Blue Energy : Quarterly Activities and Cash Flow Report March 2022

29 April 2022

QUARTERLY ACTIVITIES REPORT

to 31 March 2022

Blue Energy Limited (ASX: BLU, 'Blue Energy', 'Blue' or 'the Company') is pleased to report on activities during the quarter ended 31 March 2022 across its exploration acreage in Queensland and the Northern Territory, in which the Company's key gas and oil projects are located.

KEY HIGHLIGHTS

• • Drilling plans on track for June spud of ATP 814 Pilot wells in North Bowen drilling program.

• • Blue progresses toward signing a drilling contract for the ATP814 Pilot well drilling program.

• • Blue confirms ATP 814 North Bowen program of 1 vertical plus 4 laterals targeting Moranbah, Fort Cooper and Rangal Coal Measures.

• • Safely completed initial ecological field survey work for Required Environmental Management Plan for proposed Greater McArthur 2D regional Seismic Survey in the Northern Territory

North Bowen Drilling Program: The aim of the North Bowen drilling program in ATP 814 is to convert existing contingent gas resources to gas reserves from the existing inventory of resources situated in the PL 1034 area (Sapphire Block) of ATP 814P.

The PL 1034 area is immediately adjacent to the Moranbah Gas Project which is currently a producing field operated by Arrow Energy (see Figure 1). 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. Blue is targeting multiple coal seams with the drilling program and each lateral well (up to 4 laterals) will target 1000 metres in seam length for each separate coal seam before intersecting a separate vertical well (which is designed to be the water producing well for the multiple lateral wells). All equipment and services required for the drilling of both the vertical and lateral wells has now been procured in readiness for drilling operations.

Drilling Contract Progresses toward signing: Blue Energy is progressing negotiations toward the signing of a drilling contract for the North Bowen ATP814 reserve build drilling program. Based on discussions to date it is still expected that the first well in the program will spud in early-mid June 2022.

Northern Territory Ecological Survey: Field ecological work has been undertaken and completed as input to the regulatory requirement of an Environmental Management Plan (EMP) for the proposed seismic acquisition program in Blue Energy's Greater McArthur tenements (EP 200, 205 & 207 - see Figure 6). The on ground work was undertaken along the proposed seismic lines which have previously received cultural heritage clearance/certification from the Aboriginal Areas Protection Authority (AAPA) which is an independent statutory authority responsible for overseeing the protection of Aboriginal sacred sites in the Northern Territory. The field work results are now being incorporated into the EMP.

Figure 1: ATP 814, North Bowen Basin, schematic representation of Blue's proposed well locations and the proximity of existing adjacent CSG producing wells in the Arrow Energy Operated Moranbah Gas Project

ACTIVITY IN PROVEN BASINS

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

During the quarter, Blue finalised the selection of the subsurface locations, settled on the surface locations, scouted these locations and conducted the cultural heritage survey work to enable sitepreparation to commence in May. Blue is currently finalising land access agreements with the relevant landholders. All long lead time items for drilling and production testing of all 5 of the wells making up the drilling program have been procured.

The object of the North Bowen drilling campaign is to build the gas reserve base (through the conversion of 3C resources to 2P reserves) and to test the productivity of the respective target Permian coal seams. As mentioned above, Blue is finalising the negotiations of the drilling contract to commence the program by early to mid-June.

The North Bowen drilling program in PL 1034 has been formulated in conjunction with Netherland Sewell and Associates Inc of Dallas Texas (NSAI), whom Blue uses as the independent assessor and certifier for all of the Company's current oil and gas tenements.

The aim of each lateral well in this upcoming program is to remain in seam for up to 1000 metres and intersect the vertical water drainage well which is also being drilled as one of the 5 wells in the drilling program. All wells are being drilled on or close to existing seismic control and all the laterals will be drilled from a single surface pad location (see Figure 2).

Figure 2: Blue Energy reprocessed seismic line BE08-05 …. Showing proposed multiple lateral well paths intersecting proposed vertical well

This well pattern is also being assessed as a potential development concept for full field development for PLA 1034, as depicted in Figures 3 & 4

Figure 3: Schematic block diagram of well design concept for the development of the ATP 814P gas resources Source: Blue Energy Ltd.

Figure 4: Plan view of notional development concept well patterns

Source: Blue Energy Ltd.

As already announced to the market, ATP 814 currently has 2P reserves of 71 PJ+ and 3P reserves of 298 PJ+ (as independently certified 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 Area (PCAs) and PL applications, as estimated by NSAI. There is also additional upside in the Prospective Resources category in the ATP 814 permit of approximately 2,000 PJ of gas in place.

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

As previously advised to the market, on 25 January 2022, Blue announced an approximate 300% upgrade of the recoverable gas resources to 398 PJ of Contingent Resources (3C category), in ATP 854 as assessed by the Company's independent reserve certifier NSAI. Blue is now actively marketing this gas volume and looking at the potential for early development, given the permit's location near the heart of the CSG-LNG gas supply precinct, and with gas pipeline infrastructure (PPL 30 and PL 118), linking Wallumbilla to Gladstone, running directly through the permit.

The ATP 854 gas resource thus has clear near-term potential for economic development using this infrastructure (see Figure 5). Also as previously reported, Blue has lodged Potential Commercial Area Applications (PCAs) over the permit to allow more rapid progression of this tenure toward assessment and development of these potentially economic gas resources. Blue continues to work with the Queensland Government to secure grant of these PCAs.

Figure 5: Location of ATP 854 in relation to existing pipeline infrastructure and major gas fields

ACTIVITY IN EMERGING BASINS

Greater McArthur Basin, Northern Territory:

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

As announced previously, the Company has secured a further 12-month suspension (to 15 February 2023) of its work programs for the existing granted permits (EP 200, 205 and 207) in the Northern Territory. The protracted and continued delays experienced due to the impact of COVID-19 with respect to remote community access has severely impeded the work of the specific regulatory bodies (Aboriginal Area Protection Authority cultural heritage certification for the Company's proposed 2D seismic program) and their work required for the approval processes required for on-ground activity. Notwithstanding this, Blue has now completed the on-ground ecological survey work required to be completed as part of the Environmental Management Plan lodgement for the contemplated regional seismic survey across the three granted tenements.

Consultation is continuing with the respective 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 of establishing a community licence, which is required under the new Northern Territory Government exploration activity approval process. Blue is in active discussions with specific landholders to agree on Land access for the seismic survey.

This is an excerpt of the original content. To continue reading it, access the original document here.