Melbana Energy Limited Annual Report 2022

The successful drilling and commercialisation of any oil and gas discoveries in Cuban and Australian exploration permits and/ or the development/sale of the Consolidated Entity’s methanol and LNG Projects could ultimately lead to the establishment of a profitable business or result in a profit to the Company if an asset sale occurs. While the Consolidated Entity is in the exploration/appraisal stage of drilling for hydrocarbons in its offshore Australian exploration permit and overseas acreage and in the project development phase for its other offshore Australian interests, funding will be provided by asset sales, equity capital raised from the issue of new shares and/or farm out or joint development arrangements with other companies. Review of financial position The net assets increased by $30,082,682 to $37,172,262 at 30 June 2022 (30 June 2021: $7,089,580). During the year, the Consolidated Entity capitalised $9,532,768 (2021: $1,315,080) of exploration expenditure, mainly in relation to Block 9 in Cuba. The main determinants of the Consolidated Entity’s financial condition were: – Profit after tax of $6,332,812 (2021: loss of $1,398,123); – increase in share capital amounting to $22,875,044 (2021: $nil). The working capital position as at 30 June 2022 of the Consolidated Entity results in an excess of current assets over current liabilities of $26,450,132 (30 June 2021: $2,389,609). The cash balances, including term deposits, as at 30 June 2022 were $35,570,347 (2021: $10,683,656). Corporate The Consolidated Entity’s future prospects are centred on its ability to secure quality exploration, development and producing opportunities and seeking to maximise the value to shareholders of its current portfolio, identifying and securing additional value-accretive projects, and/or undertaking a corporate transaction. Funding for the coming Financial Year is sufficient to meet the Company’s forecast exploration and field development commitments however the Consolidated Entity may raise additional funding either through farm-in/sale and/or capital injection to advance its projects. In the event that the Consolidated Entity cannot meet its share of work program commitments, permits may need to be surrendered. Significant changes in the state of affairs On 20 August 2021 the Company received the approval of the National Offshore Petroleum Titles Administrator for a 20-month suspension of the permit conditions in respect of the Permit Year 3 work program (with a corresponding 20-month extension of the permit term) for its exploration permit WA-488-P. Receipt of this approval satisfied the final Condition Precedent of the Company’s sale of WA-488-P to EOG Australia and the Company soon thereafter received a payment of US$7,500,000 as the Initial Purchase Price. The terms of the sale agreement entitle the Company to receive Contingent Additional Payments totalling US$5.0million, subject to certain future elections being made in regard to theWA-488-P permit area. In addition, Melbana is entitled to payments of US$10.0million per 25 million barrels of oil equivalent (boe) that may be sold and delivered fromwithin theWA-488-P permit area in future. In the first quarter of the reporting period, the Company divested its holdings inMetgasco Limited (ASX: MEL) and Byron Energy Limited (ASX: BYE) on market for cash consideration. On 7 September 2021 the Company announced the results of its underwritten pro-rata nonrenounceable entitlements offer at $0.02 per share with the Company issuing a total of 356,438,678 fully paid ordinary shares and 546,658,017 options expiring on 10 September 2021, raising a total of $7,128,774 (gross proceeds before costs). On 13 September 2021 exploration drilling commenced in Block 9 PSC onshore Cuba. Multiple significant hydrocarbon bearing zones were intercepted during the drilling of Alameda-1. On 16 February 2022 the Company was awarded AC/P70, located offshore Australia in the Territory of Ashmore and Cartier Islands, for an initial period of six years. The permit contains the undeveloped Vesta-1 oil discovery drilled in 2005 and the Vesta-2 appraisal well drilled in 2007 identified a gas cap. The Company has a well commitment in the primary term (year three). On 16March 2022 the Company completed an institutional placement raising a total of $15,000,000 before transaction costs via a placement of 125 million fully paid ordinary shares at a price of $0.12 per share. The placement was supported by high quality institutional investors in Australia and abroad. On 21 May 2022, Zapato-1, the second exploration well of the two well Block 9 exploration drilling program commenced drilling and is still drilling ahead to the target formation as of the reporting date. During the year the Company has issued 86,899,695 fully paid ordinary shares and received proceeds of $3,041,489 before transaction costs from conversion of its listed options. As at 30 June 2022, there remained 459,758,321 Options unexercised. If all of the remaining options are converted, the Company would receive additional funds of $16,091,541. 11 Melbana Energy Limited Annual Report 2022