Warrego Energy : Half Year Financial Report

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ACN 125 394 667

Interim Financial Report

For the Half Year ended 31 December 2021

only	Half Year Financial Report
	31 December 2021
use	Contents
Directors' Report
personal
Auditor's Independence Declaration
	Directors' Declaration
	Consolidated Statement of Profit or Loss and Other Comprehensive Income
	Consolidated Statement of Financial Position
	Consolidated Statement of Cash Flows
For	Consolidated Statement of Changes in Equity
Notes to the Half Year Financial Report
	Independent Auditor's Review Report to the Members

Warrego Energy Limited - Half-Year Financial Report: 31 December 2020

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Directors' Report

The Directors of Warrego Energy Limited ("WGO") present the consolidated interim financial report for the half year ended 31 December 2021. The consolidated entity consists of Warrego Energy Limited (the "Company" or "Parent Entity") and the entities it controlled during the half year.

DIRECTORS

The Directors in office during the half year in its entirety and up to the date of this report are:

Greg Columbus	Non-executive Chairman
Dennis Donald	Managing Director, Group Chief Executive Officer
Mark Routh	Non-executive Director
Michael Atkins	Non-executive Director (appointed 31 December 2021)
David Biggs	Executive Director - CEO Australia (resigned 31 December 2021)

PRINCIPAL ACTIVITY

The principal activity of the Group during the year was the exploration for and development of oil and gas resources. Its objective is to generate shareholder wealth in a safe and responsible manner.

OPERATING RESULTS

The net loss of the consolidated entity for the period was $2,423,498 (2020: $3,284,429). There was

no impairment expense for the six months to 31 December 2021 (2020: nil).

FINANCIAL POSITION

The net assets increased by $45,018,673 in the period up to 31 December 2021 made up of an increase in total assets of $39,312,531 and a decrease in total liabilities of $5,706,142. The company raised a net cash amount of $46,321,213 during the half-year from a share placement.

REVIEW OF OPERATIONS

During the period the Group undertook the following activities:

AUSTRALIA

Warrego's Perth-based team is focused on the development of EP469 and onshore exploration opportunities including STA-EPA-0127 in the northern Perth Basin.

EP469 (50%) West Erregulla Gas Fields, onshore Perth Basin, Western Australia

West Erregulla Gas Project Development

Warrego is nearing finalisation of key agreements with Australian Gas Infrastructure Group ("AGIG") and Strike Energy Limited ("Strike", the "Operator") for the construction and operation of a gas processing facility for Phase 1 of the West Erregulla Gas Project (the "Project").

In July 2021 AGIG commenced procurement of Long Lead Items (LLI) for the construction of the gas plant and trunk line. The JV is continuing to instruct AGIG to procure Long Lead Items ("LLI") to enable the Project to remain on track for first gas in the second half of 2023. These LLI commitments are being funded by each of the EP469 Joint Venture partners and will effectively be repaid from the proposed project finance facilities.

Warrego Energy Limited - Half-Year Financial Report: 31 December 2021

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Directors' Report

Western Australia's Environmental Protection Authority ("EPA") continues to assess the upstream (gas gathering system) and midstream (gas processing plant) submissions. The Operator and AGIG provided additional information to the EPA in December for review. Subject to satisfying all requests for supplementary information and meeting regulatory requirements, the Operator and AGIG anticipate the EPA to approve and issue the environmental permits during CY 2022 after which construction can commence.

The Operator lodged an application to convert EP469 to a Production Licence (PL) at the end of January 2022 which is expected to be assessed once the EPA approval process is complete. In addition to the wells already drilled and completed, the Joint Venture has agreed to drill an additional production well, WE-6, prior to first gas which will provide redundancy and additional flexibility.

Work to secure project finance is well underway. Preparation of project financing due diligence packages has commenced with various experts appointed to prepare preliminary reports. Once the final banking group is mandated, these reports will underpin key aspects of the legal and commercial due diligence. It is anticipated that Warrego's financing will be underpinned by the substantial 155 PJ long-term gas sales contract the Company secured with Alcoa in 2020. Funding secured via project debt financing would become available to Warrego once the project receives EPA permit approval.

Warrego has committed to offset 60% of all Scope 1 and Scope 2 greenhouse gas emissions from production of first gas at West Erregulla with a trajectory to net zero by 2050 in accordance with the rigorous targets set in AGIG's proposed Greenhouse Gas Management Plan.

West Erregulla Appraisal Campaign Update

The EP469 JV continued to progress appraisal of the West Erregulla gas field during the first half of FY22.

The WE-4 well, a step out appraisal well drilled down-dip on the south-eastern flank of the Central Area of the West Erregulla gas field, commenced flow testing operations in May 2021 over a 75m perforation between 4,847m and 4,962m MDRT. Clean-up of the well was paused due to the presence of sand in the production stream which was successfully controlled. On 10 July, after a 46-hour flow period, WE-4 achieved a sustained gas flow rate of 35 MMscfd through a 76/64" choke at ~1,770 psig FWHP and produced low salinity water at a rate of 1,365 bbl/d (water entry was observed at 4,630m TVDSS). This is an excellent flow test result for a flank well and strongly correlates with the WE-2 discovery well located on the crest of the Central Area. The WE-4 well has been completed for future production.

Warrego Energy Limited - Half-Year Financial Report: 31 December 2021

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Directors' Report

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The WE-5 well, located to the north of the Central Area between WE-2 and the fault that divides the Central from the Northern Area of the field, commenced flow testing operations in July 2021. The well was perforated in two separate zones over a combined 31m interval in the Kingia Sandstone between 4,840m and 4,874m MDRT (4,613m and 4,647m TVDSS). After an extended clean-up period and prolonged flow test, it was determined that the reservoir was unable to overcome a production barrier thought to be well bore skin caused by filtrate from drilling mud invasion and cement resulting from sub-optimal cement placement around the well bore casing.

The primary flow period was conducted over 77 hours. An instantaneous flow rate of 13.1 MMscf/d was achieved while a sustained rate of 5.1 MMscf/d was measured through a 64/64" choke with 260 psig FWHP. Associated water was produced at less than 5.9 bbls/MMscf on average. Gas flows were measured down to 4,670m TVDSS although, due to the compromised flow test, there was no conclusive evidence as to the source of the produced water. The JV is continuing to evaluate technical options for WE-5 and it is anticipated that recompletion and retesting will be carried out prior to first gas.

The joint venture is preparing to recommence operations at WE-3, located in the Northern Area of the field and separated from the Central Area by a fault. WE-3 was temporarily suspended on 4 January 2021 at 4,294m MDRT in the Carynginia formation after encountering high pressure readings that were close to the design limits of the well. Following a comprehensive review of WE-3 operations and data by both JV partners and external consultants, the JV has agreed that the well can be safely re-entered. The Joint Venture has finalised the well design for the re-entry into WE-3(WE-3 ST2) and approved long lead item expenditure for drilling operations. It is anticipated that the Ensign 970 rig will mobilise to the WE-3 well location in H1 2022.

Warrego Energy Limited - Half-Year Financial Report: 31 December 2021

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