September 2021 Quarterly Activities & Cash Flow Report

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

29 October 2021

QUARTERLY ACTIVITIES REPORT

to 30 September 2021

Blue Energy Limited (ASX: BLU, 'Blue Energy' or 'Blue') is pleased to report on activities during the quarter ended 30 September 2021 across its exploration acreage in Queensland and the Northern Territory in which the Company's key gas and oil projects are located.

KEY HIGHLIGHTS

$10 million raised for drilling program to build on Bowen reserves

• Blue Energy raised $10 million through a placement to institutional and sophisticated investors, issuing 199,000,000 new shares at $0.05. The raising received strong support, with several new institutions coming onto the share register.
• The funds raised will be used to drill, complete and production test new wells in the Sapphire (PL1034), Lancewood (PL1045) and Central (PL1038) blocks of ATP814.

Bowen reserves build drilling program planning well underway

• Technical work to locate new Sapphire well sites is well advanced, with the locations likely to be within 5 km of existing "Moranbah Gas Project" producing wells. This technical work has included re-processing of the existing 2D seismic data available in the Sapphire block.
• The well design incorporates multiple long in seam laterals that will be drilled to intersect vertical production wells.
• Site location and access approvals with landholders is due to commence later this year.

Environmental field work completed for mandatory Environmental Authority upgrades for three PLs

Work completed includes:

• field-basedflora and fauna surveys
• noise and air quality modelling studies.
• Underground water impact modelling studies

Full field development plans (ATP814, North Bowen) in final stages of completion

• Approximately 140 development well surface locations have been identified within the three Production Licence Application Areas ready for lodgement with the Government.
• Development Plans have been designed to service the 500 PJ gas supply agreements.

Gas marketing continues

• Blue continues to market the un-contracted 2,500 PJ of Contingent Resource in ATP814.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Regulatory approval process for 2D survey in Northern Territory continues

• Blue is refreshing the seismic work program quotes obtained prior to the Pepper Inquiry moratorium. The Company is advancing regulatory approval of the 500 km 2D survey to be acquired in EPs 200, 205 and 207.

DETAILS OF SIGNIFICANT QUARTERLY ACHIEVEMENTS AND MILESTONES

$10 million capital raise to fund drilling in North Bowen Basin

Toward the end of the quarter, Blue completed a capital raise via a placement of new shares to institutions and sophisticated investors. The raising, jointly managed by MST Financial and Petra Capital, drew strong support from existing and new shareholders. A total of $10 million was raised via the issue of 199,000,000 new shares, which were quoted for trading on 27 September 2021.

The bulk of the funds raised will be used to carry out new drilling activity in Blue's North Bowen Basin permit, which is specifically for building on the Company's 2P reserves through the conversion of existing independently certified Contingent Resources to reserves. This drilling program will take place in the Sapphire block of ATP814P, which is currently under Production Licence Application (PLA) PL1034, together with the Central (PL1038) and Lancewood (PL1045) blocks (see Figure 1). This new drilling program will add to the existing wells already drilled by Blue Energy in these blocks which to date have already delivered a certified 71 PJ+ of 2P reserves and 298 PJ+ of 3P reserves.

Final locations are currently being worked up technically in consultation with Blue's independent reserves certifiers, Texas-based Netherland Sewell and Associates (NSAI), and land access work with landholders will be undertaken later this year. Detailed well designs incorporating multiple single- seam lateral wells intersecting vertical production well bores are being scoped for the Sapphire block at locations within 5 km of existing Arrow Energy-operated Moranbah Gas Project production wells.

Blue will undertake pre-qualification of rig and directional drilling contractors in early 2022, as well as secure long-lead-time items, aiming to be able to commence operations after this wet season.

Work on Environmental Authority upgrades for Production Licence completed

Blue has completed its field work on specific flora and fauna studies to fulfil the necessary regulatory requirements for the upgrade of the Environmental Authority (EA) governing activities on the three PLA Areas. These completed activities will be incorporated in the application for the required EA upgrades. These requirements included field-based water table base line surveys, flora and fauna surveys, and noise and air quality modelling studies.

Full Field Development Plans PL1034, 1038 and 1045 (ATP814, North Bowen)

Up to a possible 140 development well surface locations throughout the three PLA Areas have been identified in the development plans for these areas. These locations have been incorporated in the aforementioned EA application, and have been integrated into the planning for gas and water gathering infrastructure construction for gas export (into the domestic gas supply agreements executed and previously announced by Blue Energy). These Development Plans will be incorporated into the regulatory submission requirements for the PLAs.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

ACTIVITY IN PROVEN BASINS

Bowen Basin, Queensland - ATP814 (Blue Energy 100% and Operator)

Blue has progressed the technical field work for the various environmental surveys required to upgrade the EAs for the current three PLAs. This has included baseline water studies, flora and fauna surveys and impacts of the proposed 140 surface development well locations and associated gas and water flow lines needed to develop and produce the fields.

Additionally, Blue has also completed the noise and air quality modelling requirements for the updated EAs. This data will be combined to form the submission to the Queensland Department of Environment and Science, which is responsible for issuing EAs.

Well plans and gas gathering infrastructure location work have also been completed as part of the formal Development Plan and is being used for both the regulatory applications and the costings for the Final Investment Decision.

In conjunction with planning for this Field Development work, Blue is actively finalising well design for the reserve build drilling program following the $10 million capital raise. The aim of this program is to convert to reserves the Contingent Resources in the Sapphire (PL1034), Central (PL1038) and Lancewood (PL1045) blocks in order to increase the Company's 2P reserve base and meet the gas supply agreements executed with Origin Energy, Energy Australia and Queensland Pacific Metals.

Locations for these wells are currently being finalised using the reprocessed 2D seismic data in the Sapphire block. As part of this process, these locations will be endorsed by NSAI. It is likely that the reserve build wells will be a combination of in seam lateral wells intersecting a main vertical production well so that gas production from each seam can be metered and reserve build can then be attributed to each of the main seams intersected and tested.

Blue continues to pursue long-term gas marketing opportunities for its gas resources in ATP814. As announced previously, Blue has secured offtake agreements for up to 400 PJ of gas supply at Wallumbilla (the southern gas market) and 112 PJ in Townsville (the northern market). This leaves approximately 2,500 PJ of Contingent Resources yet to be committed to potential new gas buyers.

Development of the North Bowen Basin's total gas resource is critical to delivery of near-term gas to east coast gas users. The North Bowen Basin is one of the few east coast gas basins that has the scale of resource (estimated at 15,000 PJ) and is sufficiently de-risked (i.e., already discovered and on production) to make a rapid and long-term difference to the supply of new gas into the east coast domestic gas market.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Figure 1: ATP814, Bowen Basin, Queensland. Figure shows: (1) granted PCAs together with existing PL applications, (2) the NQGP gas pipeline to Townsville, and (3) the major high-voltage electricity transmission line between Gladstone and Townsville.

As already announced to the market, ATP814 currently has 2P reserves of 71 PJ+ and 3P reserves of 298 PJ+ (as independently estimated by NSAI) allocated to it. There is also significant upside within the constituent blocks comprising the Permit with a combined 3,248 PJ+ of Contingent Resources in all the area held by the Company's ATP814 granted Potential Commercial Areas (PCAs) and PLAs, as estimated by NSAI. There is also additional upside in the Prospective Resources category in the ATP814 permit of approximately 2,000 PJ of gas in place.

Surat Basin, Queensland - ATP854 (Blue Energy 100% and Operator)

As previously reported, Blue has lodged PCAs over the Permit, which contains 103 PJ+ of Contingent Resources, as defined by previous drilling activities and as estimated by NSAI. The Company continues to work with the Queensland Government to secure grant of these PCAs. Work commenced late in the period on a plug and abandonment program of several legacy wells, drilled previously by Blue in the permit. This work is ongoing.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Figure 2: Pipeline routes impacting ATP854, ATP813 and ATP814

ACTIVITY IN EMERGING BASINS

Greater McArthur Basin, Northern Territory -

various permits and equity levels, Blue Energy Operator (see Figure 3)

Blue is currently seeking a revised quote for the 500 km 2D seismic survey proposed to be acquired over EPs 200, 205 and 207 in the Greater McArthur Basin. This program was originally costed prior to the Pepper Inquiry moratorium. Approval documentation for this program is currently being prepared and consultation is continuing with Aboriginal Land Councils, Traditional Owners, pastoral landowners, government departments, and other community stakeholders on the program together with the outstanding application areas as part of the process to establish a community licence, which is required under the new Northern Territory Government exploration activity approval process.

As reported previously, the Company requested and was granted a 12-month suspension of its work programs for its existing granted permits (EPs 200, 205 and 207) in the Northern Territory. The lengthy delays experienced due to the impact of COVID-19 on matters such as remote community access have severely impeded the work of the specific regulatory bodies (Aboriginal Area Protection Authority cultural heritage certification for Blue's proposed 2D seismic program) for the approval processes needed prior to on-ground activity.

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