Ann: Shareholder Update, page-2

AXP Energy Limited (ASX: AXP, OTC US: AUNXF),(‘AXP’, ‘Company’ is pleased to update
shareholders following the release of its financial results for the Half Year ending 31 December
2022. As recently communicated, performance in the half has been impacted by a number
of factors including weaker gas prices in North America, lower oil sales due to some non-
recurring logistical challenges, and an unprofitable Natural Gas Liquids (‘NGLs’ sales
channel.
Despite these challenges, the Company has made solid progress in the Half Year, and in the
current Quarter, restructuring and enhancing operations to underpin improved financial
performance. Considerable progress has been made in the following key areas:
A SIMPLIFIED AND IMPROVED NATURAL GAS LIQUIDS BUSINESS
AXP’s earnings in the Half Year, and indeed throughout all of CY2022, were adversely
impacted by the Company having to purchase and transport expensive third-party material
to safely deliver a saleable, blended NGL product from its largest sales channel. As reported
(see ASX announcement 3 February 2023) the negative impact of this to AXP across CY2022
was ~US$3.32M.
The Company has now put in place solutions that both eliminate blending in the winter
months and greatly reduce the cost of blending in the summer months. In addition, it has
also identified multiple alternative sales channels which are being actively pursued to
improve transport logistics and support a higher margin NGL business going forward. As a
result of these initiatives, the significant costs incurred throughout CY2022 have been largely
eliminated from current operations and the Company expects the NGL business to normalise
in the near term.
GAS PRODUCTION OPTIMISATION AND NEW WELL RECOMPLETIONS
To reduce the impact of lower gas prices in the short to medium term, and to ensure the
Company is well-positioned to immediately capitalise on any improved pricing,
management has undertaken a number of key initiatives:
• Increasing production in the fields with lower operating costs: Specifically, AXP has
increased production from the KayJay field to over 1,100Mcf/d at the end of CY2022,
from 450Mcf/d at end CY2021. The gathering and compression costs for this field are
roughly half the cost of the fields dedicated to the midstream processing facility, which
represents AXP’s largest gas sales channel and accounts for ~70% of its gas production.
The KayJay field also has multiple market outlets, which make this field an attractive target
for further investment in gathering system improvements and preparation for
recompletions.


ANNOUNCEMENT
AXP Energy Limited | ABN 98 114 198 471
Australian Office: Level 4, 8 Spring Street, Sydney NSW 2000 | P: +61 2 9299 9580
www.axpenergy.com
The three recompletions done in the KayJay field this fiscal year continue to increase their
flow rates and are continuing to generate increased sales volumes. AXP will continue to
prioritize capital projects in the KayJay field;
• Improve production efficiencies and lower midstream costs: Within the Company’s
largest sales channel, AXP continues to work constructively with our midstream partner to
improve efficiency and reduce operating costs. Pleasingly, the reliability of these fields
has improved considerably, a testament to the cooperation between both parties. Other
such initiatives are actively being pursued to deliver better production outcomes and we
look forward to informing shareholders accordingly, as these come to fruition;
• Rationalise operations: Across all leases, AXP has rationalised its well count through the
temporary shut-in of wells that are marginal producers. This is reducing operating costs
and has also allowed the Company to temporarily reduce headcount of field staff and
associated costs;
The Company is also seeking to manage its exposure to gas price volatility and current low
prices through gas marketing initiatives. Although spot market gas prices have been in the
range of $2.50/MMBtu this week, three new contracts have recently been signed for an
aggregate of ~1,500MMBtu/day at average prices closer to $4/MMBtu for 12 months. AXP
will continue to actively monitor the spot price of gas to strike the right balance between
managing its exposure to lower gas prices and maximising returns from any future price rises;
Within the low gas price environment, the Company’s primary focus is cost control across the
entire operation. However, AXP will also look to realise additional revenue by reducing its oil
inventory where prices support this. To this end, AXP has secured additional third-party
haulage capacity, to complement its in-house fleet and so that it may boost oil sales and
capitalise on any short-term favourable pricing.
Chief Executive Officer Tim Hart commented: “The key to the next two quarters is cost control
and improving operational efficiencies. With numerous improvements to our gas and NGL
business already completed, we are better prepared in 2023 to manage through these lower
commodity prices that typically coincide with the summer months. When opportunities to
move more oil to market look favourable, AXP also has additional resources available to
complement our in-house oil hauling capabilities. Our portfolio has significant optionality and
we continue to work hard to deliver improved margins, better gas production reliability and
increased volumes. The key catalyst to benefit from this work in the short to medium term is
the gas price. That said, the WTI oil price is tracking favourably and we are very focused on
growing oil sales and benefiting from this pricing. More regular updates will be provided so
shareholders are well up to speed on pricing and all material operational activities.”