Material Risks Risk Management Approach Counterparty Credit and Recovery Risk The Company is exposed to the failure of counterparties to meet their obligations, including the failure of a joint operation partner to fund cash calls under a joint operating agreement in a timely manner that will not result in a disruption to operations. The Company’s joint operating partner has not met cash calls when due and substantial amounts remain outstanding. Recovery of those amounts depends on continued negotiation, the financial capacity of the counterparty and the practical enforceability of contractual remedies in the relevant jurisdictions. The amounts ultimately recovered may be materially less than the amounts owing, may be received later than assumed, or may not be recovered at all. Delays or shortfalls in recovery increase the Company’s funding requirement. The Company monitors cash calls and outstanding balances continuously and maintains detailed supporting records, including interest accruals and payment allocation records, to support recovery. It has pursued the default remedies available under the joint operating agreement and continues to negotiate settlement while preserving its contractual rights, with legal advice obtained in the relevant jurisdictions. Recoveries are not assumed in the Company’s cash flow forecasts until receipt is reasonably certain, and the going concern and impairment assessments are prepared on scenarios that do not depend on full recovery. Permits and Tenure Risks All licences, permits and production sharing contracts in which the Company has interests are subject to renewal and completion of minimum work conditions which will be at the discretion of relevant organs of government in the countries in which it operates. The maintenance of licences and permits, obtaining renewals or getting licences and permits granted often depends on the Company being successful in obtaining required statutory approvals for proposed activities and/or satisfying the various financial obligations associated with the ongoing maintenance of such licences and permits, amongst other obligations. Where the Company is unable to fund minimum work commitments, licences and permits may be forfeited or renewals refused, resulting in the loss of the associated asset and its carrying value. The Company actively monitors the obligations in all its licenses, permits and production sharing contracts. There is in place an established process to determine whether licenses and permits are retained, extended, or surrendered after considering the overall value of the license or permit to the Company’s portfolio as a whole and therefore decide whether capital should be allocated to those permits. Where funding or operational constraints affect the Company’s ability to meet a work commitment, the Company engages with the relevant regulator early and, and where available, applies for suspension, extension or variation of the commitment rather than allowing a default to occur. Disputes and Litigation Risk The company is in negotiation with its operating partner in relation to amounts owing under the joint operating agreement. The Company may become involved in further legal proceedings. Any significant or costly dispute or litigation, including proceedings in jurisdictions where enforcement of a judgement or award is uncertain, could adversely impact the value of its assets, financial performance or reputation, and could absorb management time and financial resources. The Company maintains robust contractual and governance frameworks, obtains legal advice on key agreements, and implements compliance and riskmanagement practices designed to prevent and promptly address disputes. The Company manages contractual risk through arbitration clauses in established centres such as London, although enforcement and recovery risks remain. Material disputes are reported to the Board and, where the recognition criteria are met, provisions or contingent liability disclosures are made in accordance with AASB 137 Provision, Contingent Liabilities and Contingent Assets. Tax Risk The Company is subject to taxation, royalties and other imposts in Australia and other jurisdictions where it operates. It currently benefits from concessionary tax arrangements in Cuba; however, there is no assurance these concessions will remain in place or extend beyond their current agreed periods. Any changes in tax laws, government royalty policies, or their interpretation or enforcement whether in Australia, Cuba or elsewhere could increase the Company’s effective tax rate, reduce cash flows and profitability, or adversely affect project economics. The Company actively monitors taxation and royalty regimes in all jurisdictions of operation and investment, engages specialist tax and legal advisers, and structures its operations to comply with applicable laws while optimising available incentives. Financial forecasts incorporate tax and royalty sensitivity analyses, and the Company maintains constructive engagement with relevant tax authorities to help anticipate and manage potential changes. These measures aim to limit the financial impact of any adverse changes, though some residual risk remains. Governance and Risk continued 38 Melbana Energy Limited Annual Report 2026
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