Adams Diversified Equity Fund, Inc.
Annual Report 2023

Plain-text annual report

ADX Energy Ltd ABN 50 009 058 646 ANNUAL REPORT 31 DECEMBER 2023 ADX ENERGY LTD CONTENTS Contents Page Corporate Directory………………………………………………………………………………………………………… 2 Chairman’s Report………………………………………………………………………………………………………….. 3 Operations Report…………………………………………………………………………………………………………… 7 Reserves Report……………………………………………………………………………………………………………… 27 Directors’ Report……………………………………………………………………………………………………………… 32 Auditors’ Independence Declaration to the Directors…………………………………………………… 47 Directors’ Declaration……………………………………………………………………………………………………… 48 Consolidated Statement of Profit or Loss and Other Comprehensive Income………………….. 49 Consolidated Statement of Financial Position………………………………………………………………….. 50 Consolidated Statement of Changes in Equity…………………………………………………………………. 51 Consolidated Statement of Cash Flows……………………………………………………………………………. 52 Notes to the Financial Statements…………………………………………………………………………………… 53 Independent Auditor’s Report…………………………………………………………………………………………. 91 Additional Shareholder Information………………………………………………………………………………… 96 Tenement Schedule…………………………………………………………………………………………………………. 99 - 1 - ADX ENERGY LTD CORPORATE DIRECTORY Directors Ian Tchacos (Executive Chairman) Paul Fink (Technical Director / CEO) Edouard Etienvre (Non-Executive Director) John Begg (Non-Executive Director) Company Secretaries Peter Ironside Amanda Sparks Registered and Principal Office 29 Bay Road Claremont, Western Australia 6010 Telephone: Web Page: www.adxenergy.com.au Email: admin@adxenergy.com.au +61 8 9381 4266 Share Registry Computershare Investor Services Pty Ltd Level 17 221 St George’s Terrace Perth, Western Australia 6000 Telephone: +61 8 9323 2001 Facsimile: +61 8 9323 2033 Solicitors Steinepreis Paganin Level 4, Next Building 16 Milligan Street Perth Western Australia 6000 Bankers Commonwealth Bank of Australia 1254 Hay Street West Perth Western Australia 6005 Stock Exchange Listing Australian Securities Exchange Ltd 152-158 St Georges Terrace Perth Western Australia 6000 ASX Code: ADX Auditors InCorp Audit & Assurance Pty Ltd (formerly Rothsay Audit & Assurance Pty Ltd) Suite 11, 4 Ventnor Avenue West Perth, Western Australia 6005 - 2 - ADX ENERGY LTD CHAIRMAN’S REPORT Dear Shareholder, During the year ended 31 December 2023, ADX Energy Ltd (“ADX” or the “Company”) has progressed the development of its business in Austria in a number of important areas. Your Company has established three new asset partnerships through valuable farmouts to progress appraisal and exploration activities in Upper Austria, added to its Vienna basin fields production with sustained and stable oil production testing at its Anshof oil discovery and the drilling of the Anshof-2 appraisal well. ADX also finalised permitting for the large Welchau gas prospect, early results from which indicate a gas- condensate discovery that can be transformational for the Company. The establishment of our partnerships has been made possible by the development of a partnership structure for the first time in Austria that has been approved by Bundesministerium für Finanzen (Finance Ministry) to ensure compliance with the terms of our underlying exploration contracts in Upper Austria, thereby providing a clear commercial framework for further co-investment in our attractive portfolio of assets. Our progress during 2023 places the Company on a trajectory of establishing strong underlying value development through increasing production and reserves growth as well as exposing our Shareholders to exceptional value generation opportunities via an active exploration program funded primarily via farmout transactions and cash flow. In addition to the above-mentioned asset and commercial activities, the Company has been able to access capital necessary to carry out its activities and continue to build its asset base via a combination of placements and loan note transactions. Of particular importance, given the focus of our activities, the Company has been able to expand its shareholder base into the United Kingdom and Europe. The RED E200 drill rig prior to well spud at the Welchau-1 location, ADX-AT-II licence in Upper Austria Subsequent to the year-end, ADX announced a gas and liquids hydrocarbon discovery at the Welchau-1 gas exploration well. The drilling and evaluation results indicate a structural outcome similar to the predrill prognosis, a large gross hydrocarbon column (356 metres) supported by excellent liquids rich gas shows and a flow of gas and hydrocarbon liquids to surface, evidence of good open fracture and vuggy porosity (required for good well productivity in carbonate reservoirs) and an excellent correlation between gas shows and fractures as well as the vuggy porosity confirmed on logs. While we were unable to complete our sampling program in the well, the results are very positive and the potential of the discovery remains undiminished. We now look forward to reporting further analysis of drilling results culminating in the announcement of a Contingent Resource prior to testing the well in October 2024. This will then allow us to confirm the flow rate potential of the well and, if successful, the reserves potential of Welchau. It is truly a very compelling economic proposition to discover a potentially large gas resource in the heart of Europe, at shallow drill depths and adjacent to infrastructure in a market in great need for domestic gas. - 3 - ADX ENERGY LTD CHAIRMAN’S REPORT Energy markets in Europe have been in turmoil since Russia’s invasion of Ukraine in February 2022. Gas markets have fundamentally changed due to the phasing out of Russian gas and an increased reliance on imported LNG resulting in structurally higher prices in Europe together with ongoing market volatility. Austria is very vulnerable on the supply side, importing 87% of its gas, with 65% sourced from Russia via Ukraine in calendar year 2023. Anything we can do to increase domestic gas supply will be of significant importance for the energy security and economy of the Republic of Austria. During the year, ADX has enjoyed the benefit of working in an efficient, transparent and supportive licensing regime made possible by having competent people on the ground that can operate assets, originate new investment opportunities and introduce partners to fund the Company’s growth. These attributes are becoming particularly rare amongst junior energy companies, and favourably distinguishes ADX from its peers. Our business in Austria is growing rapidly, enabled by the availability of an extensive 3D seismic data, the ability to rapidly secure permitting for our drilling and production activities, access to infrastructure and the high value pricing for our oil and gas. Anshof is a great case study for what can be achieved in Austria - we commenced permitting the discovery well in July 2021 after securing the exploration permit in January of that year. We spudded the well in December 2021 and announced a discovery in January 2022. We tested the well in April 2022 and had the well on long-term production test by October 2022. It is stunning progress in comparison to other jurisdictions. I don’t know of many places, other than perhaps Texas, where that can be achieved. Production operations during the year resulted in an increase in production from 238 BOEPD in 2022 compared to an average of approximately 287 BOEPD in 2023. The boost in production coming largely from the contribution from the Anshof discovery while that was on long term test. We hope to build on the production rate at Anshof with the installation of a permanent production facility with a processing capacity of up to 3000 BOPD of liquids and plan to drill two additional wells at the location during 2024. Sales revenues from Austrian Production during the year totalled A$ 12,175,000 net to ADX. This was a 16% decrease compared to the year ending 31 December 2022. The decrease in revenue is mainly the result of a decrease in product prices. The average received crude oil price was reduced from A$132.48/bbl to in 2022 to A$115.19/bbl in 2023. Oil Tanker Loading during Anshof-3 Long term Production Test, ADX-AT-II licence in Upper Austria While capital markets remained relatively tight, ADX was able to raise A$ 6.4 million from a placement and share purchase plan in November last year. The issue was oversubscribed, and it was significant that approximately 40% of the funds were sourced from European and UK investors. It is becoming increasingly apparent that ADX’ activities are starting to resonate with European investors who have experienced high energy prices and supply insecurity. 2023 was a busy year operationally. We achieved some important targets with the long-term stable production test from the Anshof-3 discovery well as well as the procurement and commencement of installation of a permanent production facility at Anshof which will facilitate increased stable production. The results of the Anshof-2 appraisal well were a temporary setback, however, we expect that a side track well will deliver a positive result and add to the soon-to- recommence production at Anshof-3 once the permanent facility is commissioned in late March 2024/early April 2024. - 4 - ADX ENERGY LTD CHAIRMAN’S REPORT We are planning for the Anshof-2 side track to be followed up with a further appraisal well later in the year, with the goal being to have three wells producing at Anshof by year-end. We are very pleased to introduce a high-quality, collaborative partner to the Anshof project. The Anshof-2 and the planned Anshof-1 well will be predominantly funded via the investment agreement with MND Austria a.s. (“MND”). MND have funded past costs and long lead drilling expenditures of EUR 1,932,000 and have total firm investment payment obligations of EUR 5,280,000 for the drilling, completion and tie-in of the Anshof-2 and Anshof-1 wells. Under the terms of the investment agreement MND will earn a 30% economic interest in the Anshof Field Area. A further partnership transaction was completed with MND after year end. MND paid back costs of EUR 450,000 to ADX and has committed to fund EUR 4,500,000 of exploration drilling expenditure to earn a 50% economic interest in an investment area within the ADX-AT-I exploration licence where the partnership plans to drill a further gas exploration well in Q4 2024. In addition to our partnerships with MND we have a very important investment agreement with TSXV-listed MCF Energy Ltd. (“MCF”) that has delivered significant funding for the drilling of the successful Welchau-1 well. MCF have paid back costs and will fund 50% of the Welchau-1 well costs up to EUR 5.1 million to earn a 25% economic interest in the Welchau Investment Area. MCF Energy CEO Jim Hill (left) and ADX Energy Executive Chairman Ian Tchacos on location at Welchau All in all, 2023 has been a very positive year however, it was with deep regret after year end that I reported the illness of our Chief Executive Officer, Mr Paul Fink. Paul has made an exceptional contribution to the growth of the Company. I am now very happy to report that Paul is on the mend and is likely to resume his duties in the coming months. I would also like to thank Mr Andrew Childs, who retired as a Non-Executive Director, and welcome Mr John Begg as our new Non-Executive Director. John brings a wealth of talent to our board, he is a highly experienced energy professional that has been instrumental in the discovery and commercialisation of numerous oil and gas fields in Australia, North Africa, SE Asia and California. - 5 - ADX ENERGY LTD CHAIRMAN’S REPORT Looking forward, we have a very active and exciting year ahead of us which we expect will include the following important milestones:      The further evaluation, assessment and testing of the potentially transformational Welchau gas liquids discovery, The imminent commissioning of the Anshof permanent production facility and the recommencement of production from the Anshof-3 well, The drilling of the Anshof-2 side track and the Anshof-1 appraisal wells which have the potential to significantly boost production at Anshof, The drilling of a further gas exploration well funded by our partner MND in the ADX-AT-I permit and The ongoing development of our highly prospective exploration portfolio. Your Board believes that your Company has a compelling investment proposition provided by the combination of production, reserves growth and an active exploration program mainly funded by farmin transactions. The recent potentially large discovery at Welchau validates the quality of the ADX’ Teams asset selection and adds a uniquely strategic and potentially transformative dimension to ADX’ near term future as a European energy company. We thank you for your support and look forward to reporting a very exciting period in the Company’s development. IAN TCHACOS Executive Chairman - 6 - ADX ENERGY LTD OPERATIONS REPORT OPERATIONS REVIEW Europe Energy Markets Overview Russia’s invasion of Ukraine in February 2022 has fundamentally changed the European gas market by:     phasing out Russian gas supplies (down 84%); increasing supplies of and reliance on liquified natural gas (LNG); causing structurally higher prices above historical averages; and enhancing market volatility. However, after the unprecedented market conditions experienced in 2022; the natural gas market in Europe gradually re- balanced in 2023 due to softer demand caused by mild weather for the past two winters; and reduced consumption (power generation, residential and industrial). During the period, natural gas consumption in Europe dropped by 7% to its lowest level since 1995. LNG is now the main source of natural gas supply in Europe contributing to 42% of the supply. However, the increase in global LNG production only represents 34% of the decrease in Russian piped gas deliveries to Europe. As a result, natural gas supply in Europe remains tight which creates uncertainty and volatility. Despite a steep decline in natural gas prices in Europe (down 68% in 2023), these remain elevated and substantially above historical averages. There is also a strong correlation between European gas price and Asian LNG price benchmarks. Natural gas and Brent crude oil prices 2018-2026 Whilst market conditions have improved, security of supply remains a key concern; primarily in winter. For the past two winters, temperatures above seasonal average has distorted the actual impact of the gas supply shock faced since February 2022. However, this risk is acknowledged by market participants and illustrated by the wide summer/winter spreads observed in the futures market. Domestic gas production does not provide a much-needed safety net. It declined by approx. 10% in 2023 mainly due to the shutdown in October 2023 of the giant Groningen field in The Netherlands. Europe’s gas production is expected to drop by an additional 7% by 2026. - 7 - ADX ENERGY LTD OPERATIONS REPORT Further reduction in piped gas supplies from Russia is also contributing to supply uncertainty. Piped gas supplies from Russia to Europe halved in 2023 (lowest level since the 1970s). Further reduction is anticipated from the end of October 2024 with the expiry of the Ukraine gas transit contract which the Ukrainian government is not willing to renew. ) s e r t e m c i b u c n o i l l i m ( s e i r e v i l e d s a g l a r u t a N 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Q1-23 Q2-23 Q3-23 Q4-23 Russian piped gas - Ukraine gas transit Russia piped gas - Turkstream Russia - LNG U.S. LNG Algeria Libya Other LNG U.K. Norway Azerbaijan Quarterly natural gas supply in Europe (2023) LNG supply to Europe cannot be taken for granted. Reliance on spot LNG cargoes carries significant supply chain uncertainties and risk of diversion to more attractive markets. China regained its position as the World’s largest LNG importer in 2023 (imported quantities up by 14%) and LNG demand in the Asia-Pacific grew by 4%. This combined with lower demand for LNG in Europe have led the Platts LNG Japan-Korean Marker to trade at a USD 10.7 per boe premium to Dutch TTF (2023 average) therefore shifting flexible LNG flows to Asian markets. e o b r e p D S U 10.0 8.0 6.0 4.0 2.0 0.0 10.7 5.8 6.6 7.3 2023 2024 2025 2026 Platts LNG Japan-Korea Marker premium to Dutch TTF (2023-2026) - 8 - ADX ENERGY LTD OPERATIONS REPORT Electricity prices experienced a steep correction in 2023 (annual average down by 61%) in line with the decline of natural gas prices after record highs in 2022. However, electricity prices remain 200% higher than in 2019. After dropping by 3.1% in 2022, demand for electricity in Europe declined further in 2023 (down 3.2%) to the level of the early 2000’s due to:    economic slowdown in Europe; energy efficiencies and mild winter weather; and depressed industrial demand (-5.8% in 2022 and -6.0% in 2023) mainly from energy intensive industries such as chemicals and metals processing. Supply recovery also contributed to the price re-adjustment. Whilst gas-fired power generation declined sharply in 2023, hydropower generation recovered (+16% in 2023 vs -20% in 2022) and availability of nuclear power generation improved after extensive maintenance in France. ) h W M r e p R U E ( s e c i r p y t i c i r t c e e e a s e o h W l l l 600 500 400 300 200 100 0 0 2 - n a J 0 2 - r a M 0 2 - y a M 0 2 - l u J 0 2 - p e S 0 2 - v o N 1 2 - n a J 1 2 - r a M 1 2 - y a M 1 2 - l u J 1 2 - p e S 1 2 - v o N 2 2 - n a J 2 2 - r a M 2 2 - y a M 2 2 - l u J 2 2 - p e S 2 2 - v o N 3 2 - n a J 3 2 - r a M 3 2 - y a M 3 2 - l u J 3 2 - p e S 3 2 - v o N Wholesale electricity prices in Austria (2020-2023) European electricity demand outlook is strong for the next three years. Demand is expected to gradually return to 2021 levels by end of 2026 (+2.3% p.a. on average over the 2024 to 2026 period). Despite some structural demand destruction in energy-intensive industries, a recovery in electricity demand is anticipated due to more moderate prices and expanding electrification (electric vehicles, heat pumps, data centres, etc.). It is anticipated that electricity demand will grow by +2.5% p.a. in 2025 and 2026. - 9 - ADX ENERGY LTD OPERATIONS REPORT ASSET ACTIVITIES SUMMARY PRODUCTION AND DEVELOPMENT - VIENNA BASIN FIELDS AND ANSHOF DISCOVERY AREA - ONSHORE AUSTRIA  ADX is operator and holds a 100% interest in the Vienna Basin Fields.  ADX is operator and held an 80% economic interest in the Anshof Discovery Area (excluding the Anshof-2 well) until 15 September 2023 reducing to 50% for the remainder of the period following the finalisation of the Anshof Investment Agreement.  ADX is Operator and holds a 60% economic interest in the Anshof-2 well. The production rate net to ADX from the Vienna Basin Fields and the Anshof Discovery Area (collectively, Austrian Production) during the year averaged approximately 287 BOEPD compared to 238 BOEPD for the year ending December 2022. Stable oil and gas production continued during the year from the 100% ADX owned Vienna Basin Fields producing an average of 221 BOEPD. The 20% increase in average production was due to Anshof-3 test production through to October contributing an average 66 BOEPD net to ADX over the year shown in the figure below. After coming online in October 2022, the Anshof-3 well was shut in on 19th September 2023 after reaching the regulatory limit of 5,000 tonnes (36,000 barrels) for test production. Anshof-3 production is expected to recommence after the installation and commissioning of a permanent production facility in late March 2024/early April 2024. Austrian monthly and average daily oil equivalent production rate for oil, gas and total BOEPD - 10 - ADX ENERGY LTD OPERATIONS REPORT Sales revenues from Austrian Production during the year totalled A$ 12,175,000 net to ADX, a 16% decrease compared to the year ended 31 December 2022. The decrease in revenue is the result of a decrease in product prices. The average crude oil price received reduced from A$132.48/bbl to in 2022 to A$115.19/bbl in 2023 and the gas prices came off record highs delivering an average of A$371.69/BOE in 2022 reducing to A$130.47/BOE. Notwithstanding that gas prices have come off the 2022 record highs, gas prices achieved from the Vienna Basin in 2023 continue to outstrip oil prices. The figure below shows the variation in monthly sales revenue and the revenue contribution from the Anshof-3 well test. Austrian Production monthly oil and gas sales revenue Due to volatile market conditions and in line with its rolling hedging strategy, ADX seeks to provide stability for near term revenue generation, ADX hedged approximately 100 BOPD from April 2023 through to the end of the period. On 5 April 2023 a total of 16,440 barrels for the period between 1 April 2023 to 30 September 2023 was hedged under a swap contract at a fixed price of USD 82.94 per barrel (Dated Brent price). On 27 July 2023, ADX executed further hedging transactions with a fixed price swap contract for 15,810 barrels of oil at a fixed Brent crude oil price for August 2023 to December 2023 at USD 81.45 per barrel. The hedging counterparty for both transactions was Britannic Trading Limited (a trading entity of BP). The balance of the crude oil production from the Vienna basin fields and all of ADX’ share of the crude oil production from the Anshof field was unhedged allowing ADX to maintain exposure to upside in Brent crude oil pricing. Gas production from the Vienna basin fields was also unhedged. - 11 - ADX ENERGY LTD OPERATIONS REPORT Vienna Basin Fields Gaiselberg and Zistersdorf (collectively the Vienna Basin Fields) continued stable and low-emissions oil and gas production through 2023. 80,874 BOE were produced and sold into the European market. The following table summarises ADX’ unaudited estimates of Developed Reserves as at 31 December 2023, based on reserves reported 31 December 2022, less production from the Vienna Basin Fields during the subsequent twelve-month period. ADX confirms that it is not aware of any new information or data that may materially affect the Vienna Basin Reserves. ADX Vienna Basin Unaudited Developed Reserves as at 31 December 2023 Total Developed (BOE) @ 31 December 2022 Production 2023 (BOE) Total Developed (BOE) @ 31 December 2023 1P Reserves 2P Reserves 1,059,965 1,719,965 80,874 80,874 979,091 1,639,091 Notes 1. ADX holds a 100% working interest in the fields 2. The notional reference point for reserves is the permit boundary or export line inlet. 3. Deterministic evaluation methods have been used. 4. Associate gas resources includes inerts sold with the gas. 5. There is no fuel & flare consumption for the Fields. 6. BOE means barrels of oil equivalent including solution gas 7. Conversion factors are 1.124m3/tonne oil, 165.4 sm3 gas per boe and a gas Higher Heating Value of 40.7 MJ/sm3 Anshof Oil Discovery Area Appraisal and Development The Anshof-3 exploration well located in the ADX-AT-II license in Upper Austria encountered oil in Eocene oil reservoirs in 2022 and an extended production test commenced on 16 October 2022 using a leased early production unit. The well produced at a stable rate of approximately 110 barrels per day (gross) through the 2023 year until it was shut in on 19th September 2023 after reaching the regulatory limit of 5,000 tonnes (36,000 barrels) for test production. Production during the period was curtailed due to facilities constraints. Anshof-3 production is expected to recommence after the installation and commissioning of a permanent production facility in late March 2024/early April 2024. Anshof Permanent Production Facility; currently being moved from Ampfing to Anshof - 12 - ADX ENERGY LTD OPERATIONS REPORT Anshof-3 production performance exceeded expectations throughout the test in 2023 with strong pressure support and deliverability. Water-free 33° API crude oil production has been maintained since October 2022 and the crude oil quality continues to meet all the required specifications of the transporter and the buyer (OMV-refinery near Vienna). The Anshof-2 well was drilled in the fourth quarter 2023. The well intersected the predicted Eocene oil reservoir section at a depth of approximately 2160 metres measured depth (MD), approximately 60 metres shallower than prognosis in terms of vertical depth but with no movable oil. Remapping of the field extent incorporating these results is underway. Anshof Field Area and Anshof-2 Well Participation and Operatorship ADX and MND executed an Energy Investment Agreement on 04th August 2023 (“Anshof EIA”) whereby MND earned 30% interest in the Anshof Field Area from ADX. Under the terms of the Anshof EIA, MND will make payments to ADX VIE GmbH of EUR 1,335,000 for back costs and EUR 597,353 for Anshof-1 and Anshof-2 well long lead items. The total firm and contingent investment payment obligations by MND are up to EUR 11,520,000 to earn a 30% economic interest in the Anshof Field Area (Refer to the ASX release dated 7 August 2023). ADX’ economic interest in the Anshof Field Area reduced from 80% to 50% as a result of this transaction. XST elected not to participate in the Anshof-2 well. ADX and MND agreed to fund XST’s share of well costs on a 50:50 basis and in turn obtain the right to 60% and 40% respectively of production from the well unless XST opts to buy back into the well at a premium of 500% to well costs. XST retains its 20% economic interest in the remainder of the Anshof Field Area (i.e. Anshof Field Area less the Anshof-2 well) with both ADX and MND’s economic interests remaining at 50% and 30% respectively. Anshof Production Licence Award A production licence was awarded on 3 March 2023 by Austria’s Ministry of Finance to ADX VIE GmbH (ADX) for the Anshof oil field. The licence became effective from 31 March 2023.The award of the production licence provides the regulatory framework for development of the Anshof Field including the recommencement of production of Anshof and the further development of the field. Permanent Production Facilities Planning and Engineering Procurement, planning and design work continued during the reporting period for the installation of permanent production facilities (PPF) to replace the early production system used for the test of Anshof-3 which was shut in during September 2023. The early production system limited oil production due to processing, storage and offloading for trucking (of oil to train loading export facilities) constraints and was only designed to produce a single well. The PPF will have the capacity to process oil from multiple wells with liquids production capacity of approximately 3,000 barrels of oil per day. It will be mostly unmanned and operate 24 hours per day. Installation and commissioning of the PPF is planned for late March 2024/early April 2024. Production from the PPF will initially be trucked to a nearby train loading facility as has been the case with the Anshof-3 well. In the longer term it is intended to construct new production pipelines to nearby export facilities less than 4km from the Anshof-3 location. Anshof-2 Appraisal Well The Anshof-2 downdip appraisal well was successfully drilled during the quarter to a total measured depth of 2321 metres (TMD) with a final inclination of approximately 73° (i.e. near horizontal). The well was spudded at 10:00 am Central European Time (CET) on the 13th of November 2023 and the RED Drilling & Services GmbH (RED) E-202 drilling rig was released on the 12th of December 2023 following completion of suspension operations. Anshof-2 was drilled without any lost time safety incidents and within budget. - 13 - ADX ENERGY LTD OPERATIONS REPORT Anshof-2 Drilling with the RED E-202 drilling rig The well intersected the predicted Eocene oil reservoir section at a depth of approximately 2160 metres measured depth (MD), approximately 60 metres shallower than prognosis in terms of vertical depth. The Eocene sands confirm at least 12 metres net vertical thickness of high quality reservoir with an average porosity of 15% and a maximum porosity of 20%, significantly better than the reservoir quality and thickness found in the Anshof-3 discovery well. Although there is oil saturation interpreted from logs across the interval there is no evidence of moveable oil. Based on the log analysis the well intersected the Eocene below the field oil-water-contact (OWC). The well was plugged back with cement and suspended at the 9 5/8” casing shoe for deviation to a yet to be finalised up-dip location. The presence of a thick high-quality reservoir section was in line with ADX’ P10 (upside) case pre drill maps and the fact that Anshof oil field structure is flatter and larger due to the Eocene sands being encountered some 60 metres higher than prognosis. Remapping is underway and is expected to result in increased oil volumes for the expected OWC. ADX will review the depth conversion, fault mapping and seal integrity as part of its review and assessment for the best follow-up well as an Anshof oil producer. This will also include a critical review of the potential field OWC depth to be between the ODT seen in Anshof-3 and the water-up-to (WUT) seen in Anshof-2. Anshof Field Reserves Independent consultants RISC Advisory Pty Ltd (RISC) were engaged to provide an independent reserve and resource assessment for the Anshof field. The competent person’s report prepared by RISC (CPR) has an effective date of 1 October 2022. Refer to ASX release dated 31 October 2022. Since that time, the Anshof-3 extended test has produced water-free approximately 36,000 barrels at rates and pressures higher than expected by RISC. The Anshof-2 well has also been drilled and the presence of a much thicker than expected high-quality reservoir section and the fact that Anshof oil field structure is flatter and may be larger due to the Eocene sands being encountered 60 metres higher than prognosis is expected to compensate for the shallower than expected OWC depth at Anshof-2. As a result, a larger crestal volume with greater reservoir thickness can be expected requiring fewer production wells due to higher well productivities and reserves recovery per well. ADX plans to integrate these results and provide an update in relation to the Anshof Field Reserves as soon as the relevant work has been completed . The following table summarises the unaudited estimates of gross Developed Reserves as at 31 December 2023, based on unaudited reserves reported as at 31 December 2022, less production from the Anshof-3 during the subsequent twelve- month period. - 14 - ADX ENERGY LTD OPERATIONS REPORT Anshof Unaudited Reserves (Gross) as at 31 December 2023 Anshof Gross Reserves (BOE) @ 31 December 2022 Production 2023 (BOE) Anshof Gross Reserves (BOE) @ 31 December 2023 1P Reserves 2P Reserves 493,518 29,685 463,833 5,118,518 29,685 5,088,833 Notes 1. The notional reference point for reserves is the permit boundary or export line inlet. 2. ADX has an 50% economic interest in the Anshof discovery area and 50% entitlement to its gross reserves and resources; except the Anshof-2 well where it has a 60% economic interest and entitlement subject to the terms of XST’s non-participation in the well. 3. Probabilistic methods have been used to determine oil in place and recoverable oil. Deterministic methods were used to develop production profiles and well numbers. 4. Associated gas resources include inerts sold with the gas. There is no fuel and flare. 5. Conversion factors are 7.3 bbl per tonne of oil and 5,800 MMscf per MMboe of gas. 6. ADX confirms that the results of the Anshof-2 well will impact Anshof Field Reserves estimates. As described in its announcement of 11 December 2023, the presence of a much thicker than expected high-quality reservoir section and the fact that Anshof oil field structure is flatter and larger due to the Eocene sands being encountered 60 metres higher than prognosis is expected to compensate for the shallower than expected OWC depth at Anshof-2. As a result, a larger crestal volume with greater reservoir thickness may be present requiring fewer production wells due to higher well productivities and reserves recovery per well. Table 1: Anshof Field Reserves and Resources A. Proved Reserves are those quantities of Petroleum that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable from known reservoirs and under defined technical and commercial conditions. If deterministic methods are used, the term “reasonable certainty” is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. B. Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P). In this context, when probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the 2P estimate. - 15 - ADX ENERGY LTD OPERATIONS REPORT UPPER AUSTRIA EXPLORATION LICENSES, MOLASSE BASIN – ONSHORE AUSTRIA Welchau Giant Gas Exploration Well  ADX is operator and holds a 75% interest in the Welchau Investment Area subsequent to completion of MCF’s funding obligations. During the period, ADX executed an Energy Investment Agreement with MCF Energy Ltd via its subsidiary MCF Energy GmbH (MCF) to fund 50% of the Welchau-1 well costs up to a well cost cap of EUR 5.1 million to earn a 25% economic interest in the Welchau Investment Area. Upon completion of MCF’s funding obligations ADX will hold a 75% economic interest in the Welchau Investment Area. The Welchau gas prospect has exceptional gas resource potential, located in the heart of Europe at a relatively shallow drill depth and proximal to gas pipelines. Pre-drill, ADX estimated that Welchau had best technical Prospective Resources of 807 BCFE (134 MMBOE)1 at a reporting date of 22 June 2023. The Welchau prospect targeted the same reservoirs as the nearby Molln-1 well which tested gas in 1989. Map showing ADX-AT-II license area and the Welchau-1 drilling location in the Northern Calcareous Alps During the period, ADX achieved all the necessary milestones to be prepared for drilling in early 2024. These included:     Securing a drilling permit from the Mining Authority; Securing and Environmental Clearance from the Department of Nature Protection of the State Government of Upper Austria; Contracted all drilling and associated services including the RED Drilling & Services GmbH E-202 drilling rig; and Commenced Well site construction. 1 Prospective Resources are those estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) related to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further explorations appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. - 16 - ADX ENERGY LTD OPERATIONS REPORT Subsequent to the year-end, the Welchau-1 gas exploration well was spudded on 24th February 2024. Well site construction was completed and rig mobilisation occurred in January 2024. The well reached a total depth of 1733 metres on 17th March 2024. Welchau-1 was drilled without any lost time safety incidents and below budget due to improved drill rates and efficiencies. Strong liquids-rich gas shows were encountered over a 115-metre interval in the Steinalm Formation between 1452 and 1567 metres. A 7-metre core was recovered from 1511 metres to 1519 metres MD in the Steinalm Formation to gather information on the rock properties (lithology and mineralogy, stratigraphy, petrophysical properties) and to have a calibration section for log interpretation. The cut surfaces of the core confirmed the presence of a natural fracture system which is essential for gas production performance with an intense, light blue petroleum fluorescence evident on the fracture surfaces when viewed under ultra violet light. An image of the cut section of recovered core is shown below. Cut section of Welchau-1 core demonstrating its natural fracture system The logging of Welchau-1 confirmed open fracture networks and vuggy porosity essential for well productivity coincident with high gas shows (up to 20%) seen during drilling. - 17 - ADX ENERGY LTD OPERATIONS REPORT Left: The Welchau-1 mudlog with several distinct gas peaks in the area from 1490 to 1550 m MD. The zone of the highest gas peak (> 8%) can clearly be identified on the image log (top right) where large vugs (dark coloured due to conductive mud entering the formation) are present. Bottom right: A piece of rock recovered during coring, which shows intense, light blue fluorescence on naturally occurring fractures. Five pressure recordings from the interval 1479 metres to 1597 metres MD revealed a complex carbonate reservoir setting in an over pressurised hydraulic system at an equivalent formation density of 1.28 SG. The corresponding permeability of the pressure tested levels show medium to very high permeability which is in agreement with fracture density and petrophysical log interpretation. Liquid hydrocarbon and gas inflow to the wellbore was observed at surface following downhole sampling operations. High mud gas readings for C1 of up to 20% were recorded from the well bore with heavier components up to C5 recorded. Following the observation of gas seen at surface, liquid hydrocarbons were also observed in the mud at surface exhibiting florescence. The inflow of hydrocarbons to the well bore is further confirmation of the existence of mobile hydrocarbons. Future well operations include the casing, cementing and suspension of the well for later production testing, followed by rig down and demobilisation of the RED E200 drill rig. The future testing and potential deepening of the well can be done with a cost-effective workover rig. - 18 - ADX ENERGY LTD OPERATIONS REPORT Upper Austria AGS Exploration Licences, Molasse Basin – Onshore Austria  ADX is operator and holds a 100% interest in the ADX-AT-I and ADX-AT-II exploration licences other than the Anshof Discovery Area (above), the Welchau Farmout area (above) and the ADX-AT-I Investment Area (below). ADX holds licence areas for exploration, production and gas storage with a total area of 1,022 km2 in the Molasse basin in Upper Austria. During the first half year of 2023, ADX has added major potential to the Company’s portfolio in the licences by de-risking existing prospects and identifying and maturing new exploration and appraisal prospects based on leading edge 3D seismic and artificial intelligence (AI) applications. ADX-AT-I and ADX-AT-II Licence Areas During the period, ADX focussed on the giant Welchau gas prospect and the low-risk shallow gas portfolio in the ADX-AT-I licence such as the combined HOCH and GAST and SCHOE prospects shown below in the exploration prospect inventory table reported on 22 June 2023. The map above shows the location of the three above mentioned prospects in the northern part of ADX AT-I. The Low-Risk Shallow Gas Portfolio was significantly boosted by the maturation of mainly stratigraphic prospects with the systematic application of AI software and the contribution of international experts on sequence stratigraphic traps. So far, all prospects have a strong AVO (Amplitude Versus Offset) 3D seismic signature, indicating presence of gas reservoirs and hence further contributing to the reduction of the pre-drill risk. All prospects share the following highly favourable and important attributes: A. Shallow drill depths from 800 to 2000 metres and hence low-cost drilling; B. Highly productive proven reservoirs known from offset wellbores; and C. Short tie-in distances to the extensive Upper Austrian gas network. - 19 - ADX ENERGY LTD OPERATIONS REPORT Prospective Resources reported 22 June 2023 A detailed review of the HOCH and GAST prospects has revealed that they could be two connected parts of the same much larger combined accumulation adding significantly to the resource potential. The subsequent estimated technical prospective resources are shown in the table below. Prospective resources estimates of the combined HOCH and GAST prospect Prospective Resources are those estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) related to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further explorations appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. - 20 - ADX ENERGY LTD OPERATIONS REPORT ADX-AT-I Investment Area  ADX is operator and holds a 50% interest in the ADX-AT-1 Investment Area subject to MND completing its funding obligations. During the period, ADX finalised agreements with MND Austria a.s. (MND) for MND to fund a gas exploration program in ADX-AT-I. The transaction was announced on the 4th of December 2023 and received confirmation of acceptance of the MND Investment Area partnership documentation by the Austrian Ministry of Finance. The transaction subsequently reached completion on the 5th of January 2024. MND a.s., the parent of MND, is a highly credentialled European explorer, producer and oil services group that generated approx. EUR 8.5 billion of revenue in 2022. MND will secure a 50% economic interest in the Exploration Investment Area by providing cash payments of EUR 0.45 million to ADX and funding 100% of an agreed exploration work program of EUR 4.5 million. The Exploration Investment Area is part of the ADX-AT-I licence area. At completion (January 2024) MND paid back costs of EUR 0.45 million to ADX and will fund EUR 4.5 million for exploration drilling to earn a 50% economic interest in MND Investment Area (an exploration investment area within the ADX-AT-I license), in Upper Austria. ADX retained a 100% interest in the remainder of the ADX-AT-I licence including adjacent gas exploration prospects (e.g. OHO and ZAM). The MND Investment Area is shown in the map below. Map showing the MND Investment Area within the ADX-AT-I licence which includes the LICHT and IRR gas exploration prospects Several gas prospects, all mapped using 3D seismic, are available for drilling in the MND Investment Area. ADX and MND currently intend to drill either the LICHT or the IRR gas exploration prospect during the second half of 2024. The LICHT prospect location has already received a drilling permit including an environmental clearance and ADX continues to work on securing drilling and environmental approvals for IRR. The prevailing strong gas pricing in Austria and proximity to infrastructure means that success with even a modest sized gas discovery can be highly value adding and profitable for the Company. Both prospects offer significant resource potential and are fully covered by high quality 3D seismic and supported by seismically generated direct hydrocarbon indicator responses. ADX and MND plan to select the first drilling prospect early in 2024 with a view to drilling during the second half of 2024. - 21 - ADX ENERGY LTD OPERATIONS REPORT The IRR prospect is featured in the Prospect Summary below. It shows the large (stratigraphic) resources upside potential and the strong analogy with a close by gas field that has produced approximately 155 BCF of gas during its field life prior to conversion to a large gas storage facility. Prospective Resources are those estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) related to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further explorations appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. IECEA MARE PRODUCTION LICENSE AND PARTA EXPLORATION LICENSE – ONSHORE WESTERN ROMANIA Parta Exploration Licence – Onshore Western Romania  ADX holds a 49.2% shareholding in Danube Petroleum Limited (Danube). The remaining shareholding in Danube is held by Reabold Resources Plc. Danube via its wholly owned subsidiary, ADX Energy Panonia srl, holds a 100% interest in the Parta Exploration licence (including a 100% interest in the Parta Appraisal Sole Risk Project) and a 100% interest in the Iecea Mare Production licence. ADX is the operator of the permit pursuant to a services agreement with Danube. During the reporting period, ADX has submitted technical and financial documents in relation to the Parta Exploration Licence to the relevant Romanian authorities following several positive meetings with the governing authority for the possible extension of the current licence period. The governing authority is the National Agency for Mineral Resources (NAMR) which is supporting the extension which can be granted through a government process. The validity of the Iecea Mare production licence is 20 years and not affected. ADX continues to be engaged in ongoing discussions with the Regulatory Authorities in this regard and ADX has delivered a number of requested reports in support of the extension discussions, including reports specifically documenting the extensive past activity with the objective of receiving a de facto waiver on the fulfilment of the obligatory work program. Options to exploit the geothermal potential of the Romanian part of the Pannonian Basin are under investigation with the authorities in combination with a subsurface review of the likely prospectivity. - 22 - ADX ENERGY LTD OPERATIONS REPORT Italy - d 363C.R-.AX Licence - Offshore Sicily  ADX is operator and holds 100% interest in the d 363C.R-.AX Exploration Permit In February 2019, the Italian government suspended exploration activities in onshore and offshore licenses to determine suitability for sustainable hydrocarbon prospecting, exploration and development activities (refer ASX Announcement dated 4 February 2019). In May 2022, Italian licensing authorities offered ADX the opportunity to ratify the d363C.R-.AX licence under a number of conditions including that only the gas potential within the licence is commercially exploited. Pleasingly, the technical work undertaken by ADX has highlighted the excellent shallow gas prospectivity of the shallow water licence. The total best technical prospective resource potential of five high graded prospects is 369 BCF (refer ASX announcement 30 August 2022). The five high graded prospects are considered as relatively low risk, simple 4-way dip anticline closures featuring a seismic amplitude response commonly known as DHIs (or Direct Hydrocarbon Indicators). The table below summarises the above-mentioned prospects that are defined by existing 2D seismic. Based on initial discussions with the Italian authorities, ADX submitted a work program in 2022 committing to seismic reprocessing and the option to acquire 2D seismic and 3D seismic data. Since none of the gas prospects and other identified leads have been covered with 3D seismic to date, ADX expects that more prospects may be identified, including large stratigraphic traps as indicated by the existing 2D seismic. It is expected that 3D seismic would substantially reduce exploration risk and attract further investment through farmouts. At the end of 4 years after licence ratification, ADX could elect to drill a well or drop the licence. During the reporting period, ADX has at the request of the Ministry (Ministero dell’Ambiente e della Sicurezza Energetica) submitted several documents in relation to the excellent gas exploration potential of the licence and in relation to ADX’ technical and financial capability. ADX received a principally positive reply from the Ministry in mid-July 2023 subject to further submissions. ADX is currently awaiting ministerial response following the submission of several technical, commercial and financial capability documents for the award of a gas exploration and exploitation license. ADX has been informed by the Italian ministry during the quarter that the documents are currently under a final review by an independent group of experts outside of the Ministry. - 23 - ADX ENERGY LTD OPERATIONS REPORT EXPLORATION AND PRODUCTION FARM-OUT ACTIVITIES During the period, ADX has had success with multiple farmout transactions during the period including with MCF Energy Ltd. in relation to Welchau, the MND Anshof Investment Agreement and another Investment Agreement for MND to fund a gas exploration program in ADX AT-I. ADX has been engaged in further on-going discussions with multiple parties to fund additional exploration and appraisal programs in Upper Austria. This has resulted in in a number of farm-in proposals currently under discussion and further prospect generation to attract further investment in the extensive ADX exploration portfolio. The Participation Framework Agreements developed by ADX and approved by the Ministry (for the Anshof transaction) can be readily used as a template for future farm-in and co-investment transactions. NEW VENTURE E&P ACTIVITIES Subject to ADX’ current focus on the Welchau discovery evaluation and operations, ADX continues to evaluate complementary production, appraisal and exploration opportunities located onshore Europe where it has geotechnical and operational experience. Priority opportunity is given to projects where there are significant synergies with the Company’s current portfolio and operations. During the reporting period, ADX has successfully participated in the evaluation and offer process for a highly complementary production, appraisal and exploration opportunity for an onshore Europe opportunity. As one of the preferred bidders ADX will continue to further evaluate the opportunity which would have significant synergies with the Company’s current portfolio and operations. ADX RENEWABLE ENERGY PROJECT FORMATION Electricity remains ADX’ highest operating expense at the Vienna Basin Fields. Despite the re-balancing in the European electricity market over the past 12 months, wholesale electricity prices in Austria remained elevated throughout 2023 trading at a significant premium to historical average prices (prior to the invasion of Ukraine by Russia in February 2022) and look set to remain high according to the futures market. It is ADX’ long-term plan to make the Vienna Basin Fields a multi-energy hub combining low emissions oil and gas production operations, renewable energy production and hydrogen storage activities. During the period, ADX has also undertaken a feasibility review of the GMU geothermal project which is feasible and potentially commercially attractive due to increased energy prices. The combination of oil and gas targets overlying a potential geothermal target reduces risk. We are seeking a partner in this project. ADX remains committed to these projects in the longer term, however, due to capital and skills constraints during the period, ADX has prioritised oil and gas activities at a time when Europe and particularly Austria are seeking domestic sources of energy supply. VIENNA BASIN HYDROGEN PRODUCTION AND STORAGE PROJECT Work undertaken on the Vienna Basin Solar Project over the Period has demonstrated that there are strong synergies for the Vienna Basin Hydrogen Project. These include the creation of a monetisation route for green electricity due to grid injection limitations and having access to a cost-effective feedstock allowing the production of premium green hydrogen compliant with standards applicable to the mobility sector. ADX has therefore commenced during the period the evaluation of a green hydrogen early production scheme (Green Hydrogen EPS) using a small-scale electrolyser with a capacity of ≤ 250 kW. The Green Hydrogen EPS would allow ADX to produce green hydrogen using as feedstock electricity generated from the Vienna Basin Solar Project and generate early revenues focusing on the mobility sector (which attracts higher prices due to product scarcity). The next phases of the Vienna Basin Hydrogen Project would remain as follows:  a pilot phase with a 2.5 MW electrolyser capacity able to produce approx. 370 tonnes of renewable hydrogen; and - 24 - ADX ENERGY LTD OPERATIONS REPORT  a scaleup phase whereby the electrolyser capacity will be upgraded to 30 MW resulting in a renewable hydrogen production capacity of 5,200 tonnes per annum. Timing of the Vienna Basin Hydrogen Project implementation is dependent on the upgrade of the electricity grid to be able to access sufficient renewable electricity to feed larger size electrolysers. ADX is also awaiting further regulatory advances in relation to renewable gases which will provide more offtake certainty required for project expansion. Austria has committed to achieve climate neutrality by 2040 (as opposed to 2050 for the European Union) and is considering the introduction of a mandatory quota for renewable gases (similar to mandatory blending of biofuels in gasoline and diesel). If implemented, such regulation would provide a strong legal and commercial framework for renewable hydrogen production. VIENNA BASIN SOLAR PROJECT ADX undertook during the Period further evaluation of various photovoltaic (PV) plant configurations for the Vienna Basin Solar Project taking into consideration that electricity injection into the local grid is limited to up to 300 kWh per connection point. The implementation of the Vienna Basin Solar Project would allow ADX to become a renewable energy producer within 12- 15 months from final investment decision. Initially, the most attractive configuration is a solar plant with a capacity of 1 MWp at the Gaiselberg site (combined with battery storage) and solar plant with a capacity of 0.35 MWh at the Gösting site. The capacity of the solar plant at the Gaiselberg site could be upgraded to 2.5 MWp over time to provide more feedstock for the Vienna Basin Hydrogen Project. Potential layout of the PV panels at the Gaiselberg site (approx. 1 MWp) These solar plant configurations could provide cost-effective electricity supply for the Vienna Basin Hydrogen Project with an all-in cost estimated at EUR 40-65 per MWh which is below current wholesale electricity prices in Austria. - 25 - ADX ENERGY LTD OPERATIONS REPORT OIL, GAS AND GEOTHERMAL MULTI-ENERGY PROJECT IN UPPER AUSTRIA The GMU prospect located in the Eastern part of the ADX-AT-I exploration licence in Upper Austria (Molasse basin) was highlighted, presented and discussed in detail in the ASX release on the 22 June 2023. It combines a geothermal opportunity (fractured Jurassic limestone with 110°C reservoir temperature) and stacked overlying oil and gas targets defined on high quality 3D seismic The GMU prospect provides the combination geothermal potential representing 18 MW of thermal power together with overlying oil and gas potential. The combination of geothermal and hydrocarbon potential is increasingly attractive due to increasing energy prices and increasing local industry demand seeking sustainable long term alternatives to expensive oil, gas and electricity. Summary of combined Geothermal and oil & gas potential at GMU, located in the Eastern part of the ADX-AT-I licence - 26 - ADX ENERGY LTD RESERVES REPORT RESERVES REPORT Gaiselberg and Zistersdorf Production Assets, Vienna Basin – Onshore Austria ADX purchased the Vienna Basin Fields (Gaiselberg and Zistersdorf) in December 2019. Since then, the fields have been producing oil and gas continuously and have been ADX’ primary source of cash flow. ADX equity interest in the relevant production licenses is summarised as follows: Since purchase of the fields, two Competent Person’s Reports (CPR) have been undertaken by independent consultants engaged by ADX to audit the Developed Reserves at the Vienna Basin Fields. The first CPR had an effective date of 31 December 2019 and the most recent CPR prepared by RISC has an effective date of 1 July 2021. The results of RISC’s CPR were announced on the ASX on 4 November 2021. ADX reserves attributable to Vienna Basin Fields effective 31 December 2022 were previously reported (Annual Report 2022). These were based on RISC CPR audited Developed Reserves as at 1 July 2021 less production during the subsequent 18-month period. The following table summarises ADX’ unaudited estimates of Developed Reserves as at 31 December 2022, based on reserves reported 31 December 2021, less production from the Vienna Basin Fields during the subsequent 12-month period. ADX Vienna Basin Unaudited Developed Reserves as at 31 December 2023 Total Developed (BOE) @ 31 December 2022 Production 2023 (BOE) Total Developed (BOE) @ 31 December 2023 1P Reserves 2P Reserves 1,059,965 1,719,965 80,874 80,874 979,091 1,639,091 Notes 1. ADX holds a 100% working interest in the fields 2. The notional reference point for reserves is the permit boundary or export line inlet. 3. Deterministic evaluation methods have been used. 4. Associate gas resources includes inerts sold with the gas. 5. There is no fuel & flare consumption for the Fields. 6. BOE means barrels of oil equivalent including solution gas 7. Conversion factors are 1.124m3/tonne oil, 165.4 sm3 gas per boe and a gas Higher Heating Value of 40.7 MJ/sm3 - 27 - FieldWorking InterestLicense Expiry 1Block or LicenseZistersdorf Field100%N/AZistersdorfGaiselberg Field100%N/AGaiselbergNote 1: License term for life of fieldADX Vienna Basin Oil and Gas Field Interests ADX ENERGY LTD RESERVES REPORT Anshof Discovery Area, ADX AT-II AGS license, Upper Austria – Onshore Austria During January 2022, ADX discovered oil in Eocene reservoirs and shallow gas in Miocene reservoirs at the Anshof-3 well. ADX completed and tested the Eocene reservoir in May 2022. A long-term production test commenced from the Anshof-3 well on 16 October 2022. The well has produced water free oil averaging oil rates between 110-120 barrels per day continuously for the entire test period until it was shutin 19 September 2023 at the end of the test period. ADX equity interest in the relevant license is summarised as follows: ADX Anshof Oil Field Interests Area Effective Dates Anshof Field Anshof Field (except Anshof-2 Well) Anshof-2 Well 31 December 2022 – 15 September 2023 16 September 2023 – current 13 November 2023 - current Economic Interest 80%1 50%1 60%2 Licence Expiry3 Block or Licence N/A N/A N/A ADX AT-II ADX AT-II ADX AT-II Notes 1. ADX farmed down its 80% economic interest to MND in return for certain upfront and contingent payments on 15 September 2023 2. XST elected not to participate in the Anshof-2 well resulting in ADX’ additional 10% economic interest in this well 3. License Term is for life of field Independent consultants RISC were engaged to provide an independent reserve and resource assessment for the Anshof field. The RISC CPR relating to the Anshof field has an effective date of 1 October 2022. Refer to ASX release dated 31 October 2022. A long-term production test commenced from the Anshof-3 well on 16 October 2022. Since that time, the Anshof-3 extended test has produced water-free 36,000 barrels at rates and pressures higher than expected by RISC. The Anshof-2 well has also been drilled and the presence of a much thicker than expected high-quality reservoir section and the fact that Anshof oil field structure is flatter and larger due to the Eocene sands being encountered 60 metres higher than prognosis is expected to compensate for the shallower than expected OWC depth at Anshof-2. As a result, current mapping indicates a larger crestal volume with greater reservoir thickness can be expected requiring fewer production wells due to higher well productivities and reserves recovery per well. ADX plans to integrate these results and provide an update in relation to the Anshof Field Reserves as soon as practically possible. - 28 - ADX ENERGY LTD RESERVES REPORT The following table summarises the unaudited estimates of gross and net Reserves as at 31 December 2023, based on unaudited reserves reported as at 31 December 2022, less production from the Vienna Basin Fields during the subsequent twelve-month period. ADX Anshof Unaudited Reserves as at 31 December 2023 Anshof Gross Reserves (BOE) @ 31 December 2022 Gross Production 2023 (BOE) Anshof Gross Reserves (BOE) @ 31 December 2023 1P Reserves 2P Reserves 493,518 29,685 463,833 5,118,518 29,685 5,088,833 Anshof Net Reserves (BOE) @ 31 December 2022 Net Production 2023 (BOE) Reduction in net economic interest under Energy Investment Agreement Anshof Net Reserves (BOE) @ 31 December 2023 394,814 23,748 4,094,814 23,748 139,150 231,916 1,526,650 2,544,416 Notes 1. The notional reference point for reserves is the permit boundary or export line inlet. 2. ADX has an 50% economic interest in the Anshof discovery area and 50% entitlement to its gross reserves and resources; except the Anshof-2 well where it has a 60% economic interest and entitlement subject to the terms of XST’s non-participation in the well. 3. Probabilistic methods have been used to determine oil in place and recoverable oil. Deterministic methods were used to develop production profiles and well numbers. 4. Associated gas resources include inerts sold with the gas. There is no fuel and flare. 5. Conversion factors are 7.3 bbl per tonne of oil and 5,800 MMscf per MMboe of gas. 6. ADX confirms that the results of the Anshof-2 well will impact Anshof Field Reserves estimates. As described in its announcement of 11 December 2023, the presence of a much thicker than expected high-quality reservoir section and the fact that Anshof oil field structure is flatter and larger due to the Eocene sands being encountered 60 metres higher than prognosis is expected to compensate for the shallower than expected OWC depth at Anshof-2. As a result, a larger crestal volume with greater reservoir thickness is currently mapped requiring fewer production wells due to higher well productivities and reserves recovery per well. - 29 - ADX ENERGY LTD RESERVES REPORT ADX’ Total Austrian Reserves ADX’ total net Austrian Reserves are summarised below. This includes the Vienna Basin Fields Reserves and Anshof Field Reserves (described above) as of 31 December 2022. The reserves variance is a comparison of 2021 year end reserves versus 2022 year end reserves. The positive variance of 223% estimated for the 2P reserves category is the result of the reserves attributed to the Anshof field discovered in January 2022 by the Anshof-3 well which was subsequently placed on long term test production in October 2022. A production license for the Anshof field was awarded in March 2023. ADX Austrian Fields Unaudited Net Reserves as at 31 December 2023 Anshof Field and Vienna Basin Field Reserves (Barrels of Oil Equivalent) Vienna Basin Fields (BOE) * Anshof Field (BOE) # Total Reserves (BOE) @ 31 December 2023 Notes See Notes in Asset Tables above 1P Reserves 2P Reserves 979,091 1,639,091 231,916 2,544,416 1,211,007 4,183,503 Reporting Standards Reserves and resources are reported in accordance with the definitions of reserves, contingent resources and prospective resources and guidelines set out in the Petroleum Resources Management System (PRMS) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE) and reviewed and jointly sponsored by the American Association of Petroleum Geologists (AAPG), World Petroleum Council (WPC), Society of Petroleum Evaluation Engineers (SPEE), Society of Exploration Geophysicists (SEG), Society of Petrophysicists and Well Log Analysts (SPWLA) and European Association of Geoscientists and Engineers (EAGE), revised June 2018. PRMS Reserves Classifications Used 1P Denotes low estimate of Reserves (i.e., Proved Reserves). Equal to P1. 2P Denotes the best estimate of Reserves. The sum of Proved plus Probable Reserves. 3P Denotes high estimate of Reserves. The sum of Proved plus Probable plus Possible Reserves. 1. Developed Reserves are quantities expected to be recovered from existing wells and facilities. a. Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate. b. Developed Non-Producing Reserves include shut-in and behind-pipe reserves with minor costs to access. 2. Undeveloped Reserves are quantities expected to be recovered through future significant investments. A. Proved Reserves are those quantities of Petroleum that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable from known reservoirs and under defined technical and commercial conditions. If deterministic methods are used, the term “reasonable certainty” is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. B. Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P). In this context, when probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the 2P estimate. C. Possible Reserves are those additional Reserves that analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability - 30 - ADX ENERGY LTD RESERVES REPORT to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high-estimate scenario. When probabilistic methods are used, there should be at least a 10% probability that the actual quantities recovered will equal or exceed the 3P estimate. Possible Reserves that are located outside of the 2P area (not upside quantities to the 2P scenario) may exist only when the commercial and technical maturity criteria have been met (that incorporate the possible development scope). Standalone Possible Reserves must reference a commercial 2P project. Persons compiling information about Hydrocarbons. Pursuant to the requirements of the ASX Listing Rule 5.31, 5.41 and 5.42 the unaudited technical and reserves information contained in this report has been prepared under the supervision of Mr Paul Fink. Mr Fink is Technical Director of ADX Energy Limited, is a qualified geophysicist with 30 years of technical, commercial and management experience in exploration for, appraisal and development of oil and gas resources. Mr. Fink has consented to the inclusion of this information in the form and context in which it appears. Mr. Fink is a member of the EAGE (European Association of Geoscientists & Engineers) and FIDIC (Federation of Consulting Engineers). RISC independent audit and competent person reports RISC has conducted an independent audit of the Developed Reserves for the Vienna basin Fields and a competent persons report for Undeveloped Reserves for the Anshof Fields. The reserves described above are based on RISC’s assessments which have been previously announced by ADX. RISC has previously consented to the inclusion of information specified as RISC audited values in this report. - 31 - ADX ENERGY LTD DIRECTORS’ REPORT Your Directors present their report for the year ended 31 December 2023. DIRECTORS The names and particulars of the Directors of the Company in office during the year and up to the date of this report were as follows. Directors were in office for the entire year unless otherwise stated. Ian Tchacos B.Eng (Mech.) Executive Chairman (Appointed 2 March 2010) Mr Tchacos was appointed as Non-Executive Chairman of ADX on 2 March 2010 and appointed as Executive Chairman on 28 September 2015. He is a Petroleum Engineer with over 40 years international experience in corporate development and strategy, mergers and acquisitions, petroleum exploration, development and production operations, commercial negotiation, oil and gas marketing and energy finance. He has a proven management track record in a range of international oil company environments. As Managing Director of Nexus Energy, he was responsible for this company’s development from an onshore micro-cap explorer to an ASX top 200 offshore producer and operator. Mr Tchacos is a recipient of the RIU Good Oil Conference John Doran Lifetime Achievement Award. The award is presented annually to recognise an individual with an outstanding long-term record of achievement in the Australian oil and gas industry. Other directorships of listed companies in the last three years: 3D Oil Limited (current). Paul Fink MSc (Geophysics) Executive Director (Appointed 25 February 2008) Mr Fink has over 35 years of petroleum exploration and production industry experience in technical and management positions. He is a graduate from the Mining University of Leoben, Austria and started his career as a seismic data processing geophysicist and then worked predominantly on international exploration and development projects and assignments in Austria, Libya, Bulgaria, UK, Australia and Pakistan as Exploration and Reservoir Manager for OMV. In 2005, Paul started his own petroleum consultancy working on projects in Romania and as Vice President for Focus Energy, leading their highly successful exploration and development campaign in Western India. Paul was a key team member for the resulting highly successful IPO on the London Stock Exchange (Indus Gas) which led to a market capitalisation of over GBP 1.5 billion, partly due to third party reserves audits managed by Paul. Other directorships of listed companies in the last three years: Nil. Edouard Etienvre MSc (Management) Non-Executive Director (Appointed 7 January 2020) Mr Etienvre is an energy and natural resources executive and entrepreneur with over 15 years of experience in the oil and gas, mining, shipping and offshore facilities sectors initially with banks including sell-side equity research and reserve-based lending. More recently his experience has included positions with private and public E&P companies, ship owners and offshore facilities owners, mining companies and a mid-size trading group managing investments in companies active in the oil and gas sector. Mr Etienvre has extensive commercial, business development, risk assessment, management and project management experience and expertise including deal sourcing, transaction structuring and execution, commercial negotiations and financing including debt, equity, off-take finance, vendor finance and reverse take-overs. Other directorships of listed companies in the last three years: Nil. John Begg BSc (Geol) Non-Executive Director (Appointed 4 March 2024) Mr Begg is a highly experienced energy professional who has been instrumental in the discovery and commercialisation of numerous oil and gas fields in Australia, North Africa, SE Asia and California. During his career he has founded, promoted and held executive roles in a number of companies listed in Australia and the UK. John brings valuable strategic, technical and commercial support and guidance to the Board and management team. Like Mr Tchacos, Mr Begg has also been - 32 - ADX ENERGY LTD DIRECTORS’ REPORT awarded the RIU Good Oil Conference John Doran Lifetime Achievement Award (2018) for his outstanding long-term record of achievement in the Australian oil and gas industry. Other directorships of listed companies in the last three years: None. Andrew Childs BSc (Geology and Zoology) Non-Executive Director (Appointed 11 November 2009. RESIGNED 4 March 2024) Mr Childs graduated from the University of Otago, New Zealand in 1980 with a Bachelor of Science in Geology and Zoology. Having started his professional career as an Exploration Geologist in the Eastern Goldfields of Western Australia, Mr Childs moved to petroleum geology and geophysics with Perth based Ranger Oil Australia (later renamed Petroz NL). He gained technical experience with Petroz as a Geoscientist and later commercial experience as the Commercial Assistant to the Managing Director. Mr Childs is Chairman of Sacgasco Limited, Executive Chairman of Xstate Resources Limited and Managing Director of Petroleum Ventures Pty Ltd. Other directorships of listed companies in the last three years: Sacgasco Limited and Xstate Resources Limited (both current). COMPANY SECRETARIES Peter Ironside B.Com, CA Appointed 8 March 1995 Mr Ironside has a Bachelor of Commerce Degree and is a Chartered Accountant and business consultant with over 45 years’ experience in the exploration and mining industry. Mr Ironside has a significant level of accounting, financial compliance and corporate governance experience including corporate initiatives and capital raisings. Mr Ironside has been a Director and/or Company Secretary of several ASX listed companies including Integra Mining Limited and Extract Resources Limited (before $2.18bn takeover) and is currently a non-executive director of E79 Gold Mines Limited and Stavely Minerals Limited. Amanda Sparks B.Bus, CA, F.Fin Appointed 6 October 2015 Ms Amanda Sparks is a Chartered Accountant with over 35 years of resources related financial experience, with explorers and producers. Ms Sparks has extensive experience in company secretarial, financial management, capital raisings, corporate transactions, corporate governance and compliance for listed companies and is currently a non-executive director and Company Secretary of Stavely Minerals Limited, a non-executive director of Godolphin Resources Limited and Company Secretary for E79 Gold Mines Limited. MEETINGS OF DIRECTORS During the year, no formal board meetings were held. As the Board has two overseas directors, regular online management meetings were held, and all important resolutions agreed via circular resolutions: Name of Director I Tchacos P Fink E Etienvre A Childs Circular Board Resolutions 20 20 20 20 - 33 - ADX ENERGY LTD DIRECTORS’ REPORT DIRECTORS’ INTERESTS IN SHARES AND OPTIONS The following table sets out each director’s relevant interest in shares and options in shares of the Company as at the date of this report. Shares Ordinary fully paid shares Options Unlisted Options, Ex Price $Nil, Expiry 31/10/2024 Unlisted Options, Ex Price $0.16, Expiry 31/12/2024 Unlisted Options, Ex Price $Nil, Expiry 31/01/2025 Unlisted Options, Ex Price $Nil, Expiry 31/05/2025 Unlisted Options, Ex Price $Nil, Expiry 31/07/2025 Unlisted Options, Ex Price $Nil, Expiry 31/10/2025 Unlisted Options, Ex Price $Nil, Expiry 31/01/2026 Unlisted Options, Ex Price $0.17, Expiry 31/03/2026 Unlisted Options, Ex Price $Nil, Expiry 31/05/2026 Unlisted Options, Ex Price $Nil, Expiry 31/07/2026 Unlisted Options, Ex Price $Nil, Expiry 31/10/2026 Unlisted Options, Ex Price $Nil, Expiry 31/01/2027 Unlisted Options, Ex Price $Nil, Expiry 31/05/2027 Unlisted Options, Ex Price $Nil, Expiry 31/07/2027 Unlisted Options, Ex Price $Nil, Expiry 31/10/2027 Unlisted Options, Ex Price $Nil, Expiry 31/01/2028 Total Options I Tchacos P Fink E Etienvre J Begg 10,702,154 11,382,251 4,899,313 - 161,608 100,000 725,000 314,584 245,625 329,465 185,796 - 311,719 269,532 380,358 283,929 275,893 300,000 218,750 131,425 4,233,684 - 50,000 - - - - - - - - - - - - 113,451 - 163,451 - 50,000 - - - - - - - - - - - - - - 50,000 - - - - - - - 500,000 - - - - - - - - 500,000 CORPORATE INFORMATION Corporate Structure ADX Energy Ltd is a limited liability company that is incorporated and domiciled in Australia. ADX Energy Ltd has prepared a consolidated financial report incorporating the entities that it controlled during the year as follows: - ADX Energy Ltd - AuDAX Energy Srl - Bull Petroleum Pty Ltd - Terra Energy Limited ADX VIE GmbH - Danube Petroleum Limited - - ADX Energy Panonia Srl - Kathari Energia Limited - Kathari Energia GmbH parent entity 100% owned Italian controlled entity 100% owned Australian controlled entity (dormant) 100% owned UK controlled entity Terra Energy Limited owns 100% of this Austrian controlled entity 49.18% owned UK controlled entity Danube Petroleum Limited owns 100% of this Romanian controlled entity 100% owned UK controlled entity Kathari Energia Limited owns 100% of this Austrian controlled entity Principal Activity The principal activities of the Group during the year were oil and gas production, appraisal and exploration. Operations review Refer to the Operations Review preceding this report. - 34 - ADX ENERGY LTD DIRECTORS’ REPORT Summary of Financial Position, Asset Transactions and Corporate Activities A summary of key financial indicators for the Group, with prior year comparison, is set out in the following table: Cash and cash equivalents held at year end Net profit/(loss) for the year after tax Non-controlling interest in loss for the year Included in loss for the year: Operating revenue Cost of sales – operating costs Cost of sales – depreciation/amortisation Restoration expenses – changes in abandonment provision Dry well costs Impairment expenses Exploration expensed Basic profit/(loss) per share from continuing operations Net cash from/(used in) operating activities Net cash from/(used in) investing activities Net cash from/(used in) financing activities Production in Austria was as follows: Crude Oil Sold (Barrels)* Gas Sold (Boe) Total Oil Equivalent (Boe) Consolidated Consolidated 31 December 2023 31 December 2022 $ 8,007,441 (4,209,715) (145,506) 13,178,208 (9,309,549) (2,281,358) (970,159) (1,638,550) - (1,787,750) (1.12) (2,916,480) 456,607 6,768,031 $ 3,569,631 (2,437,874) (133,611) 14,452,734 (7,451,979) (2,351,874) (888,944) - (817,122) (2,105,903) (0.72) cents 3,636,599 (4,829,609) (1,189,792) 31 December 2023 102,614 31 December 2022 75,839 8,062 110,676 12,309 88,148 * Crude oil sold represents total gross production. This includes 29,801 crude oil barrels sold from the Anshof-3 well for the year ended 31 December 2023 (2022: 6,483). Refer to note 25 of the financial statements for partnership details for the Anshof-3 well. - 35 - ADX ENERGY LTD DIRECTORS’ REPORT Funds from Farmouts and Partners During the year, the following funds were received from partners: - On 24 March 2023, ADX received EUR 228,460 (A$ 387,722) from MCF in accordance with the Energy Investment Agreement dated 28 November 2022 as payment for past costs relating to the Welchau prospect and the Molln appraisal opportunity. - On 6 July 2023, EUR 58,972 (A$ 96,659) was received from MCF Energy Ltd. For study costs in relation to the Welchau prospect. - On 13 September 2023, a total of EUR 1,932,353 (A$ 3,167,272) for past costs and long lead drilling expenditures was received from MND Austria a.s. (MND) to secure a 30% economic interest in the Anshof Field within the ADX- AT-II licence in Upper Austria. In November and December 2023, ADX received a total of EUR 1,550,268 (A$ 2,508,118) for Anshof-2 drilling expenditures and permanent production facilities was received from MND Austria a.s. (MND). - Loan Repayments During the year, $613,491 of bank loans were repaid in Austria (refer to note 12 of the financial statements). Loan Notes On 11 July 2023, ADX announced that it had secured A$1.5 million in loan note funding for the ongoing pre-investment in equipment and services to drill up to 4 wells, as well as engineering and services for the installation of a permanent production facility to replace an early production unit currently in operation at the Anshof-3 production well. A total of 30 loan notes of A$ 50,000 each totalling A$ 1.5 million (Loan Notes) were issued to a small number of supportive existing shareholders and new sophisticated investors. The terms for the Loan Notes are summarised as follows: Face Value of Each Loan Note Number of Loan Notes Issued Total Loans aggregate amount Loan Term Interest Rate per annum (payable quarterly in arrears) Free Attaching Unlisted Options with an Exercise Price of $0.1, expiring 11 January 2025 Free Attaching Unlisted Options with an Exercise Price of $0.14, expiring 11 January 2025 * Post-consolidated amounts Loan Note A $50,000 20 $1,000,000 18 Months (11 January 2025) 8% 150,000 Options per Loan Note (3,000,000 in Total) 150,000 Options per Loan Note (3,000,000 in Total) Loan Note B $50,000 10 $500,000 18 Months (11 January 2025) 12% - Total Loan Notes $50,000 30 $1,500,000 18 Months (11 January 2025) 8-12% Total of 3,000,000 Options* 215,000 Options per Loan Note Total of 5,150,000 Options* (2,150,000 in Total) Additional Hedging On 27 July 2023, ADX executed further hedging transactions with Britannic Trading Limited (a trading entity of BP) with the following additional derivative financial instruments:  Fixed price swaps for 15,810 barrels of oil at a fixed Brent crude oil price for August 2023 to December 2023 at USD 81.45 per barrel. Subsequent to year end, on 26 January 2024, ADX executed further hedging transactions with Britannic Trading Limited with a:  Fixed price swap contract for 8,400 barrels of oil at a fixed Brent crude oil price for February 2024 to May 2024 inclusive of USD 80.00 per barrel. The quantity of hedged oil equates to approximately 70 BOPD during that period. - 36 - ADX ENERGY LTD DIRECTORS’ REPORT Consolidation of Capital On 29 August 2023, ADX announced that a General Meeting would be held on Thursday 28 September 2023, to consolidate the issued capital of the Company through the conversion of every ten (10) existing Shares into one (1) Share (Consolidation). ADX previously had long history (over 25 years) originating as a gold and base metal company before becoming an Energy company. Consolidation was proposed by the Company in order to reduce the number of Shares on issue as the Board considered it appropriate for ongoing growth with a capital structure that is more in line with ADX’ size, peer group companies and the increasing European shareholder presence on the Company’s share register. Upon receiving Shareholders approval, the capital consolidation was completed, with an effective date of 28 September 2023. Placement Raising $ 4.8 million In November 2023, ADX advised it had successfully raised $ 4.8 million from placements totalling 48,000,000 shares at a price of $ 0.10 per share to sophisticated, institutional and professional investors. One (1) free attaching unlisted option was issued for every two (2) Placement Shares. The exercise price of the Placement Options is $ 0.16 with an expiry date of 31 December 2024. The funds raised from the Placement and the Securities Purchase Plan will be applied to near term activities of the Company, which included funding of the Company’s increased economic interest in the recently completed Anshof-2 Appraisal Well, the installation of permanent production facilities at Anshof to enable increased production from the Anshof-3 and Anshof-2 Wells as well as funding for the Company’s share of the Welchau-1 Exploration Well. Securities Purchase Plan (SPP) Raising $ 1.578 million On 22 November 2023, eligible Shareholders (SPP Participants) were invited to participate in a Securities Purchase Plan Offer at $ 0.10 per Share. This was the same price as the offer price under the Placement. SPP Participants also received one free-attaching unquoted option to acquire a Share for every two SPP Shares issued. The SPP Options are exercisable on the same terms as the Placement Options. A total of 15,780,000 SPP Shares and 7,640,000 SPP Options were issued on 22 December 2023, and the final 250,000 SPP Options were issued on 22 February 2024. Unmarketable Parcel Share Sale Facility On 24 February 2023, ADX announced that it has completed the unmarketable parcel share sale facility (Facility) for shareholders who held less than A$ 500 worth of fully paid ordinary shares in the Company (Unmarketable Parcel), as announced on ASX on 19 December 2022. Consideration totalled $193,541.56 ($0.00758712 per share, based on a pre- consolidation basis). DIVIDENDS No dividends were paid or declared during the year. The Directors do not recommend payment of a dividend. ENVIRONMENTAL ISSUES The Company’s environmental obligations are regulated by the laws of the countries in which ADX has operations. The Company has a policy to either meet or where possible, exceed its environmental obligations. No environmental breaches have been notified by any governmental agency as at the date of this report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Company during the year are detailed in the Operations Report and Financial Summary in this report. FUTURE DEVELOPMENTS The Company intends to continue its production operations in Austria and continue its’ exploration and development programme on its existing permits, and to acquire further suitable permits for exploration and development. Additional comments on likely developments are included in the Operations Report. - 37 - ADX ENERGY LTD DIRECTORS’ REPORT SHARES UNDER OPTION Unissued ordinary shares of the Company under option at the date of this report are as follows: Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Total Options Number 13,231,674 161,608 31,865,000 3,000,000 5,150,000 725,000 6,350,000 314,584 245,625 500,000 329,465 185,796 311,719 269,532 380,358 283,929 275,893 300,000 332,291 131,425 64,343,899 Exercise Price 13 cents Nil cents 16 cents 10 cents 14 cents Nil cents 17 cents Nil cents Nil cents 17 cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Expiry Date 10/08/2024 31/10/2024 31/12/2024 11/01/2025 11/01/2025 31/01/2025 30/04/2025 31/05/2025 31/07/2025 31/03/2026 31/10/2025 31/01/2026 31/05/2026 31/07/2026 31/10/2026 31/01/2027 31/05/2027 31/07/2027 31/10/2027 31/01/2028 No option holder has any right under the options to participate in any other share issue of the Company or any other related entity. 2,580,756 (pre-consolidation 25,707,560) unlisted options with an exercise price of nil were exercised by Directors during the year. INDEMNIFICATION AND INSURANCE OF OFFICERS The Company has paid a premium to insure the Directors and Officers of the Company and its controlled entities. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the group. - 38 - ADX ENERGY LTD DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) The Directors present the 2023 Remuneration Report, outlining key aspects of ADX’ remuneration policy and framework, together with remuneration awarded this year. The report is structured as follows: A. Key management personnel (KMP) covered in this report B. Remuneration policy, link to performance and elements of remuneration C. Contractual arrangements of KMP remuneration D. Remuneration awarded E. Equity holdings and movement during the year F. Other transactions with key management personnel G. Use of remuneration consultants H. Voting of shareholders at last year’s annual general meeting A. KEY MANAGEMENT PERSONNEL COVERED IN THIS REPORT For the purposes of this report key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise). Key Management Personnel during the Year Directors Ian Tchacos Paul Fink Edouard Etienvre Andrew Childs Other KMPs Amanda Sparks - - - - - Executive Chairman Executive Director Non-Executive Director Non-Executive Director Company Secretary and Chief Financial Officer B. REMUNERATION POLICY, LINK TO PERFORMANCE AND ELEMENTS OF REMUNERATION The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders. The Board ensures that executive reward satisfies the following key criteria for good reward corporate governance practices:  Competitiveness and reasonableness; Acceptability to shareholders; Transparency; and Capital management.    Remuneration Philosophy The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and Executives. To this end, the Company embodies the following principles in its remuneration framework:   provide competitive rewards to attract high calibre Executives; and if required, establish appropriate, demanding performance hurdles in relation to variable Executive remuneration. The Group has structured an executive framework that is market competitive and complementary to the reward strategy for the organisation. - 39 - ADX ENERGY LTD DIRECTORS’ REPORT Both Executive and Non-Executive Directors may elect, subject to Shareholder approval, to reduce their cash director fees and consulting fees in lieu of Shares in accordance with the Company’s Directors’ Share Plan (Salary Sacrifice). The Shares are issued on a quarterly basis according to the Directors’ fees owing to each of the Directors at that time, at an issue price of no less than the volume weighted average sale price of Shares sold on ASX during the 90 days prior to the expiration of the corresponding calendar quarter in which the Directors’ fees were incurred. The Executive Directors may also elect, subject to Shareholder approval, to reduce their cash consulting fees in lieu of Options in accordance with the Company’s Performance Rights and Option Plan. The Options are issued on a quarterly basis according to the consulting fees owing to each of the Directors at that time, using a deemed price of no less than the volume weighted average sale price of Shares sold on ASX during the 90 days prior to the expiration of the corresponding calendar quarter in which the consulting fees were incurred. Remuneration Committee Due to the limited size of the Company and of its operations and financial affairs, the use of a separate remuneration committee is not considered efficient for ADX. The Board has taken a view that the full Board will hold special meetings or sessions as required. The Board are confident that this process for determining remuneration is stringent and full details of remuneration policies and payments are provided to shareholders in the annual report and on the web. The Board has adopted the following policies for Directors’ and executives’ remuneration. Non-Executive directors’ remuneration Non-executive Directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. Retirement payments, if any, are agreed to be determined in accordance with the rules set out in the Corporations Act as at the time of the Director’s retirement or termination. Non-executive Directors’ remuneration may include an incentive portion consisting of options or similar instruments, as considered appropriate by the Board, which may be subject to shareholder approval in accordance with ASX listing rules. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers the amount of Director fees being paid by comparable companies with similar responsibilities and the experience of the Non-executive Directors when undertaking the annual review process. Fees for Non-Executive directors are not linked to the performance of the Group. Executive Remuneration In determining the level and make-up of Executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Remuneration is compared with the external market by reviewing industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable Executive roles. Remuneration consists of a fixed remuneration and may include a long term incentive portion as considered appropriate. Executives remuneration is currently a fixed consulting fee based on a daily rate for actual days worked. Long term incentives granted to Executives are delivered in the form of options. The option incentives granted are aimed to motivate Executives to pursue the long term growth and success of the Company within an appropriate control framework and demonstrate a clear relationship between key Executive performance and remuneration. Director options are granted at the discretion of the Board and approved by shareholders. Performance hurdles are not attached to vesting periods; however the Board may determine appropriate vesting periods to provide rewards over a period of time to key management personnel. During the year there were no performance related payments made. C. CONTRACTUAL ARRANGEMENTS OF KMP REMUNERATION On appointment to the board, all Non-Executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the board policies and terms, including compensation, relevant to the office of director. Non-Executive Directors are paid a fee of A$ 33,000 per annum, inclusive of any superannuation if applicable. In accordance with the Company’s Directors’ Share Plan (Salary Sacrifice), part may be paid in cash, and part in shares. - 40 - ADX ENERGY LTD DIRECTORS’ REPORT Remuneration and other terms of employment for the Executive Directors and the other key management personnel are also formalised in consultancy agreements. The major provisions of the agreements relating to remuneration are set out below. Name I Tchacos – Executive Chairman – Technical Consultancy I Tchacos – Executive Chairman – Corporate Consultancy Term of agreement Term of 2 years commencing 1 July 2020. Subsequently monthly. Ongoing P Fink – Executive Director – Consultancy with ADX Energy Ltd Term of 2 years commencing 1 July 2020. Subsequently monthly. P Fink – Executive Director – Consultancy with ADX VIE GmbH E Etienvre – Non-Executive Director – Consultancy with ADX Energy Ltd No written agreement Term of 2 years commencing 1 July 2020. Subsequently monthly. Amanda Sparks – Company Secretary and Chief Financial Officer Ongoing Base annual remuneration inclusive of superannuation at 31/12/23 Technical consulting - $1,500 per day (cash) Termination benefit 2 months (up to $18,000) Corporate consulting - $500/month (cash) plus options subject to Board and Shareholder approval for additional work at a value of $1,500 per day 2 months (up to $18,000) In addition, I Tchacos receives Directors fees of $25,000 pa. 80% paid in cash, 20% paid in equity (subject to Shareholder approval) Retainer of $500 per month (cash) plus consulting at $1,500 per day (50% cash and 50% equity (options), subject to shareholder approval) Whilst P Fink is on a leave of absence due to an illness, the Board has agreed to temporarily increase the monthly retainer to $15,000. In addition, P Fink receives Directors fees of $25,000 pa. 80% paid in cash, 20% paid in equity (subject to Shareholder approval). Whilst P Fink is on a leave of absence due to an illness, the Board has agreed to pay these directors fees 100% in cash. Consulting at EUR 900 per day 2 months (up to $18,000) None Consulting at $1,500 per day (50% cash and 50% equity (shares), subject to shareholder approval) 1 month (up to $7,500) In addition, E Etienvre receives non-executive Directors fees of $33,000 pa. 61% paid in cash, 39% paid in equity (subject to Shareholder approval). E Etienvre also receives Director fees from 49% owned subsidiary, Danube Petroleum Limited of GBP 12,000 per annum Monthly retainer of $3,200, 50% paid in cash and 50% paid in equity. Additional hours above 20 hours per month are paid in cash at $160 per hour. None - 41 - ADX ENERGY LTD DIRECTORS’ REPORT D. REMUNERATION OF KEY MANAGEMENT PERSONNEL Details of the remuneration of each Director and named executive officer of the Company, including their personally-related entities, during the year was as follows: 2023 Directors I Tchacos P Fink E Etienvre A Childs Other KMP A Sparks TOTAL 2023 Cash salary, directors fees and consulting fees, including accruals* $ 347,679 358,002 197,767 29,797 80,640 1,013,885 Post-Employment Share Based Share Based Share Based Superannuation $ Shares (in lieu of cash fees) (1) $ Options (in lieu of cash consulting fees) (1) $ Options (employee incentive plan) (2) $ 3,009 - - 3,203 10,221 16,433 3,750 3,750 124,617 - 14,400 146,517 60,000 37,828 - - - 97,828 Total $ 414,438 399,580 322,384 33,000 - - - - 41,600 41,600 146,861 1,316,263 (1) Share based payments. These represent the amount expensed in the year for Shares and Options in lieu of cash consulting fees. (2) Share based payments. These represent the amount expensed for options granted and vested in the year. * Includes accruals of fees paid subsequent to year end via equity. 2022 Post-Employment Share Based Share Based Cash salary, directors fees and consulting fees, including accruals $ Superannuation $ Shares (in lieu of cash fees) $ Options (in lieu of cash consulting fees) $ Directors I Tchacos P Fink E Etienvre A Childs Other KMP A Sparks TOTAL 2022 318,743 345,221 228,564 29,932 62,680 985,140 2,952 - - 3,143 8,093 14,188 3,750 3,750 74,677 - 14,400 96,577 73,125 51,609 - - - 124,734 Total $ 398,570 400,580 303,241 33,075 85,173 1,220,639 There were no performance related payments made during the year. Performance hurdles are not attached to remuneration options. - 42 - ADX ENERGY LTD DIRECTORS’ REPORT Share-based Compensation Shares: The Company’s Directors’ Share Plan (Salary Sacrifice), allows for shares to be issued on a quarterly basis according to the Directors’ fees owing to each of the Directors at that time, at an issue price of no less than the volume weighted average sale price of Shares sold on ASX during the 90 days prior to the expiration of the corresponding calendar quarter in which the Directors’ fees were incurred. The shares are issued after Shareholder approval. The following shares were granted as equity compensation benefits (in lieu of cash remuneration) to Directors during the year. Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Date Issued 24/01/2023 26/05/2023 26/05/2023 21/08/2023 22/11/2023 Number of Shares 35,714 897,140 640,959 677,120 442,795 2,693,728 Value based on 90 Day VWAP $ 2,500 62,800 44,867 47,398 39,852 197,417 In lieu of part remuneration for the quarter ended 31/12/2022 2022 Year 31/03/2023 30/06/2023 30/09/2023 Issued Subsequent to Year End 02/02/2024 214,660 22,969 31/12/2023 Summarised as: Director Ian Tchacos Paul Fink Edouard Etienvre Andrew Childs Issued during the year 2023 Number of Shares 67,460 67,460 2,558,808 - 2,693,728 2023 $ 5,000 5,000 187,417 - 197,417 The following shares were granted as equity compensation benefits (in lieu of cash remuneration) to other KMPs (Amanda Sparks) during the year. Date Issued 24/01/2023 26/05/2023 21/08/2023 22/11/2023 Number of Shares 68,571 68,571 68,571 53,333 259,046 Value based on 90 Day VWAP $ 4,800 4,800 4,800 4,800 19,200 In lieu of part remuneration for the quarter ended 31/12/2022 31/03/2023 30/06/2023 30/09/2023 Issued Subsequent to Year End 02/02/2024 44,859 4,800 31/12/2023 - 43 - ADX ENERGY LTD DIRECTORS’ REPORT Options: The Executive Directors may also elect, subject to Shareholder approval, to reduce their cash consulting fees in lieu of Options in accordance with the Company’s Performance Rights and Option Plan. The Options are issued on a quarterly basis according to the consulting fees owing to each of the Directors at that time, using a deemed price of no less than the volume weighted average sale price of Shares sold on ASX during the 90 days prior to the expiration of the corresponding calendar quarter in which the consulting fees were incurred. The following options were granted as equity compensation benefits (in lieu of cash remuneration) to Directors during the year. Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Date Issued 24/01/2023 26/05/2023 21/08/2023 22/11/2023 Number of Options 514,955 470,759 499,554 332,291 1,817,560 Value based on 90 Day VWAP $ 36,047 32,953 34,969 29,906 133,875 In lieu of part remuneration for the quarter ended 31/12/2022 31/03/2023 30/06/2023 30/09/2023 Issued Subsequent to Year End 02/02/2024 131,425 14,062 31/12/2023 Summarised as: Director Ian Tchacos Paul Fink 2023 Number of Options 1,078,572 738,988 1,817,560 2023 $ 79,875 54,000 133,875 During the year the following options were granted as equity compensation benefits to Key Management Personnel. These options vested at grant date. 2023 Other KMP A Sparks Number of Options Exercise price 17 cents, expiry 30/04/2025 Value* per option at grant date $ 1,000,000 0.0416 These options were granted under ADX’s Employee Incentive Plan. * Value at grant date has been calculated in accordance with AASB 2 Share-based Payment. Stavely used a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Further details are in note 3 of the financial statements. The inputs to the model used were: Grant date Spot price ($) Exercise price ($) Vesting date Expiry date Expected future volatility (%) Risk-free rate (%) Dividend yield (%) Value Each ($) 21/11/2023 0.115 0.17 21/11/2023 30/04/2025 100 4.01 - 0.0416 - 44 - ADX ENERGY LTD DIRECTORS’ REPORT No other options were granted as equity compensation benefits to Directors and other Key Management Personnel. Shares issued to Key Management Personnel on exercise of compensation options During the year to 31 December 2023, 2,580,757 compensation options (post-consolidation) were exercised by Directors or other Key Management Personnel (2022: 23,250,146 pre-consolidation). A summary of options exercised by Directors is as follows: Ian Tchacos Unlisted Options Paul Fink Unlisted Options Total exercised Number Exercise Price 1,207,813 Nil cents 1,372,944 2,580,757 Nil cents E. EQUITY HOLDINGS AND MOVEMENTS DURING THE YEAR Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. (a) Shareholdings of Key Management Personnel Balance at beginning of the year Options exercised Granted as remuneration Share Purchase Plan Balance at end of the year Directors I Tchacos P Fink E Etienvre A Childs Other KMPs A Sparks 8,865,199 1,207,813 9,841,847 1,372,944 2,037,527 2,538,852 3,298,873 - - - 67,460 67,460 2,558,808 - 200,000 10,340,472 100,000 11,382,251 100,000 100,000 4,696,335 2,638,852 259,046 300,000 3,857,919 26,582,298 2,580,757 2,952,774 800,000 32,915,829 (b) Option holdings of Key Management Personnel Balance at beginning of the year Granted as remuneration Share Purchase Plan Options Loan Note Options Options exercised Balance at end of the year Not exercisable Exercisable Directors I Tchacos P Fink E Etienvre A Childs Other KMPs 4,481,500 1,078,572 747,497 738,988 - - - - - - - A Sparks 359,525 1,000,000 5,588,522 2,817,560 150,000 150,000 - - - 430,000 (1,207,813) 4,352,259 (1,372,944) 113,541 - - - - - 1,939,525 430,000 (2,580,757) 6,405,325 - - - - - 4,352,259 113,541 - - 1,939,525 6,405,325 F. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL There were no other transactions with key management personnel during the year. - 45 - ADX ENERGY LTD DIRECTORS’ REPORT G. USE OF REMUNERATION CONSULTANTS No remuneration consultants were engaged by ADX during the year. H. VOTING OF SHAREHOLDERS AT LAST YEAR’S ANNUAL GENERAL MEETING The Company received more than 99.5% of “yes” votes on its Remuneration Report for the 2022 year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. END OF THE AUDITED REMUNERATION REPORT SUBSEQUENT EVENTS Equity Issues in Lieu of Remuneration On 2 February 2024, ADX issued the following shares and options. These amounts were accrued in the 31 December 2023 financial statements: a. b. c. 214,660 shares issued pursuant to ADX’ Directors’ Share Plan, approved by Shareholders on 12 May 2023. The shares were issued to directors in consideration of remuneration elected to be paid in shares for the quarter ended 31 December 2022 ($22,969). 44,859 shares issued to ADX’s Company Secretaries and consultants in consideration of remuneration elected to be paid in shares for the quarter ended 31 December 2023 ($4,800). 131,425 Options granted to Director Ian Tchacos, as approved by Shareholders on 12 May 2023. The options were granted in consideration of consultancy fees remuneration elected to be paid in options for the quarter ended 31 December 2023 (value $14,062). The options have a nil exercise price and expire on 31 January 2028. On 25 March 2024, 9,968,337 unlisted options were exercised raising $1,296,634. There are no other matters or circumstances that have arisen since 31 December 2023 that have or may significantly affect the operations, results, or state of affairs of the Group in future years. CORPORATE GOVERNANCE The Directors of the Company support and adhere to the principles of corporate governance, recognising the need for the highest standard of corporate behaviour and accountability. Please refer to the Company’s website for details of corporate governance policies: http://adx-energy.com/en/investors/corporate-governance.php AUDIT INDEPENDENCE AND NON-AUDIT SERVICES Auditor’s independence - section 307C The Auditor’s Independence Declaration is included on page 47 of this report. Non-Audit Services There were no non-audit services provided during the year. Signed in accordance with a resolution of the Directors. Ian Tchacos Executive Chairman Dated this 28th day of March 2024 - 46 - AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 In.Corp Audit & Assurance Pty Ltd ABN 14 129 769 151 To the directors of ADX Energy Ltd: As lead auditor of the audit of ADX Energy Ltd for the year ended 31 December 2023, I declare that, to the best of my knowledge and belief, there have been: • no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of ADX Energy Ltd and the entities it controlled during the year. In.Corp Audit & Assurance Pty Ltd Level 1 6-10 O’Connell Street SYDNEY NSW 2000 Suite 11, Level 1 4 Ventnor Avenue WEST PERTH WA 6005 GPO BOX 542 SYDNEY NSW 2001 T +61 2 8999 1199 E team@incorpadvisory.au W incorpadvisory.au Graham Webb Director 28 March 2024 Liability limited by a scheme approved under Professional Standards Legislation ADX ENERGY LTD DIRECTORS’ DECLARATION 1. In the opinion of the directors: a) The financial statements and notes are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s financial position as at 31 December 2023 and of its performance for the year then ended; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and iii) complying with International Financial Reporting Standards (IFRS) as stated in note 1 of the financial statements; and b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the year ended 31 December 2023. This declaration is signed in accordance with a resolution of the Board of Directors. Ian Tchacos Executive Chairman Dated this 28th day of March 2024 - 48 - CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023 ADX ENERGY LTD Operating revenue Cost of sales Gross profit Other income Other Expenses: Administration, staff and corporate expenses, net of recoveries from projects (including share based payments) Exploration expensed Restoration expenses – changes in abandonment provision Dry well costs Impairment of wells Finance costs Loss on disposal of plant and equipment Total other expenses Loss before income tax Income tax benefit/(expense) LOSS AFTER INCOME TAX Loss is attributable to: Owners of ADX Energy Ltd Non-Controlling Interest Consolidated Year ended 31 Dec 2023 $ 13,178,208 (11,865,367) 1,312,841 Year ended 31 Dec 2022 $ 14,452,734 (8,891,910) 5,560,824 Note 2 2 2 3,628,457 5,057 2 (4,895,548) (3,598,107) 14 9 9 2 (1,787,750) (2,105,903) (970,159) (881,944) (1,638,550) - (244,439) (4,418) - (817,122) (210,437) (1,211) (9,540,864) (7,614,724) (4,599,566) (2,048,843) 4 389,851 (389,031) (4,209,715) (2,437,874) (4,064,209) (145,506) (2,304,263) (133,611) 17 (4,209,715) (2,437,874) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Hedge accounting Income tax relating to items of other comprehensive income/(loss) 18 Other comprehensive income for the year, net of tax 240,499 - - 240,499 139,731 107,389 - 247,120 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (3,969,216) (2,190,754) Total comprehensive income is attributable to: Owners of ADX Energy Ltd Non-Controlling Interest (3,699,668) (269,548) (2,093,716) (97,038) (3,969,216) (2,190,754) Earnings per share for loss attributable to the ordinary equity holders of the Company: Basic loss per share 5 Cents Per Share (1.12) Cents Per Share (0.72) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. - 49 - ADX ENERGY LTD CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023 Consolidated 31 December 2023 $ 31 December 2022 $ Note ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets Non-Current Assets Other receivables Oil and gas properties Right of use assets Deferred tax assets Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Borrowings Lease liabilities – right of use assets Current tax liabilities Provisions Total Current Liabilities Non-Current Liabilities Borrowings Lease liabilities – right of use assets Provisions Total Non-Current Liabilities Total Liabilities Net Assets 6 7 8 7 9 10 4 11 12 13 4 14 12 13 14 Equity Issued capital Reserves Accumulated losses Capital and reserves attributable to owners of ADX Energy Ltd Non-controlling interests 15 16 17 Total Equity 8,007,441 3,421,979 2,255,367 13,684,787 3,569,631 2,090,945 883,199 6,543,775 1,104,192 25,145,587 1,209,783 1,490,803 1,137,797 23,675,687 239,640 1,066,393 28,950,365 26,119,517 42,635,152 32,663,292 5,136,865 609,394 105,644 - 241,701 6,093,604 2,336,041 592,336 130,761 233,807 347,640 3,640,585 1,403,067 1,110,752 18,286,204 592,336 156,025 15,875,114 20,800,023 16,623,475 26,893,627 20,264,060 15,741,525 12,399,232 90,503,290 5,399,490 (88,273,347) 7,629,433 8,112,092 84,105,646 4,121,084 (84,209,138) 4,017,592 8,381,640 15,741,525 12,399,232 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. - 50 - ADX ENERGY LTD CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023 Issued Capital $ Reserves $ Accumulated Losses $ Non- controlling Interest Total Equity $ At 1 January 2022 81,435,632 3,675,722 (81,904,875) 8,478,678 11,685,157 Loss for the year Other comprehensive income Total comprehensive income for the year, net of tax Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Share based payments - - - - (2,304,263) (133,611) (2,437,874) 210,547 - 36,573 247,120 210,547 (2,304,263) (97,038) (2,190,754) 2,911,133 (241,119) - - - 234,815 2,670,014 234,815 - - - - - - - - 2,911,133 (241,119) 234,815 2,904,829 As at 31 December 2022 84,105,646 4,121,084 (84,209,138) 8,381,640 12,399,232 At 1 January 2023 84,105,646 4,121,084 (84,209,138) 8,381,640 12,399,232 Loss for the year Other comprehensive income Total comprehensive income for the year, net of tax Transactions with owners in their capacity as owners: Issue of share capital Cost of issue of share capital Share based payments – options and performance rights - - - - (4,064,209) (145,506) (4,209,715) 364,541 - (124,042) 240,499 364,541 (4,064,209) (269,548) (3,969,216) 6,714,188 (316,544) - - - 913,865 6,397,644 913,865 - - - - - - - - 6,714,188 (316,544) 913,865 7,311,509 As at 31 December 2023 90,503,290 5,399,490 (88,273,347) 8,112,092 15,741,525 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. - 51 - ADX ENERGY LTD CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023 Cash flows from operating activities Receipts in the ordinary course of activities Payments to suppliers and employees, including for exploration expensed Government subsidies received Interest received Interest paid Income taxes paid Consolidated Year ended 31 Dec 2023 $ Year ended 31 Dec 2022 $ Note 14,674,462 15,385,930 (17,286,768) (12,837,726) - 3,760 (58,564) (249,370) 1,236,230 5,057 (152,892) - Net cash flows from/(used in) operating activities 6(i) (2,916,480) 3,636,599 Cash flows from investing activities Payments for oil and gas properties Payments for exploration appraisal/development Receipts from exploration partners and farmouts Funds received on behalf of partner Funds paid on behalf of partner Other payments Net cash flows from/(used in) investing activities Cash flows from financing activities Proceeds from issue of shares and options Payment of share issue costs Repayment of loan notes Proceeds from loan notes Repayment of bank loans Cash secured for permits Payment of lease liabilities (right of use assets) Net cash flows from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents held Net foreign exchange differences Add opening cash and cash equivalents brought forward (5,090,328) (5,765,139) (129,153) 5,999,966 - - (323,878) 456,607 (139,854) 1,213,443 107,999 (181,253) (64,805) (4,829,609) 6,378,000 (316,544) 2,550,000 (140,300) - (2,625,000) 1,500,000 (613,491) - (179,934) 6,768,031 - (629,614) (227,151) (117,727) (1,189,792) 4,308,158 (2,382,802) 129,652 3,569,631 13,916 5,938,517 Closing cash and cash equivalents at the end of the year 6 8,007,441 3,569,631 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. - 52 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 1 – SUMMARY OF MATERIAL ACCOUNTING POLICIES (i) Basis of Preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis. ADX Energy Ltd is a for-profit entity for the purpose of preparing the financial statements. The financial report is presented in Australian dollars, which is the group’s presentation currency. Functional and presentation currency The functional currency of the parent entity is Australian Dollars. ADX has identified Australian dollars as its functional currency on the basis that all fundraising is in Australian dollars (AUD), and loans to subsidiary companies are made from Australian dollars. ADX’s subsidiaries have the following functional currencies: AuDAX Energy Srl – EUR Bull Petroleum Pty Ltd – AUD Terra Energy Limited – GBP ADX VIE GmbH – EUR Danube Petroleum Limited – GBP ADX Energy Panonia Srl – EUR Kathari Energia Limited – GBP Kathari Energia GmbH – EUR The presentation currency of the Group is Australian dollars. Going Concern The financial statements have been prepared on the basis that the Company will continue to meet its commitments and can therefore continue normal business activities and realise assets and settle liabilities in the ordinary course of business. As a producer in Austria, the Group expects to generate cash flows, however with a focus on exploration and development in other parts of Europe, the Group may need additional cash flows to finance these activities. As a consequence, the ability of the Company to continue as a going concern may require additional capital fundraising, farmouts of projects or other financing opportunities. The Directors believe that the Company will continue as a going concern. As a result the financial statements have been prepared on a going concern basis. However, should fundraising, farmouts or any alternative financing opportunities be unsuccessful, the Company may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of liabilities that might be necessary should the Company not continue as a going concern. (ii) Statement of Compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). - 53 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 1 – SUMMARY OF MATERIAL ACCOUNTING POLICIES - continued (iii) Adoption of new and revised standards Early adoption of accounting standards The Group has not elected to apply any pronouncements before their operative date in the annual reporting year beginning 1 January 2023. New and amended standards adopted by the Group There were no material new or amended standards implemented that had a material impact on the financial statements during the year. (iv) Significant Accounting Estimates and Judgements Significant accounting judgements In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements. Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting year are: Share-based payment transactions The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the value of the services, or a Black-Scholes option pricing model. Commitments - Exploration The Group has certain minimum exploration commitments to maintain its right of tenure of its permits. These commitments require estimates of the cost to perform exploration work required under these permits. Deferred Appraisal Costs The Group capitalises acquisition expenditure and appraisal costs relating to its permits where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the Directors are of the continued belief that such expenditure should not be written off since exploration activities in such areas have not yet concluded. Impairment of Oil and Gas Properties For oil and gas properties, the expected future cash flow estimation is based on a number of factors, variables and assumptions, the most important of which are estimates of reserves and resources, future production profiles, commodity prices, costs and foreign exchange rates. These estimates may impact any impairment calculations. - 54 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 1 – SUMMARY OF MATERIAL ACCOUNTING POLICIES - continued (iv) Significant Accounting Estimates and Judgements - continued Provision for Restoration and Rehabilitation Obligations associated with exploration, development and production assets are recognised when the Group has a present obligation, the future sacrifice of the economic benefits is probable, and the provision can be measured reliably. The determination of the provision requires significant judgement in terms of the best estimate of the costs of performing the work required, the timing of the cash flows and the appropriate discount rate. A change in any, or a combination of, the key assumptions used to determine the provision could have a material impact on the carrying value of the provision. On an ongoing basis, the restoration will be remeasured in line with the changes in the time value of money (recognised as an expense and an increase in the provision), and additional disturbances recognised as additions to the provision. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). Asset retirement obligation costs will be incurred by the Group at the end of the operating life of some of the Group’s facilities and properties. The Group assesses its asset retirement obligations provision at each reporting date. The ultimate asset retirement obligations costs are uncertain and cost estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing, extent and amount of expense can also change. Therefore, significant estimates and assumptions are made in determining the provision for asset retirement obligations. As a result, there could be significant adjustments to the provisions established which would affect future financial results. The provision at reporting date represents management’s best estimate of the present value of the future asset retirement obligations costs required. (v) Foreign currency translation The presentation currency of the Group is Australian Dollars. The functional currency of ADX Energy Ltd is Australian Dollars. ADX’s subsidiaries have the following functional currencies: Danube Petroleum Limited – GBP Bull Petroleum Pty Ltd – AUD Terra Energy Limited – GBP Kathari Energia Limited – GBP AuDAX Energy Srl – EUR ADX VIE GmbH – EUR ADX Energy Panonia Srl – EUR Kathari Energia GmbH – EUR Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted at the rate of exchange ruling at the balance sheet date. As at the reporting date the assets and liabilities of the subsidiaries are translated into the presentation currency of ADX Energy Ltd at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. - 55 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 2 –INCOME AND EXPENSES Revenue Revenue is recognised when or as the Group transfers control of goods or services to a customer at the amount to which the Group expects to be entitled. If the consideration promised includes a variable component, the Group estimates the expected consideration for the estimated impact of the variable component at the point of recognition and re-estimated at every reporting period. Revenue from the sale of oil and gas is recognised and measured in the accounting period in which the goods and/or services are provided based on the amount of the transaction price allocated to the performance obligations. The performance obligation is the supply of oil and gas over the contractual term; the units of supply represent a series of distinct goods that are substantially the same with the same pattern of transfer to the customer. The performance obligation is considered to be satisfied as the customer receives the supply through the pipeline, based on the units delivered. Hence revenue is recognised over time. Exploration, evaluation and appraisal expenditure Exploration expenditure is expensed to the profit or loss statement as and when it is incurred and included as part of cash flows from operating activities. Evaluation/appraisal and development expenditure is capitalised to the Statement of Financial Position as oil and gas properties. Evaluation/appraisal is deemed to be activities undertaken following a discovery from the beginning of appraisal and pre-feasibility studies conducted to assess the technical and commercial viability of extracting a resource before moving into the Development phase. The criteria for carrying forward the costs are: - Such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or - Evaluation activities in the area of interest which has not yet reached a state which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area are continuing. Costs carried forward in respect of an area of interest which is abandoned are written off in the year in which the abandonment decision is made. Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ Note OPERATING REVENUE Oil sales Gas sales Hedging gains/(losses), net Other operating revenue (including reimbursements) COST OF GOODS SOLD Operating costs Royalties Depreciation Amortisation of asset retirement obligation assets Partner share of ANS-3 operations 25 11,831,146 1,051,873 12,883,019 (109,679) 404,868 9,873,014 4,578,156 14,451,170 (630,812) 632,376 13,178,208 14,452,734 8,473,800 746,322 2,281,358 274,460 89,427 6,473,304 127,009 2,124,200 197,675 (30,278) 11,865,367 8,891,910 - 56 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ Note NOTE 2 –INCOME AND EXPENSES - continued OTHER INCOME: Income from farmouts - costs recoveries Option fee income Interest revenue Other OTHER EXPENSES – Administration and corporate expenses: Share based payments – in lieu of cash remuneration Share based payments – in lieu of other services Share based payments – performance rights and options Less: prior period accrued share based payments Add: accrued share based payments issued/to be issued after period end Net foreign exchange losses/(gains) Short term lease expenses Depreciation – right of use assets Defined contribution superannuation/pension expense Other administration, personnel and corporate expenses 3(a) Less: project cost recoveries OTHER EXPENSES – Finance costs: Interest expense Accretion Right of use assets – interest Share based payments – borrowing costs 3(a) 3,391,226 163,635 3,760 69,836 3,628,457 470,062 - 634,590 1,104,652 (140,335) 482,884 (84,892) 88,341 133,692 153,430 5,233,086 6,970,858 - - 5,057 - 5,057 429,665 42,000 23,463 495,128 (90,538) 140,334 44,033 39,553 115,517 118,719 3,928,520 4,791,266 (2,075,310) (1,193,159) 4,895,548 3,598,107 81,961 91,740 22,271 48,467 139,947 68,357 2,133 - 244,439 210,437 NOTE 3 – EQUITY-BASED PAYMENTS Equity settled transactions: The Group provides benefits to executive directors, employees and consultants of the Group in the form of share-based payments, whereby those individuals render services in exchange for shares or rights over shares (equity-settled transactions). When provided, the cost of these equity-settled transactions with these individuals is measured by reference to the fair value of the equity instruments at the date at which they are granted. - 57 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 3 – EQUITY-BASED PAYMENTS – continued The fair value of options is determined either using the Black-Scholes option pricing model, or in the case of consulting by directors, the number of options granted will be determined by dividing the Directors’ consulting fees that the Company has agreed to pay to the Related Parties via equity using a deemed price based on the volume weighted average sale price of Shares sold on ASX during the 90 days prior to the expiration of the corresponding calendar quarter in which the Directors’ consulting fees were incurred. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of ADX Energy Ltd (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant individuals become fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects: (i) (ii) (iii) the grant date fair value of the award; the extent to which the vesting period has expired; and the number of awards that, in the opinion of the Directors of the Company, will ultimately vest taking into account such factors as the likelihood of non-market performance conditions being met. This opinion is formed based on the best available information at reporting date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. If an equity-settled award is forfeited, any expense previously recognised for the award is reversed. However, if a new award is substituted for a cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. (a) Value of equity based payments in the financial statements Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ Note Expensed against issued capital: Share-based payments – Options in lieu of capital raising costs Share-based payments – Shares in lieu of capital raising costs Expensed in the profit and loss: Share-based payments – Employee Performance Rights and Options 3(b)(iv) Options issued in lieu of fees: Share-based payments – Options Issued to Directors 3(b)(ii) Shares issued in lieu of fees: Share-based payments – Shares Issued to Directors Share-based payments – Shares Issued to other KMPs Share-based payments – Shares Issued to consultants Share-based payments – Shares Issued for other services 3(b)(i) 3(b)(iii) 3(b)(iii) - - - 49,820 51,000 100,820 634,590 23,463 133,875 768,465 197,417 19,200 119,570 - 1,104,652 161,532 184,995 93,341 19,200 155,592 42,000 495,128 Options issued to loan note holders - Share-based payments – Borrowing costs 12 48,467 - - 58 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 3 – EQUITY-BASED PAYMENTS – continued (b) Summary of remuneration equity-based payments granted during the year: (i) Shares granted to Directors pursuant to ADX’ Directors’ Share Plan, approved by Shareholders on 12 May 2023 as follows: Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Date Issued 24/01/2023 26/05/2023 26/05/2023 21/08/2023 22/11/2023 Number of Shares 35,714 897,140 640,959 677,120 442,795 2,693,728 Value based on 90 Day VWAP $ 2,500 62,800 44,867 47,398 39,852 197,417 In lieu of part remuneration for the quarter ended 31/12/2022 2022 Year 31/03/2023 30/06/2023 30/09/2023 Issued Subsequent to Year End 02/02/2024 Summarised as: Director Ian Tchacos Paul Fink Edouard Etienvre Andrew Childs Issued during the year 214,660 22,969 31/12/2023 2023 Number of Shares 67,460 67,460 2,558,808 - 2,693,728 2023 Remuneration value $ 5,000 5,000 187,417 - 197,417 2022 Number of Shares 62,574 62,574 1,041,264 - 1,166,412 2022 Remuneration value $ 5,000 5,000 83,341 - 93,341 (ii) Options granted to Directors pursuant to ADXs’ Performance Rights and Option Plan, approved by Shareholders on 12 May 2023 as follows: Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Date Issued 24/01/2023 26/05/2023 21/08/2023 22/11/2023 Number of Options 514,955 470,759 499,554 332,291 Value based on 90 Day VWAP $ 36,047 32,953 34,969 29,906 In lieu of part remuneration for the quarter ended 31/12/2022 31/03/2023 30/06/2023 30/09/2023 1,817,560 133,875 Issued Subsequent to Year End 02/02/2024 131,425 14,062 31/12/2023 - 59 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 3 – EQUITY-BASED PAYMENTS – continued (b) Summary of remuneration equity-based payments granted during the year - continued: Summarised as: Director Ian Tchacos Paul Fink Issued during the year 2023 Number of Options 1,078,572 738,988 1,817,560 2023 Remuneration value $ 79,875 54,000 133,875 2022 Number of Options 1,147,402 841,850 1,989,252 2022 Remuneration value $ 93,563 67,969 161,532 (iii) Shares to consultants and company secretaries in lieu of remuneration: Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Date Issued 24/01/2023 26/05/2023 21/08/2023 22/11/2023 Number of Shares $ 556,967 378,970 438,250 503,684 1,877,871 38,988 26,528 30,677 42,577 138,770 In lieu of part remuneration for the quarter ended 31/12/2022 31/03/2023 30/06/2023 30/09/2023 Issued Subsequent to Year End 02/02/2024 Summarised as: Other KMPs Amanda Sparks Consultants Other consultants Issued during the year 402,643 41,388 31/12/2023 2023 Number of Shares 2023 Remuneration value $ 2022 Number of Shares 2022 Remuneration value $ 259,046 19,200 232,208 19,200 1,618,825 1,877,871 119,570 138,770 1,923,081 2,155,289 155,592 174,792 (iv) During the year the following securities were granted as equity compensation benefits to employees and consultants: Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. a) 6,628,000 unlisted performance rights granted on 1 June 2023 to employees in Vienna pursuant to the Company’s Employee Incentive Plan for the 2022 year. On 8 June 2023, 5,641,853 of the Performance rights vested into fully paid ordinary shares, and 986,147 Performance rights lapsed. b) 3,850,000 unlisted options granted and allotted on 21 November 2023 to employees and consultants pursuant to the Company’s Employee Incentive Plan; and c) 2,500,000 unlisted options granted and allotted on 6 December 2023 to consultants pursuant to the Company’s Employee Incentive Plan. - 60 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 3 – EQUITY-BASED PAYMENTS – continued (b) Summary of remuneration equity-based payments granted during the year - continued: The inputs to the model used were: Grant date Spot price ($) Exercise price ($) Vesting date Expiry date Expected future volatility (%) Risk-free rate (%) Dividend yield (%) Value Each ($) Number Granted Valuation Method 1/06/2023 Performance rights 0.07 Nil 8/6/2023 Upon vesting N/A - - 0.07 6,628,000 21/11/2023 Options 0.115 0.17 Immediately 30/04/2025 100 4.01 - 0.0416 3,850,000 6/12/2023 Options 0.10 0.17 Immediately 30/04/2025 100 4.01 - 0.0318 2,500,000 Market Price at Grant Date Black-Scholes Black-Scholes Black-Scholes option pricing model The assessed fair values of the options were determined using a Black-Scholes option pricing model, taking into account the exercise price, term of option, the share price at grant date and expected price volatility of the underlying share, expected dividend yield and the risk-free interest rate for the term of the option. The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. - 61 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 3 – EQUITY-BASED PAYMENTS – continued (c) Weighted average exercise price The following table shows the number and weighted average exercise price (WAEP) of share options granted as remuneration share based payments. Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. 12 Months to 31 December 2023 Number 12 Months to 31 December 2023 WAEP $ 12 Months to 31 December 2022 Number 12 Months to 31 December 2022 WAEP $ Outstanding at the beginning of year Granted to Directors during the year Granted to employees during the year Granted in lieu of fees Lapsed during the year Exercised during the year Outstanding at the end of the year Exercisable at year end 5,653,997 1,817,559 6,350,000 - - (2,580,756) 11,240,800 11,240,800 0.02 Nil 0.17 - - - 0.13 0.13 6,003,510 1,989,252 - 425,000 (438,750) (2,325,015) 5,653,997 5,653,997 0.1 Nil - 0.13 0.15 - 0.02 0.02 The weighted average share price for options exercised during the year was $Nil (2022: $Nil). (d) Weighted average fair value The weighted average fair value of remuneration equity-based payment options granted during the year was $0.046 (2022: $0.06). (e) Range of exercise price The range of exercise price for options granted as remuneration share based payments outstanding at the end of the year was $nil to $0.17 (2022: $nil to $0.13). (f) Weighted average remaining contractual life The weighted average remaining contractual life of remuneration share based payment options that were outstanding as at the end of the year was 1.63 years (2022: 2.32 years). - 62 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 4 - INCOME TAX EXPENSE (a) Income Tax Expense The reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Company’s applicable income tax rate is as follows: Loss for year before tax Prima facie income tax (benefit) @ 30% Tax effect of non-deductible items Tax rate differential Windfall tax - Austria Translation differences Tax rate change – Austria Deferred tax assets not brought to account Income tax expense/(benefit) attributable to operating result (b) Current tax liabilities Current tax liabilities Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ (4,599,566) (1,379,870) (2,048,843) (614,653) 727,502 109,895 - (2,509) 26,471 128,660 (389,851) 616,040 (38,763) 178,777 16,441 - 231,189 389,031 - 233,807 (c) Deferred tax assets not recognised relate to the following: Tax losses 15,065,555 14,642,907 These deferred tax assets have not been brought to account as it is not probable that tax profits will be available against which deductible temporary differences can be utilised. (d) Deferred tax assets and liabilities: Deferred tax assets: Tax losses - Austria Temporary differences - Other Less: Offset Deferred Tax Liabilities: Temporary differences - Oil and gas properties, net of JV Temporary differences - Asset retirement obligations Temporary differences - Other (e) Franking Credits The franking account balance at year end was $nil (2022: $nil). (f) Tax Consolidation Legislation 2,769,083 306,660 (1,271,132) (35,558) (278,250) 1,490,803 1,118,269 70,342 (6,185) (60,916) (55,117) 1,066,393 ADX Energy Ltd and its 100% owned Australian subsidiaries have not formed a tax consolidated group. - 63 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 5 - EARNINGS PER SHARE Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Basic loss per share attributable to members of ADX Energy Ltd Consolidated Year Ended 31 Dec 2023 Cents Year Ended 31 Dec 2022 Cents (1.12) $ (0.72) $ Loss attributable to ordinary equity holders of the Company used in calculating: - basic earnings per share (4,064,209) (2,304,263) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share Diluted earnings per share is not disclosed because potential ordinary shares, being options granted, are not dilutive and their conversion to ordinary shares would not demonstrate an inferior view of the earnings performance of the Company. Number of shares Number of shares 362,870,060 321,305,210 NOTE 6 - CASH AND CASH EQUIVALENTS Cash at bank and on hand 8,007,441 3,569,631 - 64 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 6 - CASH AND CASH EQUIVALENTS – continued (i) Reconciliation of loss for the period to net cash flows used in operating activities Loss after income tax Income from partners classified as investing cash flows Non-Cash Items: Depreciation and amortisation Restoration expenses – changes in abandonment provision Dry well costs Impairment of wells Loss on sale of plant and equipment Foreign exchange losses/(gains) Share-based payments expensed Accretion Change in assets and liabilities: (Increase)/decrease in receivables (Increase)/decrease in inventories (Increase)/decrease in oil and gas assets (Increase)/decrease in deferred tax assets Increase/(decrease) in payables Increase/(decrease) in income tax payable Increase/(decrease) in lease liabilities Increase/(decrease) in provisions Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ (4,209,715) (2,829,402) (2,437,874) - 2,689,510 970,159 1,638,550 - 4,418 (84,892) 1,153,119 91,740 (232,997) (1,310,583) (657,342) (424,409) 404,434 (233,808) 3,122 111,616 2,437,392 881,944 - 817,122 1,211 44,033 495,128 68,357 777,458 (84,820) - 170,884 194,958 233,808 - 36,998 Net cash flows (used in)/from operating activities (2,916,480) 3,636,599 (ii) Non-Cash Financing and Investing Activities There were no non-cash financing or investing activities during the year other than the issue of 8,150,000 options to loan note holders ($145,400). Refer to note 12. (2022: $100,820 for shares and options issued to lead manager of a placement). Other non-cash operating activities, consisting of shares and options granted in lieu of remuneration are disclosed in note 3. - 65 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 7 – TRADE AND OTHER RECEIVABLES Current Trade and other debtors Accrued income – back costs GST/VAT refundable Prepayments Prepayments – inventories Cash secured for credit cards Others Total current receivables Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 754,896 728,038 845,741 579,626 438,488 20,000 55,190 1,371,408 - 55,225 536,505 - 20,000 107,807 3,421,979 2,090,945 Information about the impairment of trade and other receivables, their credit quality and the group’s exposure to credit risk, foreign currency risk and interest rate risk can be found in note 24. Receivables do not contain past due or impaired assets as at 31 December 2023 (2022: none). Non-Current Cash secured for bank loans and licences Prepayments Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 1,104,192 - 1,104,192 1,072,992 64,805 1,137,797 EUR 120,000 (AUD 194,143) is held as security for bank loans – refer note 12. The remaining EUR 562,501 (AUD 910,049) is secured for the Group’s AGS licences in Austria. NOTE 8 – INVENTORIES Inventories include hydrocarbon stocks, consumable supplies and maintenance and drilling spares. Inventories are valued at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes direct costs and an appropriate portion of fixed and variable production overheads where applicable. Inventories determined to be obsolete or damaged are written down to net realisable value, being the estimated selling price less selling costs. Consolidated Year Ended 31 Dec 2023 $ - 46,732 2,208,635 2,255,367 Year Ended 31 Dec 2022 $ 473,178 58,806 351,215 883,199 Drilling inventories Oil and gas inventories Materials and consumables Total current inventories - 66 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 9 – OIL AND GAS PROPERTIES Oil and gas properties are stated at cost less accumulated depreciation and impairment charges. Oil and gas properties include the costs to acquire, construct, install or complete production and infrastructure facilities such as pipelines, capitalised borrowing costs, development wells and the estimated cost of dismantling and restoration. Subsequent capital costs, including major maintenance, are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. Oil and gas properties and other plant and equipment are depreciated to their estimated residual values at rates based on their expected useful lives with a maximum period of 100 months. All items of oil and gas properties are depreciated using the straight-line method over their useful life capped at 100 months. They majority of the Oil and Gas equipment is depreciated over 8.3 years. Impairment: Oil and gas properties are assessed for impairment on a cash-generating unit (CGU) basis. Individual assets within a CGU may become impaired if their ongoing use changes or if the benefits to be obtained from ongoing use are likely to be less than the carrying value of the individual asset. Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 266,833 182,913 340,222 3,511,728 6,960,443 1,655,805 3,072,838 10,807 296,672 177,793 265,259 3,723,913 4,647,644 1,441,571 4,588,376 21,132 16,001,589 15,162,360 9,143,998 25,145,587 8,513,327 23,675,687 296,672 (38,817) 8,978 266,833 177,793 5,120 182,913 331,264 (36,338) 1,746 296,672 176,351 1,442 177,793 Austria Buildings Undeveloped land Field office fixtures and equipment Plant and machinery Wells Retirement obligation assets Construction in progress Rights and other intangible assets Romania Appraisal costs Reconciliation of the carrying amount of oil and gas assets: Buildings – opening balance Depreciation Translation differences Undeveloped Land – opening balance Translation differences - 67 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 9 – OIL AND GAS PROPERTIES - continued Field office fixtures and equipment – opening balance Additions Disposals Depreciation Translation differences Plant and machinery – opening balance Additions Depreciation Translation differences Wells – opening balance Additions Transfers Depreciation Impairment Translation differences During the prior year, $817,122 of impairment was recorded for wells that are no longer economic. These wells have not been abandoned and may become economic in the future. Retirement obligation assets (Austria) – opening balance Additions Amortisation Translation differences Construction in progress – opening balance Additions – net of partner contributions Transfers to Wells Dry well costs expensed Translation differences - 68 - Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 265,259 143,408 - (75,321) 6,876 340,222 3,723,913 373,687 (696,730) 110,858 3,511,728 4,647,644 94,323 3,568,743 (1,459,433) - 109,166 6,960,443 1,441,571 449,456 (274,460) 39,238 1,655,805 4,588,376 3,494,943 (3,568,743) (1,638,550) 196,812 3,072,838 333,519 - (1,287) (67,913) 940 265,259 4,460,030 - (752,634) 16,517 3,723,913 6,527,211 196,132 - (1,256,963) (817,122) (1,614) 4,647,644 1,446,983 187,795 (197,675) 4,468 1,441,571 2,473,884 2,168,855 - - (54,363) 4,588,376 ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 9 – OIL AND GAS PROPERTIES - continued Rights and other intangible assets – opening balance Depreciation Translation differences Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 21,132 (11,057) 732 10,807 31,501 (10,352) (17) 21,132 Appraisal costs – Romania – opening balance 8,513,327 8,085,301 148,804 237,826 244,041 253,618 108,507 65,901 9,143,998 8,513,327 1,209,783 239,640 239,640 1,263,948 (156,782) (133,692) (3,331) 1,209,783 356,545 - - (115,517) (1,388) 239,640 5,113,468 23,397 5,136,865 2,336,041 - 2,336,041 Additions Additions – rehabilitation and restoration provision – note 14 Translation differences NOTE 10 – RIGHT OF USE ASSETS Non-Current Assets Right of use assets - properties Reconciliation of the carrying amount of right of use assets: Opening balance Additions Disposals Depreciation Translation differences Refer to note 13 for lease liabilities for right of use assets. NOTE 11 – TRADE AND OTHER PAYABLES Current Trade creditors and accruals Accrued interest payable The Group’s exposure to interest rate risk is discussed in Note 24. - 69 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 12 – BORROWINGS Loan Notes On 11 July 2023, ADX secured $1,500,000 in loan note funding. A total of 30 loan notes of $ 50,000 each totalling $ 1,500,000 (Loan Notes) were issued to a small number of supportive existing shareholders and new sophisticated investors. The Loan Notes are unsecured. The terms for the Loan Notes are summarised as follows: Face Value of Each Loan Note Number of Loan Notes Issued Total Loans aggregate amount Loan Term per Rate annum Interest (payable quarterly in arrears) Free Attaching Unlisted Options with an Exercise Price of $0.10, expiring 11 January 2025 Free Attaching Unlisted Options with an Exercise Price of $0.14, expiring 11 January 2025 * Post-consolidated amounts Loan Note A $50,000 20 $1,000,000 18 Months (11 January 2025) 8% 150,000 Options per Loan Note (3,000,000 in Total) 150,000 Options per Loan Note (3,000,000 in Total) Loan Note B $50,000 10 $500,000 18 Months (11 January 2025) 12% - 215,000 Options per Loan Note (2,150,000 in Total) Total Loan Notes $50,000 30 $1,500,000 18 Months (11 January 2025) 8-12% Total of 3,000,000 Options* Total of 5,150,000 Options* The Options were valued using a Black-Scholes option pricing model (total value $145,400). The inputs to the model used were: Valuation date Spot price ($) Exercise price ($) Vesting date Expiry date Expected future volatility (%) Risk-free rate (%) Dividend yield (%) Value Each ($) Number Granted Total Value $ 5/7/2023 5/7/2023 0.07 0.10 0.07 0.14 Immediately 11/01/2025 Immediately 11/01/2025 80 8 - 0.021 3,000,000 63,000 100 12 - 0.016 5,150,000 82,400 - 70 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 12 – BORROWINGS - continued Bank Loans As announced on 5 August 2020, ADX’ Austrian subsidiary, ADX VIE GmbH, secured banking facilities totalling EUR 1,130,000 from Volksbank Wien AG (Volksbank) and guaranteed by the Austria Wirtschafts (“Economy”) Service (the Innovation and Start Up Financing bank of the Austrian state) (AWS), split between two loan facilities: - Loan A - EUR 500,000 (A$ 808,931): interest-free until 31 July 2022, at which point interest charged is at Euribor plus 0.75%, with the rate to be at least 0%; and Loan B - EUR 630,000 (A$ 1,019,253): incurring interest at 1% per annum on the drawn down value. -  The Collateral for the loan facilities is EUR 120,000 (A$ 194,143) (held in an ADX VIE GmbH bank account with Volksbank).  The loans are fully drawn. Loan repayments commenced on 30 June 2022 and continue to be repaid every six months through to 31 December 2024.  Loan covenants restrict dividends and profit distributions but do not prevent payment of intercompany recharges or loans. A negative pledge relating to other debt is limited to taking up further debt at a subsidiary level and does not restrict servicing of existing debt. As at the date of this report, EUR 753,332.66 (A$ 1,218,787.67) of these loans have been repaid. Current Bank loans – Loan A - interest bearing Bank loans – Loan B - interest bearing Non-Current Loan notes – interest bearing - unsecured Loan notes – borrowing costs (options) Loan notes – borrowing costs (options - accretion) Loan notes – net Bank loans – Loan A - interest bearing Bank loans – Loan B - interest bearing The Group’s exposure to liquidity and interest rate risk is discussed in Note 24. Consolidated Year Ended 31 Dec 2023 $ Year Ended 31 Dec 2022 $ 339,751 269,643 609,394 1,500,000 (145,400) 48,467 1,403,067 - - 1,403,067 262,096 330,240 592,336 - - - - 262,096 330,240 592,336 - 71 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 13 – LEASE LIABILITIES Current Right of use assets Other Non-Current Right of use assets Other NOTE 14 – PROVISIONS Current Provision for employee entitlements Non-Current Provision for employee entitlements Consolidated 31 December 2023 $ 31 December 2022 $ 105,644 - 105,644 1,110,752 - 1,110,752 120,462 10,299 130,761 119,819 36,206 156,025 241,701 347,640 234,346 16,793 Provision for asset retirement obligations (ARO) – production assets 17,144,238 15,207,275 Provision for rehabilitation and restoration – Romania 907,620 651,046 18,286,204 15,875,114 Provision for asset retirement obligations (non-current) – opening balance 15,207,275 13,909,846 Additions capitalised – note 9 Additions expensed Accretion Translation differences 449,456 970,159 91,740 425,608 187,795 881,944 68,357 159,333 Provision for asset retirement obligations (non-current) – closing balance 17,144,238 15,207,275 Provision for rehabilitation and restoration – Romania – opening balance Additions capitalised - note 9 Translation differences Provision for rehabilitation and restoration – Romania – closing balance 651,046 237,826 18,748 907,620 538,138 108,507 4,401 651,046 - 72 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 15 – ISSUED CAPITAL (a) Issued Capital Ordinary shares fully paid (b) Movements in Ordinary Share Capital 31 December 2023 $ 31 December 2022 $ 90,503,290 84,105,646 Note: Effective 28 September 2023, ADX Shareholders approved a capital conversion of every ten (10) existing Securities into one (1) Security. All data below is based on post-consolidation data. Number of Shares Summary of Movements – Current Year (2023) 351,291,583 Opening balance 1 January 2023 35,714 68,571 488,396 305,956 591,184 640,959 68,571 310,399 Issue of shares to Directors (part remuneration for 12/2022 quarter) Issue of shares to Company Secretary (remuneration for 12/2022 quarter) Issue of shares to Consultants (remuneration for 12/2022 quarter) Issue of shares to Directors (part remuneration for 09/2022 quarter) Issue of shares to Directors (part remuneration for 12/2022 quarter) Issue of shares to Directors (part remuneration for 3/2023 quarter) Issue of shares to Company Secretary (remuneration for 3/2023 quarter) Issue of shares to Consultants (remuneration for 3/2023 quarter) 5,641,853 Shares issued upon exercise of Performance Rights 2,580,756 Options exercised by Directors at $Nil 677,120 68,571 369,679 442,795 53,333 450,351 Issue of shares to Directors (part remuneration for 6/2023 quarter) Issue of shares to Company Secretary (remuneration for 6/2023 quarter) Issue of shares to Consultants (remuneration for 6/2023 quarter) Issue of shares to Directors (part remuneration for 9/2023 quarter) Issue of shares to Company Secretary (remuneration for 9/2023 quarter) Issue of shares to Consultants (remuneration for 9/2023 quarter) 48,000,000 Placement and SPP at 10 cents 15,780,000 Placement and SPP at 10 cents Costs of share issues – cash 427,865,791 Closing Balance as at 31 December 2023 Note 3(b)(i) 3(b)(iii) 3(b)(iii) 3(b)(i) 3(b)(i) 3(b)(i) 3(b)(iii) 3(b)(iii) 3(b)(iv) 15(c)(ii) 3(b)(i) 3(b)(iii) 3(b)(iii) 3(b)(i) 3(b)(iii) 3(b)(iii) 15(b)(i) 15(b)(ii) 2023 $ 84,105,646 2,500 4,800 34,188 21,417 41,383 44,867 4,800 21,728 - - 47,398 4,800 25,878 39,852 4,800 37,777 4,800,000 1,578,000 (316,544) 90,503,290 - 73 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 15 – ISSUED CAPITAL - continued (b) Movements in Ordinary Share Capital Number of Shares Summary of Movements – Prior Year (2022) 2,974,437,202 Opening balance 1 January 2022 902,728 436,363 3,627,388 Issue of shares to Directors (part remuneration for 12/2021 quarter) Issue of shares to Company Secretary (remuneration for 12/2021 quarter) Issue of shares to Consultants (remuneration for 12/2021 quarter) 43,258,177 Shares issued upon exercise of Performance Rights 23,250,146 Options exercised by Directors at $Nil 5,250,000 Shares issued to advisor (cash) 154,253 3,185,543 600,000 4,657,511 Issue of shares to Directors (part remuneration for 12/2021 quarter) Issue of shares to Directors (part remuneration for 3/2022 quarter) Issue of shares to Company Secretary (remuneration for 3/2022 quarter) Issue of shares to Consultants (remuneration for 3/2022 quarter) 425,000,000 Placement at 6 cents 8,500,000 4,741,208 600,000 6,429,146 2,680,384 685,714 4,516,771 Issue of shares in lieu of broker fees (non-cash) Issue of shares to Directors (part remuneration for 6/2022 quarter) Issue of shares to Company Secretary (remuneration for 6/2022 quarter) Issue of shares to Consultants (remuneration for 6/2022 quarter) Issue of shares to Directors (part remuneration for 9/2022 quarter) Issue of shares to Company Secretary (remuneration for 9/2022 quarter) Issue of shares to Consultants (remuneration for 9/2022 quarter) Costs of share issues – non-cash Costs of share issues – cash 3,512,912,534 Closing Balance as at 31 December 2022 2022 $ 3(b)(i) 81,435,632 9,930 3(b)(iii) 4,800 3(b)(iii) 3(b)(vi) 15(c)(ii) 3(b)(iii) 3(b)(i) 3(b)(i) 3(b)(iii) 3(b)(iii) 15(b)(i) 3(b)(v) 3(b)(i) 3(b)(iii) 3(b)(iii) 3(b)(i) 3(b)(iii) 3(b)(iii) 3(b)(v) 37,777 - - 42,000 1,234 25,484 4,800 36,796 2,550,000 51,000 37,930 4,800 49,979 18,763 4,800 31,041 (100,820) (140,300) 84,105,646 Current Year transactions: (i) Placement Raising A$ 4.8 million In November 2023, ADX advised it had successfully raised $ 4.8 million from placements totalling 48,000,000 shares at a price of $ 0.10 per share to sophisticated, institutional and professional investors. One (1) free attaching unlisted option was issued for every two (2) Placement Shares. The exercise price of the Placement Options is $ 0.16 with an expiry date of 31 December 2024. The funds raised from the Placement and the Securities Purchase Plan will be applied to near term activities of the Company, which included funding of the Company’s increased economic interest in the recently completed Anshof-2 Appraisal Well, the installation of permanent production facilities at Anshof to enable increased production from the Anshof-3 and Anshof-2 Wells as well as funding for the Company’s share of the Welchau-1 Exploration Well. - 74 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 15 – ISSUED CAPITAL - continued (b) Movements in Ordinary Share Capital - continued (ii) Securities Purchase Plan (SPP) Raising A$ 1.578 million On 22 November 2023, eligible Shareholders (SPP Participants) were invited to participate in a Securities Purchase Plan Offer at $ 0.10 per Share. This was the same price as the offer price under the Placement. SPP Participants also received one free-attaching unquoted option to acquire a Share for every two SPP Shares issued. The SPP Options are exercisable on the same terms as the Placement Options. The 15,780,000 SPP Shares and 7,890,000 SPP Options were issued on 22 December 2023. (c) Options on issue at year end Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Total Options During the year: Note 15(c)(iii) 15(c)(iv) 15(c)(iv) Number 23,175,011 511,608 31,640,000 3,000,000 5,150,000 725,000 6,350,000 314,584 245,625 329,465 185,796 311,719 269,532 380,358 283,929 275,893 300,000 332,291 73,780,811 Exercise Price 13 cents Nil cents 16 cents 10 cents 14 cents Nil cents 17 cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Expiry Date 10/08/2024 31/10/2024 31/12/2024 11/01/2025 11/01/2025 31/01/2025 30/04/2025 31/05/2025 31/07/2025 31/10/2025 31/01/2026 31/05/2026 31/07/2026 31/10/2026 31/01/2027 31/05/2027 31/07/2027 31/10/2027 (i) 1,817,560 unlisted options were granted in lieu of remuneration to Directors Ian Tchacos and Paul Fink. Refer note 3(b)(ii). (ii) 2,580,757 unlisted options were exercised by Directors (exercise price was nil as these were previously granted in lieu of remuneration). (iii) 31,640,000 unlisted options were issued for every two shares subscribed for in November 2023 Placement and December 2023 Securities Purchase Plan.. (iv) 3,000,000 unlisted options with an exercise price of $0.10 and 5,150,000 unlisted options with an exercise price of $0.14were issued to Loan Note holders – refer to note 12. (v) 6,780,006 unlisted options with an exercise price of $0.15 lapsed during the year. - 75 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 Consolidated 31 December 2023 $ 31 December 2022 $ 6,638,109 (1,238,619) 5,724,244 (1,603,160) 5,399,490 4,121,084 5,724,244 913,865 6,638,109 5,489,429 234,815 5,724,244 (1,603,160) 364,541 (1,238,619) (1,706,318) 103,158 (1,603,160) NOTE 16 - RESERVES Share-based payments reserve Foreign currency translation reserve Share-based payments reserve Balance at the beginning of the year Share-based payments (options granted) Balance at the end of the year Nature and purpose of the reserve: The Share-based payments reserve is used to recognise the fair value of options issued but not exercised. Foreign currency translation reserve Balance at the beginning of the year Currency translation differences Balance at the end of the year Nature and purpose of the reserve: The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. - 76 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 17 – NON-CONTROLLING INTERESTS Non-Controlling Interests Movement during the year: Balance at the beginning of the year Share of loss for the period Share of other comprehensive income Balance at the end of the year Consolidated 31 December 2023 $ 8,112,092 31 December 2022 $ 8,381,640 8,381,640 (145,506) (124,042) 8,112,092 8,478,678 (133,611) 36,573 8,381,640 Non-controlling interests represent Reabold Resources Plc (LSE AIM:RBD) (Reabold) interest held in the Danube group. The Danube Group consists of Danube Petroleum Limited (registered in England and Wales) and its wholly owned Romanian subsidiary, ADX Energy Panonia Srl. As at 31 December 2023, Reabold holds a 50.82% interest in Danube (2022: 50.82%). ADX Energy Ltd continues to consolidate the Danube Group as it has control via day-to-day management, accounting and two out of three directors on the board of Danube Petroleum Limited are directors of ADX Energy Ltd. Summarised financial information for Danube Petroleum Limited and its 100% owned subsidiary ADX Energy Panonia SRL is as follows. The amounts disclosed are before inter-company eliminations: Summarised Statement of Financial Position Current assets Current liabilities Current net assets Non-current assets Non-current liabilities Non-current net assets Net Assets Summarised Statement of Profit or Loss and Other Comprehensive Income Revenue Loss for the period Other comprehensive income Total comprehensive income Consolidated 31 December 31 December 2023 $ 569,779 (198,909) 370,870 15,861,710 (907,620) 14,954,090 2022 $ 603,901 (199,450) 404,451 15,613,993 (651,046) 14,962,947 15,324,960 15,367,398 (286,309) (244,081) (530,390) - (262,911) 71,968 (190,943) Loss allocated to Non-Controlling Interests (145,506) (133,612) Other comprehensive income allocated to Non-Controlling Interests (124,042) 36,574 - 77 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 17 – NON-CONTROLLING INTERESTS - continued Consolidated 31 December 31 December 2023 $ 2022 $ Summarised Statement of Cash Flows Cash flows from/(used in) operating activities (including VAT paid) Cash flows from/(used in) investing activities Cash flows from financing activities Net foreign exchange differences Net increase/(decrease) in cash and cash equivalents (139,076) 412,403 185,336 (3,501) 455,162 76,903 (253,618) - (45,469) (222,184) NOTE 18 – DERIVATIVE FINANCIAL INSTRUMENTS The Group’s accounting policy for cash flow hedges are as follows: Cash flow hedges are a derivative or financial instrument designated to hedge the exposure to variability in cash flows attributable to a particular risk associated with an asset, liability or forecast transaction.  Recognition date: At the date the instrument is designated as a hedging instrument.   Measurement: Measured at fair value. The fair value of oil derivative contracts is determined by estimating the difference between the relevant market prices and the contract price, for the volumes of the derivative contracts. Changes in fair value: Changes in the fair value of derivatives designated as cash flow hedges are recognised directly in other comprehensive income and accumulated in equity in the hedging reserve to the extent that the hedge is effective. Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. To the extent that the hedge is ineffective, changes in fair value are recognised immediately in the income statement within other income or other expenses. Amounts accumulated in equity are transferred to the income statement or the statement of financial position, for a non-financial asset, at the same time as the hedged item is recognised. When a hedging instrument expires or is sold, terminated or exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the underlying forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Hedge effectiveness is determined at the inception of the hedge relationship, and through regular prospective assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Group enters into hedge relationships where the critical terms of the hedging instrument match with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness. Hedging reserves The hedging reserve includes the cash flow hedge reserve and the costs of hedging reserve. The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges. The group defers the changes in the forward element of forward contracts and the time value of option contracts in the costs of hedging reserve. - 78 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 18 – DERIVATIVE FINANCIAL INSTRUMENTS - continued Hedging Reserve Balance brought forward Change in value of hedging instruments recognised in Other Comprehensive Income for the period Movement for the year Balance at the end of the year As at 31 December 2023, there were no derivative financial instruments in place. NOTE 19 – PARENT ENTITY INFORMATION Statement of Financial Position information Current assets Non-current assets Current liabilities Non-current liabilities Net Assets Issued capital Reserves Accumulated losses Profit and loss information Loss for the year Comprehensive income for the year Commitments and contingencies Consolidated 31 December 31 December 2023 $ - - - - 2022 $ 107,389 (107,389) (107,389) - Company 31 December 2023 $ 31 December 2022 $ 4,852,494 4,575,920 (400,138) (1,421,993) 780,526 3,089,249 (415,353) (16,792) 7,606,283 3,437,630 90,503,290 6,638,110 84,105,646 5,724,245 (89,535,117) (86,392,261) 7,606,283 3,437,630 (3,142,856) (3,142,856) (2,597,967) (2,597,967) There are no commitments or contingencies, including any guarantees entered into by ADX Energy Ltd on behalf of its subsidiaries as at year end. - 79 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 19 – PARENT ENTITY INFORMATION - continued Subsidiaries Name of Controlled Entity Class of Share Place of Incorporation % Held by Parent Entity AuDAX Energy Srl Bull Petroleum Pty Ltd Terra Energy Limited ADX VIE GmbH Danube Petroleum Limited ADX Energy Panonia Srl Kathari Energia Limited Kathari Energia GmbH Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Italy Australia UK Austria UK Romania UK Austria 31 December 2023 31 December 2022 100% 100% 100% 100% 100% 100% Held 100% by Terra Energy Limited Held 100% by Terra Energy Limited 49.18% 49.18% Held 100% by Danube Petroleum Limited Held 100% by Danube Petroleum Limited 100% 100% Held 100% by Kathari Energia Limited Held 100% by Kathari Energia Limited Refer to note 17, non-controlling interests, for details on Danube Petroleum Limited Group. NOTE 20 – COMMITMENTS AND CONTINGENCIES (a) Short term leases (non-cancellable): Within one year Later than one year, not later than five years Balance at the end of the year Short term leases are primarily for the office lease in Perth. Consolidated 31 December 2023 $ 31 December 2022 $ 15,076 - 15,076 399,170 1,240 400,410 The Group has a lease-to-buy contract for a production unit for Anshof operations in upper Austria. The rental cost of EUR 50,000 per quarter (for a maximum of eight quarters) is capitalised as construction in progress at year end. The agreement commenced on 1 November 2023. ADX has the option to purchase prior to the end date of 31 October 2025 with a balloon payment of up to EUR 600,000. Commitments and Contingencies for Oil and Gas Properties (b) In order to maintain current rights of tenure to exploration licenses the Company may be compelled to perform minimum exploration activities to meet requirements specified by the relevant governments. These expenditure commitments may be varied as a result of renegotiations, relinquishments, farm-outs or sales. Land leases in Austria are held by an unrelated party and reimbursed by ADX. These amount to approximately EUR 51,000 per annum (A$ 81,000) and comprise approximately 95 individual lease contracts, and have no end date or termination date. - 80 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 20 – COMMITMENTS AND CONTINGENCIES - continued Parta Exploration License and Iecea Mare Production License - Western Romania Ownership of Parta Exploration License and Iecea Mare Production License. ADX holds a 49.2% shareholding in Danube Petroleum Limited (Danube). The remaining shareholding in Danube is held by Reabold Resources Plc. Danube via its‘ wholly owned subsidiary, ADX Energy Panonia srl, holds a 100% interest in the Parta Exploration license (including a 100% interest in the Parta Appraisal Sole Risk Project) and a 100% interest in the Iecea Mare Production license. ADX is the operator of the permit pursuant to a Services Agreement with Danube. Parta Exploration License In December 2012, the Romanian Government ratified the concession agreement for ADX’ EX 10 Parta license (Parta Permit). The committed work program agreed in June 2019 for the Parta Permit required the acquisition of 60 km of 2D and 100 km2 of 3D seismic and the drilling of two exploration wells. Total commitments are estimated at A$ 5.4 million (EUR 3.5 million) for a 2 year period commencing 21 June 2019 following an extension agreed with the National Agency of Mineral Resources (NAMR), which was extended for another 18 months until 3 December 2022. ADX Energy Panonia SRL is the Romanian license holder in accordance with the concession agreement for exploration phase 1. The total concession agreement duration is 20 years with a possible 15 years extension. After phase 1 which expired on 3 December 2022, ADX had the option to immediately enter phase 2, by assuming further commitments, or apply for another extension which will require a government ratified approval. ADX has chosen the second option and is in ongoing discussions with the governing body i.e. NAMR with a view to the submission of an extension application to the government. Iecea Mare Production License In 2018, ADX acquired a 100% equity interest in the Iecea Mare Production license (License). ADX has committed to pay a 5% royalty from the license seller Amromco Energy for production from wells located within License. The current production license is valid until November 2034 and extensions are possible. The license does not carry any commitments, but an annual work-program has to be agreed with the Romanian government (via NAMR), which then becomes a commitment. ADX estimates the annual cost for such activities may be approximately $50,000 per annum. Data User Agreement –Austria In December 2019, ADX entered into a Data User Agreement (DUA) with RAG Austria AG (RAG) for access to RAG Exploration Data (including 3650 km2 of modern 3D seismic) in the Molasse Basin, in Upper Austria. Under the DUA, ADX has exclusive access to 3D and 2D seismic and geological data from RAG for oil and gas activities in its exploration, production and gas storage licenses (AGS Licenses) ratified on the 1st January 2021 with the Federal Ministry responsible for Mining (BMLRT) on behalf of the Republic of Austria as an event subsequent to year end. ADX has agreed to pay RAG a license fee as a function of the active AGS license areas for up to 5 years. In 2023, the fee paid to RAG under the DUA was EUR 78,652. Upper Austria Exploration (AGS) Licenses – Austria ADX executed concession agreements for exploration, production and gas storage in Upper Austria (Upper Austria AGS) on the 8th of January 2021 between ADX and Federal Ministry responsible for Mining on behalf of the Republic of Austria. Effective on 1st April 2022, ADX successfully was awarded license extensions for the Upper Austria AGS license areas ADX- AT-I and ADX-AT-II resulting in a total area of 1022 km2. In order to secure these licenses and the related work program, ADX VIE GmbH had to put in place a bank guarantee for an amount of EUR 937,378 (of which EUR 562,316 is secured by cash). The total term for the Upper Austria AGS licenses including the newly awarded extension area is 16 years without any relinquishment and the first 4-year firm period commenced on 1st January 2021. ADX has a 3 well exploration drilling commitment during the 4-year firm period. The total remaining minimum financial obligation to keep the Upper Austria AGS licenses in good standing taking into account expenditures already made in relation to the drilling of the Anshof-3 discovery well is EUR 1.25 million which needs to be expended in the ADX-AT-I license area before the 1st of January 2025. In January 2024 ADX has secured funding obligation from MND Austria a.s. (MND) in relation to ADX-AT-I. MND has paid back costs of EUR 0.45 million to ADX VIE GmbH and will fund EUR 4.5 million for exploration drilling to earn a 50% economic interest in an Exploration Investment Area within the ADX-AT-I license. MND’s obligation will meet ADX’ obligation outstanding in relation to ADX-AT-I. - 81 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 20 – COMMITMENTS AND CONTINGENCIES - continued Anshof Prospect in Upper Austria – Xstate Partnership Agreement In November 2021, ADX signed a farm-in agreement with Xstate Resources Limited (Xstate) to partially fund the drilling of the Anshof prospect in the ADX-AT-II exploration license in Upper Austria (Farmin HOA). Under the terms of the Farmin HOA, Xstate has funded 40% of the Anshof well drilling expenditure up to a cap amount of EUR 1.8 million (EUR 720,000 net to Xstate) to earn a 20% economic interest in the Anshof Prospect Area. Xstate satisfied its funding commitments by funding 40% of the Anshof well drilling expenditures and has earned an economic interest in the Anshof Prospect Area. Xstate has elected not to fund 40% of a second well in Anshof or the Anshof Farmin Area to earn a 20% economic interest in the entire Anshof Farmin Area (Second Well Funding). As a result of the abovementioned election Xstate only has economic rights in relation to the Anshof Prospect Area, not the entire Anshof Farmin Area. ADX and Xstate have agreed to enter into a partnership comprised of Articles of Association, production sharing agreement and a cooperation agreement which will cover the conduct of ongoing operations and sharing of production from the Anshof Prospect Area. Anshof Field Area in Upper Austria – MND Partnership Agreement On 7 August 2023, ADX and MND entered into an Energy Investment Agreement (EIA) in relation to the appraisal and development of the Anshof Field Area subject to the satisfaction of conditions precedent including confirmation of acceptance of the Anshof Field Area partnership documentation by the ministry of finance of the Republic of Austria (Bundesministerium für Finanzen) (BMF) and the payment by MND to ADX of past costs and long lead drilling expenditures of EUR 1.932 million. The EIA conditions precedent were satisfied on 18th of September 2023. The total firm investment payment obligations by MND are EUR 5.28 million for the drilling, completion and tie-in of the Anshof-2 and Anshof-1 wells. Under the terms of EIA, MND has secured 30% economic interest in the Anshof Field Area by the payment of past costs as well as the payment of firm investment obligations. ADX VIE, MND and existing partner XST finalised partnership and operating agreements covering the Anshof Field Area following the announced clearance of documentation between ADX VIE, MND and existing partner XST by the BMF. ADX is the operator and retains a 50% economic interest in the Anshof Field Area with partners MND and XST holding a 30% and 20% economic interest respectively in the partnership. ADX will retain a 100% interest in the remainder of the ADX-AT-II exploration area other than the Welchau Area where ADX holds a 75% economic interest. Welchau Prospect in Upper Austria - Farmin On the 29th of November 2022, ADX announced an investment agreement with Kepis & Pobe Financial Group Inc., (KPFG) a leading Canadian energy finance and development group. KPFG committed to fund 50% of the Welchau-1 well costs based on a well cost cap of EUR 3.8 million to earn a 20% economic interest in the Welchau Investment Area which includes the giant Welchau gas prospect (807 BCFE). Subsequently, KPFG satisfied completion conditions, including the payment of initial funds for long lead items during the first quarter of 2023. As announced on 23 January 2023, KPFG assigned its interest in the investment agreement to TSXV listed MCF Energy Ltd (MCF). On the 9th of January 2024, ADX announced that MCF and ADX had agreed to vary the terms of the EIA such that MCF will fund 50% of the Welchau-1 well costs up to EUR 5.1 million to earn a 25% economic interest in the Welchau Investment Area. MCF and ADX will pay their economic interest share of Welchau Investment Area related costs of 25% and 75% respectively once the revised well cost cap has been reached. ADX and MCF have agreed to enter into a partnership comprised of Articles of Association, production sharing agreement and a cooperation agreement which will cover the conduct of ongoing operations and sharing of production from the Welchau Investment Area. - 82 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 20 – COMMITMENTS AND CONTINGENCIES - continued ADX-AT-I Investment Area in Upper Austria – MND Partnership Agreement On the 5th of December 2024, ADX announced an Energy Investment Agreement (EIA) with MND for co-investment in an exploration area within the ADX-AT-I license (Investment Area), in Upper Austria. In accordance with the terms of the EIA MND has paid back costs of EUR 0.45 million to ADX and has committed to fund EUR 4.5 million for exploration drilling to earn a 50% economic interest in the Investment Area. Completion was subject the clearance of the Investment Area partnership documentation by the BMF which was secured on the 9th of January 2024. ADX is the operator and retains a 50% economic interest in the ADX-AT-I Investment Area. ADX retains a 100% interest in the remainder of the ADX-AT-I licence. Other contingencies d363 C.R-.AX license – Italy ADX was advised on the 4th of February 2019 that the Italian senate passed legislation to suspend exploration activities in all permits that have been approved or are in the process of being approved for a period of up to 18 months (to approximately August 2020) to enable the government authorities to evaluate the suitability of exploration areas for sustainable hydrocarbon exploration and production activities. The Italian senate further advised that the suspension will be extended to the first quarter of 2021. Due to the COVID-19 pandemic the suspension of exploration activities were further extended. During the reporting period the Italian licensing authorities offered ADX the opportunity to ratify d363 C.R-.AX prospecting license. The ratification is subject to a number of conditions including that only the gas potential within its d363C.R-.AX license is commercially exploited. ADX submitted a report to the Italian authorities detailing the natural gas prospectivity of the license for gas, upon which the licensing authorities reactive positively and asked ADX to submit a new work program suitable for exploration and development of the offshore gas resources. Based on discussions with the authorities a detailed report and work commitment was submitted in October 2022. The commitment for the first 3 years will consist of, subject to a pending approval: 150 km of seismic data purchase from ENI and Total with a minimum expenditure of EUR 70,000; 2D and 3D seismic reprocessing with a minimum expenditure of EUR 40,000; and    Acquisition of new 2D seismic of 150 line km or 60 sqkm of 3D seismic, subject to the outcome of the preceding reprocessing and interpretation work. The financial commitments is EUR 500,000. It should be noted that after each year and fulfilment of the respective work, ADX can drop the license. In year 4, ADX can elect to drill a well (with a commitment to reach 2500 metres total depth (TD) or drop the license. - 83 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 21 – RELATED PARTY DISCLOSURES (a) Compensation of Key Management Personnel Short-term employment benefits Post-employment benefits Share-based payments (b) Other transactions and balances with Key Management Personnel Consolidated 31 December 31 December 2023 $ 1,013,885 16,433 285,945 2022 $ 985,140 14,188 221,311 1,316,263 1,220,639 i) Director Ian Tchacos, through Warroorah Pty Ltd ATF Tchacos Fund and Ian Z Tchacos, provides office premises to ADX Energy Ltd. The key terms are gross monthly rental of $2,103.87 per month, monthly estimated outgoings of $334.32 per month (both excluding GST), lease commencing 1 August 2022 for a 12 month term, thereafter on 3 month rolling terms. Rent review to be on 1 July of each year based on CPI. These terms are considered normal commercial rates. Rental paid, including outgoings, for the year (excluding GST) ended 31 December 2023 totalled $29,395 (2022: $11,395). ii) In the prior year, Director Andrew Childs, through his entity Resource Recruitment provided ADX Energy Ltd office premises in Subiaco, and paid rent on a month by month basis at normal commercial rates to 31 July 2022. Rental paid for the year (excluding GST) ended 31 December 2023 totalled $nil (2022: $18,200). iii) Andrew Childs is Executive Chairman of Xstate Resources Limited (Xstate). Xstate holds a 20% economic interest in ADX’ Anshof field in Upper Austria. iv) In July 2023, Company Secretary, Amanda Sparks, through the A & A Sparks S/F A/C and her spouse Anthony Sparks, provided $100,000 loan notes to ADX Energy Ltd (refer to note 12). The interest rate is 12%. These terms were considered normal commercial rates. 430,000 free attaching unlisted options with an exercise price of $0.14 and expiring 11 January 2025 were issued with the Loan Notes. During the year, interest of $5,030 was paid or accrued. (c) Transactions with Other Related Parties i) ii) In July 2023, Company Secretary, Peter Ironside, through Ironside Pty Ltd , provided $200,000 loan notes to ADX Energy Ltd (refer to note 12). The interest rate is 8% for $100,000 and 12% for $100,000. These terms were considered normal commercial rates. 300,000 free attaching unlisted options with an exercise price of $0.10, and 730,000 free attaching unlisted options with an exercise price of $0.14 and both expiring 11 January 2025 were issued with the Loan Notes. During the year, interest of $8,384 was paid or accrued. In November 2023, Company Secretary, Peter Ironside, through Ironside Pty Ltd and Ironside Pty Ltd , participated in ADX’s placement (refer to note 15(b)(i)). A total of 1,690,000 shares, together with 845,000 free attaching options were issued to related entities of Peter Ironside for $129,000. The exercise price of the Placement Options is $ 0.16 with an expiry date of 31 December 2024. - 84 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 22 – AUDITOR’S REMUNERATION Amount paid or due and payable to the auditor for: Audit and review of the financial statements Other services Total remuneration of auditors NOTE 23 – SEGMENT INFORMATION Consolidated 31 December 31 December 2023 $ 2022 $ 52,000 - 52,000 50,500 - 50,500 Reportable Operating Segments Identified For management purposes, the Group has organised its operating segments into three reportable segments as follows:    Sicily Channel Offshore Exploration and Evaluation Segment: this segment includes assets and activities that are associated with oil and gas exploration offshore Italy. Romania Exploration and Appraisal/Development Segment: this segment includes assets and activities that are associated with oil and gas exploration, appraisal and development in that region, and include the costs if the parent entity, Danube Petroleum Limited. Austria Production Segment: this segment includes assets and activities that are associated with oil and gas production in that region. All oil sales are made to a single customer in Austria, and all gas sales are made to a single customer in Austria. The following items are not allocated to segments as they are not considered part of core operations of any segment and are managed on a Group basis.    Interest revenue Foreign currency gains/(losses) Corporate costs - 85 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 23 – SEGMENT INFORMATION - continued Operating Segments Year ended 31 December 2023 Revenue and income Total segment revenue Result Segment result after tax Reconciliation of segment profit after tax to net loss after tax: Unallocated revenue and income Foreign currency gains/(losses) Unallocated expenditure Net loss after tax Sicily Channel $ Romania $ Austria (Production) Total Operations $ $ - - 13,178,208 13,178,208 13,178,208 (45,552) (204,207) (1,441,731) (1,691,490) 3,760 (84,892) (2,437,093) (4,209,715) Depreciation, amortisation and impairment included in segment result - - 2,689,510 2,689,510 Assets Segment assets Reconciliation of segment assets: Unallocated cash Other Total assets Liabilities Segment liabilities Reconciliation of segment liabilities: Unallocated liabilities Total liabilities Capital expenditure for the year Segment capital expenditure – oil and gas assets Reconciliation of capital expenditure: Unallocated additions Total capital expenditure 34,075 9,247,218 27,994,830 37,276,123 5,207,126 151,903 42,635,152 (8,232) (1,254,382) (23,314,000) (24,576,614) (2,317,013) (26,893,627) - - 4,704,621 4,704,621 - 4,704,621 - 86 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 23 – SEGMENT INFORMATION - continued Operating Segments Year ended 31 December 2022 Revenue and income Total segment revenue Result Segment result after tax Reconciliation of segment profit after tax to net profit after tax: Unallocated revenue and income Foreign currency gains/(losses) Unallocated expenditure Net profit/(loss) after tax Sicily Channel $ Romania $ Austria (Production) Total Operations $ $ - - 14,452,734 14,452,734 14,452,734 212,844 (268,417) 414,715 359,142 5,067 (44,033) (2,758,040) (2,437,874) Depreciation, amortisation and impairment included in segment result - - 3,254,514 3,254,514 Assets Segment assets Reconciliation of segment assets: Unallocated cash Other Total assets Liabilities Segment liabilities Reconciliation of segment liabilities: Unallocated liabilities Total liabilities 23,833 8,895,232 22,627,545 31,546,610 675,677 441,005 32,663,292 (5,220) (675,883) (19,145,945) (19,827,048) (437,012) (20,264,060) Capital expenditure for the year Segment capital expenditure – oil and gas assets Reconciliation of capital expenditure: Unallocated additions Total capital expenditure - 253,618 2,552,782 2,806,400 - 2,806,400 - 87 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 24 – FINANCIAL RISK MANAGEMENT The Group is exposed to market risk (commodity, currency and interest rate risks), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. ADX’ Board of Directors (Board) is responsible for approving ADX’s policies on risk oversight and management and ensuring management has developed and implemented effective risk management and internal controls. Risk management is carried out by the senior executives under these policies which have been approved by the Board. Management identifies, evaluates and, if necessary, hedges financial risks. Commodity price risk During the year the Group continued generating revenue from its fields in Austria. With this oil and gas production and revenue, the group is exposed to the Brent Benchmark crude oil price and European gas price fluctuations. Exposure to oil and gas price risk is measured by monitoring the Group’s forecast financial position and cash flows with various assumptions. This analysis is regularly performed. Commodity prices’ hedging may be undertaken where the Board of Directors determines that a hedging strategy is appropriate to mitigate potential periods of adverse movements in commodity prices and protect forward cash flows to meet commitments. This will be balanced against the desire to expose shareholders to oil price upside and the reliability of production forecasts. As at 31 December 2023, no derivative financial instruments were in place. The hedging program is designed to provide certainty of cash flows during a period of expected ongoing volatility. Currency risk The Group’s source currency for the majority of costs is in Euro (EUR). Operating revenue is invoiced in EUR but is indexed to Dated Brent price which is denominated in United States Dollar (USD). Currency risk arises where the value of a financial instrument or monetary item fluctuates due to changes in foreign currency exchange rates. The exposure to currency risk is measured using sensitivity analysis and cash flow forecasting. The Board has formed the view that in the ordinary course of business it would not be beneficial for the Group to purchase forward contracts or other derivative financial instruments to hedge any currency risk. Currency risk for operating revenue is hedged via hedging of the commodity as necessary (see section ‘Commodity price risk’). During the year the company undertook capital raising activities via the issue of new shares on the ASX. These capital raisings are priced and received in AUD. Over the time period of a capital raising there is some short-term exposure to movements in the AUD to EUR exchange rates as part of the funds are used in Europe. At year end, management has assessed that the entity’s exposure to foreign exchange movements is immaterial due to revenues and costs primarily in EUR and therefore no further analysis is provided. The Group manages its foreign exchange risk by constantly reviewing its exposure to commitments payable in foreign currency and ensuring appropriate cash balances are maintained in EUR and AUD, to meet current operational commitments. - 88 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 24 – FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES - continued Interest rate risk At balance date the Group’s exposure to market risk for changes in interest rates relates primarily to the Company’s borrowings. The Group constantly analyses its exposure to interest rates, with consideration given to potential renewal of existing positions, the mix of fixed and variable interest rates and the period to which deposits may be fixed. Given the very low interest rates for variable borrowings, the interest rate risk is considered immaterial. Borrowings - fixed rate Borrowings – variable Borrowings - variable (non-interest bearing) Total Liquidity risk 31 December 2023 $ 31 December 2022 $ 1,500,000 609,394 - 2,109,394 - 1,184,672 - 1,184,672 Liquidity risk is the risk that Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows with scenario analysis. As at reporting date the Group had sufficient cash reserves to meet its current requirements. The contractual maturity analysis of payables as at year end are: 31 December 2023 Trade and other payables Borrowings Total 31 December 2022 Trade and other payables Borrowings Total Total $ Less than 1 Year $ Between 1-5 Years $ 5,136,865 2,109,394 5,136,865 609,394 - 1,500,000 7,246,259 5,746,259 1,500,000 2,336,041 1,184,672 2,336,041 592,336 3,520,713 2,928,377 - 592,336 592,336 Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures credit risk on a fair value basis. Significant cash deposits are with institutions with a minimum credit rating of A+ (or equivalent) as determined by a reputable credit rating agency e.g. Standard & Poor. The Group has only one customer for operating revenue being a significant company in Austria. Revenue is received monthly and hence the credit risk deemed very low. The customer is Austria’s largest energy storage company, and one of Europe’s leading gas storage facility operators The Group does not have any other significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics. - 89 - ADX ENERGY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 NOTE 25 -PARTNERSHIPS – ANSHOF EOCENE OIL PROJECT Under ADX’s upper Austria AGS licence, ADX must retain 100% ownership of the licence and is required to act without restrictions from partners. ADX is permitted to establish a partnership with other parties to allow an economic participation within the licence area. ADX has an Anshof Partnership with MND Austria a.s. (MND) and Xstate Resources Limited (ASX: XST) (Xstate). ADX is the operator and holds an 50% economic interest in the Anshof Discovery Area. MND and Xstate holds a 20% and 30% economic interest respectively. For the period prior to 8 September 2023, ADX held 80% and Xstate held 20%. As ADX provides the Partners with an interest in the operating result of Anshof, ADX recognises 100% of all sales revenue and 100% of expenses associated with the operations and also recognises an expense representing the Partners share of operating results. Consolidated 31 December 2023 $ 31 December 2022 $ Partner Share of Operations (included as cost of goods sold) Partners share of ANS-3 operations profit/(loss) – refer to note 2 89,427 (30,278) Operations – ANS-3 Sales revenue Cost of Goods Sold (excluding depreciation and amortisation) Profit allocated: ADX VIE GmbH MND Austria a.s. Xstate Resources Limited NOTE 26 - SUBSEQUENT EVENTS 3,433,391 (2,851,270) 825,444 (976,836) 582,121 (151,392) 492,694 (26,997) 116,424 582,121 (121,114) - (30,278) (151,392) On 2 February 2024, ADX issued the following shares and options. These amounts were accrued in the 31 December 2023 financial statements: a. b. c. 214,660 shares issued pursuant to ADX’ Directors’ Share Plan, approved by Shareholders on 12 May 2023. The shares were issued to directors in consideration of remuneration elected to be paid in shares for the quarter ended 31 December 2022 ($22,969). 44,859 shares issued to ADX’s Company Secretaries and consultants in consideration of remuneration elected to be paid in shares for the quarter ended 31 December 2023 ($4,800). 131,425 Options granted to Director Ian Tchacos, as approved by Shareholders on 12 May 2023. The options were granted in consideration of consultancy fees remuneration elected to be paid in options for the quarter ended 31 December 2023 (value $14,062). The options have a nil exercise price and expire on 31 January 2028. On 25 March 2024, 9,968,337 unlisted options were exercised raising $1,296,634. There are no other matters or circumstances that have arisen since 31 December 2023 that have or may significantly affect the operations, results, or state of affairs of the Group in future years. - 90 - In.Corp Audit & Assurance Pty Ltd ABN 14 129 769 151 Level 1 6-10 O’Connell Street SYDNEY NSW 2000 Suite 11, Level 1 4 Ventnor Avenue WEST PERTH WA 6005 GPO BOX 542 SYDNEY NSW 2001 T +61 2 8999 1199 E team@incorpadvisory.au W incorpadvisory.au ADX ENERGY LTD INDEPENDENT AUDITOR’S REPORT To the members of ADX Energy Ltd Opinion We have audited the financial report of ADX Energy Ltd (“the Company”) and its controlled entities (“the Group”) which comprises the consolidated statement of financial position as at 31 December 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended on that date and notes to the financial statements, including material accounting policy information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 31 December 2023 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. independence requirements of the auditor the that We confirm the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. independence declaration required by We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Liability limited by a scheme approved under Professional Standards Legislation ADX ENERGY LTD INDEPENDENT AUDITOR’S REPORT (continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter – Revenue. Refer to Note 2 to the financial statements How our Audit Addressed the Key Audit Matter The Group generated revenue of $13,178,208 predominately from the sale of gas and oil. Revenue recognition is considered to be a key audit matter given the significance of revenue to the group’s results and performance. Our procedures over revenue included but were not limited to the following: • We documented and assessed the processes and controls in place to recognize revenue; • We verified a sample of oil and gas sales revenue transactions and associated receipts to determine they were accurately accounted for; • We reviewed the accounting policy for revenue recognition and ensured it was in accordance with AASB 15 “Revenue”; and • We assessed the appropriateness of the revenue disclosures included in the financial report. Key Audit Matter – Oil and Gas Properties. Refer to Note 9 to the financial statements How our Audit Addressed the Key Audit Matter The Group’s principal assets are oil and gas production plant and equipment with a carrying value of $25,145,587 as at 31 December 2023. The carrying value of these assets is considered to be a key audit matter given they represent the approximately 60% of Group. the total assets of Our procedures over oil and gas properties included but were not limited to the following: • We verified a sample of additions to assure the correct capitalisation process and the existence of the asset; • We reviewed management’s assessment for impairment; • We applied our knowledge of the business and corroborated our work with publicly available external information; and • We assessed the appropriateness of disclosures included in the financial report. the ADX ENERGY LTD INDEPENDENT AUDITOR’S REPORT (continued) Key Audit Matters (continued) Key Audit Matter retirement obligations. Refer to Note 14 to the financial statements – Asset The Group has a significant asset retirement obligation provisions the Austrian and for Romanian oil and gas properties. These provisions are considered to be a key audit matter given they are subject to a significant level of judgement and are material in the context of the financial statements as a whole. How our Audit Addressed the Key Audit Matter the asset Our procedures over retirement obligation provisions included but were not limited to the following: • We reviewed management’s estimate, the useful the assets forming part of the asset retirement obligation; • We discussed with management as to the their lives and valuation of surrounding compliance regulatory retirement obligations; • We reviewed the compliance of the accounting treatment of the asset retirement obligation with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, and • We assessed the appropriateness of disclosures included in the financial report. the Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for information comprises the information included in the Group’s annual report for the year ended 31 December 2023, but does not include the financial report and our auditor’s report thereon. information. The other the other Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. ADX ENERGY LTD INDEPENDENT AUDITOR’S REPORT (continued) Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and for such internal control as the directors determine is necessary to enable the preparation of the financial report to be free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. We communicate with the directors regarding, amongst other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. that we have complied with relevant ethical We also provide the directors with a statement requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe those matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communications. ADX ENERGY LTD INDEPENDENT AUDITOR’S REPORT (continued) REPORT ON THE REMUNERATION REPORT Report on the Remuneration Report We have audited the remuneration report included in the directors’ report for the year ended 31 December 2023. In our opinion the remuneration report of ADX Energy Ltd for the year ended 31 December 2023 complies with section 300A of the Corporations Act 2001. Responsibilities for the Remuneration Report The directors of Remuneration Report in accordance with section 300A of the Corporations Act 2001. the Company are responsible for the preparation and presentation of the Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. In.Corp Audit & Assurance Pty Ltd Graham Webb Director 28 March 2024 ADX ENERGY LTD ADDITIONAL SHAREHOLDER INFORMATION Information as at 25 March 2024 a) Substantial Shareholders (who have lodged notices with ADX Energy Ltd) Name None Number of Shares Disclosed in Substantial Holder Notice b) Shareholder Distribution Schedule Size of Holding 1 - 1,001 - 5,001 - 10,001 - 1,000 5,000 10,000 100,000 100,001 and over Total Shareholders Number of shareholders holding less than a marketable parcel Voting Rights Number of Shareholders 93 139 451 1,031 438 2,152 188 Number of Ordinary Shares 28,976 452,899 3,782,857 40,391,976 394,144,723 438,801,431 Percentage of Issued Capital 0.01 0.10 0.86 9.21 89.82 100.00 Subject to any rights or restrictions for the time being attached to any class or classes of Shares, at meetings of Shareholders or classes of Shareholders: (i) each Shareholder entitled to vote may vote in person or by proxy or attorney, Representative; (ii) on a show of hands, every person present who is a Shareholder or a proxy, attorney or Representative of a Shareholder has one vote; and (i) on a poll every member entitled to vote and present in person or by proxy or attorney or representative duly authorised shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or Representative, have one vote for the Share, but in respect of partly paid Shares, shall have such number of votes being equivalent to the proportion which the amount paid (not credited) is of the total amounts paid and payable in respect of those Shares (excluding amounts credited). There are no voting rights for Option holders or Performance Rights. c) Securities Subject to Escrow: There are no securities subject to escrow. - 96 - ADX ENERGY LTD ADDITIONAL SHAREHOLDER INFORMATION d) Twenty largest shareholders: Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR PAUL FINK EQUITY TRUSTEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 EONIA PTY LTD BNP PARIBAS NOMINEES PTY LTD NGX COMMODITIES LTD MR BRIAN THOMAS CLAYTON + MRS JANET CLAYTON WARROORAH PTY LTD IRONSIDE PTY LTD HIGHBRIDGE VIEW PTY LTD MOMENTIUS PTY LTD IRONSIDE PTY LTD IRONSIDE PTY LTD MR SYED KHALIL BIN SYED IBRAHIM MR TIMOTHY FRANCIS CLIVE MCDONNELL BOND STREET CUSTODIANS LIMITED Remaining Holders Balance Shares on issue Number of Ordinary Shares 63,683,136 24,434,257 24,133,702 22,560,100 11,382,251 6,500,000 5,931,431 5,289,901 5,135,737 4,223,584 4,133,334 4,066,416 3,515,222 3,264,000 3,261,205 3,130,953 3,100,000 3,000,000 2,913,312 2,615,036 % of Issued Capital 14.51 5.57 5.50 5.14 2.59 1.48 1.35 1.21 1.17 0.96 0.94 0.93 0.80 0.74 0.74 0.71 0.71 0.68 0.66 0.62 206,273,577 47.01 232,527,854 438,801,431 - 97 - ADX ENERGY LTD ADDITIONAL SHAREHOLDER INFORMATION e) Unlisted Options (Holders of more than 20%): Unlisted Options Unlisted Options Unlisted Options Number 13,231,674 161,608 31,865,000 Exercise Price 13 cents Nil cents 16 cents Expiry Date 10/08/2024 31/10/2024 31/12/2024 Unlisted Options 3,000,000 10 cents 11/01/2025 Unlisted Options 5,150,000 14 cents 11/01/2025 Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options 725,000 6,350,000 314,584 245,625 500,000 329,465 185,796 311,719 269,532 380,358 283,929 275,893 300,000 332,291 131,425 Total Options 64,343,899 Nil cents 17 cents Nil cents Nil cents 17 cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents Nil cents 31/01/2025 30/04/2025 31/05/2025 31/07/2025 31/03/2026 31/10/2025 31/01/2026 31/05/2026 31/07/2026 31/10/2026 31/01/2027 31/05/2027 31/07/2027 31/10/2027 Nil cents 31/01/2028 Holders of >20% No holder with > 20% Mr Ian Tchacos (100%) HSBC Custody Nominees (Australia) Limited (27.51%), all others each holding less than 20% Jetosea Pty Ltd (50%), all others each holding less than 20% Jetosea Pty Ltd (50%), all others each holding less than 20% Mr Ian Tchacos (100%) Employee Incentive Plan Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr John Begg (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (100%) Mr Ian Tchacos (66%) and Mr Paul Fink (34%) Mr Ian Tchacos (100%) - 98 - ADX ENERGY LTD TENEMENT SCHEDULE Permit Onshore Austria, Zistersdorf and Gaiselberg Production License Upper Austria AGS Licenses (a) Onshore Romania, Parta (b) Onshore Romania, Iecea Mare Production Licence (b) Offshore Italy, d363C.R-.AX (c) % held 100% 100% 100% 100% 100% (a) Concession agreements for exploration, production and gas storage in Upper Austria (Upper Austria AGS). Anshof Discovery Area ADX announced a farmout to ASX listed Xstate Resources Limited (Xstate) to earn a 20% economic interest in the Anshof Discovery Area. Xstate have earned their 20% economic interest. ADX announced a subsequent Anshof Investment Agreement with MND Austria a.s (MND) where MND has secured a 30% economic interest in the Anshof Discovery Area by providing cash payments to ADX and funding 60% of the Anshof work program funding. In accordance with Anshof Discovery Area Partnership agreements the economic interests in the Anshof-2 well are 60% ADX and 40% MND. XST has elected not to participate in the Anshof-2 well. ADX and MND agreed to fund XST’s share of well costs on a 50:50 basis and will in turn obtain the right to 60% and 40% respectively of production from the well unless XST opts to buy back into the well at a premium of 500% to well costs. XST retains its 20% economic interest in the remainder of the Anshof Discovery Area Partnership (i.e. Anshof Discovery Area less the Anshof-2 well) with both ADX and MND’s economic interests remaining at 50% and 30% respectively. Welchau Farmin Area ADX has executed an Energy Investment Agreement with MCF Energy Ltd via its subsidiary MCF Energy GmbH (MCF) to fund 50% of the Welchau-1 well costs up to a well cost cap of EUR 5.1 million to earn a 25% economic interest in the Welchau Investment Area. Upon completion of MCF’s funding obligations ADX will hold a 75% economic interest in the Welchau Investment Area. ADX-AT-I Investment Area ADX announced an Exploration Investment Agreement with MND Austria a.s (MND) where MND will secure a 50% economic interest in the Exploration Investment Area by providing cash payments to ADX and funding 100% of an agreed exploration work program of EUR 4.5 million. The Exploration Investment Area is part of the ADX- AT-I licence area. ADX retains a 100% interest in the remainder of the ADX-AT-II exploration license and the remainder of the ADX- AT-I exploration license. (b) ADX holds a 49.2% shareholding in Danube Petroleum Limited (Danube). The remaining shareholding in Danube is held by Reabold Resources Plc. Danube via ADX Energy Panonia holds a 100% interest in the Parta Exploration license (including a 100% interest in the Parta Appraisal Sole Risk Project) and a 100% interest in the Iecea Mare Production license. ADX is the operator of the permit pursuant to a Services Agreement with Danube. (c) ADX has commenced a process with the Italian Designated Authority to convert the exclusively awarded application to a ratified licence. This process was commenced after the award by the Ministry of Industry. - 99 - 

Continue reading text version or see original annual report in PDF format above