Pilot Energy : Annual Report to shareholders

Pilot Energy Limited / ABN 86 115 229 984 And Controlled Entities

For personal use only

Annual Report 2021

For the year ended 30 September 2021

Contents

only	Corporate Directory
	Chairman's Letter
use	Review of Operations
Directors' Report
	Auditor's Independence Declaration
	Consolidated Statement of Profit or Loss and Other Comprehensive Income
personalFor	Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
	Notes to the Consolidated Financial Statements
	Directors' Declaration
	Independent Audit Report
	Additional Information for Listed Public Companies

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Pilot Energy Annual Report 2021

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Corporate Directory

For personal use only

Directors	Bradley Lingo (Executive Chairman)
	Anthony (Tony) Strasser (Managing Director)
	Daniel Chen (Non-Executive Director)
	Bruce Gordon (Non-Executive Director)
Company Secretary	Cate Friedlander
Registered and	Level 1, 85 Elizabeth Street
Principal Office	Paddington NSW 2021
	www.pilotenergy.com.au
	[e-mail]
Auditors	MNSA Pty Ltd
	Level 1, 283 George Street
	Sydney NSW 2000
Legal Advisers	MinterEllison	Squire Patton Boggs
	Governor Macquarie Tower	Level 17, 88 Phillip Street
	1 Farrer Place	Sydney NSW 2000
	Sydney NSW 2000
Share Registry	Boardroom Pty Limited
	Level 12, 225 George St,
	Sydney NSW 2000
ASX Code	ASX: PGY
Legal Form of Entity	Public Company
Country of Incorporation	Australia
and Domicile

Pilot Energy Annual Report 2021

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Chairman's Letter

For personal use only

Dear Shareholder,

On behalf of the board of directors of Pilot Energy Limited ('Pilot', or the 'Company') it is my pleasure to present the 2021 Annual Report.

In 2020 major shareholders of the Company recognised that a growing interest in clean energy sources and the emergence of the COVID-19 pandemic was resulting in significant decline in investor interest in traditional oil and gas exploration and production businesses and as such Pilot needed a change of strategy. In responding to shareholders, the Board undertook in the first half of CY 2020 a strategic review of Pilot's assets at that time.

A major outcome of this review was the recognition that the Company held a material position in one of Australia's most significant renewable resource areas - the Mid West coastal region of Western Australia. The strategic review also recognised that the Company's historical focus on upstream oil and gas exploration and its exploration asset holdings in the Mid West Renewable Zone could be repurposed to build the future of the Company around the energy transition. The business plan is in place and the Company is aggressively pursuing the diversification and transition to the development of integrated renewable energy, hydrogen and carbon management projects by leveraging its existing oil and gas tenements and infrastructure to cornerstone these developments.

In implementing the new energy transition strategy, the 2020/2021 year has been a very exciting time in the repositioning of Pilot Energy and in particular with the successful conclusion of key transactions which has set the foundations for the energy transition pathway. These include the following:

• Completion of the acquisition of Royal Energy Pty Ltd (and gaining exposure to a strategic interest in the Cliff Head Oil
  Field and associated infrastructure) on 1 June 2021. Following completion, Tony Strasser joined Pilot as the Company's Managing Director;
• Recapitalising the Company by successfully raising $11 million from institutional and sophisticated investors; and
• Commencing the Mid West and South West Feasibility Studies with Australian and world leading engineering consultants and advisers. These Studies will form the basis for the development pathway for the CCS, hydrogen and renewables projects.

Furthermore, we have also made significant advancements with key partners in the region, namely APA and Warrego who have partnered with Pilot in the Mid West Hydrogen and CCS Feasibility study. The consortium represents an exciting evolution of Pilot's business plan with the participation of key Australian energy industry participants supporting Pilot's feasibility studies and vision for the Mid West Blue Hydrogen project.

I would like to thank fellow directors, Tony Strasser (Managing director), Daniel Chen and Bruce Gordon, and Cate Friedlander (In house legal counsel and Company Secretary) and Nick Watson (Head of Commercial & Renewables) for their continued dedication and hard work with the single focus of the leading the Company through a complex transition from a junior oil & gas exploration and production company to a significant operator and provider of clean energy (through CCS, hydrogen and renewables projects) into Western Australia.

To our shareholders, we thank you for your ongoing support during the year. With significant progress with the recapitalisation of the Company, a renewed energetic management team, and the engagement of blue chip world renowned consultants who have commenced the energy transition feasibility studies, Pilot is set for an exciting year of partnership and development.

Yours

For and on behalf of the Board

Brad Lingo, Chairman

Pilot Energy Annual Report 2021

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For personal use only

Review of Operations

As at 30 September 2021

Highlights

• Completion of $3 million equity capital raising via share placement to institutional and sophisticated investors in November 2020 ($2.5 million) and fully underwritten share purchase plan in January 2021 ($0.5 million).
• Capital raising of $8 million completed in August 2021 following shareholder approval. Funds raised have provided sufficient capital to conclude the Feasibility Studies, Cliff Head expenditure and corporate costs.
• Following satisfaction of key conditions including the capital raising, the Company was reinstated to the ASX Official
  List on 11 August 2021. In parallel with reinstatement the Company issued a prospectus dated 9 August 2021 to raise a nominal amount ($1000) and to remove any trading restrictions that may have previously attached to shares issued before the closing date of the prospectus.
• Major restructure of the ownership of offshore Perth Basin exploration permit WA-481-P securing $300,000 in cash and 3-year work programme full carry valued at approximately $1.2 million. Formation of the Cliff Head Wind & Solar Project Joint Venture with Triangle Energy and Pilot as 80% owner and operator centred on the Cliff Head Offshore Oil Field (Transaction remains subject to regulatory approval of the WA-481P transfer).
• Acquisition of additional interest in South Perth Basin exploration permits which provides foundation for the South West Blue Hydrogen and Carbon Capture Storage Project.
• Submission of expression of interest for the Oakajee Strategic Industrial Area Renewable Hydrogen Project to the
  Government of West Australia providing comprehensive renewable energy, hydrogen, and carbon management solutions.
• Grant funding application submitted for funding under the Commonwealth Government's Carbon Capture, Use and Storage Development Fund to accelerate two Western Australian CCS projects.
• Completed the acquisition of Royal Energy Pty Ltd (and interest in the Cliff Head Oil Field) on 1 June 2021. Following completion, Tony Strasser (Managing Director) and Bruce Gordon (Non-Executive Director) joined the Pilot Board and executive team.
• Key consultants engaged to conduct Feasibility Studies for Mid West WA Blue Hydrogen and Mid West WA Wind and
  Solar Projects.

Subsequent to the end of the year:

• Pilot formed consortium with APA Group and Warrego Energy to jointly undertake and fund Pilots Mid West Blue
  Hydrogen and CCS Feasibility Study. Consortium to work with leading consultants contributing funding and sector expertise, further strengthening the team working on the study.
• Pilot commenced the South West Carbon Management and Blue Hydrogen Feasibility Study with RISC, Genesis and Technip. The study will explore the opportunity to capture and store the South West Western Australian regions CO2 and flue gas emissions generated in the Kwinana Industrial Precinct, in addition to the potential development of a Blue Hydrogen project.
• Pilot finalised farmin terms with Advanced Energy Transition Pty Ltd to drill one exploration well in either EP 416 or EP 480 which overlie the Western Australian Government-sponsored South West Hub Carbon Capture & Storage Project and to test the natural gas potential of the Leschenault Gas Prospect .
• Cliff Head joint venture (CHJV) completed a lifting on 26th October 2021, of 107,000 bbls of Cliff Head crude under the Offtake Agreement with BP Singapore, with the CHJV receiving approximately A$10.7 million in November 2021.
• Grant funding applications submitted for funding under the Carbon Capture, Use and Storage Hubs and Technologies Program - Technologies Stream to progress a CCS project to final investment decision and complete Front End Engineering and Design (FEED) on an innovative Blue Hydrogen production technology designed to optimise the CO2 stream for capture and storage.

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