Blue Energy : Quarterly Activities & Cash Flow Report March 2023

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

28 April 2023

QUARTERLY ACTIVITIES REPORT

to 31 March 2023

Blue Energy Limited (ASX: BLU, 'Blue Energy', 'Blue' or 'the Company') is pleased to report on activities during the quarter ended 31 March 2023 across its exploration acreage in Queensland and the Northern Territory, in which the Company's key gas and oil projects are located.

KEY HIGHLIGHTS

• Sapphire pilot flowing continuous gas at 100,000 standard cubic feet per day (scfd).
• Sapphire Pilot water rate is approximately 200-250 barrels per day of water.
• Sapphire water quality remains within specification for use by stock and for domestic use.
• Gas quality data continues to record high methane content (97%) and low CO2 content (1%).
• Sale of Moranbah Gas Project by Arrow Energy and AGL to Queensland Pacific Metals creates positive alignment for Blue to negotiate access to the infrastructure and for a more efficient and cost effective supply of gas to domestic market and in in particular QPM 's proposed Nickel refinery in Townsville (existing MoU for gas supply).
• Federal Government reveals extension of $12/Gj price cap extension and draft "Code of Conduct" for the gas industry. which includes exemptions for small companies who have domestic only gas projects, like Blue Energy's Sapphire development is focussed on.
• Phase 2 of the Government funded, KPMG authored, Bowen Basin pipeline study is completed and with the Qld Government for public release.

Figure 1: Sapphire 6 flare stack showing now continuous gas production on a windy night.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Federal Government Gas Market intervention

There has been much recent press regarding the status of the Federal Government's price cap and code of conduct mechanisms first touted in December last year. Federal Energy Minister Chris Bowen released (26th April 2023) a consultation draft of the Mandatory Code of Conduct for the gas sector. Responses on the draft are due for submission by the 12 May 2023. In essence, the key elements of the draft code are that:

1. A price cap, which is to be set at $12/GJ and subject to a review commencing by 1 July 2025;
2. A process for qualifying for exemptions from the price cap on the basis of making satisfactory ACCC and court enforceable supply commitments; and
3. Small producers of gas will qualify for be automatic exemption from the price cap if they supply only to the domestic market and in volumes less than 100 PJ per annum.

Blue is encouraged by the proposed exemption of small domestic gas producers from the price cap contained in the draft consultation code of conduct documentation but will assess it carefully and respond accordingly. On its face, it appears that Blue's Sapphire Project will be exempt from the price cap if there is a price cap still enforced by the ACCC beyond 2025.

ACTIVITY IN PROVEN BASINS

Bowen Basin, Queensland: ATP 814 (Blue Energy 100% and Operator)

As announced in the December 2022 Quarterly Activities Report, the Sapphire Pilot Well drilling program has been completed, with the production testing phase of the program now underway. The aggregate gas rate from the Pilot is just over 100,000 standard cubic feet per day and water rate is approximately 200-250 barrels per day with both showing encouraging trends - the gas rate in the pilot wells is increasing, as the water rate is stabilising (Figure 2).

Geological data from the drilling phase has been provided to the Company's independent reserve certifier Netherland Sewell and Associated Inc of Dallas (NSAI), for assessment. The object of the Pilot Well drilling and production testing campaign has been to build Blue's gas reserve base (through the conversion of 3C resources to 2P reserves) from the existing inventory of 3C resources situated in the PL 1034 area (Sapphire Block) of ATP 814P, as well as to assess the productivity of the respective target Permian coal seams. The results of these two exercises (reserves and flow rates) will then contribute toward and inform the sizing of the future Sapphire Field Development.

The PL 1034 application area is located immediately adjacent to the Moranbah Gas Project (MGP), a producing gas field which is in ownership transition to Queensland Pacific Minerals, with whom Blue Energy has an existing non-binding Memorandum of Understanding to supply gas to the proposed QPM Nickel refinery in Townsville. With the acquisition of the MGP by QPM, there is now full alignment for Blue to utilise MGP infrastructure and to fulfil the supply agreement to the proposed QPM Townsville plant.

The application for PL 1034 is currently with the Queensland Government for the issue of the Production Licence (PL). Blue Energy is 100% owner and operator of ATP 814P and the PL 1034 application area.

As already announced to the market, ATP 814 contains 79 PJ+ of 2P reserves and 335 PJ+ of 3P reserves (as independently certified by NSAI). Significant upside also exists within the constituent blocks 2

NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

comprising the permit, with a combined 3,276 PJ+ of Contingent Resources in all the area held by the Company's ATP 814 granted Potential Commercial Areas (PCAs) and PL applications, as also certified by NSAI. The Prospective Resources category in the ATP 814 permit totals approximately 2,000 PJ+ of gas in place.

Figure 2: Sapphire gas and water rates since commissioning (water is blue curve and LH axis; gas is red curve and RH Axis). Gas rate shows steady increasing trend as water stabilising. +see Listing Rule 5.42 Disclosure at page 7

Surat Basin, Queensland: ATP 854 (Blue Energy 100% and Operator)

Blue has lodged PCA applications over this permit area to allow this tenure to progress more quickly toward assessing and developing the potential economic gas resources which Blue's work to date has identified. Blue continues to work with the Queensland Government to secure grant of these PCAs.

Blue has an existing 398 PJ+ of Contingent Resources in ATP 854 as assessed by NSAI. The gas resource located near the heart of the CSG-LNG Surat Basin gas supply precinct and has gas pipeline infrastructure (PPL 30 and PL 118) linking Wallumbilla to Gladstone running directly through the permit (see Figure 3 below).

• see Listing Rule 5.42 Disclosure at page 7.

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Figure 3: Location of ATP 854 in relation to existing pipeline infrastructure and major gas fields.

Source: Blue Energy.

ACTIVITY IN EMERGING BASINS

Greater McArthur Basin, Northern Territory:

(Various permits and equity levels, Blue Energy Operator: see Figure 6)

Blue has lodged the Environmental Management Plan (EMP) for the acquisition of 2D regional seismic in EPs 200, 205 and 207. The EMP incorporates the results of the survey work undertaken by Blue Energy which looked at the flora, fauna aspects of the survey line locations and access points of the seismic line locations. Blue is working the relevant Northern Territory Government departments to progress the EMP to approval.

As previously advised Blue has sought and been granted a Suspension and Extension of the EP 200, 205 and 207 tenures and work programs to reflect the delays in approval processes experiences on the work programs in these tenures,

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NATURAL GAS - Reliable, Dispatchable, Sustainable,

… ESSENTIAL

Figure 4: The Blue Energy exploration asset portfolioSource: Blue Energy.

Galilee Basin, Queensland: ATP 813 (Blue Energy 100% and Operator)

Blue has an existing 838 PJ+ of Contingent Gas Resources in ATP 813 within the Betts Creek Coal Measures in this permit (as assessed by NSAI). As previously reported, NSAI has identified a further 1,956 PJ++ of Prospective Resource (gas in place) in the permit. Blue has 9 separate but contiguous PCA applications over part of the permit area which are currently with the Queensland Department of Resources for grant.

CORPORATE

Cash position

Cash on hand (at 31 March 2023) was A$2.5 million, however post record date, receipt of insurance claim funds yields a cash balance of $3.5 million as at 9th April 2023. The Company has nil debt.

Blue's accompanying Appendix 5B (Quarterly Cashflow Report) includes an amount in Item 6.1 which constitutes Non-executive Directors' fees for the quarter. The aggregate amount of payments to related parties and their associates for the June quarter (shown in Items 6.1 and 6.2 of the attached Quarterly Cashflow Report) relates to cash fees paid to all Directors (including salaries paid to the Executive Chairman and Managing Director).

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