MEC RESOURCES LIMITED — Interim / Quarterly Report 2021

Apr 25, 2021

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26 April 2021

UPDATE FOR THE QUARTER ENDING 31 MARCH 2021

MEC Resources Ltd (ASX: MMR, ACN 113 900 020) (“ MEC ” or “the Company ”) is pleased to provide its Quarterly Report & Appendix 4C (Quarterly Cashflow Report) for the quarter ended 31 March 2021.

Operational Update

MEC has a non-controlling interest in the unlisted energy explorer Advent Energy Ltd (“ Advent ”) of 48.2%.

Advent holds a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside.

Advent’s assets include PEP11 (85%) in the offshore Sydney Basin and RL1 (100%) in the onshore Bonaparte Basin in the Northern Territory.

MEC continues to monitor its investment in Advent and has representation on the board of Advent in directors Mr Anthony Huston and Mr David Breeze.

The Company has not considered new investments during the last quarter.

Advent Energy has provided the following information to MEC

Investee Advent has submitted to the National Offshore Petroleum Titles Administrator (NOPTA) an application to enable the drilling of the Baleen drill target in the PEP11 permit offshore NSW. The PEP11 Joint Venture has reviewed the work program and now proposes to proceed with the drilling of a well at Baleen subject to approvals from NOPTA and other regulatory authorities, and financing, and has now made application to NOPTA to change the current Permit conditions. The current permit expiry date is in February 2021. The application to NOPTA includes the extension of the permit title for up to two years to enable the drilling and includes an application for the removal of the requirement for a 500 sq km 3D seismic program. NOPTA has confirmed that this application is now in the final decision phase however as at the date of this report no formal reply has been received.

Advent has continued with various aspects of the operational development of the PEP11 permit including the following key items as announced by MEC;

• 13 January 2021 - A preliminary well services agreement had been executed with Add Energy the purpose of which was to review and assess rig availability and engagement terms. Under the Agreement Add Energy will initiate a review of rig availability and engagement terms for the Baleen well program. Add Energy will also develop a scope of supply for regulatory and environmental compliance and review the drilling campaign schedule including a review of the program for geosequestration drilling research as part of the Baleen drill project. Add Energy provides drilling and well engineering specialized consultancy services and solutions to the energy industry on a global scale, including well design and environmental services. Add Energy is headquartered in Stavanger, Norway and operates in every region of the world from 15 locations including Europe, the Middle East, the Americas and Australia.

MEC Resources Ltd

ACN 113 900 020 Level 1, 9 Bowman Street, South Perth WA 6151 P: +61 08 9217 2400 E: info@mecresources.com.au W; www.mecresources.com.au

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Add Energy will deliver phased approach services to Advent Energy for the preparation and drilling of the Baleen Well PEP11. In the first stage of the phased approach, Add Energy will provide technical support in the following areas:

1. Review of current well design documentation.

2. Develop a suitable well design and cost estimates.

3. Develop drilling schedule and define a ready to drill tentative window.

The initial report received from Add Energy documents the Basis of Well Design (BOWD) and rationale for design of the well, the well cost compilation and the project schedule. The report addresses the revised drill target on the Baleen prospect initially announced with total depth of 2,150 metres on seismic data line B4-18. As advised Advent now intends, subject to approvals and funding, to undertake deeper drilling to also undertake evaluation of the Offshore Sydney Basin for carbon sequestration (storage). This has resulted in a revised specification of a well to target early Permian sandstones for both hydrocarbon and carbon sequestration potential with a revised total depth being set at 3,150 m.

• 5 February 2021 – Investee Advent has on behalf of the PEP11 joint venture submitted to NOPTA an application to suspend and extend the PEP11 permit offshore NSW. The application has been made under the COVID-19 -Work Bid Exploration Permits announcement released by the Federal Government on 20 April 2020. In that release the Government recognised the that the COVID-19 pandemic was having a significant impact on the offshore petroleum sector and that additional flexibility would be required to assist titleholders to manage the COVID -19 crisis. The Joint Authority confirmed in that release that it regarded the COVID-19 pandemic as a force majeure event. The application for a 24-month extension and suspension of the Permit Year 4 work program commitments, with a corresponding 24-month extension of the permit term and was accepted for processing by NOPTA on 4 February 2021. This application was lodged to ensure the company is not in breach of the Year 4 PEP11 work program and expenditure commitments.

• 10 February 2021 – Appointment of Mr Andrew Hogan as Contracts Manager by Advent for its PEP11 Baleen Well project in the Offshore Sydney Basin. Mr Hogan holds geoscience degrees from Trinity College Dublin and National University of Ireland, Galway and comes with over 30 years of Operational and Commercial experience in the upstream sector of the Energy industry. Prior to relocating to Perth in 2009 he spent 18 years based in Aberdeen working in the UK sector of the North Sea. He is well known in the Drilling and Completion community across Australia and New Zealand, having spent 24 years with one of the major oilfield Service Companies and 5 years with a major global offshore Drilling Contractor and will bring his experience to bear to assist and advise the board of Advent Energy in the procurement of key equipment and services for the safe and efficient drilling of the Baleen well in PEP11.

• 1 March 2021 – Add Energy on the back of its Preliminary Well Services Agreement had commissioned the Xodus Group to undertake a preliminary environmental screening assessment of the proposed Baleen well activity. Xodus Group are a leading global energy environmental consultancy with a strong track record in the Australian offshore sector where they are subject matter experts in environmental impact assessment and regulatory approvals. This will be aided by the pre-existing environmental information which exists from the prior technical work in the licence including the Environmental Plan which was accepted by the authorities for a 2D Seismic survey which was commissioned by Advent and carried out in 2018. The screening will identify the work required to undertake an environmental impact assessment to support the required approvals. The aims of the preliminary environmental impact assessment are to:

MEC Resources Ltd

ACN 113 900 020 Level 1, 9 Bowman Street, South Perth WA 6151 P: +61 08 9217 2400

E: info@mecresources.com.au W; www.mecresources.com.au

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1. Produce a detailed summary of required technical inputs.

2. Produce a detailed summary of required environmental inputs.

3. Outline a proposed approach for stakeholder consultation; and

4. Identify key controls potentially required to manage the activity

5. 8 March 2021 – Drilling manager appointed.

6. 8 April 2021 – Basis of Well Design Report for the Baleen well in offshore license PEP11 had been received.

7. 16 April 2021 – Environmental Review Report for the Baleen well in offshore license PEP11 had been received.

Advent is proposing with its Joint Venture partner Bounty Oli & Gas NL (ASX:BUY) to use the drilling program at Baleen to investigate the potential for CCS - Carbon Capture and Storage (geo-sequestration of CO2 emissions) in PEP11. CCS can use the process to capture and store CO2 fossil fuel emissions. Both the International Energy agency and the Intergovernmental Panel on Climate change believe that CCS can play an important role in helping to meet global emission reduction targets. CCS is part of a suit of solutions with the potential to mitigate greenhouse gas emissions and help address climate change. The Sydney Basin is a major contributor to Australia’s greenhouse gas emissions and contributes up to 34% of the total national emissions. Independent Government published research has indicated at least 2 TCF (Trillion Cubic Ft) of CO2 storage may be feasible in the offshore Sydney Basin.

Advent is a strong supporter of plans for Net Zero by 2050 and sees the company playing a direct role in achieving that target, especially in New South Wales. It aims to do this in two ways. First, by finding gas closest to Australia’s biggest domestic energy market, gas which can be used to provide reliable back-up for increased uptake of renewable energy in NSW. Second, through its plans to explore for opportunities in offshore NSW for CCS, a key clean energy technology. The significance of the carbon storage objective in addition to gas has been highlighted by the report from The Australian Financial Review (7 April 2021) “Carbon prices tipped to surge” which references dramatic action in Europe’s carbon markets with “carbon prices almost doubling in the last four months from Euro 23 (A$35) a tonne in November 2020 to Euro 41 (A$62) in March 2021 as more ambitious (carbon) markets aligned with net zero emissions goals to drive prices higher.”

Advent Energy’s 100% subsidiary Onshore Energy Pty Ltd (“ Onshore ”) made an application for suspension and extension of the permit conditions in EP386 which was not accepted by the Department (DMIRS). Onshore sought a review of the decision by the Minister of Resources who responded setting out a course of action in relation to that decision which Onshore is following. Onshore has lodged an appeal against this decision with the State Administrative Tribunal (SAT). This remains in the appeal process at present.

On 30 December 2020 Advent lodged an Offer Information Statement with ASIC for a non-renounceable entitlement issue of two (2) Shares for every three (3) shares held at an issue price of $0.05 (5 cents) per Share to raise up to $6,525,108. The offer remains open at present. The Offer is partially underwritten by Grandbridge Securities Pty Ltd (ABN 84 087 432 353) (AFSL 517246) up to the amount of $1,000,000. Grandbridge Securities Pty Ltd is also Lead Manager to the Offer.

MEC Resources Ltd

ACN 113 900 020 Level 1, 9 Bowman Street, South Perth WA 6151 P: +61 08 9217 2400 E: info@mecresources.com.au W; www.mecresources.com.au

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Corporate Update

Director Status – Mr David Breeze

On 25 January 2021 the Company announced that a submission, which included various supporting evidence, was made to the ASIC regarding Mr Breeze’s illegal removal from the Company as a director. On 4 January 2021 the ASIC accepted the submission and lodged a Notice of Revocation on the ASIC website document number 031113498.

The practical effect of this Notice of Revocation is that a document lodged with the ASIC on 26 November 2016 by an officer of the Company at the time, document number 7E8563094, to remove Mr Breeze as a director of MEC is withdrawn.

This in turn validates statements made by the Company in its ASX release on 22 October 2020 concerning Mr Breeze’s continuing appointment as a director of MEC.

PDF Status

MEC was notified on 5 February 2021 by the Innovation Investment Committee of Innovation and Science Australia (the “Committee”) that the Committee had revoked MEC’s PDF registration as a result of the Company contravening ss19(1), 27, 27A and 42 of the Pooled Development Fund Act 1992 (“PDF Act”).

Following this notification on 1 March 2021 MEC informed the PDF Committee that it would exercise its right of review, had appointed legal counsel on the matter and would provide further information to the Committee and further noting on 12 March 2021 that it was informed by the Department of Industry, Science, Energy and Resources that it would commence a review of the decision that led to the revocation of MEC’s PDF registration. MEC confirmed that the internal review is a merit-based process and enables a decision maker (not involved in the first decision in this circumstance) to take a fresh look at its original decision.

Newly appointed review officers had confirmed that MEC has met all the requirements of an internal review request which in turn is governed by s55 of the PDF Act.

MEC confirmed it has provided the information it is satisfied with to support / strengthen its view, the review officers we will prepare a recommendation to the decision maker as to whether to confirm or revoke the original decision or vary it in such manner as the delegate thinks fit. The decision maker has 60 days to make a decision. The date therefore for decision is no later than 27 April 2021.

As soon as practicable after the decision maker confirms, varies or revokes the decision, the department will on the decision makers behalf provide MEC with written notice that advises of the confirmation, variation or revocation of the decision.

In the event of an adverse decision or finding MEC will apply to the Administrative Appeals Tribunal under the Administrative Appeals Tribunal Act 1975 for review of the decision as confirmed or varied by the PDF Board.

MEC had requested that the revocation only be given effect at the end of all appeals process.

MEC Resources Ltd

ACN 113 900 020 Level 1, 9 Bowman Street, South Perth WA 6151 P: +61 08 9217 2400

E: info@mecresources.com.au

W; www.mecresources.com.au

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ASX Suspension Status

The Company’s shares are currently suspended from the ASX however the Board continues to liaise and provide information to the ASX as it works towards the return of its shares to trading status on the ASX including answering providing information on the Claratti transaction full details of which are noted in ASX release dated 15 April 2021.

On 16 December 2020, the Company made a formal submission to the ASX which included a shareholder meeting seeking approval of various resolutions the aim of which is to have MEC readmitted to trading status. The Company is currently awaiting a reply from the ASX.

We once again thank you for your continued support and welcome your questions/comments regarding the Company.

If you have any questions, please do not hesitate to contact David Breeze on 08 9328 8477 or email info@mecresources.com.au.

This announcement has been approved by the Board of Directors of MEC.

David Breeze Managing Director MEC Resources Ltd

MEC Resources Ltd

ACN 113 900 020 Level 1, 9 Bowman Street, South Perth WA 6151 P: +61 08 9217 2400 E: info@mecresources.com.au W; www.mecresources.com.au

Rule 4.7B

Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

MEC Resources Limited

ABN

44 113 900 020

Quarter ended (“current quarter”)

31 March 2021

Consolidated statement of cash flows	Current quarter $A’000	Year to date (6 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities*	- - - - - - (28) - - - - - -	- - - - - - (276) - - - - - -
	(28)	(276)
*includes operational expense support for Advent Energy Ltd
2. Cash flows from investing activities 2.1 Payments to acquire: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets	- - - - - -	- - - - - -

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (6 months) $A’000
2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities		- - - - - - - - -	- - - - - - - - -
		-	-
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities		- - - - - - - - -	- - - - - - - - -
		-	-
4. 4.1 4.2 4.3	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above)	190 (28) -	438 (276) -

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (6 months) $A’000
4.4 4.5 4.6	Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	- -	- -
		161	161
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)		161 - - -	190 - - -
		161	190
6. Payments to related parties of the entity and their associates 6.1 Aggregate amount of payments to related parties and their associates included in item 1 6.2 Aggregate amount of payments to related parties and their associates included in item 2
			Current quarter $A'000
			0
			-

Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

7. Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A’000 7.1 Loan facilities - 7.2 Credit standby arrangements - 7.3 Other (please specify) - 7.4 Total financing facilities - 7.5 Unused financing facilities available at quarter end	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
	-	-
	-	-
	-	-
	-	-
		-

• 7.6 Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

8. Estimated cash available for future operating activities	$A’000
8.1 Net cash from / (used in) operating activities (Item 1.9) 8.2 Cash and cash equivalents at quarter end (Item 4.6) 8.3 Unused finance facilities available at quarter end (Item 7.5) 8.4 Total available funding (Item 8.2 + Item 8.3) 8.5 Estimated quarters of funding available (Item 8.4 divided by Item 8.1)	(100) 161 0 161
	1.61

• 8.6 If Item 8.5 is less than 2 quarters, please provide answers to the following questions:

• Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?

Answer:

No. The Company is currently working with the ASX in order to readmit the company to trading status. Other than administration costs and management of the Company’s current investments no other activities are being undertaken by MEC pending readmittance to trading on the ASX.

1. Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?

Answer:

The Company anticipates that following approval from the ASX it will take about 6 to 8 weeks to complete various steps to see MEC readmitted to trading status on the ASX. MEC expects to be making a market announcement in relation to this process which will include a a capital raising in the form of rights issue.

1. Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Answer:

Yes. The Company continues to focus on its short-term business objectives which is the have MEC readmitted to trading status on the ASX. As noted, this requires an approval from the shareholders of the Company and in this regard a Notice of General Meeting will be arranged in the near future subject to approval of such notice by the ASX.

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Date: 26 April 2021..............................................................

Authorised by: ...................................................................................

(By the Board – see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [ name of board committee – eg Audit and Risk Committee ]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations , the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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