Buru Energy : Half Year Accounts

Buru Energy Limited

ABN 71 130 651 437

Interim Financial Report

For the six months ended 30 June 2019

BURU ENERGY LIMITED

TABLE OF CONTENTS

DIRECTORS' REPORT.......................................................................................................................................................................	3
AUDITOR'S INDEPENDENCE DECLARATION .................................................................................................................................	6
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ......................................................................................	7
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OR LOSS ...........................................................	8
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................................	9
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS ..................................................................................................	10
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ..............................................................................	11
DIRECTORS' DECLARATION ...........................................................................................................................................................	17
INDEPENDENT REVIEW REPORT..................................................................................................................................................	18
CORPORATE DIRECTORY..............................................................................................................................................................	20

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BURU ENERGY LIMITED

DIRECTORS' REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

The Directors present their report together with the condensed consolidated interim financial statements of the Group comprising Buru Energy Limited (Buru Energy or the Company) and its subsidiaries for the six month period ended 30 June 2019 and the auditor's independent review report thereon.

Directors

The Directors of the Company in office at any time during or since the end of the period are as follows:

• Mr Eric Streitberg - Executive Chairman
• Ms Eve Howell - Non-Executive
• Mr Robert Willes - Non-Executive

The Company Secretary is Mr Shane McDermott.

Principal Activities

The principal activity of the Group during the period was oil and gas exploration and production in the Canning Basin, in the northwest of Western Australia. There were no significant changes in the nature of the Group's principal activities during the period.

Review of Operations

Ungani Oilfield - L20 & L21 (Buru Energy has 50% interest and is Operator of the Ungani Joint Venture)

Production from the Ungani Oilfield for the six months ended 30 June 2019 totalled ~182,000 bbls (Buru Energy's share ~91,000 bbls), at an average rate of ~1,000 bopd from five wells (Ungani 1ST1, Ungani 2, Ungani 4ST1, Ungani 5 and Ungani Far West 1). The average production rate included well offline time with ongoing minor well interventions and maintenance being carried out as required throughout the period. The northern wet season at the start of the year saw lower than average rainfall and whilst there were some short periods of precautionary closures of the Ungani access road, these did not result in any lost days of production. The additional wells currently being drilled on the field (Ungani 6H and Ungani 7H) are expected to result in a material increase in production rates during the second half of 2019.

Ungani crude oil continues to be trucked to CGL storage Tank 10 at Wyndham Port for storage prior to its FOB sale. The price received FOB Wyndham is the realised Brent linked oil price less the buyer's fixed shipping discount. Ungani Joint Venture sales during the period totalled ~A$15 million from ~167,000 bbls from three liftings at an average FOB Wyndham price of ~A$89/bbl (Buru Energy's share ~$7.5 million from ~83,500 bbls). The first lifting commenced on 31 December 2018 and was completed on 1 January 2019 for ~70,000 bbls at ~A$75/bbl with ~47,000 bbls recorded as revenue in 2018 and the remaining ~23,000 bbls recognised as revenue in 2019. The second lifting was completed on 12 March for a further ~70,000 bbls at ~A$86/bbl and the third lifting was completed on 23 May for ~74,000 bbls at ~A$95bbl. The existing Trafigura oil sales and lifting contract expired on 30 June 2019, and after a market based tender process, a new contract on more favourable commercial terms has been executed with Petro- Diamond Singapore.

During the period, the Ungani Joint Venture commenced drilling the Ungani 6H development well with the NGD 405 drilling rig. Drilling of the well was significantly delayed by a number of operational problems including rig mechanical issues, lost circulation zones, and consequent difficult drilling conditions in the Ungani Shale section. The well was drilled at a high angle to the top of the Ungani Dolomite which was intersected as planned at a measured depth of 2,346 metres. Attempts to then run the 5½ inch (140mm) casing to the planned depth at the top of the Ungani Dolomite were ultimately unsuccessful, and the casing was cemented in place at a depth of 2,310 metres measured depth and the well was suspended after the end of the period. The NGD 405 rig has since undergone a period of required maintenance and repairs before being mobilised to drill the Adoxa 1 exploration well. The forward plan at Ungani 6H is to run an expandable liner over the remaining shale section prior to the underbalanced coil tubing unit drilling of the reservoir section.

The Ungani 7H well location is adjacent to the Ungani 4 well pad and the well was spudded on 26 August 2019. The preparations for the underbalanced coil tubing drilling of the horizontal reservoir sections in Ungani 6H and Ungani 7H are substantially complete and these operations are currently expected to be completed in the fourth quarter.

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BURU ENERGY LIMITED

DIRECTORS' REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2019 (CONT'D)

Further upgrades to the Ungani Production Facility are progressing on time and on budget. The facility is being debottlenecked and expanded to handle the expected increased oil production from Ungani 6H and Ungani 7H, as well as the increased produced water from the field generally. This expansion involves the installation of new tanks and associated infrastructure to tie the new wells into the facility.

Lennard Shelf Permits - L6, L8 & EP 129 (Buru Energy 100%)

The Blina Oilfield remained shut-in during the period with decommissioning of legacy wells and facilities on the Lennard Shelf proceeding. Well decommissioning is being undertaken with Buru Energy's Jacking Platform system. This system provides a low cost, safe and effective alternative to using a workover rig for these operations. As at the end of the period, these decommissioning operations were ~50% complete and progressing on time and on budget.

In preparation for the planned workover and test of the Yellowdrum reservoir section in the Blina 4 well, the Jacking Platform has been used to remove the existing tubing string which was completed for production from the deeper Nullara Formation level. During this operation, initial flush production of some 600 barrels of oil was recovered from the Nullara reservoir at high flow rates. This was an unexpected and encouraging result and the significance of this oil recovery and its implications for the forward program is being reviewed.

Exploration

The Adoxa 1 exploration well is located on EP 428 (Buru Energy 50% and Operator). Roc Oil (Canning) Pty Ltd (ROC) is earning a 50% interest under the terms of the 2018 Farmin Agreement whereby ROC is required to fund agreed exploration expenditures on a promoted 80/20 basis (Farmin Carry). For the purpose of drilling the Adoxa 1 well, the parties agreed that this well would be funded outside the Farmin Carry, with both ROC and Buru Energy paying for this well at the 50/50 equity level.

The Adoxa 1 well was drilled to a total depth of 2,300 metres and an extensive suite of wireline logs and pressure measurements were then acquired. These identified a zone from 1,891 to 1,902 metres measured depth ("1900 zone") in the Upper Anderson section that is interpreted from logs and pressure data to have the potential to flow oil. All of the other zones where oil shows were noted in the well were interpreted to be either tight (poor reservoir) or water wet. In order to provide a definitive test of the 1900 zone a 4½ inch (114mm) casing string was run into the well and the NGD 405 rig was then mobilised to the Ungani 7 location.

Yulleroo Gas Assets

The Yulleroo Gasfield is located on Exploration Permits EP 391 & EP 436 where Buru Energy has a 50% interest in the conventional gas assets and a 100% interest in the unconventional gas assets. Four wells have defined a substantial gas accumulation with a number of zones identified from which there is potential for conventional gas production. A program to evaluate these conventional gas resources is currently being finalised. Conventional gas resources could be used to supply local industry and power generation as a substitute for LNG trucked from the Pilbara.

Corporate

An additional $0.5 million "accelerated capital repayment" of the loan from Alcoa related to a legacy gas sales agreement was paid in the first week of January 2019. The repayment was calculated under the terms of the agreement on Ungani crude sales revenue during the 2018 year. The remaining liability of $4.5 million is repayable in two instalments with $2.5 million due on 31 December 2019 and the remainder due in December 2020.

The Company's acquisition of an additional interest in EP 457 and EP 458 from a subsidiary of Mitsubishi Corporation (refer ASX announcement 10 December 2018) reached final settlement in March 2019. Buru Energy now owns a 60% interest in each of EP 457 and EP 458, with Rey Resources Ltd holding the remaining 40%. Buru Energy continues as the Operator of these permits, with ongoing technical work identifying a number of prospective new play types.

After Balance Date Events

No significant events have occurred subsequent to balance date.

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BURU ENERGY LIMITED

DIRECTORS' REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2019 (CONT'D)

Dividends

The Directors do not propose to recommend the payment of a dividend. No dividends have been paid or declared by the Company during the current period.

Auditor's Independence Declaration

The lead auditor's independence declaration for the period is set out on page 6 and forms part of this Directors' Report.

Rounding Off

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 dated 1 April 2016 and in accordance with that Corporations Instrument, amounts in the condensed consolidated interim financial report and Directors' Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

This report is made in accordance with a resolution of Directors.

__________________________	__________________________
Mr Eric Streitberg	Mr Robert Willes
Executive Chairman	Non-Executive Director
Perth	Perth
30 August 2019	30 August 2019

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