Karoon Energy : FY22 Half Year Results Announcement & Investor Presentation

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23 February 2022

Company Announcements Office

ASX Limited

Dear Sir / Madam

Interim Financial Report - 2022 Financial Year -

ASX Release and Investor Presentation

Attached are the following documents in relation to Karoon Energy Ltd's interim financial report for the financial half-year ended 31 December 2021:

• ASX release; and
• investor presentation.

The documents referred to above have been authorised for release by the Board of Directors.

Yours faithfully

Nick Kennedy

Company Secretary

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Underlying net profit after tax of US$21.1 million1 for the first half of FY2022

Highlights:

^ Reflects Baúna operations from 7 November to 31 December 2020 and is therefore not directly comparable.

• Underlying net profit after tax (NPAT) for the first half of FY2022 was US$21.1 million1.
• A statutory net loss after tax of US$97.7 million was reported, which included a non-cash adjustment to the anticipated contingent consideration payable to Petrobras for the Baúna asset of US$121.3 million net of tax (US$183.8 million pre-tax), following an increase in Karoon's oil price outlook.
• The solid underlying NPAT1 reflected oil production from the Baúna Field of 2.50 million barrels (MMbbl), and oil sales of 2.57 MMbbl. The weighted average realised price, net of selling expenses and logistics, was US$72.43/bbl, which was 23% higher than the average price of US$59.00/bbl realised in FY2021. Oil revenue received from the five cargoes lifted was US$186.5 million.
• Unit production costs were US$23.50/bbl, below the US$28 - 32/bbl FY2022 guidance range due to higher than anticipated first half production over a largely fixed cost base. Unit depreciation and amortisation was US$11.79/bbl, in line with prior market guidance.
• Cash and cash equivalents at 31 December 2021 were US$204 million and the Company had US$130 million of undrawn debt, placing Karoon in a strong financial position.
• Production guidance for FY2022 has been narrowed to 4.4 - 4.6 MMbbl, while guidance for unit production costs has been reduced to US$28 - 30/bbl. Unit depreciation and amortisation guidance is unchanged at US$12 - 13/bbl. Additional guidance is shown in Table 1 on page 4.
• Activities on the Baúna well intervention program and Patola field development, which together have the potential to increase Karoon production to over 30,000 bopd by early 2023, are targeted to commence in late April/early May 2022.
• The recent entry into an agreement to purchase more than 480,000 Verified Emission Reductions (carbon credits) from Shell, which have VCS and CCB Verra certifications, will enable Karoon to be carbon neutral

1. EBITDA (earnings before interest, tax, depreciation, depletion, and amortisation), underlying EBITDA and underlying net profit after tax (NPAT) are non-IFRS measures that are unaudited but are derived from financial statements, which have been subject to review by the Company's auditor. These measures are presented to provide further insight into Karoon's performance. See notes on page 4 of the Interim Financial Report to derive EBITDA, underlying EBITDA and underlying NPAT.
2. Excludes depreciation on the FPSO right of use asset.

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for its Scope 1 and 2 Baúna greenhouse gas (GHG) emissions in FY2021, and result in an estimated 60% of total Baúna-Patola Scope 1 and 2 emissions to be offset between 2022 and 2030.

Commenting on the results, Chief Executive Officer and Managing Director, Dr Julian Fowles, said:

Financial and Operational Performance

"Karoon's underlying NPAT for the six months to end December 2021 of US$21.1 million1 was a pleasing result. It reflected an outstanding operational performance from the Baúna asset, aligned with Karoon's goal to be a safe and reliable producer, despite ongoing challenges from the global COVID-19 pandemic. The result also reflected the global strength in oil prices, with the average price realised for the period nearly 25% higher than that received during FY2021.

"Based on the recent rise in oil prices and considering external forecasts, we now anticipate that the oil price over the next few years will be considerably higher than our forecast in June 2021. As a result, we have recognised a material increase in the assessed net present value of the contingent consideration payable to Petrobras for the Baúna asset, resulting in a statutory net loss after tax for the half year of US$97.7 million (details of the contingent consideration calculation are shown in Note 10 on page 27 of the Interim Financial Report for the financial half year ended 31 December 2021). It should be noted that higher oil prices should generate additional cash flows to fund the higher Petrobras payments.

"A key highlight for the half year was achieving 99% facilities uptime, including 99.8% uptime in the fourth quarter of CY2021. This excellent performance is a testament to the hard work from our Brazilian operational team and underlines the benefit of our policy of undertaking proactive maintenance, which seeks to ensure the integrity and reliability of the Baúna FPSO. Unit production costs of US$23.50/bbl were below our guidance range, largely due to higher production than anticipated over a largely fixed cost base. Finance fees and interest, excluding capitalised FPSO lease interest expense, were also below guidance at US$2.3 million, as certain debt establishment costs have been capitalised during Patola's development period. Other costs were in line with guidance provided in January 2022 in the December 2021 quarterly results.

"The results included US$1.7 million of exploration and evaluation expenditure expensed, primarily related to the ongoing evaluation of the Neon project. In addition, a net foreign exchange gain of US$3.4 million was recognised, due to the appreciation of Karoon's cash balances held in Australia relative to the US dollar during the half-year. The forex gain has been excluded from underlying EBITDA and underlying NPAT.

"After adjusting the statutory tax benefit for US$13.3 million of foreign exchange impacts on Brazilian tax assets and liabilities, the result reflected an effective tax rate of 32%. Permanent differences, largely resulting from different overseas corporate tax rates, accounted for the remaining gap to the Brazilian 34% corporate tax rate.

"Operating cash flow for the first half was US$83.9 million, which, together with the draw-down of US$30 million from the Company's new debt facility, helped lift the cash balance from US$133 million at the end of June 2021 to US$204 million at the end of December 2021. Including US$130 million of undrawn debt, our liquidity position is US$334 million, which should be sufficient to fund the estimated cost of the forthcoming Baúna intervention campaign and Patola development program.

Development Projects

"Since taking FID on these projects in mid-2021, we have made good progress with our execution preparations and costs remain within guidance. Assuming no major delays with regulatory approvals or the maintenance and inspection of the Maersk Developer rig, currently taking place in Trinidad and Tobago, and its mobilisation to Brazil, the first Baúna well intervention is expected to commence between 15 April and 15 May 2022. The Baúna campaign is scheduled to take approximately 4 - 6 months to complete, and Patola development drilling is targeted to commence immediately afterwards. Given that the interventions and Patola wells will utilise existing

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infrastructure, we expect to capture material operating and logistical efficiencies as production rates increase. Indicative unit operating costs are targeted to fall from US$28-30/bbl in FY2022 to US$12 - 18/bbl in FY2023.

"We are continuing to undertake substantial analysis, engineering and technical work on the potential development of the Neon oil discovery. A decision whether to drill one or more control wells on Neon, to assist with development planning, will be taken in coming months. We are also continuing to assess the market for value accretive acquisitions, using a highly disciplined approach to capital allocation and rigorous assessment of potential opportunities.

Sustainability

"A key focus for Karoon is to ensure that our operations are sustainable. During the first half of FY2022, we completed two projects - replacing a low-pressure flare and installing a new mooring buoy - that will reduce greenhouse gas (GHG) emissions from our operations. In addition, we have recently entered into an agreement to purchase high quality carbon credits from Shell over 2022 - 2030, which will offset an estimated 60% of GHG emissions from Baúna and Patola. Together with carbon credits acquired in November 2021, the Shell agreement will enable us to achieve our target of being carbon neutral for Scope 1 and 2 Baúna emissions in FY2021. This represents a significant step towards Karoon being carbon neutral on Scope 1 and 2 Baúna-Patola emissions from FY2021 onwards and net zero on all Scope 1 and 2 emissions by 2035. Investigations into additional ways to avoid and reduce emissions within our operations and investment opportunities in carbon offset projects in Brazil, which provide both climate related and social benefits, are progressing.

Outlook

"Karoon enters the second half of FY2022 in a strong financial and operating position with more than US$200 million in cash and US$130 million undrawn from our debt facility. Reliable production from our high quality Baúna asset combined with higher oil prices are currently generating strong cash flow to help fund Karoon's sanctioned growth projects. Over the longer term we shall continue to balance investment in high value growth relative to returns to shareholders."

For further information on this release, please contact:

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Conference call

Karoon's Chief Executive Officer and Managing Director, Dr Julian Fowles, will hold a conference call for analysts and investors to discuss the 2022 Half Year Results on Wednesday, 23 February 2022 at 11am (Melbourne time). The conference call will be streamed live and can be accessed via the following link:

https://webcast1.boardroom.media/watch_broadcast.php?id=61e0ee55a0d48

A recording of the call will be available on Karoon's website.

This announcement has been authorised for release by the Board of Karoon Energy Ltd.

Table 1: Guidance for FY2022

Notes:

1. Guidance is subject to various risks (including those "Key Risks" set out in Karoon's 2021 Annual Report).
2. Unit Production Costs: based on daily operating costs associated with Baúna Production, excluding government royalties.
3. Other Operating costs: includes corporate and non-oil and gas related depreciation, excludes government royalties and foreign exchange gains/losses.
4. Other costs include exploration expensed and hedge premiums.
5. Excludes depreciation on FPSO right-of-use asset capitalised under AASB 16 'Leases', which is included as part of Unit Production Costs.
6. The variance between low and high guidance is largely related to timing of the commencement of the Maersk Developer drilling rig activities in Brazil, with the exact timing subject to mobilisation to Brazil. Excludes any borrowing costs associated with the Patola development that may be capitalised.
7. Relates to deferred consideration payable to Petrobras 18 months after closing and is separate from the contingent consideration payable to Petrobras which is dependent on future oil prices.

All guidance is subject to the statement below regarding "Forward-looking statements".

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