Announcement PDF For Immediate Release ASX Announcement 26 February 2025 2024 Annual Report and Audited Financial Statements Australis Oil & Gas (“Australis” or “Company”) is pleased to provide its 2024 Annual Report including the audited consolidated financial statements for the year ended 31 December 2024. As a result of prudent operating and financial management, the Company achieved its key financial and operating objectives in 2024 by safely maintaining its significant undeveloped TMS asset whilst maximising liquidity and achieving reductions in net debt. An additional US$4 million of net debt was drawn early in 2024 to increase balance sheet liquidity to assist with the continued efforts to introduce a strategic or financial partner to recommence the development of the TMS. By year end the Group’s net debt reduced to US$2.2 million from US$4.2 million at 1 January 2024. This positive result was due to the Company continuing to generate surplus cashflow from operations. As in the previous year, the disciplined restrictions on capital spending required certain leases (non HBP) to expire without renewal leading to the non-cash write down of US$5.7 million of previously capitalised expenditure. The Company remains confident it can re-lease many of these areas subject to capital availability. The Company’s net loss after tax of US$8.3 million was largely the result of the abovementioned write down of expired leaseholds and depletion and depreciation expense (non-cash) of US$4.3 million. The nature of the Company’s large undeveloped TMS Core area and quality inventory it represents in an environment of diminishing Tier 1 undeveloped locations within the established and maturing plays, continues to provide the board with confidence that an appropriate partner or partners for the development and unlocking of the value of the Company’s TMS asset will be secured. A summary of financial and operating results for the year are as follows: Financial Results 2024 - (US$) Gross revenue from oil sales (before royalties& hedges) Loss from hedging Average achieved sales price (including hedges) Field Netback* Field Netback (Working Interest)* Adjusted EBITDA* Net loss after taxation Year end cash position Total Facility borrowings $19.8 million $(0.4) million $76/bbl $7.3 million $28.71/bbl $2.5 million $(8.3) million $6.2 million $8.4 million A UST RA LI S O I L & GA S LI MI T E D ABN 34 609 262 937 Ground Floor, 215 Hay Street Subiaco WA 6008 • PO Box 8225 Subiaco East WA 6008 T +61 (8) 9220 8700 • F +61 (8) 9220 8799 www.australisoil.com Operating Results 2024 Oil sales (Working Interest) Net oil sales (after royalties) TMS year end independent PDP reserves (Net)1 Year end independent mid case(2C) contingent resources1 Total Acreage leased within the TMS Core Acreage leased and HBP within the TMS Core 254,000 bbls 205,000 bbls 1.6 MMbbls 63 MMbbls 48,000 net acres 39,900 net acres *Field Netback and Adjusted EBITDA are considered non-IFRS measures. Please refer to Non-IFRS Financial Measures below. The 2024 Annual Report and Appendix 4E is attached. Australis Oil & Gas Limited advises that in accordance with Clause 6.1 of the Australis constitution and ASX Listing Rule 3.13.1: a) The 2025 Annual General Meeting (AGM) will be held at 11.00am (WST) on Thursday 22 May 2025, and b) the closing date for the receipt of nominations from persons wishing to be considered for election as a director is 31 March 2025. Any nominations must be received in writing no later than 5.00 pm (WST) on 31 March 2025 at the Company’s registered office. Shareholders of the Company (Shareholders) will be advised of further details regarding the AGM in a separate Notice of Meeting, which will be provided to Shareholders in April 2025. The Notice of Meeting will also be available on the ASX Company Announcements Platform and on the Company’s website at www.australisoil.com. This ASX announcement was authorised for release by the Australis Disclosure Committee. For further information, please contact: Ian Lusted Managing Director Australis Oil & Gas Limited +61 8 9220 8700 Graham Dowland Finance Director Australis Oil & Gas Limited +61 8 9220 8700 About Australis Australis (ASX: ATS) is an ASX listed upstream oil and gas company seeking to provide shareholders value and growth through the strategic development of its quality onshore oil and gas assets in the United States of America. The Company’s acreage within the core of the oil producing TMS contains 2.1 million bbls of recoverable producing reserves ( 2P - mid case) providing free cash flow and approximately 65 million bbls of mid case 2P + 2C recoverable oil. The Company was formed by the founders and key executives of Aurora Oil & Gas Limited, a team with a demonstrated track record of creating and realising shareholder value. Footnotes 1. All estimates and risk factors taken from Ryder Scott, report prepared as at 31 December 2024 and generated for the Australis concessions to SPE standards. See ASX announcement released on 31 January 2025 titled “Quarterly Activities Report”. The analysis was based on a land holding of 48,000 net acres. Australis is not aware of any new information or data that materially affects the information included in the referenced announcement and all the material assumptions and technical parameters underpinning the estimates in the original announcement continue to apply and have not materially changed. Ryder Scott generated their independent reserve and contingent resource estimates using a deterministic method which is based on a qualitative assessment of relative uncertainty using consistent interpretation guidelines. The independent engineers using a deterministic incremental (risk based) approach estimate the quantities at each level of uncertainty discretely and separately. 2 Non-IFRS Financial Measures References are made within this report to certain financial measures that do not have a standardised meaning prescribed by International Financial Reporting Standards (IFRS). Such measures are neither required by, nor calculated in accordance with IFRS, and therefore are considered Non–IFRS financial measures. Field Netback and Adjusted EBITDA are Non-IFRS financial measures commonly used in the oil and gas industry. Non-IFRS financial measures used by the Company, including Field Netback and Adjusted EBITDA, may not be comparable with the calculation of similar measures by other companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS. Adjusted EBITDA represents net income /(loss) for the period before income tax expense or benefit, finance costs, depletion, depreciation and amortisation charges, expire lease write off and impairment provision. EBITDAX represents Adjusted EBITDA before exploration expenditure. The following table reconciles net profit after tax to Adjusted EBITDA: 31 December 2024 US$’000 Net profit after tax (8,271) Adjustments: Net finance expenses 853 EBIT Depletion & Depreciation Expired ease write off (7,418) 4,282 5,672 Adjusted EBITDA 2,536 FIELD NETBACK Field Netback represents oil and gas sales net of royalties, production and state taxes, inventory movements, hedging gains or losses, field based production expenses but excludes depletion and depreciation. GLOSSARY Term TMS bbl(s) MM PDP 2C TMS Core HBP Definition Tuscaloosa Marine Shale Barrel(s) of oil Millions Proved Producing Reserves Most Likely Contingent Resource The Australis designated productive core area of the TMS delineated by production history Leased minerals deemed held by production by an existing producing well. 3 26 February 2025 APPENDIX 4E FINANCIAL YEAR ENDED 31 DECEMBER 2024 AUSTRALIS OIL & GAS LIMITED (ASX: ATS) ABN or equivalent company reference 34 609 262 937 This information should be read in conjunction with the Australis Oil & Gas Limited 2024 Annual Report (which contains the 2024 audited Financial Report and other information required for Appendix 4E) Results for Announcement to the Market (1) Revenue from ordinary activities Decreased by 6% from US$20.7 million in 2023 to US$19.4 million in 2024 Loss from ordinary activities after tax attributable to members Decreased by 46% from a loss of US$15.3 million for 2023 to a loss of US$8.3 million for 2024 Net loss for the period attributable to members Decreased by 46% from a loss of US$15.3 million for 2023 to a loss of US$8.3 million for 2024 (1) (1) An explanation of the results is contained within the 2024 Annual Report which can be found on the ASX website or the Australis website at www.australisoil.com (1) Comparisons are made to the financial year ended 31 December 2023 Dividends No dividends have been paid or proposed for the year ended 31 December 2024 (2023: nil) Net Tangible Asset per Security 31 December 2024 US$0.04 31 December 2023 US$0.04 This report is based on audited accounts This ASX announcement was authorised for release by the Australis Disclosure Committee. For further information, please contact either: Graham Dowland Finance Director Australis Oil & Gas Limited +61 8 9220 8700 Julie Foster Company Secretary Australis Oil & Gas Limited +61 8 9220 8700 A UST RA LI S O I L & GA S LI MI T E D ABN 34 609 262 937 Ground Floor, 215 Hay Street Subiaco WA 6008 • PO Box 8225 Subiaco East WA 6008 T +61 (8) 9220 8700 • F +61 (8) 9220 8799 www.australisoil.com 2024 Annual Report Australis Oil & Gas Limited ABN 34 609 262 937 CONTENTS CHAIRMAN’S LETTER 2 BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS 4 FINANCIAL AND CORPORATE REVIEW 15 GLOSSARY 25 SUSTAINABILITY REPORT 29 DIRECTORS’ REPORT 39 REMUNERATION REPORT 47 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 64 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 65 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 66 CONSOLIDATED STATEMENT OF CASH FLOWS 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 68 CONSOLIDATED ENTITY DISCLOSURE STATEMENT 110 DIRECTORS’ DECLARATION 111 AUDITOR’S INDEPENDENCE DECLARATION 112 INDEPENDENT AUDIT REPORT 113 ASX ADDITIONAL INFORMATION 117 CORPORATE DIRECTORY 119 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED 1 CHAIRMAN’S LETTER In recent years I have reiterated your Board’s clear objective as creation and realisation of shareholder value. Our strategy to deliver this has remained consistent and we are still committed to it. Our inability to date to execute a transaction consistent with this strategy has been very frustrating for all, and in several cases puzzling. Our strong preference remains the use of our largely undeveloped acreage as currency to generate funded activity on our asset base that will lead to an upward revaluation. We are presently engaged in discussions with multiple parties in the US and remain optimistic that the consistent recommendations made by third-party evaluation teams to do a deal will make its way through the C Suite in due course. The US oil and gas industry is producing close to alltime highs, but growth in oil production has slowed and gas production has started to fall. There will be a fine balance to be found politically between an industry that remains large, active and crucially important to both the economy and domestic politics and the desire for cheap energy. U.S. oil is likely headed toward a period of decreasing growth and increasing upward price pressure. Increased international oil production could drive prices lower but is that in the best interests of those other producer nations? The macro environment for oil in the US and wider has been complex in recent years and remains so. Headlines from senior US politicians to “drill baby drill” are not necessarily consistent with stated objectives from the same parties to reduce oil prices. In our opinion, neither statements will impact significantly on oil industry corporate strategy, which remains focused on shareholder returns. U.S. oil’s drilling inventory and reserves remain of value and in demand. Convincing industry players to commit capital to areas that are not presently considered their core has proven difficult in recent years. 2 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED CHAIRMAN’S LETTER We believe that diminishing Tier 1 oil locations in other maturing plays will reinforce the uniqueness of the TMS Core, given its productivity, attractive commercial characteristics and substantial remaining undeveloped inventory. The production history available for our wells paints a very clear picture as to performance and nature of our production, without taking in to account the potential upside associated with technological and operating practice advances in recent years. Our operations and management teams again deserve credit for the manner in which operations have been managed. Throughout this financial year all operations were executed with an excellent environmental, health and safety record. Our Chair of Remuneration describes succinctly in his report the commitment, flexibility and preparedness to sacrifice of our staff and management in maintaining successful, safe operations and in presenting our opportunity to third parties. As a Board we are appreciative of this commitment, determination and demonstration of excellence. I would like to take this opportunity to express my appreciation to all shareholders for your loyalty and continued support. Our financial results are covered in detail within this report. You will see that adjusted EBITDA was higher than the previous year at US$2.5 million (2023 US$1.1 million) from revenue of US$19.8 million. Australis’ 2024 operational cashflow of US$2.8 million from its producing wells has largely enabled the maintenance of our core undeveloped asset and service of our debt obligations. A material write down was made which related to leases that expired during the year and were not released, principally giving rise to the reportable loss for the year of US$8.3 million (2023: loss US$15.3 million). Jonathan Stewart Chairman Management and staff have again worked very hard during 2024 and I would like to acknowledge their contribution and service. Yours sincerely, 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED 3 BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS AUSTRALIS BUSINESS STRATEGY & THE TMS Australis was formed as a private company immediately following the sale of the executive team’s previous listed vehicle, Aurora Oil and Gas Limited (AUT:ASX), to Baytex Energy Corp. for A$1.6 billion. The new company quickly began its search for a new unconventional asset with the following characteristics. • • • • an oil weighted production demonstrable reservoir quality and production deliverability a low entry cost and the potential for material scale existing or easily accessed infrastructure and proximity to sales markets More broadly Australis was seeking a strategic asset that would be desirable for a US independent public company which was seeking new high quality development inventory. We felt that this approach was valid as there were a limited number of oil weighted unconventional plays onshore in the US and those already in development were showing early signs of maturity. In 2016 the Company secured its initial position in the TMS as we believed it met all of the key criteria we were seeking. A large depositional expanse had demonstrated variable reservoir performance, but activity in 2014 had clearly demonstrated a smaller delineated core where well productivity was on par with the Eagle Ford wells drilled by Aurora just prior to being sold. This was particularly impressive as there had been over 10,000 wells drilled in the Eagle Ford at that time whereas the total well count in the TMS stood at ~85 in 2016. Furthermore, the industry had continued to optimise operational execution in conditions that in 2012 – 2014 were considered challenging by the incumbent operators in the TMS. This continuing advance in technology and knowledge removed one of the potential barriers for development activity in the play. In addition, the play is located in southwest Mississippi within 60 miles of significant refining capacity and multiple pipelines with available capacity were already running through the area. Furthermore, there was very little competition for acreage and hence the entry costs were low allowing Australis to target a material position. Finally, the state oil and gas regulations and field rules were highly favourable for development activities. Australis focused on the delineated core area and through a series of transactions and an active lease program built a controlling position, which we felt would be a further enticement for an incoming party and act as a barrier to entry for a new participant without dealing with the Company. 4 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS TMS BRIEF HISTORY The unconventional oil and gas industry has been built upon the application of modern development technology such as horizontal drilling and fracture stimulation, to known hydrocarbon bearing source rocks. The TMS has long been identified as the source rock for conventional reservoirs in the area and following the early success of the nearby and similarly aged Eagle Ford Shale in 2009 – 2011 a number of companies took substantial positions in the TMS and drilled several appraisal wells in order to assess its technical and economic viability. The TMS is depositionally a large area and in order to focus their efforts, companies used the Eagle Ford Shale as an analogue and targeted the equivalent characteristics that had proved to be the most productive in that play. In the TMS, these target horizons were considerably deeper and hotter than in the Eagle Ford, which generally made the drilling more difficult and expensive. The depositional history of the TMS is more complex than the Eagle Ford, which leads to variability in reservoir quality across the whole play and as a result the production results of these early wells were variable and ultimately companies such as EOG and Devon elected to exit their position at that time (between 2012 and 2013) and pursue other delineated and lower cost options within their portfolios. As a result, the TMS began to develop a reputation as being a challenging play. A number of operators remained active in the play and over the next two years approximately 50 wells were drilled which helped delineate an area of higher quality reservoir and more consistent productivity in a shallower part of the TMS than that initially targeted, and they also largely resolved the early technical and operational challenges that all unconventional reservoirs face when first being developed. By 2014, activity levels were picking up in the play with 7 rigs operating at one point during that year. Encana in particular implemented a structured appraisal program of leasing and drilling within the delineated core area. In late 2014 the oil price dropped dramatically from highs of ~$100/bbl to as low as $35/bbl and industry activity slowed considerably and practically stopped in emerging plays such as the TMS. All of the incumbent operators in the TMS went through some form of debt restructuring or bankruptcy process and the play’s reputation was further tarnished, such that no TMS drilling activity took place between early 2015 and late 2018. The wells that were drilled and completed in 2014, using a design that reflects the start of the optimisation process and benefiting from having targeted the TMS Core area generated extended production profiles. This long production history allowed high confidence and favourable comparisons to the more established and evolved plays with thousands of wells drilled within them. The comparisons clearly verified quality rock productivity within that core area. 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED 5 BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS HISTORICAL AUSTRALIS OPERATIONS After several years of aggregating data and assimilating the base position Australis completed a six-well program in 2018/19 which had four key aims 1. 2. 3. 4. Confirm well deliverability. The historical wells drilled within the TMS core had demonstrated productivity on a per foot basis that was on par with the established unconventional oil plays, we are able to clearly demonstrate this again from the wells drilled. Convert term lease acreage to longer term HBP status. Leases are held for an agreed term or until a well is drilled within a formed unit. There after the acreage is deemed ‘held by production’ or HBP within the unit and the rights to drill the remaining undeveloped locations in the unit are held for the producing life of the well. Australis converted approximately 10,000 net acres to HBP with its work program. Demonstrate consistency in well execution. Our results were mixed with this objective. Australis clearly demonstrated that wells could be drilled on a comparable cost basis to the more established plays with two wells coming in under budget and a similar $/horizontal foot to comparable depth plays. Two of the wells had operational challenges which ultimately led to shorter laterals than planned. One was due to a local geological anomaly that is not expected elsewhere in the core and the other was due to operational errors. The final two wells attempted to use an alternative drilling fluid which introduced new execution challenges and on hindsight would not be used again going forward. Achieve Incremental production and revenue increase to support operations and strategy. This was achieved, albeit the levels of incremental production (and resulting revenue) were heavily influenced by the total producing footage achieved in the campaign. With the conclusion of our drilling campaign in late 2019 the Company switched focus to identifying a partner for the next phase of early development activity. At around this time the industry was going through a fundamental shift in business strategy which has proven to make securing a partner for a new and emerging play significantly more difficult and of course the events of early 2020 surrounding the COVID pandemic with the impact on commodity prices was also unforeseen. During 2020 and 2021 the Company focused on maintaining shareholder exposure to the TMS opportunity and we made significant cuts to G&A costs allowing for debt repayment to be accelerated. We were hedged through the worst of the commodity price collapse and had to adjust the business model to the prevailing market challenges. The oil price and business confidence recovered in late 2021, and by 2022 Australis was able to recommence targeted partnering efforts within the industry which have continued through 2024. 6 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS It has proven to be a challenge to convince industry participants to invest in the TMS during this period. The reasons for this reluctance have typically not been technical but have been more strategic in nature. Public companies have been forced to move from an aggressive production growth model to a lower risk, shareholder return focus. This has typically meant that companies have focused on their existing positions and carry out development activity sufficient to simply maintain production rates, ie offset natural decline profiles. This strategy works for a period of time, but with inventory naturally being high graded the focus has switched to replacement strategies. Interestingly the majority of recent US production growth has originated from private companies operating in established plays who have been seeking greater monthly volumes, rather than public company growth from development. Until this year the majority of public company transactions have either been mergers or the acquisition of these higher production private entities, both of which generate cash flow positive deal metrics and help the acquirer meet shareholder distribution targets. BUSINESS DEVELOPMENT IN 2024 Whilst this report marks another year passing without Australis securing a partner for the TMS, there has been an evolution of the industry sentiment which has been very apparent this year and is supportive our business strategy. Industry commentary and deal analysis moved from simply talking about production metrics to a focus on acquired inventory. Australis has for many years argued that limited oil shale development options outside of the maturing and highly consolidated established plays (the Eagle Ford, Bakken and Permian account for nearly 90% of the US unconventional oil production) meant that focus has to switch to emerging plays for those seeking additional Tier 1 drilling inventory to underwrite the longer term maintenance of shareholder returns. The alternative of drilling out lesser quality locations requires incremental capital to achieve the same production results and diversion of funds intended for shareholders or the acceptance of reduced production which is ultimately unsustainable. During 2024 Australis carried out technical diligence with large / mid sized public companies. Whilst we continue to interact with interested parties, two completed their diligence processes with recommendations to proceed but the play was ultimately deemed incompatible with portfolio and investment plans by the executives of those companies. The opportunity was retained having passed technical diligence for potential future review if circumstances or priorities changed. We also completed diligence with a number of private equity backed companies but were unable to agree on acceptable commercial terms. 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED 7 BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS OPERATIONS IN 2024 SAFETY AND ENVIRONMENTAL PERFORMANCE During 2024 there were no reportable spills and 5 non-reportable spills totaling 3.10 bbls (2.9 bbls of oil and 0.2 bbls of water), all contained within the wellsite pads and all immediately and completely remediated. These figures represent a further improvement on recent results (2022 – 2 reportable and 5 non-reportable, 2023 – 1 reportable and 4 non reportable) and are yet further testimony to the operational effectiveness of the field team. The Australis team places the utmost importance on our safety and environmental culture and awareness. There were no OSHA reportable incidents, either for Australis or contractor staff during 2024 which yet again demonstrates the field teams focus and performance in this critical area of operations. Further information is provided in the sustainability section within this annual report on these incidents. PRODUCTION OPERATIONS Production operations continued throughout 2024 without any major disruptions other than on 12 September when hurricane Francine crossed the Louisiana coastline as a category 2 hurricane with sustained winds of 140km/hr. The storm moved north and passed just to the east of the field having downgraded to a tropical storm. There were no injuries or major equipment damage from the storm, but power was lost to most of the field and it took time to clear debris and to re-establish electricity supply to some of the Australis pads. There was a second weather event during the last few days of the year and power was lost to some of our wellsites for up to three days, but there was no material damage and production was restarted as soon as power was restored to individual wellsites. Production performance from the existing wells was largely in line with management’s expectation and this is confirmed by the Company’s recently released 2024 Year End Reserve Report, which showed only very modest adjustments in anticipated production volumes. There were several wells that were produced at lower than maximum production rates during the year, typically because of the cost associated with well intervention to restore full production rates. With increased capital availability these workover programs would be scheduled. Overall sales volumes for 2024 are summarised in the table below. Production decline through the year was in line with expectation with inventory changes being the primary drivers for higher volumes in Q1 and lower volumes in Q3. Sales Volumes WI (bbls) 8 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Total 67,300 64,400 60,300 62,000 254,000 2024 ANNUAL REPORT AUSTRALIS OIL & GAS LIMITED BUSINESS STRATEGY, TMS ASSET AND 2024 OPERATIONS LEASE OPERATING EXPENSES (LOE) Since the completion of our development operations in 2019 Australis has operationally focused on its production costs, both LOE and workover expenses. Optimising these activities from a cost and process perspective is valuable for future development modelling and also maximizes returns in the short term. Each year we have been able to demonstrate continuing improvement on a range of fronts and in particular lease operating costs, with 2024 being no exception, despite ongoing cost pressure due to prevailing interest rates. As a result of these efforts the total LOE on a gross or 8/8ths basis has reduced by 11% this year. The bulk of these savings have come from a substantial reduction in workover costs. Production costs consist of LOE and workover expenses and are split into three categories which are described below and the performance is shown in the Figure 3 on a gross or 8/8ths basis. • Fixed LOE– shown in blue in the chart below. These are largely labour costs and repair and maintenance. As can be seen those costs increased by a modest 3% in 2024 compared to the previous year. • Variable LOE– shown in orange in the chart below. These are mainly third-party costs. The majority of this component is attributed to power costs and produced water disposal, both of which have seen cost pressure during 2024. Savings have been made through initiatives such a