Blue Energy : 2022 Financial Statements

F I N A N C I A L R E P O R T F O R T H E Y E A R

E N D E D 3 0 J U N E 2 0 2 2

BLUE ENERGY LIMITED

ACN 054 800 378

C O N T E N T S

	Page
Directors' Report	3
Auditor's Independence Declaration	19
Independent Auditor's Report	20
Consolidated Statement of Comprehensive Income	24
Consolidated Statement of Financial Position	25
Consolidated Statement of Changes in Equity	26
Consolidated Statement of Cash Flows	27
Notes to the Consolidated Financial Statements	28
Corporate and Group Information	28
Basis of Preparation and Other Significant Accounting Policies	28
Invested Capital	31
Working Capital and Financial Risk Management	32
Capital and Related Party Disclosures	35
Results for the Year	37
Other	40
Directors' Declaration	42
Additional Shareholder Information	43
Corporate Directory	44

BLUE ENERGY LIMITED AND CONTROLLED ENTITIES

2

D I R E C T O R S ' R E P O R T

The Directors of Blue Energy Limited ("the Company", "Blue Energy", or "BLU") submit herewith their report on the Company and its controlled entities ("the Group") with respect to the financial year ended 30 June 2022.

DIRECTORS

The names and particulars of the Directors of the Company in office during or since the end of the financial year are as follows:

Name	Position	Date Appointed
John Ellice-Flint	Executive Chairman	05/04/2012
John Phillips	Managing Director (Executive)	28/06/2010
Rodney Cameron	Non-executive Director (Deputy Chairman)	15/11/2011
Mark Hayward	Non-executive Director	16/02/2021

John Ellice-Flint BSc (Hons) Harvard, AMP

Mr John Ellice-Flint is an Australian-born businessman whose foresight and wide-ranging oil and gas industry credentials are recognised internationally. John has over 45 years of exploration, production, operations and commercial experience in the oil and gas industry and has held many senior positions with multinational exploration and production companies. John's achievements in the oil and gas industry are well-known and highly respected. Following a 26 year international career at Unocal Corporation, serving in a variety of senior executive roles within strategic planning, exploration and technology functions, John became Managing Director and CEO of Santos Limited, Australia's largest domestic gas producer, from 2000 - 2008. John guided Santos Limited through a major growth period which culminated in the recognition of the potential of coal seam gas development through the Gladstone LNG export project in Queensland.

John Phillips BSc (Hons), GAICD

John is a Petroleum Geologist with over 35 years' experience in the oil and gas industry. John joined Blue Energy as Chief Operating Officer in May 2009, was promoted to CEO in April 2010 and joined the Board of Blue Energy in June 2010. John's career in ind ustry has involved oil and gas experience in a variety of petroleum basins both domestically and internationally. John has gained extensive operational experience through his involvement with Delhi Petroleum, Esso, Conoco, Petroz and Novus, culminating in his role as Chief Ope rating Officer with Sunshine Gas before its takeover by QGC and subsequently by the BG Group.

Rodney Cameron BAdmin (Hons), MBA, MFM, FAICD, FCPA

Rodney has over 35 years industry experience, particularly in the energy and resources industries. He is a seasoned financial executive having been CFO for an ASX listed multi-national renewable energy company, as well as an executive director and CFO for a US multinational independent power generation company. Rodney has also worked in various management capacities for National Australia Bank, Rio Tinto, Telstra, and Atlantic Richfield Inc.

Rodney is a member of the Risk and Audit Committee.

Mark Hayward BBus(ACC), MAICD, FCA

Mark is a Chartered Accountant and was a partner at Ernst and Young for 31 years until 30 June 2020 primarily in the financial audit group. He has extensive experience working both locally and internationally with companies in the energy and resources sectors includin g those with operations in Australia, Canada, USA, Singapore and South America. Mark brings to the Board strong technical accounting skills and an ability to identify the key risk areas for the company and industry.

Mark chairs the Risk and Audit Committee.

Directorships of other listed companies

No Directorships in other listed companies were held by current directors in the three years up to 30 June 2022.

COMPANY SECRETARY

Mr Stephen Rodgers was appointed Company Secretary on 15 March 2018. Mr Rodgers is a lawyer with over 33 years' experience and holds a Bachelor of Laws degree from Queensland University of Technology. Stephen practiced law with several firms in Brisbane and for many years operated his own specialist commercial and property law practice before joining the ASX listed Sunshine Gas Limite d as the in-house Legal and Commercial Counsel. In 2008, Stephen was appointed as Company Secretary to Comet Ridge Limited, a position he still holds. Stephen is also the Company Secretary for Galilee Energy Limited. Stephen has extensive experience in the operat ion and running of an ASX listed oil and gas company as well as a detailed knowledge of Governance and legal matters.

EARNINGS PER SHARE
	2022	2021
	(Cents)	(Cents)
Basic loss per share	(0.10)	(0.07)
Diluted loss per share	(0.10)	(0.07)

DIVIDENDS

No dividends were paid or declared by the Company during the financial year. The Directors do not recommend the payment of a final dividend (2021: nil).

3

BLUE ENERGY LIMITED AND CONTROLLED ENTITIES

D I R E C T O R S ' R E P O R T

PRINCIPAL ACTIVITIES

Blue Energy Limited is an energy company that undertakes exploration, evaluation and development of conventional and uncon ventional oil and gas resources. This activity is carried out in a single significant geographical segment, being Australia, principally in Queensland and the Northern Territory. In Queensland, Blue Energy has 100% equity holding in all its exploration tenements and is the Operator. In the Northern Territory exploration tenements, Blue Energy is earning an interest through funding a farm in work program but is the Operator. As a result of being the Operator in all of its tenement holdings, Blue Energy is in control of all capital and operating expenditures and is the point of contact for the respective State and Territory Regulators regarding work programs. There has been no change in the principal activities of the Group from the prior year.

Figure 1: The Blue Energy exploration asset portfolio

Source: Blue Energy Ltd.

OPERATING AND FINANCIAL REVIEW

Reserve and Resource Position

Blue Energy's Bowen Basin 2P and 3P Reserves are estimated (by the independent consultancy Netherland, Sewell and Associates, Inc of Dallas Texas (NSAI)) to be 71 PJ and 298 PJ respectively. Blue Energy's 3C Contingent Resource estimate as at 30 June 2022 was 4,476 PJ of technically recoverable gas, whilst the 1C and 2C Contingent Resource estimates were 226 PJ and 1,313 PJ, respectively. The Gas Reserves remain confined to ATP814P in the North Bowen Basin, whilst the Contingent Resources are established by NSAI in Blue Energy's ATP814P, ATP813P and ATP854P tenements. The Reserve and Resource estimate by NSAI current as at 30 June 2022 is presented in Table 1.

On 25 January 2022, Blue Energy announced an approximate 300% upgrade of the recoverable gas resources in ATP 854P from NSAI. The upgrade is in net recoverable gas resource across the 1C, 2C and 3C Contingent Resource categories, and represents an increase in the permit's total Contingent Resource base from 101 PJ to 398 PJ of 3C. Both 1C and 2C Contingent Resource categories also increased over 300%.

These reserves are not yet developed, and there has been no production of gas by the Group to deplete the reserves. All reserves and resources stated in the table are in respect of unconventional gas (Coal Seam Gas) and are undeveloped reserves and net to Blue Energy.

These reserves remain undeveloped due to local market conditions and limited pipeline infrastructure within the North Bowen Basin region. It is the Group's intention to develop these reserves by facilitating appropriate commercial transactions to enable the provision of appropriate infrastructure. To this end Blue Energy has entered into a nonbinding Heads of Agreement (HoA) to supply 100 PJ of gas over 10 years to EnergyAustralia and a similar agreement for 300 PJ of gas supply over 10 years to Origin Energy with both contract delivery points at Wallumbilla. In addition to these two agreements, Blue Energy has also executed a Memorandum of Understanding with Queensland Pacific Metals to supply up to 112 PJ of gas over 15 years to their proposed nickel refinery in Townsville. Blue Energy continues to negotiate with other gas users to build the contracted volume and facilitate development of its North Bowen Basin gas resources. The reserves being ear-marked in this agreement are proximate to existing production but require appropriate infrastructure and commercial arrangeme nts to be put in place for them to be brought to market.

The Group's entire reserve and resource position is independently reviewed and certified by NSAI, an independent reserve certifier, and reported by the Group directly should there be a change, as required under ASX Listing Rules for continuous disclosure. The G roup continues to work with NSAI on providing any updates on the reserve and resources position.

4

BLUE ENERGY LIMITED AND CONTROLLED ENTITIES

D I R E C T O R S ' R E P O R T

Table : Reserve and Resource Inventory as at 30 June 2022

Permit	Block	Assessment	Announcement	Methodology	Certifier	1P	1C	2P	2C	3P	3C
		Date	Date			(PJ)	(PJ)	(PJ)	(PJ)	(PJ)	(PJ)
ATP854P		22/01/2022	25/01/2022	SPE/PRMS	NSAI	0	90	0	194	0	398
ATP813P		29/10/2014	30/10/2014	SPE/PRMS	NSAI	0	0	0	61	0	830
ATP814P	Sapphire	5/12/2015	8/12/2015	SPE/PRMS	NSAI	0	66	59	108	216	186
ATP814P	Central	5/12/2015	8/12/2015	SPE/PRMS	NSAI	0	50	12	99	75	306
ATP814P	Monslatt	5/12/2015	8/12/2015	SPE/PRMS	NSAI	0	0	0	619	0	2,054
ATP814P	Lancewood	5/12/2015	8/12/2015	SPE/PRMS	NSAI	0	5	0	23	1	435
ATP814P	Hillalong	6/02/2020	7/02/2020	SPE/PRMS	NSAI	0	0	0	182	0	237
ATP814P	South	30/06/2013	29/07/2013	SPE/PRMS	NSAI	0	15	0	27	6	30
Total						0	226	71	1,313	298	4,476
(PJ)

All numbers are net to Blue Energy

Subsequent to the end of the period, and as described in more detail under the Subsequent Events heading in this Directors' Report, on 14 July 2022, Blue Energy announced a further significant increase in the Reserve and Resource Inventory for ATP814P.

+Listing Rule 5.42 Disclosure

The estimates of Reserves and Contingent Resources noted throughout this Directors' Report have been provided by Mr John Hattner of Netherland, Sewell and Associates Inc (NSAI) and were originally reported in the Company's market announcements of 25 January 2012, 26 February 2013, 19 March 2013, 8 December 2015, 28 February 2019, 22 January 2022 and 14 July 2022. NSAI independently regularly reviews the Company's Reserves and Contingent Resources. Mr Hattner is a full-time employee of NSAI, has over 30 years of industry experience and 20 years of experience in reserve estimation, is a licensed geologist and a member of the Society of Petroleum Engineers (SPE), and has consented to the use of the information presented herein. The estimates in the reports by Mr Hattner have been prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum and Resource Management System (PRMS) approved by the SPE, utilising a deterministic methodology.

Blue Energy confirms that it is not aware of any new information or data that materially affects the information included in any of the announcements relating to ATP 813, 814 or 854 referred to in this report and that all of the material assumptions and technical parameters underpinning the estimates in the announcements continue to apply and have not materially changed.

• Listing Rule 5.28.2 disclosure: The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

Bowen Basin

ATP814P (Blue Energy 100% and Operator)

The Federal and Queensland government support for the North Bowen Basin gas pipeline basin and the need for new gas supply, has been highlighted by the jointly funded $10 million KPMG/GHD/NSAI Bowen Basin Pipeline Feasibility Study. This ongoing phased study will assist Blue Energy in its commercialising activities to establish domestic east coast gas off-takers with the knowledge that there is Government interest and support for bringing Bowen gas to the east coast market with new build infrastructure, as well as local Townsville customers. Accordingly, Blue Energy has successfully executed the first of several planned long-term gas supply agreements with major off-takers. Blue Energy and EnergyAustralia have signed a non-binding Heads of Agreement for the supply of 100 PJ of gas over 10 years. In addition, Blue Energy executed a similar non-binding Heads of Agreement with Origin Energy for 300 PJ of gas supply over 10 years. The gas for both of these agreements is to be delivered to the Wallumbilla hub.

The permit consists of 7 separate blocks, with the Sapphire Block holding the majority of the 2P and 3P reserves. This Block is in very close proximity to the current production from the Moranbah Gas Project Joint Venture. The application for Production Licence (PL) 1034 within ATP814P is currently with the Queensland Government. The PL 1034 area is immediately adjacent to the Moranbah Gas Project which is currently a producing field operated by Arrow Energy (see Figure 2).

As at 30 June 2022 Blue Energy's 100% ATP814P had 71 PJ of 2P reserves, 298 PJ of 3P reserves and 3,248 PJ of Contingent Resources (as independently estimated by Netherland, Sewell and Associates Inc (NSAI). Events subsequent to the balance date have yielded further increases in the Company's reserve and resource base, specifically in ATP 814. These changes are covered in the "events subsequent to balance date" section of these accounts ((Table 3)

With respect to the local Townsville market, and as previously advised, Blue Energy has executed two non binding Memorandums of Understanding (MoU) as follows:

1. MoU with North Queensland Gas Pipelines Pty Ltd to work together to establish new gas off -takers in the Townsville market.
2. MoU with Queensland Pacific Metals (QPM) to work to execute a binding Gas Sales Agreement for the delivery of gas from Blue Energy's ATP814 tenement to QPM for their proposed Townsville Nickel processing facility.

5

BLUE ENERGY LIMITED AND CONTROLLED ENTITIES