Material Risks Risk Management Approach Schedule Risk The timing of the Company’s planned activities may be affected by factors beyond its control, including adverse weather, government actions or delays, industrial action, availability of key equipment, and the actions or funding delays of joint venture partners. Regulatory approvals and permitting in Cuba may also result in drilling or project delays, potentially impacting schedules and costs. The Company incorporates schedule contingencies and flexible project planning into its programs, engages early and regularly with regulators, and maintains strong relationships with contractors, suppliers and joint venture partners to minimise potential delays. Critical equipment procurement and logistics are closely managed, and alternative suppliers and schedules are assessed to reduce the impact of unforeseen disruptions. Joint Operations Risk The Company is party to a joint operation arrangement and may enter into further joint operations. Although The Company has sought, and will seek, to protect its interests, existing and future joint operations necessarily involve special risks., including but not limited to inconsistent goals with joint operations partners and potential reputational risk by association to a partner. Partners may also be unable or unwilling to fulfill their obligations under the joint venture or other agreements, such as contributing capital to exploration, expansion or maintenance projects. This risk has crystallised in the Company’s existing joint operation, where the partner has not met cash calls when due. As operator, the Company may be required to fund a defaulting partner’s share in order to preserve the underlying contract, or to suspend activity, either of which may have a material adverse effect on the Company’s liquidity and on the value of the asset. The Company has a clearly structured process of contracting with third parties. In addition, The Company will only participate in joint operations where it has a real influence in the operation and is not a dormant partner. The existing Joint Operation the company is the operator and therefore drives execution and oversight of the joint operation. Where a partner defaults, the Company enforces the default provisions available to it under the joint operating agreement, re-phases the work program and expenditure to what the joint operation can fund, and keeps the relevant regulator and contract counterparty informed. All future Joint operations will continue to be structured in a manner that ensures an appropriate level of control and direction. Funding Risks The oil and gas industry is a capital-intensive industry with regulator mandated minimum work program obligations and financial support for those. There can be no assurances that all The Company’s future business activities will in fact be met without future borrowings or further capital raisings, and whether such funding will be available and on terms acceptable to the company. The Company actively manages its capital structure and funding requirements and maintains a rolling forecast of its funding needs against committed and contingent obligations. It has and continues to pursue multiple funding pathways, including asset-level farm-downs, debt and convertible instruments, and the issue of additional equity securities so that it is not dependent on any single source. Discretionary expenditure is carefully controlled and programs re-phased where funding is not secured The Company’s liquidity position and the Directors’ going concern assessment are set out in the Directors’ Report and in Note 2 to the financial statements. Drilling Risks Drilling operations are high-risk and subject to hazards often encountered in exploration, development and production drilling programs. These include unexpected geological formations, infrastructure failure and other incidents or conditions which could result in damage to plant or equipment or the environment and which could impact production throughput. Although it is intended to take adequate precautions to minimise risk, there is a possibility of a material adverse impact on the Company’s operations, and its financial results should any of these hazards be encountered. The Company manages drilling hazards through rigorous well design and planning, independent technical reviews, engagement of experienced contractors, continuous real-time well monitoring, and strict adherence to recognised HSE standards. It maintains insurance cover considered appropriate for its operations and regularly reviews emergency response plans and critical equipment to minimise downtime. These measures materially reduce the likelihood and potential impact of incidents, though a residual risk of operational or financial disruption remains. 39 Melbana Energy Limited Annual Report 2026
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