AXP Energy : 2022 Quarterly Report - March 31 2022

ASX ANNOUNCEMENT

29 APRIL 2022

QUARTERLY ACTIVITIES REPORT

AXP Energy Limited (ASX: AXP, OTC US: AUNXF),('AXP','Company') provides this summary of activities for the quarter ended 31 March 2022 (all in USD unless stated otherwise).

HIGHLIGHTS

•  Quarterly net revenue of $4,961,817, up ~8.5% on previous quarter ($4,580,652);

•  Net customers receipts were $4,403,000, down 4.65% on the prior quarter ($4,617,874);

•  AXP was operating cashflow positive $186K for the quarter (last quarter operating cash outflow: $160K);

•  Operating cashflow, although positive, was negatively impacted by the midstream outages and increased lease operating expenses;

•  Gross production was 191,713 BOE, down 6.14% on the previous quarter (204,249 BOE) due to persistent intermittent outages within our midstream processing partner's system. The Company is working closely with our midstream partner to improve transportation and processing reliability and clear production bottlenecks;

•  Unsold oil inventory held at quarter end totalled 17,715 BBL (previous quarter: 17,762 BBL);

•  AXP is well funded with cash and cash equivalents of $2,438,634;

•  The Company is very focussed on additional initiatives to improve operating cash flows, including a new well development program, a cost reduction program and incremental production gains from workovers and well recompletions in higher margin sales channels.

$5,000,000

$4,500,000 $4,000,000 $3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0

Q1

Other

NGL

Gas

OilQ2

Q3

NET REVENUE BY HYDROCARBON

FINANCIAL & CORPORATE OVERVIEW

Net revenue has increased primarily due to a favourable hydrocarbon price environment. The North American winter impacted production volumes, particularly in January due to freezing in pipelines, as did continued instability due to third party midstream performance (gathering pipeline system) and downstream outages (gas processing plant). Such outages have had a compounding effect on revenue due to the requirement to purchase gas at spot prices to fulfil contractual volume commitments.

We are working closely with our midstream partner to resolve the ongoing reliability issues and are in discussions with regard to potential compensation for the midstream outages.

The Company was only marginally operating cashflow positive for the quarter (inflow of $186K) due to the mid and downstream outages and $185K in P&A costs.

Net cash used in investing activities was $391K due to ongoing legacy payment plan expenses and costs associated with capex on the two well recompletions. Also, AXP invested circa $50K in acquiring a second oil transport vehicle to get unsold oil inventory to market more rapidly. This again reduces reliance on third parties.

AXP is well funded with cash and cash receivables at quarter end of $2.44M and minimal debt ($304K). The Company has no immediate requirement to raise equity. With the price of WTI tracking above US$100 a barrel, unsold oil inventory of 17,715 barrels delivers added financial flexibility. With additional haulage infrastructure in place and improving weather, inventory is now being sold down more rapidly.

PRODUCTION & OPERATIONS OVERVIEW

80,000

70,000

60,000

50,000

40,000 30,000 20,000 10,000

0

Oct

NGL

GasOil

Nov

Dec

Jan

Feb

Mar

GROSS PRODUCTION BY HYDROCARBON (BOE) - 6 MONTH TREND

70,000 60,000 50,000 40,000 30,000 20,000 10,000

0

Jan

NGLGasOil

Feb

Mar

GROSS PRODUCTION BY MONTH (BOE) - 3 MONTH TREND

Although gross production was down slightly from last quarter due to midstream outages related to the colder months, the system reliability improved throughout Q3 and we expect this trend to continue as weather patterns improve. Our midstream partner is also making additional system enhancements to continue these improvements.

To mitigate against midstream and downstream issues, well workovers and new production opportunities are currently focused on leases that are not linked to third-party midstream infrastructure. Around 30% of AXP's gas production sits outside this system, as does a large percentage of oil production, and work is underway to increase volumes from these higher margin, more stable production channels.

The Company is focussed on delivering significant improvements in operating cash flows in Q4 through collaboration with its midstream processing and transportation provider to improve plant reliability and production volumes, a continued focus on cost reduction programs and incremental production gains from workovers and recompletions. Improved weather conditions will also support these initiatives.

With respect to the Elite Mining business, revenue generated for the quarter was nil, the amount of government grants and tax incentives accrued during the quarter was nil, expenditure for the quarter (including development, operations, staff & administrative & corporate expenditure) was $8,729, capital & investment expenditure incurred was $4,655 and other income generated/expenditure incurred was nil. With the site now fully permitted, operations are on track to go live this quarter despite some recent delays.

CEO Tim Hart commented: "Whilst we have delivered pleasing top line growth this quarter, our focus is now firmly on mitigating against the ongoing midstream and downstream outages which have impacted our base production, growing production outside of this sales channel, where there is considerable upside, and reducing the cost base considerably with progress well advanced. In the current quarter, we are committed to delivering improvedmargins, increased production volumes and revenue from new production channels such as Elite Mining and from other leases. Dealing with the challenges we have had with the midstream partner during what is typically our softest production quarter of the year has proven difficult. However, the situation has improved and it has opened our eyes to a number of opportunities outside of the system."

EXPLORATION ACTIVITY

In early March AXP fracked 2 wells in the Illinois Basin. These wells have now been completed and are in the late stages of flowback. The flowback on both wells has taken significantly longer than expected with operational issues (now overcome) impacting the DPI-2605 fluid recovery process. An additional 9 wells have been worked over or had surface repairs and improvements completed during the quarter. It is expected that production gains from this work will be realised in the current quarter.

AXP is now focused on a field development program in a lease that has 165 wells, diverse sales channels and where no material service or development work has occurred since 2007. Progress will be reported as production gains materialise.

HEALTH, SAFETY & ENVIRONMENT

No Lost Time Injuries, Recordable Injuries or Reportable Loss of Containment incidents were recorded in the quarter.

TENEMENT SCHEDULE

AXP's leases held at the end of the quarter are available by clicking the following link:https://fremontpetroleum.com/wp-content/uploads/2021/04/FPL-TenementsList-4-20-2021.pdf

The Company increased its interest in the Kentucky JV from 50% to 100%. Otherwise, there were no changes to tenements or farm-in or farm-out arrangements during the period.

PAYMENTS TO RELATED PARTIES

Outstanding Directors fees of $75,799 were paid in the quarter.

This announcement has been authorised by the Board of AXP Energy Limited.

-ENDS-

FURTHER INFORMATION

Sam Jarvis, Non-Executive Director: 0418 165 686 Robert Lees, Company Secretary: 0411 494 406

ABOUT AXP ENERGY LIMITED

AXP ENERGY Limited (ASX: AXP) (formerly Fremont Petroleum Corporation Limited) is an oil & gas production and development company with operations in Colorado, Illinois, Kentucky, Tennessee and Virginia. AXP's focus is to aggressively grow daily production by improving current asset performance and opportunistically acquiring onshore USA oil & gas assets with the following characteristics: producing conventional oil & gas wells; production that can be enhanced through low-cost field operations and workovers; leases which are held by production and which do not require ongoing drilling commitments; and economies of scale which can be achieved by acquiring and carrying out similar enhancement strategies on contiguous or nearby fields with similar characteristics.

DISCLAIMER

This announcement contains or may contain "forward looking statements" within the meaning of Section 27A of the Securities Act of1933 and Section 21B of the Securities Exchange Act of 1934. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact and may be "forward looking statements." Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through the use of words such as "expects", "will," "anticipates," "estimates," "believes," or statements indicating certain actions "may," "could," or "might" occur. Hydrocarbon production rates fluctuate over time due to reservoir pressures, depletion, down time for maintenance and other factors. The Company does not represent that quoted hydrocarbon production rates will continue indefinitely.

AXP Energy Limited | ABN 98 114 198 471

www.axpenergy.com