Announcement PDF Annual Report For the year ended 31 December 2024 PO VALLEY ENERGY LIMITED ABN 33 087 741 571 CORPORATE DIRECTORY Directors Kevin Bailey AM Sara Edmonson Joseph Constable Katrina O’Leary Michael Gentile Company Secretary Kevin Hart Registered Office Level 5, 191 St Georges Terrace, Perth WA 6000 Rome Office Via Isonzo 34, Rome 00198 Italy Tel: +39 06 42014968 Share Register Automic Level 5, 191 St Georges Terrace, Perth WA 6000 Tel: 1300 288 664 Auditor HLB Mann Judd Level 4, 130 Stirling Street, Perth WA 6000 Solicitors Steinepreis Paganin Level 14, QV1 Building, 250 St Georges Terrace Perth WA 6000 Stock Exchange Listing Australian Securities Exchange (ASX) under the code PVE OTC Markets Group (OTCQB) under the code PVLEF Website address www.povalley.com Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director PO VALLEY ENERGY LIMITED ABN 33 087 741 571 CONTENTS CHAIRMAN’S LETTER TO SHAREHOLDERS ................................................................................................................... 1 DIRECTORS’ REPORT .................................................................................................................................................... 3 REMUNERATION REPORT .......................................................................................................................................... 12 AUDITOR’S INDEPENDENCE DECLARATION ............................................................................................................... 19 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............................................................... 20 STATEMENT OF FINANCIAL POSITION ....................................................................................................................... 21 STATEMENT OF CHANGES IN EQUITY ........................................................................................................................ 22 STATEMENT OF CASH FLOWS .................................................................................................................................... 23 NOTES TO THE FINANCIAL STATEMENTS.................................................................................................................... 24 CONSOLIDATED ENTITY DISCLOSURE STATEMENT ……………………………………………………………………………………………….57 DIRECTORS’ DECLARATION ........................................................................................................................................ 58 INDEPENDENT AUDITOR’S REPORT ........................................................................................................................... 59 TECHNICAL SUMMARY – RESERVES AND RESOURCES STATEMENT .......................................................................... 64 ASX ADDITIONAL INFORMATION ............................................................................................................................... 71 PO VALLEY ENERGY LIMITED ABN 33 087 741 571 CHAIRMAN’S LETTER Dear Shareholder, On behalf of the Board of Directors, I am pleased to present the Company’s Annual Report for the 2024 year. This year has been one of considerable achievement and growth, supported by a robust and expanding market environment. It is with great pride that I share the progress, results, and strategic initiatives that have driven the Company forward. Our operational performance remained strong, with production from the Podere Maiar-1 (PM-1) field consistently meeting expectations at steady, predictable levels. For 2024, total production reached 27.5 million standard cubic meters (17.3 million net to PVE). This robust output generated €6.5 million in gas revenues for the Group. Coupled with our disciplined operational approach, we achieved a profit after tax of €2.3 million for the year, a testament to operational excellence and our focus on maximising shareholder value. Significant strides were made across our development projects at Selva North, South, East Selva, and Riccardina. Throughout the year, we submitted drilling programs and Environmental Impact Studies (EIS) for these new wells to the Ministry for approval. Completing such an extensive volume of technical and regulatory work within a 12-month timeframe highlights the dedication and efficiency of our operations team. We have made important progress on the 3D seismic campaign across the Selva Malvezzi Production Concession. Having received regional approval (INTESA) to proceed, we successfully completed the preliminary design, planning, and permitting stages for the campaign which is significant in size. Formal permitting, scheduling and landowner agreements are now underway. Importantly, the seismic survey will be conducted using low impact technologies, ensuring minimal environmental disruption, and conducted in a respectful and responsible manner in alignment with industry best practices. From a financial standpoint, the Company remains in a strong and resilient position. We are debt-free and held €6.5 million in cash (equivalent to $11.3 million AUD) as of the first quarter of 2025. This solid financial standing provides the necessary resources to continue advancing our development plans for the four new wells and to complete the 3D seismic campaign, both of which are pivotal to our near term growth strategy. We also continue to evaluate opportunities to unlock value from our offshore Adriatic asset at Teodorico. We are actively assessing pathways, including the sale of the asset to a major offshore operator or securing a joint venture partner through a farm-in arrangement. Encouragingly, recent legislative reforms by the Government to strengthen domestic natural gas production and security bode well for the development of Teodorico. I would like to take this opportunity to sincerely thank the Board and our operations team in Italy for their dedication, hard work, and expertise. Their commitment has been instrumental to the Company’s success in 2024. 1 PO VALLEY ENERGY LIMITED ABN 33 087 741 571 CHAIRMAN’S LETTER Looking forward, we are confident in the Company’s future. Our strategic initiatives, combined with our operational efficiency and strong financial base, position us well to continue delivering value to our shareholders. We remain focussed on executing on our development plans and driving sustainable, long-term growth. Thank you for your ongoing support and confidence in the Company. Together, we look forward to another year of success and growth. Kevin Bailey AM Chairman 2 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT The Directors of Po Valley Energy Limited (“the Company” or “PVE”) present their report together with the financial report for the year ended 31 December 2024 of the Group, being the Company and its controlled entities (“the Group” or “Po Valley”). 1. Directors The Directors of the Company at any time during or since the end of the financial year are: Kevin Bailey AM — Director since 22 April 2016 Non-Executive Chairman DipFP, Age 64 Kevin was appointed as a director on 22 April 2016 and as Chairman on 2 May 2022. He has been a shareholder of PVE since April 2008 and brings significant business acumen and experience to the Board. Kevin is a highly successful businessman with a range of business interests, both local and overseas. He worked for 28 years as a Certified Financial Planner and was a founding director of Shadforth Financial Group Limited. He was a member of the Prime Minister’s Community Business Partnership and devotes considerable time to philanthropic interests. Kevin is currently Chairman of Parousia Media Pty Ltd and has served as director of various entities including the Investment Advisory Board of the Timor Leste Petroleum Fund, the $17bn Sovereign Wealth Fund of Timor Leste, Outward Looking International Pty Ltd, Halftime Australia Pty Ltd, Alpha Australia, Empart Inc, and Dads4Kids Fatherhood Foundation. In the past three years, Kevin has not been a director of any other listed company. Sara Edmonson — Director since 23 December 2019 Non-Executive Director BSBA, MBA, Age 45 Sara was appointed as a director on 23 December 2019. Sara has extensive experience in natural gas, the critical transition fuel for a low carbon future. Sara is a former President at Associazione Energia Nazionale, an Italian association created to promote sustainable production, transportation and use of domestic energy and is fluent in Italian, having previously worked both in Italy and internationally for Ernst & Young Transaction Advisory Services. During her tenure at EY, Sara advised numerous blue-chip corporate clients on transactions in Russia, Romania, Turkey and the US including the US$5 billion acquisition of DRS Technologies by Finmeccanica in 2008. She holds an MBA from St John’s University in New York City and a Masters in Sustainability Sciences from Harvard University. Sara led PVE as CEO from July 2010 to 2017 and served on the board of Coro Energy Plc from November 2017 to October 2018 and as executive until March 2019. Sara has spent the last several years focused on the energy transition leading large commercial-scale development of green hydrogen projects in Europe. She has been deeply involved in the policy shaping around decarbonisation and climate targets at EU and Member State level. In the past three years, Sara has not been a director of any other listed company. 3 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT Joseph Constable — Director since 30 November 2021 Non-Executive Director BA(Hons) MPhil, Age 33 Joseph was appointed as a director on 30 November 2021. Joseph has been a long term shareholder of PVE and has a detailed understanding of the company’s assets and brings his significant financial skills to PVE and the Board. Joseph was previously an executive director of Hancock & Gore (ASX: HNG), and portfolio manager at H&G Investment Management Limited and Executive Director at H&G High Conviction Limited (ASX: HCF). In the past three years, Joseph has not been a director of any other listed company. Katrina O’Leary — Director since 2 May 2022 Non-Executive Director BA LLB, LLM, Age 61 Katrina was appointed as a director on 2 May 2022. Katrina is an Intellectual Property (IP) and Information Technology lawyer with decades of experience in IP management, commercial and litigious matters. Katrina also advises on ESG compliance especially in the area of ethical sourcing. Her practice is international, and she has worked in Italy, the USA and Australia representing government and international organisations and major public companies. Katrina brings to the board her strength in legal compliance, governance, and risk management. In the past three years, Katrina has not been a director of any other listed company. Michael Gentile — Director since 25 November 2024 Non-Executive Director CFA Charter Holder, Age 45 Michael was appointed as director on 25 November 2024. Michael is considered one of the leading strategic investors in the junior resource sector in Canada, owning significant top-five ownership stakes in over 20 smallcap mining companies, and is also a shareholder of PVE. He is currently a director of Group Eleven Resources (TSX-V: ZNG), Northern Superior Resources (TSXV:SUP), OnGold (TSX-V:ONAU) Radisson Mining Resources (TSX-V: RDS), Roscan Gold (TSX-V: ROS) and Solstice Gold (TSX-V: SGC) and a Strategic Advisor to Northisle Copper and Gold (TSX-V: NCX). Michael cofounded Bastion Asset Management in January 2022 a rapidly growing money management firm in Montreal focused on small to mid-cap equities in the USA and Canada. Michael was previously a Vice President and Senior Portfolio Manager with Formula Growth Limited where he worked from 2002 to 2018. In the past three years, Michael has not been a director of any other ASX listed company. 2. Company Secretary Kevin Hart – Company Secretary, B.Comm, FCA Kevin Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 17 April 2018. He has over 30 years’ experience in accounting , management and administration of public listed entities in the mining, mining services and exploration industry. Kevin is a Principal in the Company Secretarial and CFO divisions of the Automic Group which provides Company Secretarial, CFO support and corporate compliance advice to a number of ASX listed entities. 4 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT 3. Directors’ Meetings The number of meetings of the Board of Directors held during the financial year and the number of meetings attended by each director are provided below: Director Attended Held Kevin Bailey AM 10 10 Sara Edmonson 10 10 Joseph Constable 10 10 Katrina O’Leary 10 10 Michael Gentile 1 1 Held: represents the number of meetings held during the time director held office. The roles and responsibilities normally undertaken by the Audit and Risk Committee and the Remunerations and Nominations Committee have been dealt with by the full board as part of its duly convened meetings rather than through separate committees. 4. Principal Activities The principal continuing activities of the Group in the course of the year were: • Production of gas at Podere-Maiar 1 in the Selva Malvezzi concession • The exploration for gas and oil in the Po Valley region in Italy. • Appraisal and development of gas and oil fields. 5. Operating and financial review Strategy Po Valley remains a northern Italy-focused energy production, development and exploration company with a streamlined focus on the following assets: - The onshore gas production and further development at Selva Malvezzi; - Offshore Adriatic gas development at Teodorico; - The large-scale gas prospect at Torre del Moro; - Canolo and Zini gas prospects in the Cadelbosco di Sopra exploration licence; and - Reinstated Bagnolo in Piano, Ravizza oil discoveries in the Cadelbosco and Grattasasso Permits and Bagnolo SW oil prospect in Cadelbosco Permit. Po Valley’s primary focus is gas production at the Podere Maiar-1 well in the Selva Malvezzi Production Concession and to advance development of the surrounding prospects at North, South and East Selva, with the goal of drilling these prospects in the next twelve to twenty-four months. Teodorico is very leveraged to the current market conditions in Italy and Po Valley continues to explore options to introduce joint venture partners or divest this large offshore gas field. 5 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT Financial results for the year The Group has had a successful year operating in a strong and growing market. Production results have been steady and continue to meet predicted levels. Total production for the year was 27,562 Mcm of gas (gross, net to the Group of 63% or 17,364 Mcm) generating revenue of €6.5 million for the Group. Gas prices have been robust in the year increasing due to strong market conditions. Significant progress has also been achieved with targeted exploration and development plans for four new wells within the Selva Malvezzi production concession. The profit after tax for the year from continuing operations was €2,391,151 (2023: €586,657). The Group’s cash reserves as at 31 December 2024 were €4,993,913 (31 December 2023: €1,252,717). A review of the operations and the results of those operations of the Group during the year is as follows: Summary of results table: 2024 Mcm 2023 Mcm Production volume (net) 17,364 6,198 €’000 €’000 Gas Sales 6,524 2,337 EBITDA1 4,004 1,159 Depreciation and amortisation – production (532) (190) Depreciation (27) (27) Unwind of discount of restoration provision (39) (108) EBIT1 3,405 834 Finance costs other than restoration provision discounting (14) (32) Taxation (1,000) (215) Net profit after tax attributable to shareholders 2,391 587 EBITDA (earnings before interest, tax, depreciation and depletion, exploration expensed and impairment losses) and EBIT (earnings before interest and tax) are non-IFRS measures that are presented to provide an understanding of the Group’s operations. The non-IFRS measures are unaudited, however, the numbers have been extracted from the financial statements that have been subject to audit by the Company’s auditor. 1 Share issues There were no new shares issued in the financial year. Earnings per share The basic and diluted earnings per share for the Group from continuing operations was 0.21 € cents (2023: 0.05 € cents) Operations Selva Gas Field (63% PVO) - Selva Malvezzi Production concession Selva is an onshore natural gas field located in the eastern part of the Po Plain, in the Bologna province of the Emilia Romagna Region. The Selva Malvezzi Production Concession was awarded in July 2022 and measures 6 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT 80.68km2. It includes the Podere Maiar Gas field (PM-1) (in production) and the gas prospects known as East Selva, Selva North and South and Riccardina carved out from the former Podere Gallina Exploration Permit. Po Valley Operations (100% subsidiary of the Company, “PVO”) is the operator under a Joint Operating Agreement (“JOA”) and holds a 63% interest in the Selva Malvezzi Production Concession with Prospex Energy Plc (“Prospex”) holding 37% (includes 20% held by Prospex subsidiary UOG Italia S.r.l). Podere Maiar-1 (“PM-1”) gas facility and production: The gas facility at PM-1 was completed in June 2023 and commenced production on 4th July 2023. The PM-1 development has a small footprint of less than one hectare and will have negligible emissions. The PM-1 facility is a fully automated gas plant at the existing Podere Maiar 1dir well and a one-kilometer-long pipeline connecting the well with the nearby Italian National Gas Grid, operated by SNAM. Gas is sold under the gas sales agreement (GSA) with BP Gas Marketing Limited (BPGM). The gas supply price in the contract is linked to Italy’s “Heren PSV day ahead mid” price. Robust gas prices were experienced over the year due to strong market conditions. Podere Maiar-1 (PM-1) Production Results Mar 2024 Quarter Jun 2024 Quarter Sept 2024 Quarter Dec 2024 Quarter Avg. daily production (scm) [gross] 69,976 74,904 76,910 79,596 Quarterly production ('000 scm) [net] 4,023 4,306 4,421 4,614 Weighted average price (per scm) € 0.30 € 0.34 € 0.39 €0.46 Revenue ('000) [net] € 1,201 € 1,456 € 1,737 €2,129 Field Operating costs ('000)1 €146 €174 €179 €162 Note: All figures in the table above, other than the daily production rate, are quoted on a net-63% share to PVE 1.Cash outflows field operating costs per quarter excludes accrued royalties Production has been consistent throughout the period averaging ~80,000 scm per day, with exception of days during which slick line operations were undertaken. The Group conducted several routine slick line operations during the year to test pressure evolution and detect any sand or water buildup. There were no significant discrepancies detected. To enhance monitoring capabilities, a surface sand detector was installed in the year. During slick line operations in September, the Group took advantage of the short shutdown to conduct routine maintenance of the plant and successfully replaced alumina in the plant regeneration columns. Selva Malvezzi Prospects: Casale Guida 1d, Ronchi 1d, Bagnarola 1d, Selva Malvezzi 1d wells The Selva Malvezzi Production Concession is the key area of focus for the Group with the next stages of development at Selva North, South, Selva East and Riccardina prospects. The Group progressed its work programs over these areas including the design, planning and permitting of a 3D seismic campaign over the whole Selva Malvezzi Production concession area and in parallel proposed drilling program planning, surface facility design and environmental studies of new wells at Casale Guida 1d (North Selva), Ronchi 1d (South Selva), Selva Malvezzi 1d (East Selva) and Bagnarola 1d (Riccardina). The drilling programs for the four new drilling projects at Casale Guida 1d (North Selva), Ronchi 1d (South Selva), Selva Malvezzi 1d (East Selva) and Bagnarola 1d (Riccardina) were filed for drilling authorization to the UNMIG department of the Italian Ministry of Environment and Energy Security (MASE) in September 2024. The Environmental Impact Study for drilling, development and production of the four wells was submitted in December 2024. 7 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT Planning and permitting for the 3D geophysical campaign across the entire Production Concession continued to advance. The Group has successfully obtained Regional approval (INTESA) from the Emilia Romagna Regional Council to commence its works under the planned 3D seismic campaign. This campaign covers the entire Selva Malvezzi Production Concession Area and is an integral part of the ongoing development program which envisages the drilling of 4 new wells. The granting of the Regional INTESA is an important step in the authorisation process which will complete with the issuing of a formal Decree from the Ministry once all documentation has been verified. In anticipation of the INTESA, the Group has completed all preliminary works in relation to the design, planning and permitting of the campaign. Now with the grant of the INTESA it will be able to commence the formalisation of the permitting and agreements with landowners. As part of these preparatory activities, the Group participated in constructive co-ordination meetings with the relevant farmers associations and has worked closely with relevant representatives to ensure that all the planned activity aligns with industry best practices. The nature of the 3D seismic campaign and the technology that will be used is purposefully designed to ensure that the environmental footprint is negligible and can be carried out quickly. The entire campaign is expected to take no more than three weeks. Once the seismic has been acquired and then reprocessed the dataset will be interpreted in-house. The drilling programs, development plans, and environmental impact studies and works on the seismic campaign constitute a significant amount of work carried out in less than 12 months and are a testament to the commitment and dedication of the Group’s operations team. Expenditure for the year on these work programs (net to the Group) were ~€399k, with continuing works expected to complete in the first half of 2025. Teodorico Offshore Gas field development (100% PVO) The Teodorico gas field is located in shallow waters (approximately 30m deep) off the east coast in the northern Adriatic Sea; the primary source of domestic gas production for much of Italy; and in close proximity to existing east coast offshore gas production facilities. Teodorico has the largest gas-in-place of all of Po Valley Energy’s gas fields and is at an advanced stage of assessment, ready for development. The Group holds a preliminary production concession for this area. In December 2023, the Italian government published a New Energy Decree in response to Italy’s energy security needs which include measures to strengthen the production and security of domestic natural gas supply. An accelerated permitting regime is envisaged as an integral part of this decree. The decree was converted into law in February 2024. This law must be operationalised, and the Italian Government has assigned this mandate to Gestiore Servizi Energetici “GSE”, an existing regulated body for energy in Italy. In addition, a new Environmental Decree 2024 (Legislative Decree n.153/2024) (“Decree”) was published in the Italian government’s Official Gazette on 17 October 2024. The Decree aims to provide regulatory certainty for hydrocarbon exploration and production whilst balancing security of supply with environmental protection. The Decree is particularly relevant to Teodorico. The Decree provides allowances for the award of natural gas production concessions within a defined area of the Adriatic Sea, if application had been made prior to the Decree’s enforcement and provided that the gas reserves exceed 500 million cubic meters. The area defined as suitable for production includes the stretch between the parallel passing through the mouth of the Goro branch of the Po River, the Po di Goro line, and 8 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT the parallel 15km to the south of the latter and with a distance of at least 9 nautical miles from the coastline. Po Valley’s Teodorico project is exactly located within this defined area. A recent administrative court ruling (TAR) on a case raised by an environmental protection group against the Ministry indicated that the Environmental Impact Assessment (EIA) for Teodorico, originally granted in March 2021, must include an evaluation of the potential impacts on two newer environmentally protected areas. These two areas, which primarily aim to protect marine life, were not officially established by the Ministry of Environment when the original assessment for Teodorico was filed. As it happened, the Environmental Impact Assessment Committee had approved the project without taking such potential protected areas into consideration. The administrative court case claimed that the Ministry had been aware that these areas had been under consideration, even if not yet officially recognized as protected, and therefore found fault with the positive EIA opinion on the basis that it was not comprehensive. Under the precautionary principle, the Administrative Court has ruled in favour of the environmental protection group(s). The Group's tenure to the Teodorico project is not impacted by this ruling. The new Environmental Decree and its intentions remain firm, that is, provision for allowances for the award of natural gas production concessions in the area in which Teodorico is located. By means of clarification, all projects which fall within the defined area of the Adriatic Sea referred in the new Environmental Decree 2024 are still subject to an environmental impact assessment which not only reviews suitability but also results in a list of precautionary measures and guidance for project operators to ensure that best practices for development are upheld. In terms of next steps, the Company has reached out to the Ministry of Environment and Energy Security to determine the best way forward. The Administrative Court ruling used wording that implies that the rest of the Environmental Impact Assessment retains its legal standing, however and the Group expects to renew the Environmental Impact Study previously submitted taking the two new areas into consideration in accordance with the Ministry’s requirements. Torre del Moro, Cadelbosco di Sopra and Grattasasso exploration licences (100% PVO) Cadelbosco di Sopra and Grattasasso are shallow gas opportunities which fit neatly with the Group’s proven exploration and development capabilities whilst Torre del Moro is a large deep gas prospect. Following a recent meeting with MASE in February 2025 and with the 2024 Environmental Decree repealing the previous plan of suitable hydrocarbon exploitation areas ‘PITESAI’ , it has been clarified that activities regarding oil exploration may resume. Accordingly, the Cadelbosco and Grattasasso oil contingent resources and Torre del Moro oil prospective resources can be restated the Po Valley’s Resources and Reserves, as originally reported in the April 2019 CGG CPR. The Group is reviewing optimal development paths for these assets including introduction of third-party investors/partners who have interest in participating in their development. Health, safety and environment Paramount to Po Valley’s ability to pursue its strategic priorities is a safe workplace and a culture of safety first. The Group regards environmental awareness and sustainability as key strengths in planning and carrying out business activities. Po Valley’s daily operations are conducted in a way that adheres to these principles and management is committed to their continuous improvement. Whilst growing from exploration roots, the Group has strived to continually improve underlying safety performance. The Group has adopted an HSE Management System which provides for a series of procedures and routine checks (including periodical audits) to ensure compliance with all legal and regulatory requirements and best practices in this area. In 2024, the Group maintained its outstanding occupational health safety and environmental track record with no incidents or near misses to report. 9 PO VALLEY ENERGY LIMITED DIRECTORS’ REPORT Principal risks and uncertainties Oil and gas exploration and appraisal involves significant risk. The future profitability of the Group and the value of the Company’s shares are directly related to the results of exploration and appraisal activities. There are inherent risks in these activities. No assurances can be given that funds spent on exploration and appraisal will result in discoveries that will be commercially viable. Future exploration and appraisal activities, including drilling and seismic acquisition, may result in changes to current perceptions of individual prospects, leads and permits. The Group identifies and assesses the potential consequences of strategic, safety, environmental, operational, legal, reputational and financial risks in accordance with the Group’s risk management policy. Po Valley management continually monitors the effectiveness of the Group’s risk management, internal compliance and control systems which includes insurance coverage over major operational activities, and reports to the Board on areas where there is scope for improvement. The Board as a whole is responsible for oversight of the Group’s risk management and control system. The principal risks and uncertainties that could materially affect PVE’s future performance are described below. External risks Expo