Material Risks Risk Management Approach Exploration Risks Development of the Company’s petroleum exploration permits is contingent upon securing funding and obtaining satisfactory exploration results. Petroleum exploration and development is expensive and risky, which even a combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. The Company’s corporate strategy has defined limits for how much risk it will assume from any one single exploration activity on a sole risk basis, beyond which it will bring in partners to participate in the exploration. This capital allocation discipline combined with bestin-class technical expertise and resources is the most practical mitigant to this risk. Development Risk The Company’s development projects may be delayed, suspended or fail for a range of reasons, including unanticipated financial, operational or political events; failure to obtain required government approvals or reach a final investment decision; cost overruns or increases in construction and operating costs; sustained declines in petroleum prices or demand; equipment or labour shortages; technical or reserves-related concerns affecting deliverability; contractual issues in securing sales contracts for petroleum products or engineering, procurement and construction services; and community or industrial actions. Counterparty defaults under sales or construction contracts could also adversely affect project economics. Any of these factors may materially impact the timing, cost and commercial viability of the Company’s development projects. The Company undertakes comprehensive planning and feasibility studies and seeks early and ongoing engagement with regulators to secure necessary approvals. Staged investment decisions and rigorous project management, including independent technical and financial reviews, are applied to control cost and schedule risk. Experienced contractors are engaged under clearly defined contracts, with contingency allowances and risk-sharing provisions where appropriate. The Company monitors market conditions to adjust development timing, diversifies sales and offtake arrangements to limit counterparty exposure, and maintains strong stakeholder and community relationships to reduce potential disruption. These measures are designed to reduce the likelihood and impact of delays or cost escalation, though a residual risk remains. Production Risk The Company’s petroleum exploration, development and production activities are subject to a range of operational and technical risks. These include damage to or failure of petroleum properties, production facilities or critical equipment; personal injury; environmental incidents and associated legal liability; and unanticipated operational or technical difficulties. Ongoing production or staged expansion projects may not proceed as planned, leading to delays in targeted production or failure to achieve expected production levels. Such delays, or cost overruns in capital or operating budgets, may create additional funding requirements and result in unplanned equity or debt raisings. Mechanical breakdowns, supply-chain interruptions and other external factors beyond the Company’s control may further impact operations and project economics. The Company applies rigorous engineering and maintenance programs, independent technical reviews and real-time operational monitoring to reduce the likelihood and impact of equipment failures or unplanned downtime. Comprehensive HSE standards, emergency response plans and appropriate insurance coverage provide further protection against environmental and legal exposures. Expansion projects undergo detailed feasibility, cost and schedule reviews with contingencies built into budgets, and are managed by experienced contractors under well-defined contracts to minimise overruns. Funding requirements are regularly stresstested, with multiple financing options maintained to support continued operations if unforeseen delays or cost increases occur. While these measures materially reduce operational and financial risk, some residual risk remains. Reserves and Resources Risk Estimates of Reserves, Contingent Resources and Prospective Resources are based on limited sampling, are not precise and no assurance can be given that these reserves or resources will be recovered during production. Production estimates, in addition to being dependent on the above reserve and resource estimates and the risks associated therewith, are further reliant on, among other things, recovery rates. These uncertainties could result in lower production, restatement of Reserves, increased funding needs and adverse impacts on cash flow, profitability and overall project economics. The Company has a Reserves Committee that is responsible for establishing and reviewing reserve and resource estimates for the Company’s portfolio of prospects. The members of this Committee, and the Company’s geoscientists that prepare estimates for this Committee, are experienced professionals with suitable formal qualifications and decades of relevant experience in the oil and gas sector preparing such estimates in accordance with relevant international norms and standards. The recommendations of this Committee are overseen at Board level by competent persons and, where appropriate, independent external certifiers are used to review internal estimates. 39 Melbana Energy Limited Annual Report 2025
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