Jupiter Energy : Mid Year Accounts 2021-2022

HALF YEAR FINANCIAL REPORT

31 DECEMBER 2021

ABN 65 084 918 481

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Jupiter Energy Limited Corporate directory 31 December 2021

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Jupiter Energy Limited Directors' report

31 December 2021

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Jupiter Energy Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the half-year ended 31 December 2021.

Directors

The following persons were directors of Jupiter Energy Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated:

Geoffrey Gander (Executive Chairman/Chief Executive Officer)

Baltabek Kuandykov (Non-Executive Director)

Alexey Kruzhkov (Non-Executive Director)

Alexander Kuzev (Non-Executive Director)

Mark Ewing (Non-Executive Director)

Principal activities

During the financial half-year the principal continuing activities of the consolidated entity consisted of:

• Exploration for oil and gas in Kazakhstan: and
• Appraisal, development and production of oil and gas properties in Kazakhstan.

Review of operations

The loss for the consolidated entity after providing for income tax amounted to $7,328,260 (31 December 2020: profit of $5,609,029).

The loss for the financial half-year includes an unrealised foreign exchange loss of $3,234,298 (Dec 2020: gain of $9,755,982) on the consolidated entity's promissory notes.

The six month period to 31 December 2021 ("the Review Period") saw the Company continue to produce oil from wells on the Akkar North (East Block), Akkar East and West Zhetybai oilfields.

Akkar East continued to produce under its Commercial Production Licence, Akkar North (East Block) returned to production under its new Commercial Production Licence and West Zhetybai produced (until 31 August 2021) under its Trial Production Licence.

Production on the Akkar East field was from wells J-51,J-52 and 19, production from Akkar North (East Block) was from well J-50 and production from the West Zhetybai oilfield was from well J-58.

Oil production from the West Zhetybia field (J-58) was shut in from 31 August 2021 as the Company commenced the approval process to transition the field to production under its Commercial Licence. These approvals are now expected to be completed in 4th Quarter 2022.

All oil produced by the Company was sold into the Kazakh domestic market, as mandated under its current Licence conditions.

There were approximately 52,200 barrels of oil (2020: 89,200 barrels) produced during the Review Period.

Production Report:

Production - Akkar North (East Block) Oilfield (J-50 well):

The implementation of a cost effective 100% gas utilisation is pivotal to enabling the Company to return all its current five production wells to optimal production - which, based on past performance, should be ~100 tonnes (~750 barrels) per day.

Production - Akkar East Oilfield (J-51,J-52,J-53 and # 19 wells):

During the Review Period, approximately 30,000 barrels of oil (2020: 16,600) were produced from wells J-51,J-52 and well 19. These three wells are located on the northern section of the permit and are part of the East Akkar oilfield.

The J-53 well, which is also located on the Akkar East oilfield, was shut in for the entire Review Period, awaiting further remedial work before potentially coming back onto production. This work will be carried out when the appropriate funding and approvals are in place.

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Jupiter Energy Limited Directors' report

31 December 2021

Production - West Zhetybai Oilfield (J-55,J-58 and J-59 wells):

During the Review Period, approximately 11,000 barrels of oil (2020: 53,700) were produced from the J-58 well. This well only operated for 2 months (July and August 2021) during the Review Period, before being shut in and it is now going through the approval process to transition to Commercial Production.

No oil was produced from the J-59 well. These two wells are located on the southern section of the permit and are part of the West Zhetybai oilfield.

The J-55 well, which is also located on the West Zhetybai oilfield, was shut in for the entire Review Period, awaiting further remedial work before potentially coming back onto production. This work will be carried out when the appropriate funding and approvals are in place.

Status of Licences:

The Company has completed the transition of the Akkar North (East Block) and Akkar East fields from Trial Production to Commercial Production.

The Company is now in the process of completing the transition of the West Zhetybai field to its Commercial Production Licence and it is expected that this process will now take until 4th Quarter 2022. The reason for this revised timeline is detailed below, under the section covering the Company's 100% Gas Utilisation Plan.

During the Review Period, the Company was successful in having the Final Reserve Report for the West Zhetybai field approved by the Kazakh Committee of Geology. This report is an important milestone in enabling the West Zhetybai field to make a successful transition from a Trial Production Licence to a Commercial Production Licence.

Preparatory Period Production Restrictions:

Under the Kazakh Sub Surface Code, there is a provision for a field to transition from its Exploration phase (Trial Production Licence) to Commercial Production under the so called "Preparatory Period", during which time the operator may produce oil whilst not having the requisite infrastructure in place to achieve 100% gas utilisation.

The Company does not currently have such gas utilisation infrastructure in place and therefore the Akkar East and Akkar North (East Block) fields are only able to produce under these "Preparatory Period" restrictions. In summary, the level of gas emissions that have been approved for the Akkar East and Akkar North (East Block) fields mean that production from the J- 50, J-51,J-52 and 19 wells is constrained.

The J-51, 52 and 19 wells would normally produce a cumulative total of ~60 tonnes (450 barrels) per day but during the Preparatory Period, this cumulative total has been reduced to ~22 tonnes (165 barrels) per day. This reduced production level ensures that all associated gas produced during production can be used on the field for power, heating and the like.

Likewise with the J-50 well on Akkar North (East Block), this well would normally produce ~15 tonnes (115 barrels) per day but during the Preparatory Period, this cumulative total has been reduced to ~8.5 tonnes (65 barrels) per day. This reduced production level also ensures that all associated gas produced during production can be used on the field for power, heating and the like.

Oil Sales:

On 16 September 2021, the Company announced that Arion Trading had signed an agreement for the purchase of 100% of Jupiter's domestic oil supply under terms consistent with those that other Jupiter oil trading partners have signed in the past. This agreement is based on 100% prepayment for all oil from the wellhead. Deliveries to Arion Trading commenced on 16 October 2021.

Drilling Report:

There was no drilling activity during the Review period.

Gas Utilisation Plan:

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Jupiter Energy Limited Directors' report

31 December 2021

On 16 September 2021, the Company signed a Framework Agreement with Sleipnir Technologies LLP (Sleipnir), a Kazakh registered company that has a background in oil trading and the design and development of oilfield infrastructure.

Under Phase 1 of the Framework Agreement, Sleipnir has been working with Jupiter Energy in a Project Management capacity, assisting in the development of a detailed Project Development Plan to achieve 100% gas utilisation on all three of the Company's oilfields (the Plan). A project team made up of Jupiter and Sleipnir personnel has developed the Plan and a local Kazakh Institute completed the documentation of the detailed technical specifications associated with the Plan.

The Plan was lodged with the relevant authorities on 11 March 2022. On the basis that the Plan is approved by the relevant authorities and funding is in place to purchase and install the requisite infrastructure equipment, the current estimate is that the Stage 1 of the Plan will be operational during 4th Quarter 2022.

The West Zhetybai field (and specifically the J-58 well) will not return to production until the Stage 1 100% Gas Utilisation infrastructure is operational. Assuming success with approvals and installation of equipment, this well would return at optimal daily production (~30 tonnes / ~230 barrels) and not at a constrained rate. The well had expected to return to constrained production in late 2Q or early 3Q 2022, however, on review, it was decided it was appropriate to combine the J-58 return to production with the Company operating in a 100% Gas Utilisation environment.

The current expectation is to install the requisite infrastructure to enable wells J-51,J-52,J-58 and 19 to return to optimal production levels before the end of CY 2022 - which should mean daily oil production of ~85 tonnes / 640 barrels.

It is planned for the J-50 well to return to optimal production in 1Q 2023 and when this occurs, daily production should reach ~100 tonnes / 750 barrels per day.

It should be noted that Stage 1 of the Gas Utilisation Plan is based on a distributed solution that will allow for the return to optimal production of the current 5 production wells. Stage 2 of the Plan will be based on a centralized approach that will allow for the necessary scalability that will be required as the Company drills more wells on the Akkar North (East Block), Akkar East and West Zhetybai fields.

Stage 2 of the Plan will be addressed during 2024, when it is expected that the Company will have access to more working capital, provided by the increased oil sales achieved through the successful implementation of Stage 1 of the Plan.

Akkar North Oilfield - Joint Development Plan:

The Akkar North oilfield area is licenced under two separate contracts - one is held by Jupiter Energy (Akkar North [East Block]) and the remainder of the field is held under licence by Jupiter Energy's neighbour MangistauMunaiGas (MMG).

As part of the approval process of moving Akkar North (East Block) into Commercial Production, the Kazakh Central Commission for Exploration and Development of Hydrocarbon Deposits (the CCED) noted that under the Kazakh Sub Surface Code (specifically paragraph 1 of Article 151 of the Code) Jupiter Energy and MMG would need to "conclude an agreement on joint exploration and production or production of a deposit or field as a single object".

During the Review Period, Jupiter Energy and MMG concluded a final version of the Joint Field Development Agreement for the future development of the entire Akkar North oilfield and submitted this agreement to the Kazakh Ministry of Energy. The Ministry is currently reviewing this Joint Field Development Plan.

West Zhetybai Oilfield - Joint Development Plan:

A small part of the West Zhetybai oilfield has an accumulation that is located on an area that is licenced under two separate contracts - one is held by Jupiter Energy and the other is held under licence by Jupiter Energy's neighbour, Ushkuyu LLP (formerly known as Ansagan Petroleum LLP).

During the Review Period, the parties agreed the parameters for a Joint Field Development Plan for this specific area and it is expected that a Joint Field Development Agreement will be submitted to the Kazakh Ministry of Energy for review before the end of 1Q 2022.

2021 Annual General Meeting:

The 2021 Annual General Meeting was held via Zoom on Friday 19 November 2021 and all Resolutions were passed on a poll.

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