Material Risks Risk Management Approach Reserves and Resources Risk Estimates of Reserves, Contingent Resources and Prospective Resources are based on limited sampling, are not precise and no assurance can be given that these reserves or resources will be recovered during production. Production estimates, in addition to being dependent on the above reserve and resource estimates and the risks associated therewith, are further reliant on, among other things, recovery rates. These uncertainties could result in lower production, restatement of Reserves, increased funding needs and adverse impacts on cash flow, profitability and overall project economics. The Company has a Reserves Committee that is responsible for establishing and reviewing reserve and resource estimates for the Company’s portfolio of prospects. The members of this Committee, and the Company’s geoscientists that prepare estimates for this Committee, are experienced professionals with suitable formal qualifications and decades of relevant experience in the oil and gas sector preparing such estimates in accordance with relevant international norms and standards. The recommendations of this Committee are overseen at Board level by competent persons and, where appropriate, independent external certifiers are used to review internal estimates. Asset Carrying Value and Impairment Risk The Company’s exploration and evaluation assets are carried at cost and are assessed for impairment indicators under AASB 6 Exploration for and Evaluation of Mineral Resources and, where relevant, AASB 136 Impairment of Assets. Carrying values depend on assumptions about future funding, the continued right to explore in the relevant area, expected commodity prices, discount rates, the timing and cost of development, and the ability to obtain the regulatory approvals necessary to commercialise a discovery. A change in any of those assumptions including a failure to secure funding, a loss of tenure, or a change in the sanctions position affecting the Company’s ability to commercialise its Cuban interests may result in an impairment charge that is material to the Company’s reported result and net asset position and may in turn affect the Company’s borrowing capacity and market perception. The Company assesses impairment indicators at each reporting date and prepares supporting assessments documenting the basis for the carrying value of each asset, including sensitivity to the key assumptions. Those assessments are reviewed by the Audit and Risk Committee and are subject to external audit. Where impairment indicators are identified, the recoverable amount is estimated, and any write-down is recognised in the period in which it is identified. Commodity Price Risk The profitability of the Company’s operations is directly linked to commodity prices, particularly oil. These prices fluctuate widely and are influenced by global supply and demand, currency exchange rates, interest rates, inflation expectations, weather conditions, availability of alternative fuels, government and cartel actions, and production levels in key regions–factors largely beyond the Company’s control. Sustained price declines could adversely affect project economics, cash flows and the Company’s ability to finance exploration, development and production activities. The Company incorporates conservative price assumptions and sensitivity analyses into project planning and financial forecasts and maintains flexibility to adjust capital expenditure and development schedules in response to market conditions. Where appropriate, the Company may use commodity price hedging and diversified offtake and sales arrangements to help stabilise cash flows. Prudent cost management and disciplined capital allocation further strengthen the Company’s ability to withstand commodity price volatility, though some residual exposure remains. Foreign Exchange Risk The Company reports in Australian dollars but incurs costs and receives amounts in other currencies, principally Canadian dollars and euros. Movements in exchange rates affect the Australian dollar value of the Company’s cash, receivables and payables, the cost of its work programs, and the amounts ultimately realised from asset transactions and from the recovery of amounts owing to it. The Company’s inability to transact in United States dollars in connection with its Cuban operations limits its choice of settlement currency and may result in additional conversion costs and exposure. The Company monitors its currency exposures and, where practicable, holds cash in the currencies in which it expects to incur costs so as to provide a natural hedge. Currency sensitivity is incorporated into cash flow forecasts and project economics. The Company does not enter into speculative currency derivatives. Where a material committed exposure arises, the Board considers whether hedging that exposure is appropriate. The Company’s exposure at the reporting date is set out in the financial instruments note to the financial statements. 41 Melbana Energy Limited Annual Report 2026
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