AXP Energy : 2022 Half-Year Report

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HALF-YEAR REPORT 2022

TABLE OF CONTENTS

For personal use only

DIRECTORS REPORT.........................................................................................................................	2
AUDITOR'S INDEPENDENCE DECLARATION ..................................................................................	6
CONSOLIDATED PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME...................................	8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................	9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY................................................................	10
CONSOLIDATED STATEMENT OF CASH FLOWS............................................................................	11
NOTES TO THE FINANCIAL STATEMENTS........................................................................................	12
DIRECTORS' DECLARATION ..........................................................................................................	34
INDEPENDENT AUDITOR'S REPORT ...............................................................................................	35

HALF-YEAR ENDED 31 DECEMBER 2021

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DIRECTORS' REPORT

DIRECTORS REPORT

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The Directors of AXP Energy Limited ('AXP' or 'Company'), formerly Fremont Petroleum Corporation Limited ('FPL'), present their report, together with the financial statements of the Group, being the Company and its controlled entities, for the half-year ended 31 December 2021.

Directors

Directors in office during the year and to the date of this report are:

Mr Simon Johnson, Non-executive Chairman appointed 6 April 2021.

Mr Samuel Jarvis, Non-executive Director appointed 28 February 2018. Member of the Audit Committee.

Mr Stuart Middleton, Non-executive Director appointed 15 April 2015. Chairman of the Audit Committee.

Mr Christian Paech, Non-executive Director appointed 1 January 2022.

Mr Peter Crown, appointed Non-executive Chairman 5 December 2019. Resigned as Chairman on 6 April 2021 and remained as Non-executive Director until resignation on 12 October 2021.

Company Secretary

Mr Robert Lees.

Review of Operations

A Board of Director's review of the operations of the economic entity during the first half financial year and the results of those operations is as follows. All amounts stated are in US$.

Exploration, Development and Production

Consolidation efforts continued as the operations team worked to bring all of the assets from AXP Energy, Inc (formerly MHP), Trey Exploration and Kentucky Exploration under a single management structure. This effort is now complete and all assets with the exception of the company's Denver-Julesburg Basin assets are managed by the AXP's operations team from the headquarters in Lexington, Kentucky.

The team is continually reviewing the well portfolio to identify wells that require work to preserve or enhance production. The team is currently working from a list of 129 wells that have been identified as presenting potential for additional production. Additional wells come onto the list as they are identified. Well workovers are occurring at a rate of 1 every 7 days.

As the price of oil continues to increase, AXP's geologists have been hard at work identifying areas that can expand the company's productive base. The geology team has been primarily focused on the leases held in the Illinois Basin as these have the best potential for oil-bearing formations. In excess of 20 well locations have been identified and ranked across

HALF-YEAR ENDED 31 DECEMBER 2021

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DIRECTORS' REPORT

For personal use only

leases in Western Kentucky. A drilling program is under development and is anticipated to start in Q4 2022. In the process of developing drilling locations, 9 legacy wells have been identified that were drilled but never completed. These wells have been technically reviewed and 2 of this inventory are currently being completed.

Operations in the Denver-Julesburg are ramping up with the tie-in of the first cryptocurrency mining operation scheduled to commence operation in Q4 2022. This will be the first gas sales in the Pathfinder field which is also anticipated to have a positive impact on the oil production as we bring some of the previously shut-in wells online.

Financial Review

The Group's financial performance during the half-year was favourably impacted by the integration of the Appalachian Basin assets acquired in February 2021.

1. Revenue
2. • The production impact of the acquisition contributed to a 7693% increase in sales revenue to $8.3M during the six months ended 31 December 2021 from $106K during the six months ended 31 December 2020;
   • Sales volumes increased YoY by 8,480% to 265.2 MBOE from 3.1 MBOE;
   • The average realised price for the financial half-year was $31.2/BOE (HY 2021: $34.6/BOE);
   • Total Revenue from the Appalachian Basin asset for the half year was $7.8M of which $4.4M was gas;
3. Profit and Loss
4. 
   AXP reported a Group loss of $718K during the half-year ended 31 December 21 (half- year ended 31 December 2020: loss of $860K).
5. Financial Position
6. 
   The Group's net assets increased 12% from $13.77M at 30 June 2021 to $15.41M at 31 December 2021. Key contributing factors to the increase in Group's net assets result from acquisition of AXP Energy, Inc. and the acquisition of Trey Exploration assets.
   Cash and cash equivalents at 31 December 2021 were $2.71M. During the half-year ended 31 December 2021, the Group received $2.51M in proceeds from the exercise of unlisted options.

HALF-YEAR ENDED 31 DECEMBER 2021

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DIRECTORS' REPORT

Significant Changes in the State of Affairs

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The following significant changes in the state-of-affairs of the Group occurred during the financial half-year:

1. Issued Capital
   Net increase in issued capital to $90.39M (30 June 2021: $87.77M).
2. Name Change to AXP Energy Limited
   As announced on 9 July 2021, Fremont Petroleum Corporation Limited changed its name from Fremont Petroleum Corporation Limited to AXP Energy Limited. The change was approved by shareholders on 10 June 2021 and became effective on the ASX 12 July 2021.
3. Trey Asset Acquisition
   The Group entered into an agreement to acquire a portfolio of producing oil and gas leases located in the Illinois Basin from Indiana based Trey Exploration, Inc in early October 2020. AXP made an initial payment of $1M in October 2020, an additional payment of $450K in April 2021, and made a final payment of $450K in October 2021 in addition to $40,500 in six interest instalments resulting from a variation from the original planned settlement timing. It has been determined that AXP did not assert control over Trey in the period beginning 1 October 2020 to 1 October 2021. Accordingly, the date control was obtained was 1 October 2021, with the Trey operating results included in the Group operating results from this date.
4. Change in Presentation Currency
   The Directors have elected to change AXP's presentation currency from Australian dollars (A$) to United States dollars (US$) effective 1 July 2021. The change in reporting (presentational) currency, in the opinion of the Directors, results in the financial statements providing more relevant information about the effect of transactions on the entity's financial position, financial performance and cashflows given the Group's US based operations. The change in presentation currency is accounted for retrospectively in the financial statements.
5. Likely Developments
   AXP is focussed on the consolidation of its assets and streamlining its operational procedures in order to maximize profit margins. Expansion and development plans are being established to continually replenish and increase production.

Environmental Regulations

The Group is subject to significant environmental regulations under federal and state laws in the USA. The Group has not been advised of any environmental breaches during the half- year.

HALF-YEAR ENDED 31 DECEMBER 2021

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