the net amount collected by Paltar from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Paltar.

Section 6          Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Paltar of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Paltar shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Paltar, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Paltar provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

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EP 234 Final Earning Agreement

(Amending and Restating the Original EP 234 Earning Agreement)

Paltar Petroleum Limited (ACN 149 987 459)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.         Farm-in and Operator....................................................................................................... 3

4.         Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 12

6.            Production Licences....................................................................................................... 13

7.            Default........................................................................................................................... 15

8.            Relinquishments and renewals....................................................................................... 16

9.            Transfer of interest or rights........................................................................................... 17

10.         Withdrawal from Agreement..................................................................................................... 18

11.         Relationship of Parties and Tax...................................................................................... 18

12.         Confidential Information............................................................................................... 20

13.         Force majeure................................................................................................................ 21

14.         Notices........................................................................................................................... 22

15.         Applicable law and arbitration....................................................................................... 23

16.         Term.............................................................................................................................. 24

17.         General provisions......................................................................................................... 24

18.         Definitions..................................................................................................................... 27

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 4 and 5

Annex 1:      Accounting Procedure

EP 234 Final Earning Agreement

(Amending and Restating the Original EP 234 Earning Agreement)

Dated 31 May 2016

Parties

Paltar Petroleum Limited (ACN 149 987 459) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Paltar)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Paltar owns the Permit.

B.                 The Parties entered into the EP 234 Earning Agreement dated 30 August 2015 (as amended by a Master Amendment dated 17 December 2015 and a Second Master Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Paltar to earn interests in the Permit and any Production Licenses that might be earned covering certain Blocks in EP 234. The cash consideration and share consideration required by this Original Earning Agreement have not yet been paid to Paltar, but the Parties now wish by this Agreement to (i) ratify and confirm the effectiveness of the Original Earning Agreement, (ii) enlarge the time allowed for payment and delivery of the consideration, (iii) combine this Original Earning Agreement with the promised but not yet delivered Additional EP 234 Earning Agreement described in the following recital C, and (iv) ratify, amend, combine, enlarge, and replace the Original Earning Agreement.

C.                 Paltar promised Nation an Additional EP 234 Earning Agreement (the “Additional Earning Agreement”) in the third restated letter agreement dated 30 August 2015, as subsequently amended, which was intended to allow Paltar to earn interests in Production Licenses, if any, that might be earned covering certain Blocks in EP 234 not subject to the Original Earning Agreement. The Additional Earning Agreement was never executed, however, and the Parties now wish by this Agreement to fulfil the promise of an Additional Earning Agreement by combining the Blocks, consideration, and earning procedures in the Original Earning Agreement with those anticipated in the unexecuted Additional Earning Agreement.

D.                Paltar and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 234 and certain other assets of Paltar. Nation Wyoming has decided to release and terminate this Option, and wishes instead for Nation to enter into an earning agreement covering the Permit Area. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation in the Permit and any Production Licences issued to Paltar in the Permit Area.

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Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, combine it with the anticipated Second Earning Agreement, expand it to cover the Permit Area, and restate and replace it as follows:

1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Paltar its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by a Paltar subsidiary, Officer Petroleum Pty Ltd) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$3,801,923. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement and an additional A$3,032,780 as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,425 shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,140 shares as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Paltar covering any of the Permit Area.

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3.                Farm-in and Operator

3.1              Nation Interest

On Nation spending at least the Earning Amount in Expenditure on or for the benefit of the Permit Area before the end of the Earning Period (Earning Date), Nation, on giving notice to Paltar verifying the amount of Expenditure Nation has incurred:

(a)                acquires a beneficial interest, to the extent of the Nation interest, in the Permit Area; and

(b)               will have the right to be transferred the Nation Interest in the Permit Area, in such manner and on such terms as do not materially increase the obligations owed the Government in respect of the area then covered by the Permit; and

3.2              Joint Venture Operating Agreement

On or as soon as practicable after the Earning Date the parties shall enter into an exploration joint venture operating agreement in respect of the Permit Area on terms customary for such an agreement in the Australian petroleum industry and under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Permit Area;

(b)               Paltar is the operator of the joint venture;

(c)                Nation shall contribute 100% of the actual Work Program Expenses under the joint venture operating agreement;

(d)               Nation shall not be permitted to withdraw from the joint venture operating agreement until the end of the fifth Permit Year;

(e)                the terms set out in clause 6.1 to 6.3 (inclusive) of this Agreement will be incorporated;

(f)                the terms of the Option in favour of Nation set out clauses 5.3 to 5.7 (inclusive) will be incorporated and, in the event that the Option is exercised by Nation with respect to a Production Licence, then the Production Licence will not form part of the joint venture property under the joint venture operating agreement from the date of exercise of the Option, and

(g)                upon entry into the joint venture operating agreement, the remaining effective clauses of this Agreement will immediately terminate with respect to the Permit Area, subject to any and all accrued rights and liabilities of the parties.

3.3              Designation of Operator

Paltar is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

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3.4              Rights and Duties of Operator

(a)                Paltar shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Permit Area under the overall direction of the Operating Committee. Paltar may employ independent contractors and agents, including Related Bodies Corporate of Paltar, in such Operations.

(b)               Paltar warrants and represents to Nation that the Permit and Paltar’s interest in the Permit is in good standing and is not subject to any breach, default or other circumstance that will or may result in the Permit being surrendered or cancelled or becoming subject to any Encumbrance. Paltar shall:

(i)                 without limiting clause 5.1(c) and subject to applicable Government requirements, ensure that each Work Program and Budget consists of work to be performed on or for the benefit of the Permit Area;

(ii)               not grant, create or allow the grant or creation of any Encumbrance over Paltar’s interest in the Permit without the prior written consent of Nation;

(iii)             not sell, transfer, assign or otherwise dispose of Paltar’s interest in the Permit or part with possession of the Permit without the prior written consent of Nation;

(iv)             immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Paltar’s interest in the Permit becoming the subject of an Encumbrance or being surrendered or cancelled; and

(v)               take all steps as are necessary or appropriate to ensure that the application for, grant and transfer or issue of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Paltar shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

5

(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Paltar personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.5              Paltar Personnel

(a)                Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.6              Information Supplied by Paltar

(a)                Paltar shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

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(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Paltar to a Government.

(b)               Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c)                Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.7              Settlement of Claims and Lawsuits

(a)                Paltar shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Paltar shall represent Nation and defend or oppose the claim or suit. Paltar may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Paltar shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.8              Limitation on Liability of Paltar

(a)                Except as set out in clause 3.8(c), neither Paltar nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(b)               Except as set out in clause 3.8(c), Nation shall defend and indemnify Paltar and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental

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to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(c)                Notwithstanding clauses 3.8(a) and 3.8(b), if any Senior Supervisory Personnel of Paltar or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in clauses 3.8(a) or 3.8(b), then Paltar shall be liable for such damages, loss, cost, expense and liability.

(d)               Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.8(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.9              Insurance Obtained by Paltar

(a)                Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Paltar shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

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(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Paltar with certificates reflecting such insurance prior to the commencement of their services.

3.10          Resignation

Subject to clause 3.12, Paltar may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

3.11          Removal

(a)                Paltar shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.12, Paltar shall be removed upon receipt of notice from any Party if:

(i)                 Paltar becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Paltar's assets.

(c)                Subject to clause 3.12, Paltar may be removed by written notice from Nation if Paltar has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.12          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.10 or clause 3.11:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Paltar has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Paltar disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.11(c) and proceedings are initiated pursuant to clause 15.2, Paltar shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

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(c)                Paltar, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Paltar, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Paltar as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Paltar shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Permit Area and to Operations. Upon delivery of the above-described property and data, Paltar shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

3.13          Commingling of Funds

Paltar may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.14          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1              Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Paltar concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2              Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

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4.3              Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

4.4              Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5              Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6              Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

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4.7              Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Paltar's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

(b)               Paltar shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

4.8              Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Paltar alone.

4.9              Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Paltar considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Paltar and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Paltar within five days after receipt of Paltar's notice request that the proposal be decided at a meeting

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rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(a), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Paltar shall give Nation a confirmation notice stating the tabulation and results of the vote.

5.                Work Programs and Budgets; Production Licence Option

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fourth and fifth Permit Years is attached as Schedule 2.

(b)               On or before the first day of June of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted, so long as such proposed Work Program and Budget will satisfy all of the Minimum Work Obligations of that Permit Year.

(c)                Any approved Work Program and Budget may be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs incurred for the third Permit Year, together with the Work Program and Budget costs estimated for the fourth Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for the fifth and subsequent years will be delivered by Nation to Paltar quarterly in advance, based on anticipated cash requirements; and

(iii)             Required amounts in addition to estimated amounts will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

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5.3              Grant of Option

If, after the Earning Date, Nation acquires an undivided 25% interest in a Production Licence pursuant to clause 6.2(a) (the Acquisition Date), Paltar shall grant to Nation, in exchange for $100 and other good and valuable consideration, the sole and exclusive option (Option) to purchase at any time during the period commencing on the Acquisition Date and ending ninety (90) days later (the Option Period) the Paltar Interest in that Production Licence free from Encumbrances, other than those referred to in clause 5.5(b).

5.4              Exercise of Option

The Option may be exercised by Nation at any time during the Option Period by giving notice in writing to Paltar specifying that the Option has been exercised.

5.5              Transfer

(a)                As soon as practicable after the exercise of the Option in accordance with clause 5.4, Paltar will deliver to Nation registrable transfer forms of Paltar’s entire interest in the Production Licence, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation shall deliver to Paltar the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government.

(b)               Upon the effective transfer of Paltar’s entire interest in the Production Licence, Nation shall assume all the obligations (and be assigned all the benefits) of:

(i)                   the Exploration Agreements that relate to the Production Licence; and

(ii)                 the royalty burdens as set forth in Schedule 1 and as provided in clause 5.6(a),

and Paltar shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Paltar.

(c)                Upon the transfer of a Production Licence pursuant to this clause 5.5, this Agreement will cease to apply to the portion of the Permit Area covered by that Production Licence.

5.6              Consideration

(a)                In consideration for the transfer of the Paltar Interest to Nation, upon exercise of the Option, Paltar shall be entitled to an overriding royalty (not subject to proportionate reduction) with respect to all petroleum produced from the portion of the Permit Area covered by the Production Licence equal to the difference between 25% and the sum of the existing royalty burdens shown in Schedule 1, such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden

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set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Paltar will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Paltar and Nation will, as soon as practicable after the exercise of the Option, enter into an overriding royalty agreement under which Paltar holds the overriding royalty described in this clause and which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

5.7              Lapse of Option

In the event that the Option is not exercised within the Option Period then the Option will lapse and the parties shall use their best endeavours to enter a production joint venture operating agreement in respect of such Production Licence under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Production Licence; and

(b)               Nation is the operator of the joint venture; and

which is otherwise on terms standard for the Australian petroleum industry (including provisions for dilution of interests).

6.                Production Licences

6.1              Decision to Apply

(a)                If a Discovery is made in the Permit Area, Paltar shall deliver any Discovery notice required under the Petroleum Act and shall as soon as possible submit to the Operating Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Paltar acknowledges and agrees that, following the Earning Date, if a Production Licence is applied for and issued in respect of any area under the Permit Area in accordance with the terms of this Agreement, (i) Paltar’s undivided interest in such Production Licence will be equal to 75%, subject to the Option granted hereunder pursuant to clause 5.3, and Nation’s undivided interest in such Production Licence will be equal to 25%.

(b)               Upon the issue of a Production Licence, Paltar will be deemed to have resigned as Operator with respect to the Permit Area covered by the Production Licence.

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(c)                Upon the issue of a Production Licence to Nation pursuant to this clause 6.2, each clause of this Agreement, other than clauses 5.3 through 5.7. will cease to apply to the Permit Area covered by that Production Licence.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Paltar shall deliver to the Operating Committee within 60 days after the determination a proposed Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Act, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.2(b). Paltar shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Paltar until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Paltar.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses incurred for the third Permit Year or to contribute the Work Program Expenses for the fourth or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all Encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be

16

requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Permit Area and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the sixth or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Paltar may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Paltar wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either to notify Paltar that it accepts Paltar’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Paltar, it will be deemed to have accepted Paltar’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Paltar effective as of the date Paltar sends notice of its desire to purchase the interest and of the fair market value.

If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Paltar, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Paltar may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the fourth and fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation’s interest in this Agreement under this clause 7.

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8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Paltar to relinquish any portion of the Permit Area, Paltar will consult with Nation before selecting the portion to be relinquished; the final decision concerning the relinquishment area will, however, be made by Paltar alone.

8.2              Extension of the Term

Decisions to renew the Permit will be made by the Operating Committee, although the Operating Committee decision whether to renew shall be decided by Nation alone. If the Operating Committee decides to renew, Nation will be bound by the renewal work program and all other consequences of the renewal; if the Operating Committee decides not to renew, Paltar may renew the Permit for its own account, and this Agreement will automatically terminate upon such renewal.

8.3              Surrender of Permit or Licence

If Paltar wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or

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otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the fifth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the fifth permit year by providing written notice to Paltar at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any Encumbrance, unless Paltar is willing to accept the assignment reflecting the withdrawal subject to any such Encumbrance and any necessary consents are obtained from the holder of such Encumbrance.

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10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Paltar shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

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11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

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(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Paltar;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Paltar; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Paltar of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Paltar, immediately deliver to Paltar all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

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12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Paltar maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

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14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Paltar Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

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                        e-mail: darrel.causbrook@causbrooks.com.au

Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the Northern Territory, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until Production Licences covering the entire Permit Area have been issued or until Nation witthdraws from the Agreement under clause 10.

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(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after March 31, 2017, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum Act. Paltar shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Paltar's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the

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business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Paltar shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Paltar is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

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17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

17.10      Gender

Reference to any gender includes a reference to all other genders.

17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

No clause within this document can be used by any person as defence to any action brought under the Criminal Code or Corporations Act.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Acquisition Date has the meaning ascribed thereto in clause 5.3.

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

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(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Blocks means the numbered blocks that each graticular section of the Northern Territory is divided into pursuant to Section 8 of the Petroleum Act and Block is a reference to any one of them.

Commencement Date means the date hereof.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

(a)               any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(b)             any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Corporations Act means the Corporations Act 2001 (Cth).

Discovery means the discovery of an accumulation of petroleum whose existence until that moment was unproven by drilling.

Earning Amount means $6,958,523 of Expenditures, which, for the avoidance of doubt, is an amount separate and apart from the Cash Consideration and the Share Consideration.

Earning Date has the meaning ascribed thereto in clause 3.1.

Earning Period means the period commencing on the Commencement Date and ending March 31, 2017.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Expenditure means expenditure in respect of Operations and other exploration on the Permit Area and includes all amounts spent on keeping the Permit in good standing or fulfilling obligations of Paltar with respect to the Permit.

Exploration Agreement means the agreement dated 27 June 2013 among Paltar, the Native Title Parties (as that term is defined in the Exploration Agreement), and Northern Land Council, and any other agreement entered into in accordance with the provisions of the Native Title Act or the Aboriginal Land Rights Act in relation to the Permit.

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Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.8(b).

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Northern Territory and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Nation Interest means an undivided twenty-five percent (25%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Native Title Claims means either:

(a)               any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(b)             any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of the Northern Territory or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

30

Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of the Northern Territory including the Northern Territory Aboriginal Sacred Sites Act (NT) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the following activities required for the operation of the Permit in accordance with this Earning Agreement:

(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

(c)               preparation, development and carrying out of exploration and appraisal programs on the Permit Area;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs.

Operator has the meaning given to it in the 1993 NT Onshore Petroleum Directions.

Option has the meaning ascribed thereto in clause 5.3.

Option Period has the meaning ascribed thereto in clause 5.3.

Paltar Interest means an undivided seventy‑five percent (75%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

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Permit means Exploration Permit 231 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Area means the entire geographic area covered from time to time by the Permit.

Permit Year means a year beginning 5 September and ending the following 4 September.

Petroleum Act means the Petroleum Act 2009 (NT).

Production Licence has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in section 50 of the Corporations Act.

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

Work Program and Budget means an annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

32

(e)              except where expressly indicated otherwise, all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

[Signature page follows]

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Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.     Exploration Agreement among Paltar, Native Title Parties and Northern Land Council

2%, increasing to 4% after one million barrels have been produced from EP 231, 232 and 234, and increasing again to 5% after one billion barrels have been produced from lands covered by the three permits

2.     Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)

10%

And see clause 5.6(a) of the Agreement for an additional overriding royalty that will be reserved by Paltar when assigning to Nation the Paltar Interest in any Production Licence, so that the effective net revenue interest in the Production Licence in the hands of Nation will, if Nation exercises its purchase option, be 75% of 100%.



\

Schedule 2 – Work Program and Budget (all values in $ AUD)

      Permit Year 4 (5 Sep 2015 to 4 Sep 2016)

            Drill one vertical exploration well                                                      $ 5,544,640

            Geological and geophysical work                                                             415,848

            Engineering, Geological and Geophysical Services                                 998,035

                                                                                                                       $ 6,958,523

      Permit Year 5 (5 Sep 2016 to 4 Sep 2017)

            Complete well drilled in Permit Year 4 and drill one new vertical well            $ 9,703,120 Geological and geophysical work                                                                                                3,326,784    Engineering, Geological and Geophysical Services                                                                                     998,035

                                                                                                                       $14,027,939



Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

Completion and testing of well drilled in Permit Year 4 occurs in Permit Year 5.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Northern Territory Department of Mines and Energy (“DME”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 13

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1          General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Paltar or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Paltar shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Paltar shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Paltar in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Paltar shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Paltar shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

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(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A $50,000.00).

1.5.2        Paltar shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Paltar, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Paltar so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Paltar's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Paltar but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Paltar on or before the due date, in the currencies requested or any other currencies acceptable to Paltar at a bank designated by Paltar. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4        Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Paltar be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Paltar may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5        If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Paltar within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Paltar's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Paltar's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Paltar is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Paltar at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Paltar shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Paltar shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Paltar shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Paltar is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Paltar.

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1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Paltar during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Paltar for adjustment. Failure on the part of Nation to make claim on Paltar for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Paltar shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Paltar shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Paltar, shall have the right to audit the Operating Account and records of Paltar relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Paltar's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Paltar for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Paltar prior to the commencement of the audit. Paltar will provide the information in electronic format or hard copy documents, if electronic format is not available. Paltar will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Paltar shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Paltar for its Affiliates.

In addition to the information provided by Paltar under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Paltar relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

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(a)      If the Affiliate of Paltar consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Paltar.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)     The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Paltar will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)     Paltar may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Paltar within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Paltar, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Paltar does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Paltar is required by law to employ a public accounting firm to audit the Operating Account and records of Paltar relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Paltar as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Paltar shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Paltar for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Paltar and Nation conducting the audit shall be reflected promptly in the Operating Account by Paltar and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Paltar will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2          Direct Charges

Paltar shall charge the Operating Account with all costs and expenditures incurred by Paltar for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in clauses 2.7.2 and 2.7.3 which are provided by Paltar’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

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2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Petroleum Act when paid by Paltar in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Paltar of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Paltar for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Paltar's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Paltar shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

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2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Paltar's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Paltar's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Paltar and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Paltar, of Material purchased or furnished by Paltar, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and Licence fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Paltar and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Paltar or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Paltar shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

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2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Paltar’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Paltar shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$50,000.00) as soon as practical after report of the same has been received by Paltar. All losses in excess of fifty thousand Australian dollars (A$50,000.00) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

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2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Paltar for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Paltar or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Paltar for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3          Indirect Charges

3.1              Purpose

Paltar shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Paltar and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Paltar and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Paltar requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

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3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Paltar's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the Year-to-Date indirect charges shall be a percentage of the aggregate Year-to-Date expenditures, calculated on the following scale:

Annual Expenditures

$0 to A$3,000,000 of expenditures = 5 %

Next A$7,000,000 of expenditures = 4 %

Next A$11,000,000 of expenditures = 3 %

Excess above A$11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A $36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4          Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Paltar. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, Licence fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

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4.2              Materials Furnished by Paltar

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Paltar may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Paltar hall be priced at net cost determined in accordance with clause 4.1 above as if Paltar had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Paltar has no control, Paltar may charge the Operating Account for the required Material at Paltar's actual cost incurred procuring such Material, in making it suitable for use, and moving it to Permit area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Paltar) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A$50,000.00). Nation shall have the right, by so electing and notifying Paltar within seven days (or such shorter period as may be specified by Paltar) after receiving notice from Paltar, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Paltar both as to quality and time of delivery. Such acceptance by Paltar shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Paltar, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Paltar is not required to accept Material furnished in kind by Nation. If Paltar fails to submit proper notification prior to billing Nation for such Material, Paltar shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

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4.4              Warranty of Material Furnished by Paltar

Paltar does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Paltar for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Paltar from the manufacturers or their agents.

Section 5          Disposal of Materials

5.1              Disposal

Paltar shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Paltar shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$50,000 or more. When Operations are relieved of Material charged to the Operating Account, Paltar shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Paltar shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Paltar in the disposition of Materials shall be charged to the Operating Account.

5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Paltar to the Operating Account at the net amount collected by Paltar from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Paltar.

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Section 6          Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Paltar of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Paltar shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Paltar, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Paltar provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

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EP 237 Final Earning Agreement

(Amending and Restating the Original EP 237 Earning Agreement)

Paltar Petroleum Limited (ACN 149 987 459)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.         Farm-in and Operator....................................................................................................... 3

4.         Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 12

6.            Production Licences....................................................................................................... 14

7.            Default........................................................................................................................... 15

8.            Relinquishments and renewals....................................................................................... 17

9.            Transfer of interest or rights........................................................................................... 17

10.         Withdrawal from Agreement..................................................................................................... 18

11.         Relationship of Parties and Tax...................................................................................... 19

12.         Confidential Information............................................................................................... 21

13.         Force majeure................................................................................................................ 22

14.         Notices........................................................................................................................... 23

15.         Applicable law and arbitration....................................................................................... 24

16.         Term.............................................................................................................................. 24

17.         General provisions......................................................................................................... 25

18.         Definitions..................................................................................................................... 27

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 4 and 5

Annex 1:      Accounting Procedure

EP 237 Final Earning Agreement

(Amending and Restating the Original EP 237 Earning Agreement)

Dated 31 May 2016

Parties

Paltar Petroleum Limited (ACN 149 987 459) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Paltar)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Paltar owns the Permit.

B.                 The Parties entered into the EP 237 Earning Agreement dated 30 August 2015 (as amended by a Master Amendment dated 17 December 2015 and a Second Master Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Paltar to earn interests in the Permit and any Production Licenses that might be earned covering certain Blocks in EP 237. The cash consideration and share consideration required by this Original Earning Agreement have not yet been paid to Paltar, but the Parties now wish by this Agreement to (i) ratify and confirm the effectiveness of the Original Earning Agreement, (ii) enlarge the time allowed for payment and delivery of the consideration, (iii) combine this Original Earning Agreement with the promised but not yet delivered Additional EP 237 Earning Agreement described in the following recital C, and (iv) ratify, amend, combine, enlarge, and replace the Original Earning Agreement.

C.                 Paltar promised Nation an Additional EP 237 Earning Agreement (the “Additional Earning Agreement”) in the third restated letter agreement dated 30 August 2015, as subsequently amended, which was intended to allow Paltar to earn interests in Production Licenses, if any, that might be earned covering certain Blocks in EP 237 not subject to the Original Earning Agreement. The Additional Earning Agreement was never executed, however, and the Parties now wish by this Agreement to fulfil the promise of an Additional Earning Agreement by combining the Blocks, consideration, and earning procedures in the Original Earning Agreement with those anticipated in the unexecuted Additional Earning Agreement.

D.                Paltar and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 237 and certain other assets of Paltar. Nation Wyoming has decided to release and terminate this Option, and wishes instead for Nation to enter into an earning agreement covering the Permit Area. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation in the Permit and any Production Licences issued to Paltar in the Permit Area.

2

Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, combine it with the anticipated Second Earning Agreement, expand it to cover the Permit Area, and restate and replace it as follows:

1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Paltar its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by a Paltar subsidiary, Officer Petroleum Pty Ltd) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$3,421,843. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement and an additional A$2,652,700 as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,425 shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,140 shares as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Paltar covering any of the Permit Area.

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3.                Farm-in and Operator

3.1              Nation Interest

On Nation spending at least the Earning Amount in Expenditure on or for the benefit of the Permit Area before the end of the Earning Period (Earning Date), Nation, on giving notice to Paltar verifying the amount of Expenditure Nation has incurred:

(a)                acquires a beneficial interest, to the extent of the Nation interest, in the Permit Area; and

(b)               will have the right to be transferred the Nation Interest in the Permit Area, in such manner and on such terms as do not materially increase the obligations owed the Government in respect of the area then covered by the Permit; and

3.2              Joint Venture Operating Agreement

On or as soon as practicable after the Earning Date the parties shall enter into an exploration joint venture operating agreement in respect of the Permit Area on terms customary for such an agreement in the Australian petroleum industry and under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Permit Area;

(b)               Paltar is the operator of the joint venture;

(c)                Nation shall contribute 100% of the actual Work Program Expenses under the joint venture operating agreement;

(d)               Nation shall not be permitted to withdraw from the joint venture operating agreement until the end of the fifth Permit Year;

(e)                the terms set out in clause 6.1 to 6.3 (inclusive) of this Agreement will be incorporated;

(f)                the terms of the Option in favour of Nation set out clauses 5.3 to 5.7 (inclusive) will be incorporated and, in the event that the Option is exercised by Nation with respect to a Production Licence, then the Production Licence will not form part of the joint venture property under the joint venture operating agreement from the date of exercise of the Option, and

(g)                upon entry into the joint venture operating agreement, the remaining effective clauses of this Agreement will immediately terminate with respect to the Permit Area, subject to any and all accrued rights and liabilities of the parties.

3.3              Designation of Operator

Paltar is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

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3.4              Rights and Duties of Operator

(a)                Paltar shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Permit Area under the overall direction of the Operating Committee. Paltar may employ independent contractors and agents, including Related Bodies Corporate of Paltar, in such Operations.

(b)               Paltar warrants and represents to Nation that the Permit and Paltar’s interest in the Permit is in good standing and is not subject to any breach, default or other circumstance that will or may result in the Permit being surrendered or cancelled or becoming subject to any Encumbrance. Paltar shall:

(i)                 without limiting clause 5.1(c) and subject to applicable Government requirements, ensure that each Work Program and Budget consists of work to be performed on or for the benefit of the Permit Area;

(ii)               not grant, create or allow the grant or creation of any Encumbrance over Paltar’s interest in the Permit without the prior written consent of Nation;

(iii)             not sell, transfer, assign or otherwise dispose of Paltar’s interest in the Permit or part with possession of the Permit without the prior written consent of Nation;

(iv)             immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Paltar’s interest in the Permit becoming the subject of an Encumbrance or being surrendered or cancelled; and

(v)               take all steps as are necessary or appropriate to ensure that the application for, grant and transfer or issue of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Paltar shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

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(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Paltar personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.5              Paltar Personnel

(a)                Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.6              Information Supplied by Paltar

(a)                Paltar shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

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(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Paltar to a Government.

(b)               Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c)                Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.7              Settlement of Claims and Lawsuits

(a)                Paltar shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Paltar shall represent Nation and defend or oppose the claim or suit. Paltar may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Paltar shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.8              Limitation on Liability of Paltar

(a)                Except as set out in clause 3.8(c), neither Paltar nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(b)               Except as set out in clause 3.8(c), Nation shall defend and indemnify Paltar and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental

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to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Paltar (or any such Indemnitee).

(c)                Notwithstanding clauses 3.8(a) and 3.8(b), if any Senior Supervisory Personnel of Paltar or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in clauses 3.8(a) or 3.8(b), then Paltar shall be liable for such damages, loss, cost, expense and liability.

(d)               Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.8(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.9              Insurance Obtained by Paltar

(a)                Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Paltar shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

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(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Paltar with certificates reflecting such insurance prior to the commencement of their services.

3.10          Resignation

Subject to clause 3.12, Paltar may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

3.11          Removal

(a)                Paltar shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.12, Paltar shall be removed upon receipt of notice from any Party if:

(i)                 Paltar becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Paltar's assets.

(c)                Subject to clause 3.12, Paltar may be removed by written notice from Nation if Paltar has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.12          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.10 or clause 3.11:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Paltar has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Paltar disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.11(c) and proceedings are initiated pursuant to clause 15.2, Paltar shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

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(c)                Paltar, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Paltar, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Paltar as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Paltar shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Permit Area and to Operations. Upon delivery of the above-described property and data, Paltar shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

3.13          Commingling of Funds

Paltar may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.14          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1              Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Paltar concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2              Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

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4.3              Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

4.4              Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5              Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6              Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

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4.7              Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Paltar's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

(b)               Paltar shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

4.8              Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Paltar alone.

4.9              Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Paltar considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Paltar and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Paltar within five days after receipt of Paltar's notice request that the proposal be decided at a meeting

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rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(a), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Paltar shall give Nation a confirmation notice stating the tabulation and results of the vote.

5.                Work Programs and Budgets; Production Licence Option

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fourth and fifth Permit Years is attached as Schedule 2.

(b)               On or before the first day of June of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted, so long as such proposed Work Program and Budget will satisfy all of the Minimum Work Obligations of that Permit Year.

(c)                Any approved Work Program and Budget may be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs incurred for the third Permit Year, together with the Work Program and Budget costs estimated for the fourth Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for the fifth and subsequent years will be delivered by Nation to Paltar quarterly in advance, based on anticipated cash requirements; and

(iii)             Required amounts in addition to estimated amounts will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

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5.3              Grant of Option

If, after the Earning Date, Nation acquires an undivided 25% interest in a Production Licence pursuant to clause 6.2(a) (the Acquisition Date), Paltar shall grant to Nation, in exchange for $100 and other good and valuable consideration, the sole and exclusive option (Option) to purchase at any time during the period commencing on the Acquisition Date and ending ninety (90) days later (the Option Period) the Paltar Interest in that Production Licence free from Encumbrances, other than those referred to in clause 5.5(b).

5.4              Exercise of Option

The Option may be exercised by Nation at any time during the Option Period by giving notice in writing to Paltar specifying that the Option has been exercised.

5.5              Transfer

(a)                As soon as practicable after the exercise of the Option in accordance with clause 5.4, Paltar will deliver to Nation registrable transfer forms of Paltar’s entire interest in the Production Licence, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation shall deliver to Paltar the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government.

(b)               Upon the effective transfer of Paltar’s entire interest in the Production Licence, Nation shall assume all the obligations (and be assigned all the benefits) of:

(i)                   the Exploration Agreements that relate to the Production Licence; and

(ii)                 the royalty burdens as set forth in Schedule 1 and as provided in clause 5.6(a),

and Paltar shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Paltar.

(c)                Upon the transfer of a Production Licence pursuant to this clause 5.5, this Agreement will cease to apply to the portion of the Permit Area covered by that Production Licence.

5.6              Consideration

(a)                In consideration for the transfer of the Paltar Interest to Nation, upon exercise of the Option, Paltar shall be entitled to an overriding royalty (not subject to proportionate reduction) with respect to all petroleum produced from the portion of the Permit Area covered by the Production Licence equal to the difference between 25% and the sum of the existing royalty burdens shown in Schedule 1, such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden

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set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Paltar will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Paltar and Nation will, as soon as practicable after the exercise of the Option, enter into an overriding royalty agreement under which Paltar holds the overriding royalty described in this clause and which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

5.7              Lapse of Option

In the event that the Option is not exercised within the Option Period then the Option will lapse and the parties shall use their best endeavours to enter a production joint venture operating agreement in respect of such Production Licence under which:

(a)                Paltar holds the Paltar Interest and Nation holds the Nation Interest in the Production Licence; and

(b)               Nation is the operator of the joint venture; and

which is otherwise on terms standard for the Australian petroleum industry (including provisions for dilution of interests).

6.                Production Licences

6.1              Decision to Apply

(a)                If a Discovery is made in the Permit Area, Paltar shall deliver any Discovery notice required under the Petroleum Act and shall as soon as possible submit to the Operating Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Paltar acknowledges and agrees that, following the Earning Date, if a Production Licence is applied for and issued in respect of any area under the Permit Area in accordance with the terms of this Agreement, (i) Paltar’s undivided interest in such Production Licence will be equal to 75%, subject to the Option granted hereunder pursuant to clause 5.3, and Nation’s undivided interest in such Production Licence will be equal to 25%.

(b)               Upon the issue of a Production Licence, Paltar will be deemed to have resigned as Operator with respect to the Permit Area covered by the Production Licence.

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(c)                Upon the issue of a Production Licence to Nation pursuant to this clause 6.2, each clause of this Agreement, other than clauses 5.3 through 5.7. will cease to apply to the Permit Area covered by that Production Licence.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Paltar shall deliver to the Operating Committee within 60 days after the determination a proposed Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Act, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.2(b). Paltar shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Paltar until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Paltar.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses incurred for the third Permit Year or to contribute the Work Program Expenses for the fourth or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all Encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be

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requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Permit Area and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the sixth or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Paltar’s notice, then Paltar may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Paltar wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either to notify Paltar that it accepts Paltar’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Paltar, it will be deemed to have accepted Paltar’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Paltar effective as of the date Paltar sends notice of its desire to purchase the interest and of the fair market value.

If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Paltar, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Paltar may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the fourth and fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation’s interest in this Agreement under this clause 7.

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8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Paltar to relinquish any portion of the Permit Area, Paltar will consult with Nation before selecting the portion to be relinquished; the final decision concerning the relinquishment area will, however, be made by Paltar alone.

8.2              Extension of the Term

Decisions to renew the Permit will be made by the Operating Committee, although the Operating Committee decision whether to renew shall be decided by Nation alone. If the Operating Committee decides to renew, Nation will be bound by the renewal work program and all other consequences of the renewal; if the Operating Committee decides not to renew, Paltar may renew the Permit for its own account, and this Agreement will automatically terminate upon such renewal.

8.3              Surrender of Permit or Licence

If Paltar wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or

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otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the fifth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the fifth permit year by providing written notice to Paltar at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any Encumbrance, unless Paltar is willing to accept the assignment reflecting the withdrawal subject to any such Encumbrance and any necessary consents are obtained from the holder of such Encumbrance.

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10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Paltar shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

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11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

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(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Paltar;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Paltar; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Paltar of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Paltar, immediately deliver to Paltar all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

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12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Paltar maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

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14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Paltar Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

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                        e-mail: darrel.causbrook@causbrooks.com.au

Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the Northern Territory, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until Production Licences covering the entire Permit Area have been issued or until Nation witthdraws from the Agreement under clause 10.

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(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after March 31, 2017, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum Act. Paltar shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Paltar's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the

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business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Paltar shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Paltar is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

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17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

17.10      Gender

Reference to any gender includes a reference to all other genders.

17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

No clause within this document can be used by any person as defence to any action brought under the Criminal Code or Corporations Act.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Acquisition Date has the meaning ascribed thereto in clause 5.3.

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

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(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Blocks means the numbered blocks that each graticular section of the Northern Territory is divided into pursuant to Section 8 of the Petroleum Act and Block is a reference to any one of them.

Commencement Date means the date hereof.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

(a)               any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(b)             any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Corporations Act means the Corporations Act 2001 (Cth).

Discovery means the discovery of an accumulation of petroleum whose existence until that moment was unproven by drilling.

Earning Amount means $6,958,523 of Expenditures, which, for the avoidance of doubt, is an amount separate and apart from the Cash Consideration and the Share Consideration.

Earning Date has the meaning ascribed thereto in clause 3.1.

Earning Period means the period commencing on the Commencement Date and ending March 31, 2017.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Expenditure means expenditure in respect of Operations and other exploration on the Permit Area and includes all amounts spent on keeping the Permit in good standing or fulfilling obligations of Paltar with respect to the Permit.

Exploration Agreement means the agreement dated 27 June 2013 among Paltar, the Native Title Parties (as that term is defined in the Exploration Agreement), and Northern Land Council, and any other agreement entered into in accordance with the provisions of the Native Title Act or the Aboriginal Land Rights Act in relation to the Permit.

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Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.8(b).

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Northern Territory and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Nation Interest means an undivided twenty-five percent (25%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Native Title Claims means either:

(a)               any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(b)             any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of the Northern Territory or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

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Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of the Northern Territory including the Northern Territory Aboriginal Sacred Sites Act (NT) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the following activities required for the operation of the Permit in accordance with this Earning Agreement:

(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

(c)               preparation, development and carrying out of exploration and appraisal programs on the Permit Area;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs.

Operator has the meaning given to it in the 1993 NT Onshore Petroleum Directions.

Option has the meaning ascribed thereto in clause 5.3.

Option Period has the meaning ascribed thereto in clause 5.3.

Paltar Interest means an undivided seventy‑five percent (75%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

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Permit means Exploration Permit 231 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Area means the entire geographic area covered from time to time by the Permit.

Permit Year means a year beginning 5 September and ending the following 4 September.

Petroleum Act means the Petroleum Act 2009 (NT).

Production Licence has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in section 50 of the Corporations Act.

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

Work Program and Budget means an annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

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(e)              except where expressly indicated otherwise, all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

[Signature page follows]

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Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.     Exploration Agreement among Paltar, Native Title Parties and Northern Land Council

2%, increasing to 4% after one million barrels have been produced from EP 231, 232 and 234, and increasing again to 5% after one billion barrels have been produced from lands covered by the three permits

2.     Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)

10%

And see clause 5.6(a) of the Agreement for an additional overriding royalty that will be reserved by Paltar when assigning to Nation the Paltar Interest in any Production Licence, so that the effective net revenue interest in the Production Licence in the hands of Nation will, if Nation exercises its purchase option, be 75% of 100%.



\

Schedule 2 – Work Program and Budget (all values in $ AUD)

      Permit Year 4 (5 Sep 2015 to 4 Sep 2016)

            Drill one vertical exploration well                                                      $ 5,544,640

            Geological and geophysical work                                                             415,848

            Engineering, Geological and Geophysical Services                                 998,035

                                                                                                                       $ 6,958,523

      Permit Year 5 (5 Sep 2016 to 4 Sep 2017)

            Complete well drilled in Permit Year 4 and drill one new vertical well            $ 9,703,120 Geological and geophysical work                                                                                                4,435,712    Engineering, Geological and Geophysical Services                                                                                     998,035

                                                                                                                       $15,136,867



Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

Completion and testing of well drilled in Permit Year 4 occurs in Permit Year 5.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Northern Territory Department of Mines and Energy (“DME”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 13

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1          General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Paltar or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Paltar shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Paltar shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Paltar in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Paltar shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Paltar shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

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(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A $50,000.00).

1.5.2        Paltar shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Paltar, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Paltar so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Paltar's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Paltar but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Paltar on or before the due date, in the currencies requested or any other currencies acceptable to Paltar at a bank designated by Paltar. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4        Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Paltar be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Paltar may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5        If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Paltar within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$ 25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Paltar's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Paltar's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Paltar is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Paltar at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Paltar shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Paltar shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Paltar shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Paltar is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Paltar.

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1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Paltar during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Paltar for adjustment. Failure on the part of Nation to make claim on Paltar for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Paltar shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Paltar shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Paltar, shall have the right to audit the Operating Account and records of Paltar relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Paltar's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Paltar for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Paltar prior to the commencement of the audit. Paltar will provide the information in electronic format or hard copy documents, if electronic format is not available. Paltar will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Paltar shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Paltar for its Affiliates.

In addition to the information provided by Paltar under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Paltar relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

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(a)      If the Affiliate of Paltar consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Paltar.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)     The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Paltar will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)     Paltar may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Paltar within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Paltar, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Paltar does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Paltar is required by law to employ a public accounting firm to audit the Operating Account and records of Paltar relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Paltar as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Paltar shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Paltar for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Paltar and Nation conducting the audit shall be reflected promptly in the Operating Account by Paltar and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Paltar will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2          Direct Charges

Paltar shall charge the Operating Account with all costs and expenditures incurred by Paltar for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in clauses 2.7.2 and 2.7.3 which are provided by Paltar’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

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2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Petroleum Act when paid by Paltar in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Paltar of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Paltar for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Paltar and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Paltar's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Paltar shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

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2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Paltar's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Paltar's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Paltar and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Paltar, of Material purchased or furnished by Paltar, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and Licence fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Paltar and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Paltar or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Paltar shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

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2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Paltar’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Paltar shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$ 50,000.00) as soon as practical after report of the same has been received by Paltar. All losses in excess of fifty thousand Australian dollars (A$ 50,000.00) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

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2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Paltar for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Paltar or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Paltar for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3          Indirect Charges

3.1              Purpose

Paltar shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Paltar and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Paltar and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Paltar requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

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3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Paltar's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the Year-to-Date indirect charges shall be a percentage of the aggregate Year-to-Date expenditures, calculated on the following scale:

Annual Expenditures

$0 to A$ 3,000,000 of expenditures = 5 %

Next A$ 7,000,000 of expenditures = 4 %

Next A$11,000,000 of expenditures = 3 %

Excess above A$ 11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A $ 36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4          Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Paltar. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, Licence fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

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4.2              Materials Furnished by Paltar

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Paltar may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Paltar hall be priced at net cost determined in accordance with clause 4.1 above as if Paltar had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Paltar has no control, Paltar may charge the Operating Account for the required Material at Paltar's actual cost incurred procuring such Material, in making it suitable for use, and moving it to Permit area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Paltar) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A $ 50,000.00). Nation shall have the right, by so electing and notifying Paltar within seven days (or such shorter period as may be specified by Paltar) after receiving notice from Paltar, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Paltar both as to quality and time of delivery. Such acceptance by Paltar shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Paltar, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Paltar is not required to accept Material furnished in kind by Nation. If Paltar fails to submit proper notification prior to billing Nation for such Material, Paltar shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

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4.4              Warranty of Material Furnished by Paltar

Paltar does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Paltar for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Paltar from the manufacturers or their agents.

Section 5          Disposal of Materials

5.1              Disposal

Paltar shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Paltar shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$ 50,000 or more. When Operations are relieved of Material charged to the Operating Account, Paltar shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Paltar shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Paltar in the disposition of Materials shall be charged to the Operating Account.

5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Paltar to the Operating Account at the net amount collected by Paltar from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Paltar.

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Section 6          Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Paltar of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Paltar shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Paltar, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$ 50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Paltar provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

GRAPHIC 17 x16063010560500.gif begin 644 x16063010560500.gif M1TE&.#EA 0 ' '< ,2'^&E-O9G1W87)E.B!-:6-R;W-O9G0@3V9F:6-E "'Y =! $ + ! < @ (#1(X% #L! end EX-10.46 18 sjdocs-7222072v1final_ep468e.htm sjdocs-7222072v1final_ep468e.htm - Generated by SEC Publisher for SEC Filing

EP 468 Final Earning Agreement

(Amending and Restating the Original EP 468 Earning Agreement)

Officer Petroleum Pty Ltd (ACN 142 330 738)

Nation Energy (Australia) Pty Ltd (ACN 606 533 046)

Contents

1.            Defined terms.................................................................................................................. 2

2.            Initial Consideration......................................................................................................... 2

3.         Farm-in and Operator....................................................................................................... 2

4.         Operating Committee....................................................................................................... 9

5.            Work Programs and Budgets.......................................................................................... 11

6.            Production Licences....................................................................................................... 13

7.            Default........................................................................................................................... 14

8.            Relinquishments and renewals....................................................................................... 16

9.            Transfer of interest or rights........................................................................................... 16

10.         Withdrawal from Agreement..................................................................................................... 17

11.         Relationship of Parties and Tax...................................................................................... 18

12.         Confidential Information............................................................................................... 20

13.         Force majeure................................................................................................................ 21

14.         Notices........................................................................................................................... 22

15.         Applicable law and arbitration....................................................................................... 23

16.         Term.............................................................................................................................. 24

17.         General provisions......................................................................................................... 24

18.         Definitions..................................................................................................................... 26

Schedule 1: Royalties

Schedule 2: Work Program and Budget for Permit Years 5 and 6

Annex 1:      Accounting Procedure

EP 468 Final Earning Agreement

(Amending and Restating the Original EP 468 Earning Agreement)

Dated 31 May 2016

Parties

Officer Petroleum Pty Ltd (ACN 142 330 738) of Level 10, 32 Martin Place, Sydney,

New South Wales 2000 (Officer)

and

Nation Energy (Australia) Pty Ltd (ACN 606 533 046) of RPO Box 60610, Granville Park,

Vancouver, British Columbia V6H 4B9 (Nation)

Background

A.                Officer owns the Permit.

B.                 The Parties entered into the EP 468 Earning Agreement dated 30 August 2015 (as amended by an Amendment dated 17 December 2015 and a Second Amendment dated 8 February 2016, the “Original Earning Agreement”) allowing Officer to earn interests in the Permit and any Production Licenses that might be earned covering certain Blocks in EP 468. The cash consideration and share consideration required by this Original Earning Agreement have not been paid, but the Parties wish to ratify and confirm the Original Earning Agreement; enlarge the time allowed for payment and delivery of the consideration; and, as more fully explained in the following recital, amend, enlarge, restate and replace the Original Earning Agreement.

C.                 Officer and Nation Energy Inc., a Wyoming corporation (“Nation Wyoming”) which owns all the outstanding stock of Nation, entered into an Option dated 30 August 2015 (as amended on 12 February 2016, the “Option”) affording Nation Wyoming the right to purchase EP 468 and certain other assets of Officer. Nation Wyoming has decided to release and terminate the Option, and wishes instead for Nation to amend the Original Earning Agreement so that it covers the entire Permit Area. By this Agreement, the Parties set forth their binding agreement concerning the Cash Consideration and Share Consideration, the costs of Operations to be borne by Nation, and the interests that may be earned by Nation in the Permit and any Production Licences issued to Officer in the Permit Area.

Operative provisions

The Parties hereby ratify and amend the Original Earning Agreement, expand it to cover the Permit Area, and restate and replace it as follows:

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1.                Defined terms

Clause 18 of this Agreement sets out and explains the defined terms, or refers to the definitions of the terms, and the rules of interpretation that apply.

2.                Initial Consideration

2.1              Cash Consideration

Upon execution of this Agreement, Nation will execute and deliver to Officer’s corporate parent, Paltar Petroleum Limited (ACN 149 987 459) (Paltar), its promissory note in the original principal amount of A$24,322,501, with payment guaranteed by Nation Wyoming. The principal amount reflects the total cash consideration due under a total of seven earning agreements (six granted by Paltar and one by Officer) of even date; the portion of the principal amount allocated to this Agreement (the “Cash Consideration”) is A$769,143. The allocated amount comprises A$769,143 previously promised and accounted for as consideration for the Original Earning Agreement, with no additional cash consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.2              Share Consideration

Within seven days after delivery to Nation Wyoming of Paltar’s audited financial statements for the three most recent fiscal years, together with such additional fiscal period financial statements as may be required for reporting by Nation Wyoming under applicable regulations of the United States Securities and Exchange Commission, Nation Wyoming will issue 900 million of its common shares to Paltar, subject to the same restrictions on the transfer of such shares as set forth in the third restated letter agreement dated 30 August 2015, as subsequently amended. Such shares reflect the total share consideration due under all seven earning agreements referred to in clause 2.1; the portion allocated to this Agreement (the “Share Consideration”) is 128,571,430 shares. The allocated portion comprises 85,714,290 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,140 shares as consideration for the new rights being granted in the remaining Blocks in the Permit Area.

2.3              Non-Refundable Consideration for Earning Rights

The Cash Consideration and Share Consideration are non-refundable consideration for the right given Nation hereunder to earn interests in any Production Licences that may be granted to Officer covering any of the Permit Area.

3.     Farm-in and Operator

3.1 Nation Interest

On Nation spending at least the Earning Amount in Expenditure on or for the benefit of the Permit Area before the end of the Earning Period (Earning Date), Nation, on giving notice to Officer verifying the amount of Expenditure Nation has incurred:

(a)                acquires a beneficial interest, to the extent of the Nation interest, in the Permit Area; and

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(b)               will have the right to be transferred the Nation Interest in the Permit Area, in such manner and on such terms as do not materially increase the obligations owed the Government in respect of the area then covered by the Permit; and

3.2 Joint Venture Operating Agreement

On or as soon as practicable after the Earning Date the parties shall enter into an exploration joint venture operating agreement in respect of the Permit Area on terms customary for such an agreement in the Australian petroleum industry and under which:

(a)                Officer holds the Officer Interest and Nation holds the Nation Interest in the Permit Area;

(b)               Officer is the operator of the joint venture;

(c)                Nation shall contribute 100% of the actual Work Program Expenses under the joint venture operating agreement;

(d)               Nation shall not be permitted to withdraw from the joint venture operating agreement until the end of the fifth Permit Year;

(e)                the terms set out in clause 6.1 to 6.3 (inclusive) of this Agreement will be incorporated;

(f)                the terms of the Option in favour of Nation set out clauses 5.3 to 5.7 (inclusive) will be incorporated and, in the event that the Option is exercised by Nation with respect to a Production Licence, then the Production Licence will not form part of the joint venture property under the joint venture operating agreement from the date of exercise of the Option, and

(g)                upon entry into the joint venture operating agreement, the remaining effective clauses of this Agreement will immediately terminate with respect to the Permit Area, subject to any and all accrued rights and liabilities of the parties.

3.3 Designation of Operator

Officer is hereby designated as Operator, and agrees to act as such in accordance with this Agreement.

3.4 Rights and Duties of Operator

(a)                Officer shall have all of the rights, functions and duties of Operator under this Agreement and will have exclusive charge of and shall conduct all Operations on the Permit Area under the overall direction of the Operating Committee. Officer may employ independent contractors and agents, including Related Bodies Corporate of Officer, in such Operations.

(b)               Officer warrants and represents to Nation that the Permit and Officer’s interest in the Permit is in good standing and is not subject to any breach, default or other circumstance that will or may result in the Permit being surrendered or cancelled or becoming subject to any Encumbrance. Officer shall:

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(i)                 without limiting clause 5.1(c) and subject to applicable Government requirements, ensure that each Work Program and Budget consists of work to be performed on or for the benefit of the Permit Area;

(ii)               not grant, create or allow the grant or creation of any Encumbrance over Officer’s interest in the Permit without the prior written consent of Nation;

(iii)             not sell, transfer, assign or otherwise dispose of Officer’s interest in the Permit or part with possession of the Permit without the prior written consent of Nation;

(iv)             immediately notify Nation of any act, event, circumstance, correspondence, notice or other information (in any form and from whatever source) that may cause, or is relevant to, Officer’s interest in the Permit becoming the subject of an Encumbrance or being surrendered or cancelled; and

(v)               take all steps as are necessary or appropriate to ensure that the application for, grant and transfer or issue of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c)                In the conduct of Operations, Officer shall:

(i)                 perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii)               conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii)             prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv)             acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v)               permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

(vi)             pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii)           carry out the obligations of Officer pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii)         have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

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(ix)             act as the Parties’ representative in respect of Native Title Rights and aboriginal heritage issues, negotiate and enter into agreements with the parties to Native Title Claims, and in all other respects deal with issues of this kind as and when they arise, including the recognition of Native Title Rights and the settlement of Native Title Claims;

(x)               in case of an emergency (including a significant fire, explosion, petroleum release, or sabotage; incident involving loss of life, serious injury to an employee, contractor, or third party, or serious property damage; strikes and riots; or evacuations of Officer personnel): (i) take all necessary and proper measures for the protection of life, health, the environment and property; and (ii) as soon as reasonably practicable, notify Nation of the details of such emergency and any measures it has taken or plans to take in response; and

(xi)             do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.5 Officer Personnel

(a)                Officer shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b)               Subject to the Laws and this Agreement, Officer will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.6 Information Supplied by Officer

(a)                Officer shall provide Nation with the following data and reports from the Operations:

(i)                 copies of all logs or surveys;

(ii)               daily drilling reports;

(iii)             copies of all tests and core data and analysis reports;

(iv)             final well report;

(v)               copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi)             engineering studies, development schedules and annual progress reports on development projects;

(vii)           field and well performance reports, including reservoir studies and reserve estimates; and

(viii)         copies of all reports relating to Operations furnished by Officer to a Government.

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(b)               Officer shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Officer’s administrative and technical personnel.

(c)                Officer shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.7 Settlement of Claims and Lawsuits

(a)                Officer shall promptly notify Nation of any and all claims or suits which arise out of Operations or relate in any way to Operations. Officer shall represent Nation and defend or oppose the claim or suit. Officer may in its sole discretion compromise or settle any such claim or suit or any related series of claims or suits for an amount not to exceed the equivalent of $250,000, exclusive of legal fees. Officer shall seek guidance from the Operating Committee on amounts in excess of the above-stated amount. Nation shall have the right to be represented by its own counsel at its own expense in the settlement, compromise or defence of such claims or suits.

(b)               Nation shall promptly notify Officer of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.8 Limitation on Liability of Officer

(a)                Except as set out in clause 3.8(c), neither Officer nor any other Indemnitee (as defined below) shall bear any damage, loss, cost, expense or liability resulting from performing (or failing to perform) the duties and functions of Operator, and the Indemnitees are hereby released from liability to Nation for any and all damages, losses, costs, expenses and liabilities arising out of, incidental to or resulting from such performance or failure to perform, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Officer (or any such Indemnitee).

(b)               Except as set out in clause 3.8(c), Nation shall defend and indemnify Officer and its Related Bodies Corporate, and their respective employees, officers and directors (collectively, the Indemnitees), from any and all damages, losses, costs, expenses (including reasonable legal costs, expenses and attorneys' fees) and liabilities incidental to claims, demands or causes of action brought by or on behalf of any person or entity, which claims, demands or causes of action arise out of, are incidental to or result from Operations, even though caused in whole or in part by a pre-existing defect, the negligence (whether sole, joint or concurrent), strict liability or other legal fault of Officer (or any such Indemnitee).

(c)                Notwithstanding clauses 3.8(a) and 3.8(b), if any Senior Supervisory Personnel of Officer or its Related Bodies Corporate engage in Wilful Misconduct which proximately causes Nation to incur damages, loss, cost, expense or liability for claims, demands or causes of action referred to in clauses 3.8(a) or 3.8(b), then Officer shall be liable for such damages, loss, cost, expense and liability.

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(d)               Notwithstanding the foregoing, under no circumstances shall Officer or any other Indemnitee ever bear any Consequential Loss.

(e)                In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.8(a) – (d) as if the new Operator were named in those clauses in place of Officer.

3.9 Insurance Obtained by Officer

(a)                Officer shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i)                 All insurance required by the Laws;

(ii)               Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iii)             Cost of well control/redrilling and recompletion expenses/seepage and contamination and pollution liability insurance covering expenses incurred in regaining control of wells including materials and services necessary to bring the wells under control and costs expended to reinstate the well to the depth and condition which existed prior to an insured occurrence; and

(iv)             Workers compensation insurance.

(b)               Officer shall, in respect of such insurance:

(i)                 use reasonable endeavours to procure or cause to be procured such insurance prior to or concurrent with the commencement of relevant operations and maintain or cause to be maintained such insurance during the term of the relevant operations or any longer term required under the Permit or the Laws;

(ii)               promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

(iii)             duly file all claims and take all necessary and proper steps to collect any proceeds.

(c)                Officer shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to:

(i)                 obtain and maintain all insurance required under the Laws or any decision of the Operating Committee; and

(ii)               provide Officer with certificates reflecting such insurance prior to the commencement of their services.

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3.10          Resignation

Subject to clause 3.12, Officer may resign as Operator at any time by so notifying Nation at least 120 days before the effective date of such resignation.

3.11          Removal

(a)                Officer shall resign immediately if it dissolves, liquidates, is wound up, or otherwise terminates its existence.

(b)               Subject to clause 3.12, Officer shall be removed upon receipt of notice from any Party if:

(i)                 Officer becomes insolvent, bankrupt or makes an assignment for the benefit of creditors; or

(ii)               a receiver or receiver and manager is appointed for a majority (by value) of Officer's assets.

(c)                Subject to clause 3.12, Officer may be removed by written notice from Nation if Officer has committed a material breach of this Agreement and has either failed to commence to cure that breach within 30 days after receipt of a Notice from Nation detailing the alleged breach or failed to diligently pursue the cure to completion.

3.12          Appointment of Successor

When a change of Operator occurs pursuant to clause 3.10 or clause 3.11:

(a)                                  the Operating Committee shall meet as soon as possible to elect a successor Operator; provided, however, that if Officer has been removed or is deemed to have resigned and either fails to vote or votes only to succeed itself, then the successor Operator shall be elected by the affirmative vote of Nation alone.

(b)               if Officer disputes commission of or failure to rectify a material breach alleged pursuant to clause 3.11(c) and proceedings are initiated pursuant to clause 15.2, Officer shall continue as Operator and no successor Operator may be appointed pending the conclusion or abandonment of such proceedings;

(c)                Officer, if it resigns or is removed as Operator, shall be compensated out of the Operating Account for its reasonable expenses related to its resignation or removal;

(d)               Officer, if it resigns or is removed as Operator, and the successor Operator shall arrange for the taking of an inventory of all Property and an audit of the books and records relating to Operations, the cost of which shall be charged to the Operating Account;

(e)                the resignation or removal of Officer as Operator and its replacement by the successor Operator shall not become effective prior to receipt of any necessary Government approvals; and

(f)                upon the effective date of the resignation or removal, the successor Operator shall succeed to all duties, rights and authority prescribed for Operator. Officer shall transfer to the successor Operator custody of all Property, books of account, records and other documents maintained by Operator pertaining to the Permit Area and to Operations. Upon delivery of the above-described property and data, Officer shall be released and discharged from all obligations and liabilities as Operator accruing after such date, except to the extent such liabilities relate to facts, matters or circumstances which occurred prior to such date.

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3.13          Commingling of Funds

Officer may commingle with its own funds the monies which it receives from or for the Operating Account pursuant to this Agreement.

3.14          Delegation

Operator may delegate all or part of its rights or responsibilities as Operator under this agreement to a Related Body Corporate. Any such delegation shall not relieve Operator of its obligations and liabilities under this Agreement.

4.                Operating Committee

4.1 Establishment of Operating Committee

An Operating Committee composed of representatives of each Party shall provide overall supervision and guidance to Officer concerning the direction of Operations. Each Party shall appoint one representative and two alternates to serve on the Operating Committee. Each Party shall as soon as possible after the date of this Agreement give notice in writing to the other Party of the name and address of its representative, its first alternate and its second alternate serving on the Operating Committee. Each Party shall have the right to change its representative and alternate representatives at any time by giving Notice to such effect to the other Party.

4.2 Authority to Vote

The representative of a Party, or in his absence the alternate representative, shall be authorised to represent such Party with respect to any matter which is within the power of the Operating Committee and is properly brought before the Operating Committee. Each such representative shall have one vote on matters coming before the Operating Committee. Alternate representatives may attend Operating Committee meetings, but shall have no vote at such meetings except in the absence of the representative for whom they are the alternate. In addition to the representative and alternate representatives, each Party may also bring to any Operating Committee meetings such technical and other advisers as it may deem appropriate. The technical and other advisers shall be given the opportunity to present data and voice opinions on behalf of a Party, but may not vote.

4.3 Subcommittees

The Operating Committee may establish such advisory subcommittees, including technical and commercial subcommittees, as the Operating Committee may deem appropriate.

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4.4 Notice of Meeting

(a)                Either Party may call a meeting of the Operating Committee by giving Notice to the other Party at least 15 days in advance of such meeting.

(b)               Notice periods above may be waived with unanimous consent of all Parties.

(c)                The day the Notice was delivered and the date the meeting is to be held shall not be included in calculating the Notice period.

(d)               Notwithstanding the above, Nation agrees that if there is an operational issue involving an urgent operational matter, then Nation shall be deemed to have waived the above notice period so that the Operating Committee may make a decision within 48 hours, as contemplated by clause 4.11(a)(i).

4.5 Contents of Meeting Notice

(a)                Each Notice of a meeting of the Operating Committee shall contain:

(i)                 the date, time and location of the meeting;

(ii)               an agenda of the matters and proposals to be considered and/or voted upon; and

(iii)             copies of all proposals to be considered at the meeting.

(b)               A Party receiving Notice may, by Notice to the other Party given not less than seven days before a meeting, may add additional matters to the meeting agenda.

(c)                With the unanimous consent of all Parties, the Operating Committee may consider at a meeting a proposal not contained in such meeting agenda.

4.6 Location of Meetings

All meetings of the Operating Committee shall be held in Sydney, New South Wales, or elsewhere as may be decided unanimously by the Operating Committee.

4.7 Operator's Duties for Meetings

(a)                With respect to meetings of the Operating Committee and any subcommittee, Officer's duties shall include, but not be limited to:

(i)                 conduct of the meeting; and

(ii)               preparation of a written record or minutes of each meeting.

(b)               Officer shall have the right to appoint the chairman of the Operating Committee and all subcommittees.

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4.8 Voting Procedure

Except as otherwise expressly provided in this Agreement in respect of certain specific matters, all decisions, approvals and other actions of the Operating Committee on all proposals coming before it shall be decided by Officer alone.

4.9 Record of Votes

The chairman of the Operating Committee shall appoint a secretary who shall make a record of each proposal voted on and the results of such voting at each Operating Committee meeting. Each representative shall sign and be provided a copy of such record at the end of such meeting and it shall be considered the final record of the decisions of the Operating Committee.

4.10          Minutes

The secretary shall provide each Party with a copy of the minutes of the Operating Committee meeting within 21 days after the end of the meeting. Each Party shall have 14 days after receipt of such minutes to give notice of its objections to the minutes to the secretary. A failure to give notice specifying objection to such minutes within said 14 day period shall be deemed to be approval of such minutes. In any event, the votes recorded under clause 4.9 shall take precedence over the minutes described above.

4.11          Voting by Notice

(a)                In lieu of a meeting, any Party may submit any proposal to the Operating Committee for a vote by Notice. The proposing Party shall notify Operator who shall give each representative notice describing the proposal so submitted and whether Officer considers such operational matter an urgent operational matter. Each Party shall communicate its vote by Notice to Officer and any other Party within one of the following appropriate time periods after receipt of Operator's notice:

(i)                 48 hours in the case of urgent operational matters;

(ii)               14 days in the case of all other proposals.

(b)               Except in the case of clause 4.11(a)(i), Nation may by Notice delivered to Officer within five days after receipt of Officer's notice request that the proposal be decided at a meeting rather than by notice. In such an event, that proposal shall be decided at a meeting duly called for that purpose.

(c)                Except as provided in clause 10.1(a), a Party failing to communicate its vote in a timely manner shall be deemed to have voted against such proposal.

(d)               If a meeting is not requested, then at the expiration of the appropriate time period, Officer shall give Nation a confirmation notice stating the tabulation and results of the vote.

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5.                Work Programs and Budgets; Production Licence Option

5.1              Agreed Permit Work Programs and Budgets

(a)                The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fifth and sixth Permit Years is attached as Schedule 2.

(b)               On or before the first day of June of each year beginning 2017 and continuing each year thereafter, Operator shall deliver to Nation a proposed Work Program and Budget detailing the Operations to be performed in respect of the Permit for the following Permit Year. Within 21 days after such delivery, the Operating Committee shall meet to consider and endeavour to agree the Work Program and Budget; failing agreement, the proposed Work Program and Budget reasonably estimated to cost the least will conclusively be deemed adopted, so long as such proposed Work Program and Budget will satisfy all of the Minimum Work Obligations of that Permit Year.

(c)                Any approved Work Program and Budget may be revised by the Operating Committee from time to time. To the extent such revisions are approved by the Operating Committee, the Work Program and Budget will be amended accordingly.

5.2              Funding of Work Program Expenses

(a)                Nation agrees to contribute 100% of the actual Work Program Expenses.

(b)               Nation must pay all Work Program Expenses as follows:

(i)                 As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Officer the full amount of the Work Program and Budget costs incurred for the fourth Permit Year, together with the Work Program and Budget costs estimated for the fifth Permit Year, as shown in Schedule 2;

(ii)               Estimated Work Program Expenses for the sixth and subsequent years will be delivered by Nation to Officer quarterly in advance, based on anticipated cash requirements; and

(iii)             Required amounts in addition to estimated amounts will be delivered by Nation to Officer in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure.

5.3 Grant of Option

If, after the Earning Date, Nation acquires an undivided 25% interest in a Production Licence pursuant to clause 6.2(a) (the Acquisition Date), Officer shall grant to Nation, in exchange for $100 and other good and valuable consideration, the sole and exclusive option (Option) to purchase at any time during the period commencing on the Acquisition Date and ending ninety (90) days later (the Option Period) the Officer Interest in that Production Licence free from Encumbrances, other than those referred to in clause 5.5(b).

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5.4 Exercise of Option

The Option may be exercised by Nation at any time during the Option Period by giving notice in writing to Officer specifying that the Option has been exercised.

5.5 Transfer

(a)                As soon as practicable after the exercise of the Option in accordance with clause 5.4, Officer will deliver to Nation registrable transfer forms of Officer’s entire interest in the Production Licence, except for the payment of stamp duty and registration fees. Nation will lodge the transfer forms, together with a notice appointing Nation or its designee as Operator of the Production Licence, with the Government for approval and registration, as required under the Petroleum Act, and promptly thereafter Nation shall deliver to Officer the duly executed transfer forms and pay the stamp duty and registration fees in the amounts determined by the Government.

(b)               Upon the effective transfer of Officer’s entire interest in the Production Licence, Nation shall assume all the obligations (and be assigned all the benefits) of:

(i)                   the Exploration Agreements that relate to the Production Licence; and

(ii)                 the royalty burdens as set forth in Schedule 1 and as provided in clause 5.6(a),

and Officer shall execute all such agreements (including any deeds of assignment and assumption) as reasonably required by Nation and the counterparties to the above agreements to perfect the assumption of such obligations and the assignment of any benefits and the release of Officer.

(c)                Upon the transfer of a Production Licence pursuant to this clause 5.5, this Agreement will cease to apply to the portion of the Permit Area covered by that Production Licence.

5.6 Consideration

(a)                In consideration for the transfer of the Officer Interest to Nation, upon exercise of the Option, Officer shall be entitled to an overriding royalty (not subject to proportionate reduction) with respect to all petroleum produced from the portion of the Permit Area covered by the Production Licence equal to the difference between 25% and the sum of the existing royalty burdens shown in Schedule 1, such that the revenue interest of Nation in such production of petroleum, after giving effect to all of the royalty burdens described in Schedule 1, will be exactly 75%, and with the understanding that if a royalty burden set forth in Schedule 1 later increases in accordance with its terms, the additional overriding royalty in favor of Officer will be correspondingly decreased, so that Nation’s revenue interest will remain constant at 75%.

(b)               Officer and Nation will, as soon as practicable after the exercise of the Option, enter into an overriding royalty agreement under which Officer holds the overriding royalty described in this clause and which more fulsomely sets out the terms of the royalty based on terms standard for such an agreement in the Australian petroleum industry.

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5.7 Lapse of Option

In the event that the Option is not exercised within the Option Period then the Option will lapse and the parties shall use their best endeavours to enter a production joint venture operating agreement in respect of such Production Licence under which:

(a)                Officer holds the Officer Interest and Nation holds the Nation Interest in the Production Licence; and

(b)               Nation is the operator of the joint venture; and

which is otherwise on terms standard for the Australian petroleum industry (including provisions for dilution of interests).

6.                Production Licenses

6.1              Decision to Apply

(a)                If a Discovery is made in the Permit Area, Officer shall deliver any Discovery notice required under the Petroleum Act and shall as soon as possible submit to the Operating Committee a report containing available details concerning the Discovery and Operator’s recommendation as to whether a Production Licence should be sought.

(b)               The Operating Committee decision whether to apply to the Government for a Production Licence shall be decided by Nation alone.

6.2              Production Licence Granted

(a)                Officer acknowledges and agrees that, following the Earning Date, if a Production Licence is applied for and issued in respect of any area under the Permit Area in accordance with the terms of this Agreement, (i) Officer’s undivided interest in such Production Licence will be equal to 75%, subject to the Option granted hereunder pursuant to clause 5.3, and Nation’s undivided interest in such Production Licence will be equal to 25%.

(b)               Upon the issue of a Production Licence, Officer will be deemed to have resigned as Operator with respect to the Permit Area covered by the Production Licence.

(c)                Upon the issue of a Production Licence to Nation pursuant to this clause 6.2, each clause of this Agreement, other than clauses 5.3 through 5.7. will cease to apply to the Permit Area covered by that Production Licence.

6.3              Production Licence Not Granted

(a)                If the Operating Committee decides not to apply for a Production Licence or, having applied for a Production Licence, the application is denied, the Operating Committee shall meet to determine whether the Discovery merits appraisal.

(b)               If the Operating Committee determines that the Discovery merits appraisal, Officer shall deliver to the Operating Committee within 60 days after the determination a proposed

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Work Program and Budget for appraisal of the Discovery. Within thirty 30 days after delivery, or earlier if necessary to meet any applicable deadline under the Petroleum Act, the Operating Committee shall meet to consider or modify such Work Program and Budget, with Nation having the sole power to approve, reject or modify the proposal.

7.                Default

7.1              Default and Notice

Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.2(b). Officer shall promptly provide Nation written notice of such default.

7.2              Immediate Consequences

From the date the default notice is given by Officer until the time all defaults under clause 7.1 have been remedied, Nation shall have no right to:

(i)                 call or attend Operating Committee or subcommittee meetings;

(ii)               vote on any matter coming before the Operating Committee or any subcommittee; or

(iii)             access any data or information relating to any operations under this Agreement.

Any matter which is to be decided by Nation alone under this Agreement shall instead be decided by Officer.

7.3              Remedies

(a)               If the Nation default relates to a failure to pay the Work Program Expenses incurred for the fourth Permit Year or to contribute the Work Program Expenses for the fifth or sixth Permit Years, and if Nation fails to remedy such default within 30 days following Officer’s notice, then Nation, upon the written request of Officer, shall surrender its entire interest in this Agreement to Officer, free of all Encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be requested by Officer. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Permit Area and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle.

(b)               If the Nation default relates to a failure to contribute a portion of the Work Program Expenses for the seventh or subsequent Permit Years, and if Nation fails to remedy such default within 30 days following Officer’s notice, then Officer may, but is not obligated to, purchase Nation’s entire interest under this Agreement for 90% of the fair market value of such interest, less the amount in default. If Officer wishes to undertake this purchase, it will notify Nation of its desire and of the fair market value, and Nation shall have seven days after receipt of this notice either to notify Officer that it accepts Officer’s statement of the fair market value, or that it requires an independent determination of the fair market value. If it does not notify Officer, it will be deemed to have accepted

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Officer’s statement of the fair market value. In either event, Nation will conclusively be deemed to have sold its rights under this Agreement to Officer effective as of the date Officer sends notice of its desire to purchase the interest and of the fair market value.

If Nation timely requests independent determination of the fair market value, the Chairman of the Australian Petroleum Production & Exploration Association Limited shall be asked by either Party to appoint an expert to make the determination. The expert so appointed shall have exclusive power to establish the venue and timing of, and the procedural rules governing, the determination of fair market value. Each Party shall bear its own costs and attorney’s fees in connection with the determination, although all fees, costs and expenses of the expert shall be borne solely by Nation.

7.4              No Right of Set Off

Nation acknowledges that a fundamental principle of this Agreement is that it pay the Work Program Expenses under this Agreement as and when required. Accordingly, Nation waives any right to raise by way of set off or to invoke as a defence any claim it may have against Officer, whether under this Agreement or otherwise, so as to reduce or avoid its obligation timely to contribute required Work Program Expenses.

7.5              Without Prejudice

Officer may exercise its rights, remedies or powers under this clause 7 or otherwise at law or in equity, concurrently, individually or cumulatively.

7.6              No penalty

The remedies in this clause 7 have been selected by the Parties in light of their recognition that Officer is not anticipated to have the funds necessary to pay Work Program Expenses for the fifth and sixth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the Parties recognize that Officer may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Officer of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Officer of its rights to acquire Nation’s interest in this Agreement under this clause 7.

8.                Relinquishments and renewals

8.1              Relinquishment

If the Petroleum Act or the Permit requires Officer to relinquish any portion of the Permit Area, Officer will consult with Nation before selecting the portion to be relinquished; the final decision concerning the relinquishment area will, however, be made by Officer alone.

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8.2              Extension of the Term

Decisions to renew the Permit will be made by the Operating Committee, although the Operating Committee decision whether to renew shall be decided by Nation alone. If the Operating Committee decides to renew, Nation will be bound by the renewal work program and all other consequences of the renewal; if the Operating Committee decides not to renew, Officer may renew the Permit for its own account, and this Agreement will automatically terminate upon such renewal.

8.3              Surrender of Permit or Licence

If Officer wishes voluntarily to surrender the entire Permit, such surrender shall require the specific agreement of Nation.

9.                Transfer of interest or rights

9.1              Obligations

If a Transfer subject to this clause 9 occurs without satisfaction (in all material respects) by the transferor of the requirements hereof, then the other Party shall be entitled to enforce specific performance of the terms of this clause 9, in addition to any other remedies (including damages) to which it may be entitled. Each Party agrees that monetary damages alone would not be an adequate remedy for the breach of any Party's obligations under this clause 9.

9.2              Transfer

(a)                Except in the case of a Party transferring all of its interest under this Agreement, no Transfer shall be made by any Party which results in the transferor or the transferee holding an interest under this Agreement of less than ten percent (10%) of its original interest under this Agreement.

(b)               Both the transferee, and, notwithstanding the Transfer, the transferring Party, shall be liable to the other Parties for the transferring Party’s share of any obligations (financial or otherwise) which have vested, matured or accrued under the provisions of this Agreement prior to such Transfer, including any obligation to contribute Work Program Expenses.

(c)                A transferee shall have no rights under this Agreement unless and until:

(i)                 it expressly undertakes in an instrument reasonably satisfactory to the other Party to perform the obligations of the transferor under this Agreement in respect of the interest being transferred; and

(ii)               except in the case of a Transfer to a Related Body Corporate, the other Party has consented in writing to such Transfer, which consent shall be denied only if the transferee fails to establish to the reasonable satisfaction of the other Party its financial capability to perform its obligations under this Agreement.

No consent shall be required under clause 9.2(c)(ii) for a Transfer to a Related Body Corporate.

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(d)               Nothing contained in this clause 9 shall prevent a Party from Encumbering its interest under this Agreement to a third party for the purpose of security relating to finance, provided that:

(i)                 the Party shall remain liable for all obligations relating to such interest;

(ii)               the Encumbrance shall be expressly subordinated to the rights of the other Party to this Agreement; and

(iii)             the Party shall ensure that any Encumbrance is expressly without prejudice to the provisions of this Agreement.

10.           Withdrawal from Agreement

10.1          Right of Withdrawal

(a)                Nation may not voluntarily withdraw from this Agreement before the close of the sixth Permit Year.

(b)               Subject to the provisions of this clause 10, Nation may withdraw from this Agreement at any time after the sixth Permit Year by providing written notice to Officer at least 90 days prior to the effective date of the withdrawal. Such Notice shall be unconditional and irrevocable when given and, on the effective date of the withdrawal, this Agreement shall terminate.

(c)                Nation may not withdraw from this Agreement if its interest in the Agreement is subject to any charge, lien, mortgage, pledge, or other Encumbrance, unless Officer is willing to accept the assignment reflecting the withdrawal subject to all such encumbrances and any necessary consents are obtained from the holder of such Encumbrance.

10.2          Obligations and Liabilities of Nation upon Withdrawal

Nation shall, following its notification of withdrawal, remain liable only for its share of the following:

(i)                 all Work Program Expenses coming due before the effective date of the withdrawal;

(ii)               all costs and expenses associated with a fire, blow out, loss of well control, act of sabotage or vandalism, or other emergency occurring prior to the effective date of the withdrawal, without regard to when such costs are actually incurred; and

(iii)             all other obligations and liabilities of Nation with respect to acts or omissions under this Agreement prior to the effective date of the withdrawal for which Nation would have been liable, had it not withdrawn from this Agreement.

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11.           Relationship of Parties and Tax

11.1          Relationship of Parties

The rights, duties, obligations and liabilities of the Parties under this Agreement shall be several, not joint or joint and several. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create a mining or other partnership or association or (except as explicitly provided in this Agreement) a trust. This Agreement shall not be deemed or construed to authorise any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries except as expressly provided in this Agreement.

11.2          Tax

Each Party shall be responsible for reporting and discharging its own royalty and tax measured by the profit or income of the Party under this Agreement. Each Party shall protect, defend and indemnify each other Party from any and all loss, cost or liability arising from the indemnifying Party's failure to report and discharge such royalties and taxes. The Parties intend that all income and all tax benefits (including, but not limited to, deductions, depreciation, credits and capitalisation) with respect to the expenditures made by the Parties hereunder will be allocated by the relevant tax authorities to the Parties based on the share of each tax item actually received or borne by each Party. If such allocation is not accomplished due to the application of the laws and regulations of the Government or other Government action, the Parties shall attempt to adopt mutually agreeable arrangements that will allow the Parties to achieve the financial results intended. Officer shall provide each Party, in a timely manner and at such Party's sole expense, with such information with respect to Operations as such Party may reasonably request for preparation of its tax returns or responding to any audit or other tax proceeding.

11.3          United States Tax Election

(a)                For United Stated Federal Income Tax Purposes, each U.S. Party hereby elects to be excluded from the application of all the provisions of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as permitted by Section 761 of said Code and the Regulations promulgated thereunder.

(b)               Should there be any requirement that each U.S. Party evidence this election, each Party agrees to execute such documents and furnish such other evidence as may be required by the United States Internal Revenue Service or may otherwise be necessary. Each Party further agrees not to give any notices or take any other action inconsistent with the election made hereby.

(c)                If any further income tax law of the United States contains provisions similar to those contained in said Subchapter K, under which an election similar to that provided by Section 761 is permitted, each U.S. Party agrees to make such elections as may be permitted by such laws. In making this election, each U.S. Party affirms that the income derived by it from the operations under this Agreement can be adequately determined without the computation of partnership taxable income.

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(d)               Unless approved by every U.S. Party, no activity shall be conducted under this Agreement that would cause any Non-U.S. Party to be deemed to be engaged in a trade or business within the United States under United States income tax laws or regulations.

(e)                Nothing in this Agreement shall be interpreted to require any Party to do or execute any document that might subject it or its income or property to United States taxation or to render liable to United States taxation any Party which prior to entering into this Agreement was not subject to United States taxation.

(f)                For the purposes of this clause 11.3, “U.S. Party” shall mean any Party that is subject to the income tax law of the United States in respect with operations under this Agreement. “Non-U.S. Party” shall mean any Party that is not subject to such income tax law.

11.4          Goods and Services Tax

(a)                Unless otherwise stated, all consideration specified in this Agreement does not include goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act).

(b)               If and to the extent that a supply under this Agreement is subject to GST, the recipient must pay to the supplier an additional amount equal to the amount of GST payable on that supply (GST Amount).

(c)                The GST Amount is payable at the same time as the GST exclusive consideration for the supply is payable or to be provided. However, the GST Amount need not be paid until the supplier provides a Tax Invoice to the recipient.

(d)               If the GST Amount differs from the amount of GST payable by the supplier, the GST Amount must be adjusted.

(e)                If a party is entitled to be reimbursed or indemnified under this agreement, the amount to be reimbursed or indemnified must be reduced by any amount for which the Participant is entitled to an Input Tax Credit (as defined in the GST Act) for the acquisition to which that reimbursement of indemnification relates.

12.           Confidential Information

12.1          Disclosure of Confidential Information

Nation may not disclose Confidential Information to any person except:

(i)                 with the written consent of Officer;

(ii)               if Nation is required to do so by law, a Government or a stock exchange;

(iii)             if Nation is required to do so in connection with legal proceedings relating to this Agreement;

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(iv)             to a transferee or potential transferee (or its advisers) of the whole or any part of Nation’s interest under this Agreement who gives an appropriate confidentiality undertaking to Nation for the benefit of Officer; or

(v)               in connection with, or in contemplation of, a listing on a stock exchange.

12.2          Disclosure by recipient of Confidential Information

If Nation discloses Confidential Information under clause 12.1, it must use all reasonable endeavours to ensure that persons receiving Confidential Information do not disclose the information except in the circumstances permitted in that clause.

12.3          Use of Confidential Information

Nation may not use Confidential Information except for the purpose of exercising its rights or performing its obligations under this Agreement.

12.4          Prior notification of disclosure to stock exchange

If Nation is required or wishes to disclose Confidential Information in accordance with clause 12.1(ii) or clause 12.1(iii), it must notify Officer of the proposed disclosure as far in advance as practicable.

12.5          Return of Confidential Information

Nation must, upon the request of Officer, immediately deliver to Officer all documents or other materials containing or referring to the Confidential Information which are in its possession, power or control or in the possession, power or control of persons who received Confidential Information from it under clause 12.1(i) or 12.1(iv).

12.6          Retention of Confidential Information

Despite clause 12.5, Nation may retain one single copy only of the documents or other materials referred to in that clause provided that the Party continues to comply with all other obligations set out in this clause 12 in respect of any retained copies.

12.7          Obligations Continue

The rights and obligations of a Party under this clause 12 with respect to confidentiality will continue to apply to that Party even after this Agreement terminates.

13.           Force majeure

13.1          Force Majeure

If, as a result of an event of Force Majeure, a Party becomes unable, wholly or in part, to perform any of its obligations under this Agreement:

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(a)                that Party shall give the other Party notice of the event of Force Majeure with reasonably full particulars and, insofar as is known to it, the probable extent to which it will be unable to perform or be delayed in performing its obligations;

(b)               on giving the notice of the event of Force Majeure, that obligation, other than an obligation to pay money, is suspended but only so far as and for so long as it is affected by the Force Majeure; and

(c)                the Party affected by the event of Force Majeure must continue to maintain, or ensure that Officer maintains, the Permit in good condition.

13.2          Labour disputes and Native Title matters

The obligation to use reasonable diligence to overcome or remove the effect of event of Force Majeure does not require the affected Party to:

(a)                settle any strike, or other labour dispute on terms contrary to its wishes;

(b)               contest the validity or enforceability of any Laws; or

(c)                settle any Native Title Claim or enter into any agreement with respect to Native Title Rights,

(d)               on terms not reasonably acceptable to it solely for the purpose of removing the event of Force Majeure.

13.3          Resumption

The obligation of the affected Party to perform its obligations resumes as soon as it is no longer affected by the Force Majeure event.

14.           Notices

14.1          Form of Notice

(a)                Unless expressly stated otherwise in this Agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this Agreement (Notice) must be in writing or given by electronic transmission, signed by an authorised officer of the sender and marked for the attention of the person identified in clause 14.3 or, if the recipient has notified otherwise, then marked for attention in the last way notified.

14.2          When Notices are taken to have been given and received

(a)                A Notice is regarded as given and received:

(i)                 if delivered by hand, when delivered;

(ii)               if sent by pre-paid post from an address in Australia to an address in Australia, three days after posting;

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(iii)             if sent by pre-paid post from or to an address outside Australia, ten days after posting;

(iv)             if given by fax, when the sender’s fax machine issues a successful transmission report;

(v)               if given by email, on the earlier of:

(A)             the time the sender receives an automated message that the email was delivered; and

(B)              six hours after being delivered unless:

(I)                the sender receives an automated message that the email was undeliverable or that the recipient is out of the office; or

(II)              the sender knows or reasonably should know that there is a network failure and accordingly knows or suspects that the email was not delivered,

(b)               in which case the email is taken not to be delivered and the sender should resend the notice by hand, post or fax.

14.3          Address details for Notices

Officer Petroleum Limited

Level 10, 32 Martin Place, Sydney, NSW 2000

Attention: Marc Bruner / Darrel Causbrook

Telephone: +61 2 8222 6100

                        Facsimile: +61 2 9222 1880

                        e-mail: darrel.causbrook@causbrooks.com.au

Nation Energy (Australia) Pty Ltd

1500 West 16^th Avenue, Suite F

Vancouver, B.C. Canada V6J 2L6

Attention: John R. Hislop

Telephone: +1 604 331 3375

Facsimile: +1 604 688 4712

e-mail: jhislop@14u.org

15.           Applicable law and arbitration

15.1          Applicable Law

This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws Western Australia, excluding any choice of law rules which would refer the matter to the laws of another jurisdiction.

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15.2          Arbitration

(a)                Any and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of, in connection with, or relating to this Agreement, including any question regarding its breach, existence, validity or termination, must be submitted to binding arbitration in accordance with, and subject to, the International Chamber of Commerce Rules of Arbitration.

(b)               The appointing and administering body will be The Institute of Arbitrators & Mediators Australia. The arbitrators must have at least ten years’ experience as to the subject of the dispute.

(c)                There shall be three arbitrators, the language of arbitration shall be English and the place of arbitration shall be a mutually-agreed place in Australia.

(d)               Each Party will each appoint one arbitrator within 30 days of the filing of the request for arbitration and the two arbitrators so appointed will select the presiding arbitrator within 30 days of the appointment of the first two arbitrators.

(e)                The resulting arbitral award will be final and binding upon the Parties, and judgment upon such an award may be entered and enforced by either Party in any court with sufficient jurisdiction.

16.           Term

(a)                Subject to clause 16(b), this Agreement shall be effective upon execution by all Parties and shall continue, unless sooner terminated by the express provisions of this Agreement, until Production Licences covering the entire Permit Area have been issued or until Nation witthdraws from the Agreement under clause 10.

(b)               Any provision of this Agreement that would (but for this clause) effect an acquisition of an interest in Australian urban land (within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) is subject to and conditional upon the person making the acquisition not having received any order or notice under the FATA prohibiting the person from making the acquisition or making the acquisition subject to conditions which are unacceptable to the person.

(c)                At any time after March 31, 2017, Nation may apply to the relevant Minister pursuant to section 96(3) of the Petroleum Act for approval of this agreement for the purposes of having an entry made in the register in accordance with section 96(7) of the Petroleum Act. Officer shall take such steps as necessary or reasonably requested by Nation in order to achieve the approval and entry in the register in accordance with this clause.

17.           General provisions

17.1          Warranties as to no Payments, Gifts and Loans

Each of the Parties warrants that neither it nor its affiliates has made or will make, with respect to the matters provided for hereunder, any offer, payment, promise to pay or authorisation of the payment of any money, or any offer, gift, promise to give or authorisation of the giving of anything of value, directly or indirectly, to or for the use or benefit of any official or employee of the Government or to or for the use or benefit of any political party, official, or candidate unless such offer, payment, gift, promise or authorisation is authorised by the Laws, or the payment of any bribe to any person or entity. Each of the Parties further warrants that neither it nor its Related Bodies Corporate has made or will make any such offer, payment, gift, promise or authorisation to or for the use or benefit of any other person if the Party knows, has a firm belief, or is aware that there is a high probability that the other person would use such offer, payment, gift, promise or authorisation for any of the purposes described in the preceding sentence. Each Party shall respond promptly, and in reasonable detail, to any notice from any other Party or its auditors pertaining to the above stated warranty and representation and shall furnish documentary support for such response upon request from such other Party.

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17.2          Conflicts of Interest

(a)                Each Party undertakes that it shall avoid any conflict of interest between its own interests (including the interests of Related Bodies Corporate) and the interest of the other Parties in dealing with suppliers, customers and all other organisations or individuals doing or seeking to do business with the Parties in connection with activities contemplated under this Agreement.

(b)               The provisions of 17.2(a) shall not apply to Officer's acquisition of products or services from a Related Body Corporate, or the sale thereof to a Related Body Corporate, made in accordance with the terms of this Agreement.

(c)                Unless otherwise agreed, the Parties and their Related Bodies Corporate are free to engage or invest (directly or indirectly) in an unlimited number of activities or businesses, any one or more of which may be related to or in competition with the business activities contemplated under this Agreement, without having or incurring any obligation to offer any interest in such business activities to any Party.

17.3          Public Announcements

(a)                Subject to clause 17.3(b), Officer shall be responsible for the preparation and release of all public announcements and statements regarding this Agreement or the Operations; provided that, no public announcement or statement shall be issued or made unless prior to its release Nation has been furnished with a copy of such statement or announcement. Where a public announcement or statement becomes necessary or desirable because of danger to or loss of life, damage to property or pollution as a result of activities arising under this Agreement, Officer is authorised to issue and make such announcement or statement without prior approval of Nation, but shall promptly furnish Nation with a copy of such announcement or statement.

(b)               Nation may issue any such public announcement or statement if it is necessary to do so in order to comply with the applicable laws, rules or regulations of any government, legal proceedings or stock exchange having jurisdiction over Nation or its Related Bodies Corporate.

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17.4          Successors and Assigns

Subject to the limitations on transfer contained in clause 9, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

17.5          Waiver

No waiver by any Party of any one or more defaults by another Party in the performance of this Agreement shall operate or be construed as a waiver of any future default or defaults by the same Party, whether of a like or of a different character. Except as expressly provided in this Agreement no Party shall be deemed to have waived, released or modified any of its rights under this Agreement unless such Party has expressly stated, in writing, that it does waive, release or modify such right.

17.6          Severance of Invalid Provisions

If and for so long as any provision of this Agreement shall be deemed to be judged invalid for any reason whatsoever, such invalidity shall not affect the validity or operation of any other provision of this Agreement except only so far as shall be necessary to give effect to the construction of such invalidity, and any such invalid provision shall be deemed severed from this Agreement without affecting the validity of the balance of this Agreement.

17.7          Modifications

Except as is provided in clause 17.6, there shall be no modification of this Agreement except by written consent of all Parties.

17.8          Headings

The topical headings used in this Agreement are for convenience only and shall not be construed as having any substantive significance or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular clause.

17.9          Singular and Plural

Reference to the singular includes a reference to the plural and vice versa.

17.10      Gender

Reference to any gender includes a reference to all other genders.

17.11      Entirety

This Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein and supersedes all prior understandings and negotiations of the Parties.

17.12      Legislation

A reference in this Agreement to the Petroleum Act or any other statute or any provision or clause thereof shall be read (unless otherwise provided in this Agreement) as though the words ‘including any statutory amendment or modification thereof any statutory provision substituted thereof, re-enactment or replacement thereof and any rules, regulations, by laws and instruments or other documents made pursuant thereto’ were added to such reference.

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No clause within this document can be used by any person as defence to any action brought under the Criminal Code, Corporations Law or holding requirements of the Australian Stock Exchange.

17.13      Rule against perpetuities

For the purposes only of avoiding breach of the rule against perpetuities this Agreement has a term not exceeding 80 years.

18.           Definitions

18.1          Defined terms

Acquisition Date has the meaning ascribed thereto in clause 5.3.

Authorised Person of a Party means:

(a)              the officers and employees of the Party;

(b)              the technical, financial, legal or other advisors of the Party; and

(c)              the respective officers and employees of the technical, financial, legal or other advisors of the Party.

Blocks means the numbered blocks that each graticular section of Western Australia is divided into pursuant to Section 27 of the Petroleum Act and Block is a reference to any one of them.

Confidential Information means all confidential, non-public or proprietary information regardless of how the information is stored or delivered, delivered to Nation before, on or after the date of this Agreement relating to this Agreement or the Operations.

Consequential Loss means:

(d)              any damages or losses which are not direct or which do not flow naturally from the relevant breach of this Agreement, even if those damages or losses may reasonably be supposed to have been in the contemplation of all Parties as a probable result of the breach at the time they entered into this Agreement; and

(e)              any losses of profits, business opportunity, reputation, customers or markets, whether direct or indirect.

Discovery means the discovery of a discrete accumulation of petroleum.

Earning Amount means $12,503,163 of Expenditures, which, for the avoidance of doubt, is an amount separate and apart from the Cash Consideration and the Share Consideration.

Earning Date has the meaning ascribed thereto in clause 3.1.

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Earning Period means the period commencing on the Commencement Date and ending March 31, 2017.

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, preferential right or trust arrangement, or other arrangement having the same effect.

Expenditure means expenditure in respect of Operations and other exploration on the Permit Area and includes all amounts spent on keeping the Permit in good standing or fulfilling obligations of Officer with respect to the Permit.

Force Majeure means any of the following events provided that they are outside the reasonable control of the affected Party and could not have been prevented or avoided by that Party taking reasonable steps:

(a)               act of God, earthquake, cyclone, fire, explosion, flood, landslide, lightning, storm, tempest, drought or meteor;

(b)              war (declared or undeclared), invasion, act of a foreign enemy, hostilities between nations, civil insurrection or militarily usurped power;

(c)               act of public enemy, sabotage, malicious damage, terrorism or civil unrest;

(d)              ionising radiation or contamination by radioactivity from any nuclear waste or from combustion of nuclear fuel;

(e)               confiscation, nationalisation, requisition, expropriation, prohibition, embargo, restraint or damage to property by or under the order of any government or government authority; or

(f)               strikes, blockades, lock out or other industrial disputes.

Government means any department, local government council, administrative or statutory authority or any other person under a Law which has a right to impose a requirement or whose consent is required.

Indemnitees has the meaning set forth in clause 3.8(b).

Law means any treaty, statute, subordinate legislation, code, regulation, rule, common law, equity determination, injunction, judgment, order, decree, ruling, directive, decision and any judicial, regulatory, administrative or other interpretation, implementation or enforcement of any of the foregoing issued by any Government having jurisdiction as to the undertakings and any other matters arising under this Agreement, whether currently in effect or subsequently modified, including Commonwealth, Western Australia and local government legislation, regulations, by‑laws, and other subordinate legislation.

Minimum Work Obligations means those work or expenditure obligations that must be performed in order to satisfy Permit obligations.

Nation Interest means an undivided twenty-five percent (25%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

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Native Title Claims means either:

(g)              any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or

(h)              any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persons as set out in the legislation of Western Australia or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Native Title Rights has the same meaning as the expressions “native title” or “native title rights and interests” defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of and relating to aboriginal persons and aboriginal cultural heritage as set out in the relevant legislation of Western Australia including the Aboriginal Heritage Act 1972 (WA) or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Notice has the meaning set forth in clause 14.1.

Officer Interest means an undivided seventy‑five percent (75%) interest in the Permit, insofar as it covers the Permit Area, and any Production Licence granted in connection therewith (subject to clause 5).

Operating Account means the account established and maintained by the Operator in accordance with this Agreement to record all charges, expenditures, credits and receipts in respect of Operations which are chargeable or to be credited to Nation.

Operating Committee means the committee established and functioning under clause 4.

Operations means the activities required for the operation of the Permit in accordance with this Earning Agreement:

(a)               management and operation of the Permit;

(b)              facilitation of access to the Permit including liaising with native title parties and landholders;

(c)               preparation, development and carrying out of exploration and appraisal programs on the Permit Area;

(d)              geological analysis and interpretation of exploration results;

(e)               compliance with conditions and legal requirements relating to the Permit;

(f)               appointment and management of contractors undertaking seismic analysis, drilling, and related exploration and appraisal programs.

Operator has the meaning given to it in the Petroleum Act.

Option has the meaning ascribed thereto in clause 5.3.

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Option Period has the meaning ascribed thereto in clause 5.3.

Parties means the entities named in the first paragraph to this Agreement and their respective permitted successors or assigns, and Party is a reference to any one of them.

Permit means Exploration Permit 468 issued under the Petroleum Act and includes any extension, renewal, conversion, substitution, modifications or variations thereof.

Permit Area means the entire area covered by the Permit.

Permit Year means a year beginning 8 September and ending the following 7 September.

Petroleum Act means the Petroleum and Geothermal Resources Energy Resources Act 1967 (WA).

Production License has the meaning provided in the Petroleum Act.

Property means all property, whether real or personal, which is owned, leased, held, developed, constructed, produced or acquired by the Operator solely for the conduct of Operations.

Related Body Corporate has the meaning given to it in the Corporations Act 2001 (Cth).

Senior Supervisory Personnel means a Party’s senior manager, who directs all operations and activities of such Party in Australia.

Transfer means assign, transfer or otherwise dispose of any interest in this Agreement in whole or part, whether by sale, lease, declaration or creation of a trust or otherwise.

Wilful Misconduct means an intentional and conscious disregard of any obligation owed by the relevant person, but does not include any act or omission which is (directly or indirectly) attributable to any breach or negligence on the part of any other person or of such other person's Related Body Corporate.

Work Program and Budget means an annual work program prepared by Officer setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program.

Work Program Expenses means the costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets.

18.2          Interpretation

In this Agreement, except where the context otherwise requires:

(a)              the singular includes the plural and vice versa and a gender includes other genders;

(b)              another grammatical form of a defined word or expression has a corresponding meaning;

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(c)              a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this Agreement and a reference to this Agreement includes any schedule or annexure;

(d)              a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;

(e)              all references to dollar amounts are in Australian currency;

(f)               a reference to a Party is to a party to this Agreement and a reference to a Party to a document includes the Party's executors, administrators, successors and permitted assigns and substitutes;

(g)              a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;

(h)              a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;

(i)                the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions;

(j)                a rule of construction does not apply to the disadvantage of a Party because the Party was responsible for the preparation of this Agreement or any part of it; and

(k)              if a day on or by which an obligation must be performed or an event must occur is not a business day in Sydney, Australia, the obligation must be performed or the event must occur on or by the next day that is a business day.

18.3          Headings

Headings are for ease of reference only and do not affect interpretation.

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Executed by Officer Petroleum Pty Ltd (ACN 142 330 738) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Nick Tropea

/s/ Marc A. Bruner

Secretary

Nick Tropea

Director

Marc A. Bruner

Print name

Print name

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors:

/s/ Darrel Causbrook

/s/ John R. Hislop

Secretary/Director

Darrel Causbrook

Director

John R. Hislop

Print name

Print name

Schedule 1 – Royalties

Holder & Granting Document

Percentage of Hydrocarbons produced/sold

1.      State of Western Australia royalty pursuant to the Petroleum Act

Between 5% and 12.5%, but most commonly either 10% [for primary location] or 12.5% [for secondary location]

And see clause 5.6(a) of the Agreement for an additional overriding royalty that will be reserved by Officer when assigning to Nation the Officer Interest in any Production Licence, so that the effective revenue interest in the Production Licence in the hands of Nation will, if Nation exercises its purchase option, be 75% of 100%.

Schedule 2 – Work Program and Budget (all values in $ AUD)

   Permit Year 5 (8 Sep 2015 to 7 Sep 2016)

         Drill two vertical exploration wells                                                       $11,089,280

         Geological and geophysical work                                                                              415,848

         Engineering, Geological and Geophysical Services                                      998,035

                                                                                                                       $12,503,163

   Permit Year 6 (8 Sep 2016 to 7 Sep 2017)

         Complete and test the two vertical exploration drilled in Permit Year 5           $27,723,200

         Geological and geophysical work                                                                          5,544,640

         Engineering, Geological and Geophysical Services                                     998,035

                                                                                                                      $24,265,875

Amounts shown above are in Australian dollars. All such amounts were originally estimated in United States dollars and converted to Australian dollars at the rate of USD 1.00 = AUD 1.38616, the oanda.com average bid rate in effect @ 10:45 pm MST, 20 May 2016.

The term Engineering, Geological and Geophysical Services was used in lieu of G&A because it is a better description of those services provided for benefit of Paltar blocks.

This is an estimate of the current work commitment to be performed on behalf of the Exploration Permit. The actual work performed will be dependent upon approval by the Western Australia Department of Mines and Petroleum (“DMP”) of the Application for Suspension, Variation and Extension that will be filed during July 2016.

Annex 1 – Accounting Procedure

_______________________

Section 1............................................................................ General Provisions. 1

Section 2.................................................................................. Direct Charges. 7

Section 3................................................................................ Indirect Charges. 11

Section 4..................................................................... Acquisition of Material 12

Section 5........................................................................ Disposal of Materials. 13

Section 6........................................................................................ Inventories. 14

____________________________________

Section 1         General Provisions

1.1              Purpose

The purpose of this Accounting Procedure is to establish fair and equitable methods for determining charges and credits applicable to Operations. If the methods prove unfair or inequitable to Officer or Nation, the Parties shall meet and in good faith endeavour to agree on changes to correct any unfairness or inequity.

1.2              Conflict

In the event of a conflict between the provisions of this Accounting Procedure and the provisions of the Agreement, the provisions of the Agreement shall prevail.

1.3              Definitions

The definitions contained in clause 18 of the Agreement shall apply to this Accounting Procedure and have the same meanings when used herein. Certain terms used herein are defined as follows:

Accrual basis means that basis of accounting under which costs and benefits are regarded as applicable to the period in which the liability for the cost is incurred or the right to the benefit arises, regardless of when invoiced, paid, or received.

Cash basis means that basis of accounting under which only costs actually paid and revenue actually received are included for any period.

Country of Operations means the Commonwealth of Australia.

Material means machinery, equipment and supplies acquired and held for use in Operations.

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1.4              Operating Account Records / Currency Exchange

1.4.1                    Officer shall at all times maintain and keep true and correct records of the production and disposition of all petroleum, and of all costs and expenditures under the Agreement, as well as other data necessary or proper for the settlement of accounts between the Parties hereto in connection with their rights and obligations under the Agreement and to enable Parties to comply with their respective applicable income tax and other laws.

1.4.2        Officer shall maintain accounting records pertaining to Operations in accordance with generally accepted accounting practices used in the international petroleum industry and any applicable statutory obligations of the Country of Operations as well as the provisions of the Permit and the Agreement.

1.4.3        The Operating Account shall be maintained by Officer in the English language and in Australian currency. Conversions of currency shall be recorded at the rate actually experienced in that conversion. Currency translations are used to express the amount of expenditures and receipts for which a currency conversion has not actually occurred. Currency translations for expenditures and receipts shall be recorded at the arithmetic average of the buying and selling exchange rates at the close of each business day of the month of the current accounting period as published by oanda.com or, if not published by oanda.com, then by Westpac Banking Corporation.

1.4.4        Any currency exchange gains or losses shall be credited or charged to the Operating Account, except as otherwise specified in this Accounting Procedure. Any such exchange gains or losses shall be separately identified as such.

1.4.5        The Accrual basis for accounting shall be used in preparing accounts concerning the Operations. If a Cash basis for accounting is used, Officer shall show accruals as memorandum items.

1.5              Statements and Billings

Unless otherwise agreed by the Parties, Officer shall submit monthly to Nation, on or before the 15^th day of each month, statements of the costs and expenditures incurred during the prior month, indicating by appropriate classification the nature thereof and the corresponding budget category.

1.5.1        These statements, as a minimum, shall contain the following information:

(i)                 advances of funds setting forth the currencies received from Nation;

(ii)               the share of Nation in total expenditures, if other than 100%;

(iii)             the accrued expenditures;

(iv)             the current account balance of Nation;

(v)                           summary of costs, credits, and expenditures on a current month, year-to-date, and inception-to-date basis or other periodic basis, as agreed by the Parties (such expenditures shall be grouped by the categories and line items designated in the approved Work Program and Budget so as to facilitate comparison of actual expenditures against that Work Program and Budget), and

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(vi)                         details of unusual charges and credits in excess of fifty thousand Australian dollars (A $50,000.00).

1.5.2        Officer shall, upon request, furnish a description of the accounting classifications used by it.

1.5.3        Amounts included in statements and billings shall be expressed in Australian currency and reconciled to the currencies advanced.

1.5.4        Each Party shall be responsible for preparing its own accounting and tax reports to meet the requirements of the Country of Operations and of all other countries to which it may be subject. Officer, to the extent that the information is reasonably available from the Operating Account records, shall provide Nation in a timely manner the necessary information to facilitate the discharge of such responsibility.

1.6              Payments and Advances

1.6.1        Upon approval of any Work Program and Budget, if Officer so requests, Nation shall advance its share of estimated cash requirements for the succeeding month's operations. Each such Cash Call shall be equal to Officer's estimate of the money to be spent in the currencies required to perform its duties under the Work Program and Budget during the month concerned. For informational purposes the Cash Call shall contain an estimate of the funds required for the succeeding two months detailed by the categories designated in the Work Program and Budget.

1.6.2        Each such cash Call, detailed by the categories designated in the Work Program and Budget, shall be made in writing and delivered to Nation not less than 15 days before the payment due date. The due date for payment of such advances shall be set by Officer but shall be no sooner than the first day of the month for which the advances are required. All advances shall be made without bank charges. Any charges related to receipt of advances from Nation shall be borne by Nation.

1.6.3        Nation shall wire transfer its share of the full amount of each Cash Call to Officer on or before the due date, in the currencies requested or any other currencies acceptable to Officer at a bank designated by Officer. If currency provided by Nation is other than the requested currency, then the entire cost of converting to the requested currency shall be charged to Nation.

1.6.4       Notwithstanding the provisions of clause 1.6.2 of this Accounting Procedure, should Officer be required to pay any sums of money for Operations which were unforeseen at the time estimates were provided to Nation, Officer may make a written request of Nation for special advances covering Nation' share of such payments. Each such Nation shall make its proportional special advances within ten days after receipt of such notice.

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1.6.5       If Nation's advances exceed its share of cash expenditures, the next succeeding cash advance requirements, after such determination, shall be reduced accordingly. However, if the amount of such excess advance is greater than the amount of the next month's estimated cash requirements for such Nation, Nation may request a refund of the difference, which refund shall be made by Officer within ten days after receipt of Nation's request provided that the amount is in excess of twenty five thousand Australian dollars (A$ 25,000.00).

1.6.6        If Nation's advances are less than its share of cash expenditures, the deficiency shall, at Officer's option, be added to subsequent cash advance requirements or be paid by Nation within ten days following the receipt of Officer's billing to Nation for such deficiency.

1.6.7        If, under the provisions of the Agreement, Officer is required to segregate funds received from the Parties, any interest received on such funds shall be applied against the next succeeding Cash Call.

1.6.8        If Officer does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within ten days following receipt of Officer's billing.

1.6.9        Payments of advances or billings shall be made on or before the due date. If these payments are not received by the due date the unpaid balance shall bear and accrue interest from the due date until the payment is received by Officer at the Agreed Interest Rate.   For the purpose of determining the unpaid balance and interest owed, Officer shall translate to Australian currency all amounts owed in other currencies using the currency exchange rate determined in accordance with clause 1.4.3 at the close of the last business day prior to the due date for the unpaid balance.

1.6.10    Subject to governmental regulation, Officer shall have the right, at any time and from time to time, to convert the funds advanced or any part thereof to other currencies to the extent that such currencies are then required for operations.   The cost of any such conversion shall be charged to the Operating Account.

1.6.11    Officer shall endeavour to maintain funds held for the Operating Account in bank accounts at a level consistent with that required for the prudent conduct of Operations.

1.6.12    If under the Agreement, Officer is required to segregate funds received from or for the Operating Account, the provisions under this clause 1.6 for payments and advances by Nation shall apply also to Officer.

1.7              Adjustments

Payments of any advances or billings shall not prejudice the right of Nation to protest or question the correctness thereof; provided, however, all bills and statements rendered to Nation by Officer during any year shall conclusively be presumed to be true and correct after 24 months following the end of such year, unless within the said 24 month period Nation takes written exception thereto and makes claim on Officer for adjustment. Failure on the part of Nation to make claim on Officer for adjustment within such period shall establish the correctness thereof and preclude the filing of exceptions thereto or making claims for adjustment thereon. No adjustment favourable to Officer shall be made unless it is made within the same prescribed period. The provisions of this clause 1.7 shall not prevent adjustments resulting from a physical inventory of the Material as provided for in clause VI. Officer shall be allowed to make adjustments to the Operating Account after such 24 month period if these adjustments result from audit exceptions outside of this Accounting Procedure, third party claims, or government requirements. Any such adjustments shall be subject to audit within the time period specified in clause 1.8.l of this Accounting Procedure.

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1.8              Audits

1.8.1        Nation, upon at least 60 days advance notice in writing to Officer, shall have the right to audit the Operating Account and records of Officer relating to the accounting hereunder for any year within the 24 month period following the end of such year, except as otherwise provided in clause 3.1 of this Accounting Procedure. As provided in clause 4.2(b)(6) of the Agreement, Nation shall have reasonable access to Officer's personnel and to the facilities, warehouses, and offices directly or indirectly serving Operations. The cost of each such audit shall be borne by Nation. Nation must take written exception to and make claim upon Officer for all discrepancies disclosed by said audit within said 24 month period. Nation may request information from Officer prior to the commencement of the audit. Officer will provide the information in electronic format or hard copy documents, if electronic format is not available. Officer will provide the information requested within 30 days before commencement of the audit but in no event sooner than 30 days after the written request. The information requested shall be limited to that normally used for pre-audit work such as trial balance, general ledger, and sub-ledger data.

1.8.2        Officer shall endeavour to produce information from its Affiliates reasonably necessary to support charges from those Affiliates to the Operating Account other than those charges referred to in clause 3.1 of this Accounting Procedure.

1.8.3       Except for charges under clause 2.7.1, the following provisions apply to all charges by Officer for its Affiliates.

In addition to the information provided by Officer under clause 1.8.2, Nation may seek to audit the books and records of an Affiliate of Officer relating to the charges by the Affiliate to the Operating Account for the same year as provided in clause 1.8.1 above. The charges of the Affiliate shall be subject to audit in accordance with (a), (b), or (c) below or any combination thereof.

(a)      If the Affiliate of Officer consents to the audit, the audit may be conducted in the same manner as the audit of the books and records of Officer.

If all or part of the charges are not audited under (a) above, the unaudited portion may be audited under (b) and/or (c) below.

(b)    The Affiliate may require use of an internationally recognized independent public accounting firm to confirm confidential or proprietary information and charges. The cost of the internationally recognized independent public accounting firm shall be borne by Nation. Nation will seek agreement with the Affiliate on the audit scope to confirm the details and facts relating to such information and charges.

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If the internationally recognized independent public accounting firm of the Affiliate declines to conduct the audit, Nation will seek agreement with the Affiliate on an alternative internationally recognized independent public accounting firm. The cost of using such firm shall be borne by Nation.

Officer will endeavor to cause its Affiliate to not unreasonably withhold approval of the use of an internationally recognized independent public accounting firm or the scope of examination requested by Nation.

If all or part of the charges are not audited under (a) or (b) above, the unaudited portion may be audited under (c) below.

(c)    Officer may request its Affiliate to provide Nation an annual report from an internationally recognized independent public accounting firm attesting that charges billed from such Affiliate to the Operating Account represent a complete and accurate allocation of its costs to the Operations, exclude any element of profit, exclude any duplication of costs covered under clauses 2 and 3, and are consistent in application to all of its activities. The report will be furnished by Officer within 12 months of the request from Nation. The cost of providing the annual report shall be borne by Nation.

No amounts paid to an Affiliate of Officer, which Nation seeks to audit, may be charged to the Operating Account if the Affiliate of Officer does not allow audit of such amounts as provided above.

1.8.4       Any information obtained by Nation under the provisions of clause 1.8 which does not relate directly to the Operations shall be kept confidential and shall not be disclosed to any party, except as would otherwise be permitted under clause 15.2(a)(ii) and (x) of the Agreement.

1.8.5       In the event that Officer is required by law to employ a public accounting firm to audit the Operating Account and records of Officer relating to the accounting hereunder, the cost thereof shall be a charge against the Operating Account, and a copy of the audit shall be furnished to Nation.

1.8.6       At the conclusion of each audit, the Parties shall endeavour to settle outstanding matters expeditiously. To this end Nation will make a reasonable effort to prepare and distribute a written report to Officer as soon as possible and in any event within 90 days after the conclusion of each audit. The report shall include all claims arising from such audit together with comments pertinent to the operation of the accounts and records. Officer shall make a reasonable effort to reply to the report in writing as soon as possible and in any event no later than 90 days after receipt of the report. Should Nation consider that the report or reply requires further investigation of any item therein, Nation shall have the right to conduct further investigation in relation to such matter notwithstanding the provisions of clauses 1.7 and 1.8 of this Accounting Procedure that the period of 24 months may have expired. However, conducting such further investigation shall not extend the 24 month period for taking written exception to and making a claim upon Officer for all discrepancies disclosed by said audit. Such further investigations shall be commenced within 30 days and be concluded within 60 days after the receipt of such report or reply, as the case may be.

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1.8.7        All adjustments resulting from an audit agreed between Officer and Nation conducting the audit shall be reflected promptly in the Operating Account by Officer and reported to Nation. If any dispute shall arise in connection with an audit, it shall be reported to and discussed by the Operating Committee, and, unless otherwise agreed by the Parties to the dispute, resolved in accordance with the provisions of clause 18 of the Agreement. If all the Parties to the dispute so agree, the adjustments) may be referred to an independent expert agreed to by the Parties to the dispute. At the election of the Parties o the dispute, the decision of the expert will be binding upon such Parties. Unless otherwise agreed, the cost of such expert will be shared equally by all Parties to the dispute.

1.9              Allocations

If it becomes necessary to allocate any costs or expenditures to or between Operations and any other operations, such allocation shall be made on an equitable basis. When it is reasonably foreseeable that such an allocation will be required, Officer will furnish a description of its allocation procedures pertaining to these costs and expenditures and its rates for personnel and other charges. Such allocations shall be subject to audit under clause 1.8.

Section 2         Direct Charges

Officer shall charge the Operating Account with all costs and expenditures incurred by Officer for the conduct of Operations. Charges for services normally provided by an operator such as those contemplated in clauses 2.7.2 and 2.7.3 which are provided by Officer’s Affiliate shall reflect the cost to the Affiliate, excluding profit, for performing such services, except as otherwise provided in clause 2.6 and clause 2.7.1.

Charges shall only be applied to the Operating Account to the extent such charges are reasonably incurred in the legitimate exercise of Operations under the Agreement and in bona fide arms-length transactions on commercial terms generally available in the market place.

The costs and expenditures shall be recorded as required for the settlement of accounts between the Parties hereto in connection with the rights and obligations under this Agreement and for purposes of complying with the tax laws of the Country of Operations and of such other countries to which any of the Parties may be subject. Chargeable costs and expenditures may include, but are not limited to:

2.1              Permits

All costs, if any, attributable to the acquisition, maintenance, renewal or relinquishment of the Permits paid in accordance with the Act when paid by Officer in accordance with the provisions of the Agreement.

2.2              Salaries, Wages and Related Costs.

Salaries, wages and related costs include everything constituting the employees' total compensation, as well as the cost to Officer of holiday, vacation, sickness, disability benefits, living and housing allowances, travel time, bonuses, and other customary allowances applicable to the salaries and wages chargeable hereunder, as well as the costs to Officer for employee benefits, including but not limited to employee group life insurance, group medical insurance, hospitalization, retirement, severance payments required by the laws or regulations of the Country of Operations.

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Expenditures or contributions made pursuant to assessments imposed by governmental authority for payments with respect to or on account of employees described in clause 2.2.1 and clause 2.2.2 shall be chargeable to the Operating Account.

2.2.1        The salaries, wages and related costs of employees of Officer and its Affiliates temporarily or permanently assigned in the Country of Operations and directly engaged in Operations shall be chargeable to the Operating Account;

2.2.2        The salaries, wages and related costs of employees of Officer and its Affiliates temporarily or permanently assigned outside the Country of Operations directly engaged in Operations and not otherwise covered in clause 2.7.2 of this Accounting Procedure shall be chargeable to the Operating Account;

2.2.3        Costs for salaries, wages and related costs may be charged to the Operating Account on an actual basis or at a rate based upon the average cost in accordance with Officer's usual practice. In determining the average cost, expatriate and national employees' rates shall be calculated separately and reviewed at least annually;

2.2.4        Reasonable expenses (including related travel costs) of those employees whose salaries and wages are chargeable to the Operating Account under clauses 2.2.1 and 2.2.2 of this Section 2 and for which expenses the employees are reimbursed under the usual practice of Officer shall be chargeable to the Operating Account; and

2.2.5        If employees are engaged in other activities in addition to the Operations, the cost of such employees shall be allocated on an equitable basis.

2.3              Employee Relocation Costs

2.3.1        Except as provided in clause 2.3.3 of this Accounting Procedure, Officer's cost of employees' relocation to or from an assignment with the Operations, whether within or outside the Country of Operations and whether permanently or temporarily assigned to the Operations, shall be chargeable to the Operating Account. If such employee works on other activities in addition to Operations, such relocation costs shall be allocated on an equitable basis.

2.3.2        Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family, transit expenses, and all other related costs in accordance with Officer's usual practice.

2.3.3        Relocation costs to an assignment that is not with the Operations to another location shall not be chargeable to the Operating Account unless the place of the new assignment is the point of origin of the employee or unless otherwise agreed by the Operating Committee.

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2.4              Offices, Camps, and Miscellaneous Facilities.

The cost of maintaining any offices, sub-offices, camps, warehouses, housing, and other facilities of Officer and/or Affiliates directly serving the Operations. If such facilities serve operations in addition to the Operations the costs shall be allocated to the properties served on an equitable basis.

2.5              Material

The cost, net of discounts taken by Officer, of Material purchased or furnished by Officer, Such costs shall include, but are not limited to, export brokers' fees, transportation charges, loading, unloading fees, export and import duties and license fees associated with the procurement of Material and in-transit losses, if any, not covered by insurance. So far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for, and the cost thereof charged to, the Operating Account as may be required for immediate use.

2.6              Exclusively Owned Equipment and Facilities of Officer and Affiliates.

Charges for providing its exclusively owned equipment, facilities, and utilities of Officer or any of its Affiliates at rates not to exceed the average commercial rates of non-affiliated third parties then prevailing for like equipment, facilities, and utilities for use in the area where the same are used hereunder. On request, Officer shall furnish Nation a list of rates and the basis of application. Such rates shall be revised from time to time if found to be either excessive or insufficient, but not more than once every six months.

Exclusively owned drilling tools and other equipment lost in the hole or damaged beyond repair may be charged at replacement cost less depreciation plus transportation costs to deliver like equipment to the location where used.

2.7              Services

2.7.1        The charges for services provided by third parties shall be chargeable to the Operating Account.

2.7.2        The cost of services performed by Officer’s Affiliates’ technical and professional staffs not located within the Country of Operation and not otherwise covered under clause 2.2.2 of this Accounting Procedure, shall be chargeable to the Operating Account. The individual rates shall include salaries and wages of such technical and professional personnel, lost time, governmental assessments, and employee benefits. Costs shall also include all support costs necessary for such technical and professional personnel to perform such services, such as, but not limited to, rent, utilities, support staff, drafting, telephone and other communication expenses, computer support, supplies, depreciation, and other reasonable expenses.

2.8              Insurance

Premiums paid for insurance required by law or the Agreement to be carried for the benefit of the Operations.

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2.9              Damages and Losses to Property

2.9.1        All costs or expenditures necessary to replace or repair damages or losses incurred by fire, flood, storm, theft, accident, or any other cause shall be chargeable to the Operating Account. Officer shall furnish Nation written notice of damages or losses incurred in excess of fifty thousand Australian dollars (A$50,000.00) as soon as practical after report of the same has been received by Officer. All losses in excess of fifty thousand Australian dollars (A$50,000.00) shall be listed separately in the monthly statement of costs and expenditures.

2.9.2        Credits for settlements received from insurance carried for the benefit of Operations and from others for losses or damages to Property or Materials shall be chargeable to the Operating Account.

2.9.3        Expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the account of Operations shall be chargeable to the Operating Account.

2.10          Litigation, Dispute Resolution and Associated Legal Expenses

The costs and expenses of litigation, dispute resolution and associated legal services necessary for the protection of the Operations under the Agreement as follows:

2.10.1    Legal services, other than those provided by the internal legal staffs of the Parties or their Affiliates, necessary or expedient for the protection of the Operations, and all costs and expenses of litigation, arbitration or other alternative dispute resolution procedure, including reasonable attorneys' fees and expenses, together with all judgments obtained against the Parties or any of them arising from the Operations.

2.10.2    If the Parties shall so agree, litigation, arbitration or other alternative dispute resolution procedures resulting from actions or claims affecting the Operations hereunder may be handled by the legal staff of one or any of the Parties or their respective Affiliates; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party or the Affiliate providing such service to Officer for the Operating Account, but no such charges shall be made until approved by the Parties.

2.11          Taxes and Duties

All taxes, duties, assessments and governmental charges, of every kind and nature, assessed or levied upon or in connection with the Operations, other than any that are measured by or based upon the revenues, income and net worth of a Party.

If Officer or an Affiliate is subject to income or withholding tax as a result of services performed at cost for the operations under the Agreement, its charges for such services may be increased by the amount of such taxes incurred (grossed up).

2.12          Ecological and Environmental

Costs incurred on the Property as a result of statutory regulations for archaeological and geophysical surveys relative to identification and protection of cultural resources and/or other environmental or ecological surveys as may be required by any regulatory authority. Also, costs to provide or have available pollution containment and removal equipment plus costs of actual control, clean up and remediation resulting from responsibilities associated with Hydrocarbon contamination as required by all applicable laws and regulations.

11

2.13          Decommissioning (Abandonment) and Reclamation.

Costs incurred for decommissioning (abandonment) and reclamation of the Property, including costs required by governmental or other regulatory authority or by the Agreement.

2.14          Other Expenditures

Any other costs and expenditures incurred by Officer for the necessary and proper conduct of the Operations and not covered in this Section 2 or in Section 3.

Section 3         Indirect Charges

3.1              Purpose

Officer shall charge the Operating Account monthly for the cost of indirect services and. related office costs of Officer and its Affiliates not otherwise provided in this Accounting Procedure. Indirect costs chargeable under this Section 3 represent the cost of general assistance and support services provided by Officer and its Affiliates. These costs are such that it is not practical to identify or associate them with specific projects but are for services which provide the Operations with needed and necessary resources which Officer requires and provide a real benefit to Operations. No cost or expenditure included under Section 2 shall be included or duplicated under this Section 3. The charges under Section 3 are not subject to audit under clauses 1.8.1 and 1.8.2 of this Accounting Procedure other than to verify that the overhead percentages are applied correctly to the expenditure basis.

3.2              Amount

3.2.1        The indirect charge under clause 3.1 of this Accounting Procedure for any month shall equal the greater of the total amount of indirect charges for the period beginning at the start of the year through the end of the period covered by Officer's invoice (Year-to-Date) determined under clause 3.2.2 of this Accounting Procedure, less indirect charges previously made under clause 3.1 of this Accounting Procedure for the year in question, or the amount of the minimum assessment determined under clause 3.2.3, calculated on an annualized basis (but reduced pro rata for periods of less than one year), less indirect charges previously made under clause 3.1 for the year in question.

3.2.2       Unless exceeded by the minimum assessment under clause 3.2.3, the aggregate Year-to-Date indirect charges shall be a percentage of the Year-to-Date expenditures, calculated on the following scale:

Annual Expenditures

$0 to A$ 3,000,000 of expenditures = 5 %

Next A$ 7,000,000 of expenditures = 4 %

12

Next A$11,000,000 of expenditures = 3 %

Excess above A$11,000,000 of expenditures = 1.5 %

3.2.3        A minimum amount of A$ 36,000.00 shall be assessed each year calculated from the Effective Date and shall be reduced pro rata for periods of less than a year.

3.3              Indirect Charge for Projects.

If a major infrastructure construction project is undertaken, a separate indirect charge for such project shall be approved by the Operating Committee at the time of approval of the project.

Section 4         Acquisition of Material

4.1              Acquisitions

Materials purchased for the Operating Account shall be charged at net cost paid by Officer. The price of Materials purchased shall include, but shall not be limited to export broker's fees, insurance, transportation charges, loading and unloading fees, import duties, license fees, and demurrage (retention charges) associated with the procurement of Materials, and applicable taxes, less all discounts taken.

4.2              Materials Furnished by Officer

Materials required for operations shall be purchased for direct charge to the Operating Account whenever practicable, except Officer may furnish such Materials from its stock under the following conditions:

4.2.1        New Materials transferred from the warehouse or other properties of Officer hall be priced at net cost determined in accordance with clause 4.1 above as if Officer had purchased such new Material just prior to its transfer. Such net costs shall in no event exceed the then current market price.

4.2.2        Material which is in sound and serviceable condition and suitable for use without repair or reconditioning shall be classed as Condition ‘B’ and priced at 75% of such new purchase net cost at the time of transfer.

4.2.3        Materials not meeting the requirements of clause 4.2.2 above, but which can be made suitable for use after being repaired or reconditioned, shall be classed as Condition "C" and priced at 50% of such new purchase net cost at the time of transfer. The cost of reconditioning shall also be charged to the Operating Account provided the Condition ‘C’ price, plus cost of reconditioning, does not exceed the Condition ‘B’ price; and provided that Material so classified meet the requirements for Condition ‘B’ Material upon being repaired or reconditioned.

4.2.4        Material which cannot be classified as Condition ‘B’ or Condition ‘C’, shall be priced at a value commensurate with its use.

4.2.5        Tanks, derricks, buildings, and other items of Material involving erection costs, if transferred in knocked-down condition, shall be graded as to condition as provided in this clause 4.2 of Section 4, and priced on the basis of knocked-down price of like new Material.

13

4.2.6        Material including drill pipe, casing and tubing, which is no longer useable for its original purpose but is useable for some other purpose, shall be graded as to condition as provided in this clause 4.2 of Section 4. Such Material shall be priced on the basis of the current price of items normally used for such other purpose if sold to third parties.

4.3              Premium Prices

Whenever Material is not readily obtainable at prices specified in clauses 4.1 and 4.2 of this clause IV because of national emergencies, strikes or other unusual causes over which Officer has no control, Officer may charge the Operating Account for the required Material at Officer's actual cost incurred procuring such Material, in making it suitable for use, and moving it to Permit area, provided that notice in writing, including a detailed description of the Material required and the required delivery date, is furnished to Nation of the proposed charge at least 10 days (or such shorter period as may be specified by Officer) before the Material is projected to be needed for operations and prior to billing Nation for such Material the cost of which exceeds fifty thousand Australian dollars (A$50,000). Nation shall have the right, by so electing and notifying Officer within seven days (or such shorter period as may be specified by Officer) after receiving notice from Officer, to furnish in kind all or part of his share of such Material per the terms of the notice which is suitable for use and acceptable to Officer both as to quality and time of delivery. Such acceptance by Officer shall not be unreasonably withheld. If Material furnished is deemed unsuitable for use by Officer, all costs incurred in disposing of such Material or returning Material to owner shall be borne by Nation furnishing the same unless otherwise agreed by the Parties. If Nation fails to properly submit an election notification within the designated period, Officer is not required to accept Material furnished in kind by Nation. If Officer fails to submit proper notification prior to billing Nation for such Material, Officer shall only charge the Operating Account on the basis of the price allowed during a "normal" pricing period in effect at time of movement.

4.4              Warranty of Material Furnished by Officer

Officer does not warrant the condition or fitness for the purpose intended of the Material furnished. In case defective Material is furnished by Officer for the Operating Account, credit shall not be passed to the Operating Account until adjustment has been received by Officer from the manufacturers or their agents.

Section 5         Disposal of Materials

5.1              Disposal

Officer shall be under no obligation to purchase the interest of Nation in new or used surplus Materials. Officer shall have the right to dispose of Materials but shall advise and secure prior agreement of the Operating Committee of any proposed disposition of Materials having an original cost to the Operating Account either individually or in the aggregate of A$50,000 or more. When Operations are relieved of Material charged to the Operating Account, Officer shall advise Nation of the original cost of such Material to the Operating Account so that the Parties may eliminate such costs from their asset records. Credits for Material sold by Officer shall be made to the Operating Account in the month in which payment is received for the Material. Any Material sold or disposed of under this clause shall be on an ‘as is, where is’ basis without guarantees or warranties of any kind or nature. Costs and expenditures incurred by Officer in the disposition of Materials shall be charged to the Operating Account.

14

5.2              Material Purchased by Nation or its Affiliate

Proceeds received from disposed Material purchased by Nation or its Affiliate shall be credited to the Operating Account, with new Material valued in the same manner as new Material under clause 4.2.1 of this Accounting Procedure and used Material valued in the same manner as used Material under clause 4.2.2 of this Accounting Procedure, unless otherwise agreed by the Operating Committee.

5.3              Sales to Third Parties

Proceeds received from Material purchased from the Property by third parties shall be credited by Officer to the Operating Account at the net amount collected by Officer from the buyer. If the sales price is less than that determined in accordance with the procedure set forth in clause 5.2 of this Accounting Procedure, then approval by the Operating Committee shall be required prior to the sale. Any claims by the buyer for defective materials or otherwise shall be charged back to the Operating Account if and when paid by Officer.

Section 6         Inventories

6.1              Periodic Inventories - Notice and Representation

At reasonable intervals, inventories shall be taken by Officer of all Material held in warehouse stock on which detailed accounting records are normally maintained. The expense of conducting periodic inventories shall be charged to the Operating Account. Officer shall give Nation written notice at least 60 days in advance of its intention to take inventory, and Nation, at its sole cost and expense, shall each be entitled to have a representative present. The failure of Nation to be represented at such inventory shall bind such Nation to accept the inventory taken by Officer, who shall in that event furnish Nation with a reconciliation of overages and shortages. Inventory adjustments to the Operating Account shall be made for overages and shortages. Any adjustment equivalent to A$50,000 or more shall be brought to the attention of the Operating Committee.

6.2              Special Inventories

Whenever there is a sale or change of interest in the Agreement, a special inventory may be taken by Officer provided the seller and/or purchaser of such interest agrees to bear all of the expense thereof. In such cases, both the seller and the purchaser shall be entitled to be represented and shall be governed by the inventory so taken.

EX-10.35 19 sjdocs-7222568v1paltar_natio.htm sjdocs-7222568v1paltar_natio.htm - Generated by SEC Publisher for SEC Filing

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO paltar nation Limited Partnership THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

SECURED CONVERTIBLE PROMISSORY NOTE

USD$584,000

Dated: October 14, 2015
Effective: August 4, 2015
                                                                                                                       Denver, Colorado

For value received, PALTAR NATION LIMITED PARTNERSHIP, a Delaware limited partnership (the “Partnership”), promises to pay to David N. Siegel Dynasty Trust dated November 16, 2015 (the “Holder”), the principal sum of Five Hundred Eighty-Four Thousand Dollars (USD$584,000). Interest shall accrue from the date of this Secured Convertible Promissory Note (this “Note”) on the unpaid principal amount hereunder at a rate equal to 10.00% per annum; provided, that on and after the Maturity Date (as defined below) or an Event of Default (as defined below), interest shall accrue from and after such date on the unpaid principal and all accrued but unpaid interest of this Note at a rate equal to 15.00% per annum. This Note is one of a number of promissory notes (collectively, the “Notes”) issued under that certain Secured Convertible Note Purchase Agreement initially dated as of August 4, 2015, by and among the Partnership and the Purchasers listed on the signature pages thereto (the “Purchase Agreement”). This Note is subject to the following terms and conditions:

1.            Maturity. Unless converted as provided herein, all principal and any accrued but unpaid interest under this Note shall be due and payable on August 4, 2016 (the “Maturity Date”). Subject to Section 2 below, interest shall accrue on this Note and shall be due and payable in full on the Maturity Date. Notwithstanding the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon a material breach by (a) the Partnership of this Note, another Note or the Purchase Agreement, or (b) Wotan Group Limited, an Australian limited company (ACN 14998651), of the Pledge Agreement (as defined below), in each case that is not cured within thirty (30) days of such breach (an “Event of Default”).

2.            Conversion.

(a)           Qualified Financing. Upon a sale of the Partnership’s limited partnership interests (“Interests”) in a single transaction or a series of related transactions yielding gross cash proceeds to the Partnership of at least $20,000,000 (including without limitation, this Note and any other Notes issued under the Purchase Agreement) on or before the Maturity Date (a “Qualified Financing”), the principal and any accrued but unpaid interest under this Note shall automatically be converted into Interests upon the terms set forth in Section 2(b) below.

(b)          Terms of Conversion. The Interests to be issued to the Holder upon a conversion pursuant to Section 2(a) shall be equal to the quotient obtained by dividing (i) the entire principal amount of this Note plus any accrued but unpaid interest under this Note by (ii) 80.00% of the per-Interest price of the Interests sold to persons other than holders of Notes in a Qualified Financing. The issuance of such Interests upon such conversion shall be substantially upon the same terms and subject to the same conditions applicable to the Qualified Financing and the Partnership’s limited partnership agreement and other documents governing such Qualified Financing. Upon such conversion of this Note, the Partnership and the Holder hereby agree to execute and deliver to each other all transaction documents related to the Qualified Financing necessary to effect the issuance of the Interests to the Holder.

3.            Conversion Procedure.

                                                   (a)        Conversion. If this Note is converted pursuant to Section 2(a), the Partnership shall give written notice to the Holder, notifying the Holder of the conversion to be effected, the applicable conversion price, the amount of principal and any accrued but unpaid interest to be converted, the Interests to be issued, the date on which such conversion is expected to occur and a request for such Holder to physically surrender this Note to the Partnership. Upon receipt of such notice, the Holder shall surrender this Note at the Partnership’s principal executive office, or, if this Note has been lost, stolen, destroyed or mutilated, then, in the case of loss, theft or destruction, the Holder shall deliver an indemnity agreement reasonably satisfactory in form and substance to the Partnership or, in the case of mutilation, the Holder shall surrender and cancel this Note. Such conversion shall be deemed to have been made in connection with the closing of the Qualified Financing, and on and after such date the person entitled to receive the Interests issuable upon such conversion shall be treated for all purposes as the record holder of such Interests.

                                                  (b)        Same Rights. Upon conversion of this Note into Interests, the Partnership shall ensure that the Holder is given the same rights with respect to such Interests as those granted to the similarly situated purchasers of Interests in the Qualified Financing.

4.            Payment; Prepayment. All payments hereunder shall be made in lawful money of the United States of America at the Holder’s address on the signature page attached hereto or at such other place as the Holder hereof may from time to time designate in writing to the Partnership. The Partnership may prepay this Note at any time without penalty by providing all holders of the Notes written notice of the Partnership’s intent to prepay the Notes, but prepayment shall not occur without the prior written consent of the holders of a majority of the aggregate outstanding principal amounts owed under all of the Notes. Such prepayment shall be made on a pro rata basis based on the respective aggregate outstanding amount of each Note to be prepaid.

5.            Security. The Holder’s rights under this Note are secured by the “Pledged Securities”, as defined in the Pledge Agreement, dated as of August 4, 2015, executed by Wotan Group Limited, an Australian limited company, in favor of the Secured Parties (as defined therein) listed on the signature pages thereto (including the Holder hereunder) (the “Pledge Agreement”).

6.            Transfer; Successors and Assigns. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the Partnership and the Holder. Notwithstanding the foregoing, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Partnership. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note (or an indemnity agreement if the Note is lost, stolen or destroyed) for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Partnership. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note. The Partnership cannot assign this Note or its obligations or rights hereunder without the approval of the Holder.

7.            Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the Partnership and the Holder shall be governed, construed and interpreted in accordance with the laws of the state of Delaware, without giving effect to principles of conflicts of law.

8.            Notices. All notices and other communications given or made pursuant to this Note shall be in writing and shall be deemed effectively given upon: (a) personal delivery to the party to be notified, (b) when sent, if received by electronic mail or facsimile during normal business hours of the recipient, and if not received during normal business hours, then on the recipient’s next business day, (c) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) three (3) business days after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature pages to the Purchase Agreement, or as subsequently modified by written notice.

9.            Amendments and Waivers. Any term of this Note may be amended only with the written consent of the Partnership and the holders of a majority of the aggregate outstanding principal amount owed under all of the Notes; provided, that the following terms cannot be amended without the consent of the holder of this Note: a reduction in the interest rate, accrued interest or principal amount owed on this Note or the convertibility price and/or discount of this Note.

10.          Entire Agreement. This Note, any Confidentiality Agreement between the Partnership and a Purchaser, the Purchase Agreement, the Pledge Agreement and the documents referred to herein and therein, constitute the entire agreement between the Partnership and the Holder pertaining to the subject matter hereof and thereof, and any and all other written or oral agreements existing between the Partnership and the Holder are expressly canceled.

11.          Interest Rate Limitation. Notwithstanding anything to the contrary contained in this Note or the Purchase Agreement (the “Loan Documents”), the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Holder shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal remaining owed under this Note or, if it exceeds such unpaid principal, refunded to the Partnership. In determining whether the interest contracted for, charged, or received by the Holder exceeds the Maximum Rate, the Holder may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of this Note.

12.          Loss of Note. Upon receipt by the Partnership of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Partnership or, in the case of mutilation, on surrender and cancellation of this Note, the Partnership shall execute and deliver, in lieu of this Note, a new Note executed in the same manner as this Note, in the same principal amount as the unpaid principal amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

[Signature Pages Follow]

IN WITNESS WHEREOF, the Partnership has executed this Secured Convertible Promissory Note as of the date first set forth above.

the Partnership:

Paltar nation Limited partnership

By: /s/ Carmen J. Lotito

                           (Signature)

Name: Carmen J. Lotito

Title: Vice President

AGREED TO AND ACCEPTED:

/s/ Robert Telles

Trustee

David N. Siegel Dynasty Trust dated November 16, 2015



[Signature Page to Secured Convertible Promissory Note]

EX-10.36 20 sjdocs-7222689v133116_paltar.htm sjdocs-7222689v133116_paltar.htm - Generated by SEC Publisher for SEC Filing

PROMISSORY NOTE

US$188,483.00                                                                                                                   March 31, 2016

FOR VALUE RECEIVED, the undersigned, PALTAR NATION LIMITED PARTNERSHIP (the “Borrower”), promises to pay to the order of DAVID N. SIEGEL REVOCABLE TRUST 2009 (the “Lender”) the principal sum of ONE HUNDRED AND EIGHTY-EIGHT THOUSAND FOUR HUNDRED AND EIGHTY-THREE DOLLARS (US$188,483.00) in lawful currency of the United States (the “Principal Sum”), together with interest thereon as herein provided.

The Principal Sum or such amount as shall remain outstanding from time to time and shall bear interest, thereon, calculated daily, at a rate of ten percent (10%) per annum as of the issue dates stated in the attached Schedule “A”. In the event of any partial repayment made on the Principal Sum, such payments shall be applied firstly towards accrued interest and then towards the Principal Sum.

The Principal Sum and all accrued and unpaid interest at the rate aforesaid will become due and payable on March 31, 2017 (the “Term”). Extension of time of payment of all or any part of the amount owing hereunder at any time or times and failures of the Lender to enforce any of their rights or remedies hereunder shall not release the Borrower from its obligations hereunder or constitute a waiver of the rights of the Lender to enforce any rights and remedies therein.

On default in payment of any sum due hereunder for the Principal Sum or interest or after 15 days’ notice of Default to the Borrower, the unpaid balance of the Principal Sum and all accrued interest thereon shall at the option of the Lender forthwith become due and payable.

This Promissory Note shall be governed by the laws of the State of Delaware.

The undersigned will have the privilege of prepaying in whole or in part the Principal Sum and accrued interest.

Presentment, protest, notice of protest and notice of dishonour are hereby waived.

DAVID N. SIEGEL REVOCABLE TRUST 2009 PALTAR NATION LIMITED PARTNERSHIP

/s/ David N. Siegel,                                                 /s/ John R. Hislop
DAVID N. SIEGEL, Trustee                                   JOHN R. HISLOP, President

SCHEDULE “A”

Issue Date

Principal Amount

10/14/15

$6,000.00

10/26/15

$1,332.00

01/08/16

$20,000.00

02/07/16

$71.00

02/17/16

$50,000.00

02/17/16

$20,000.00

02/19/16

$2,530.00

03/23/16

$3,550.00

03/30/16

$85,000.00

TOTAL

$188,483.00

EX-10.37 21 sjdocs-7222699v14816_paltarn.htm sjdocs-7222699v14816_paltarn.htm - Generated by SEC Publisher for SEC Filing

PROMISSORY NOTE

US$25,000.00                                                                                                                           April 8, 2016

FOR VALUE RECEIVED, the undersigned, PALTAR NATION LIMITED PARTNERSHIP (the “Borrower”), promises to pay to the order of DAVID N. SIEGEL REVOCABLE TRUST 2009 (the “Lender”) the principal sum of TWENTY-FIVE THOUSAND DOLLARS (US$25,000.00) in lawful currency of the United States (the “Principal Sum”), together with interest thereon as herein provided.

The Principal Sum or such amount as shall remain outstanding from time to time and shall bear interest, thereon, calculated daily, at a rate of ten percent (10%) per annum as of the issue dates of April 8, 2016. In the event of any partial repayment made on the Principal Sum, such payments shall be applied firstly towards accrued interest and then towards the Principal Sum.

The Principal Sum and all accrued and unpaid interest at the rate aforesaid will become due and payable on April 8, 2017 (the “Term”). Extension of time of payment of all or any part of the amount owing hereunder at any time or times and failures of the Lender to enforce any of their rights or remedies hereunder shall not release the Borrower from its obligations hereunder or constitute a waiver of the rights of the Lender to enforce any rights and remedies therein.

On default in payment of any sum due hereunder for the Principal Sum or interest or after 15 days’ notice of Default to the Borrower, the unpaid balance of the Principal Sum and all accrued interest thereon shall at the option of the Lender forthwith become due and payable.

This Promissory Note shall be governed by the laws of the State of Delaware.

The undersigned will have the privilege of prepaying in whole or in part the Principal Sum and accrued interest.

Presentment, protest, notice of protest and notice of dishonour are hereby waived.

DAVID N. SIEGEL REVOCABLE TRUST 2009 PALTAR NATION LIMITED PARTNERSHIP

/s/ David N. Siegel                                                  /s/ John R. Hislop
DAVID N. SIEGEL, Trustee                                   JOHN R. HISLOP, President

EX-10.38 22 sjdocs-7222728v15316_paltarn.htm sjdocs-7222728v15316_paltarn.htm - Generated by SEC Publisher for SEC Filing

PROMISSORY NOTE

US$34,000.00                                                                                                                           May 3, 2016

FOR VALUE RECEIVED, the undersigned, PALTAR NATION LIMITED PARTNERSHIP (the “Borrower”), promises to pay to the order of DAVID N. SIEGEL REVOCABLE TRUST 2009 (the “Lender”) the principal sum of THIRTY-FOUR THOUSAND DOLLARS (US$34,000.00) in lawful currency of the United States (the “Principal Sum”), together with interest thereon as herein provided.

The Principal Sum or such amount as shall remain outstanding from time to time and shall bear interest, thereon, calculated daily, at a rate of ten percent (10%) per annum as of the issue dates of May 3, 2016. In the event of any partial repayment made on the Principal Sum, such payments shall be applied firstly towards accrued interest and then towards the Principal Sum.

The Principal Sum and all accrued and unpaid interest at the rate aforesaid will become due and payable on May 3, 2017 (the “Term”). Extension of time of payment of all or any part of the amount owing hereunder at any time or times and failures of the Lender to enforce any of their rights or remedies hereunder shall not release the Borrower from its obligations hereunder or constitute a waiver of the rights of the Lender to enforce any rights and remedies therein.

On default in payment of any sum due hereunder for the Principal Sum or interest or after 15 days’ notice of Default to the Borrower, the unpaid balance of the Principal Sum and all accrued interest thereon shall at the option of the Lender forthwith become due and payable.

This Promissory Note shall be governed by the laws of the State of Delaware.

The undersigned will have the privilege of prepaying in whole or in part the Principal Sum and accrued interest.

Presentment, protest, notice of protest and notice of dishonour are hereby waived.

DAVID N. SIEGEL REVOCABLE TRUST 2009 PALTAR NATION LIMITED PARTNERSHIP

/s/ David N. Siegel                                                  /s/ John R. Hislop
DAVID N. SIEGEL, Trustee                                   JOHN R. HISLOP, President

EX-99.2 BYLAWS 23 sjdocs-7223251v1nation_exhib.htm RULE 201 OF REGULATION S-T sjdocs-7223251v1nation_exhib.htm - Generated by SEC Publisher for SEC Filing

Exhibit 101

IN ACCORDANCE WITH THE TEMPORARY HARDSHIP EXEMPTION PROVIDED BY RULE 201 OF REGULATION S-T, THE DATE BY WHICH THE INTERACTIVE DATA FILE IS REQUIRED TO BE SUBMITTED HAS BEEN EXTENDED BY SIX BUSINESS DAYS

Executed by Nation Energy (Australia) Pty Ltd (ACN 606 533 046) in accordance with section 127 of the Corporations Act by authority of its directors: /s/ John R. Hislop		/s/ Darrel Causbrook
Director John R. Hislop		Director Darrel Causbrook
Print name		Print name
Executed by Paltar Petroleum Limited (ACN 149 987 459) in accordance with section 127 of the Corporations Act by authority of its directors: /s/ Nick Tropea		/s/ Marc A. Bruner
Secretary Nick Tropea		Director Marc A. Bruner
Print name		Print name

Holder & Granting Document	Percentage of Hydrocarbons produced/sold
1. Stock Purchase and Exploration Agreement between MAB Resources LLC and Robert L. Bayless Estate, et al, dated 9 November 2005, as amended	8%
2. Acquisition and Consulting Agreement between MAB Resources LLC and Petrohunter Energy Corporation dated 1 January 2007 , as amended	4% (after proportionate reduction), decreasing to 3.9% after one million barrels have been produced from EP 136 and 143, and decreasing again to 3.85% after one billion barrels have been produced from lands covered by the two permits
3. Exploration Agreement among Sweetpea, Native Title Party and Northern Land Council dated 18 July 2012	2%, increasing to 4% after one million barrels have been produced from EP 136 and 143, and increasing again to 5% after one billion barrels have been produced from lands covered by the two permits
4. Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)	10%

Holder & Granting Document	Percentage of Hydrocarbons produced/sold
1. Exploration Agreement among Paltar, Native Title Parties and Northern Land Council	2%, increasing to 4% after one million barrels have been produced from EP 231, 232 and 234, and increasing again to 5% after one billion barrels have been produced from lands covered by the three permits
2. Northern Territory of Australia royalty pursuant to the Petroleum Act (NT)	10%

Issue Date	Principal Amount
10/14/15	$6,000.00
10/26/15	$1,332.00
01/08/16	$20,000.00
02/07/16	$71.00
02/17/16	$50,000.00
02/17/16	$20,000.00
02/19/16	$2,530.00
03/23/16	$3,550.00
03/30/16	$85,000.00
TOTAL	$188,483.00

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 7. MANAGEMENT’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Oil and Gas Properties

Revenue Recognition

Equity Incentive Plan

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibits Required by Item 601 of Regulation S-K

1. The first sentence of Item 1 of the Agreement is hereby amended in its entirety as follows:

2. Item 2 of the Agreement is deleted in its entirety and replaced with the words “[Reserved].”

3. Item 3 of the Agreement is hereby amended in its entirety as follows:

Within seven (7) days after delivery to Nation of Paltar’s audited financials as set forth in Item 18(d) of this Agreement, Nation shall issue an aggregate of 900,000,000 Nation common shares (the “Earning Agreement Shares”) to Paltar, with an agreed upon value of US$0.03 per share.

4. Item 4 of the Agreement is hereby amended in its entirety as follows:

5. Item 5 of the Agreement is deleted in its entirety and replaced with the words “[Reserved].”

6. Item 18(b) of the Agreement is hereby amended in its entirety as follows:

7. Item 18(d) of the Agreement is hereby amended in its entirety as follows:

9. The Agreement is hereby amended generally by replacing the term “Exchange Transaction” with “Transactions” except for the first instance of Exchange Transaction in the introductory paragraph.

No changes or amendments other than those expressly set forth above are being made in the Agreement. Nation and Paltar confirm and ratify the validity and current effectiveness of the Agreement, as amended by this Amendment.

1. Defined terms

2. Initial Consideration

2.1 Cash Consideration

2.2 Share Consideration

shares. The allocated portion comprises 85,714,285 shares previously promised and accounted for as consideration for the Original Earning Agreement and 42,857,145 shares as consideration for the right to earn Production Licences in the new Blocks being added under this Agreement.

2.3 Non-Refundable Consideration for Earning Rights

3. Operator

3.1 Designation of Operator

3.2 Rights and Duties of Operator

(i) perform all actions necessary to comply with the requirements imposed upon it by the JVOA;

(ii) take all steps as are necessary or appropriate under the JVOA to:

(A) maintain its position as Operator under the JVOA and use its positon as Operator under the JVOA to achieve the objectives of this Agreement;

(B) implement the decisions of the Operating Committee, including by making all decisions and casting all votes under the JVOA consistently with the decisions of the Operating Committee; and

(iii) not grant, create or allow the grant or creation of any Encumbrance over Paltar’s Participating Interest as defined in the JVOA without the prior written consent of Nation;

(iv) not sell, transfer, assign or otherwise dispose of or part with possession of Paltar’s Participating Interest under the JVOA without the prior written consent of Nation;

(vi) take all steps as are necessary or appropriate to ensure that the application for, grant and transfer of a Production Licence to Nation occurs as soon as practicable following a decision by Nation under clause 6.1(b).

(c) In the conduct of Operations, Paltar shall:

(i) perform Operations in accordance with the provisions of the Permit, the Laws, this Agreement and the decisions of the Operating Committee;

(ii) conduct all Operations in a diligent, safe and efficient manner in accordance with good and prudent oil field practices and field conservation principles generally followed by the international petroleum industry under similar circumstances;

(iii) prepare and submit to the Operating Committee the proposed Work Programs and Budgets as provided in clause 5;

(iv) acquire all permits, consents, approvals, surface or other rights that may be required for the conduct of Operations;

(v) permit Nation’s representatives to have at all reasonable times and at their own risk and expense reasonable access to the Operations with the right to observe all such Operations;

(vi) pay to the Government within the periods and in the manner prescribed by the Laws, all periodic payments, taxes, fees and other amounts pertaining to Operations, but excluding any taxes measured by the incomes of the Parties;

(vii) carry out the obligations of Paltar pursuant to the Permit, including, but not limited to, preparing and furnishing such reports, records and information as may be required pursuant to the Petroleum Act;

(viii) have, in accordance with the decisions of the Operating Committee, the exclusive right and obligation to represent the Parties in all dealings with the Government with respect to matters arising under Operations;

(xi) do all other acts and things that are reasonably necessary or desirable to fulfil its functions or are incidental to the above powers and duties.

3.3 Paltar Personnel

(a) Paltar shall engage or retain such employees, contractors, consultants and agents as are reasonably necessary to conduct Operations.

(b) Subject to the Laws and this Agreement, Paltar will determine the number of employees, contractors, consultants and agents, the selection of such persons, their hours of work, and the compensation to be paid to all such persons in connection with Operations.

3.4 Information Supplied by Paltar

(a) Paltar shall provide Nation with the following data and reports from the Operations:

(i) copies of all logs or surveys;

(ii) daily drilling reports;

(iii) copies of all tests and core data and analysis reports;

(iv) final well report;

(v) copies of the final geological and geophysical maps, seismic sections and shot point location maps and reports;

(vi) engineering studies, development schedules and annual progress reports on development projects;

(vii) field and well performance reports, including reservoir studies and reserve estimates; and

(viii) copies of all reports relating to Operations furnished by Paltar to a Government.

(b) Paltar shall provide Nation such additional information as Nation may reasonably request in writing, provided that Nation must pay the costs of preparing such information and the preparation of such information must not unduly burden Paltar’s administrative and technical personnel.

(c) Paltar shall give Nation access at all reasonable times during normal business hours to all data and reports acquired in the conduct of Operations. Nation may make copies of such other data at its sole expense.

3.5 Settlement of Claims and Lawsuits

(b) Nation shall promptly notify Paltar of any claim made against Nation by a third party which arises out of or may affect the Operations.

3.6 Limitation on Liability of Paltar

(d) Notwithstanding the foregoing, under no circumstances shall Paltar or any other Indemnitee ever bear any Consequential Loss.

(e) In the event that there is a change of Operator then, from the date a new Operator is appointed, the new Operator shall have the benefit of each of clause 3.6(a) – (d) as if the new Operator were named in those clauses in place of Paltar.

3.7 Insurance Obtained by Paltar

(a) Paltar shall maintain for such limits as it may reasonably believe prudent any and all insurance it believes appropriate under the circumstances, including:

(i) All insurance required by the Laws;

(ii) Third party liability insurance covering liability to third parties which may arise in connection with the Operations;

(iv) Workers compensation insurance.

(b) Paltar shall, in respect of such insurance:

(ii) promptly inform Nation when insurance is taken out and at Nation’s request supply it with certificates of insurance or copies of the relevant policies when they are issued; and

(iii) duly file all claims and take all necessary and proper steps to collect any proceeds.

(c) Paltar shall use its reasonable endeavours to require all contractors (including sub‑contractors) performing work with respect to the Operations to: