Cue Energy Resources Limited Notes to the financial statements 30 June 2026 Note 3. Critical accounting estimates and judgements (continued) 37 (ii) Impairment of production properties Production properties impairment testing is required when there is an indicator for impairment. Impairment testing requires an estimation of recoverable amount, using the higher of fair value less costs to sell or a value-in-use model for the respective cash generating units (CGUs). Management is required to make certain assumptions on reserves, future production volumes, pricing of its energy products, cost estimates, exchange rates and how they impact on future cashflows, where required, the costs to sell and in respect of the inputs utilised in defining an appropriate discount rate. These inputs and assumptions are inherently uncertain, and management review their accuracy and appropriateness periodically. (iii) Useful life of production properties and their amortisation Estimates of reserve quantities and future production volumes are based on certain assumptions and subject to inherent estimation uncertainties. These factors are critical elements of the calculation of the amortisation of production property assets. (iv) Estimates of reserve quantities The estimated quantities of Consolidated Entity's reported Proven and Probable hydrocarbon reserves are integral to the calculation of the amortisation expense relating to Production Property Assets and to the assessment of possible impairment of these assets. Estimated reserve quantities are based upon certain interpretations of geological and geophysical models and assessments of the technical feasibility and commercial viability of producing the reserves. These assessments require assumptions to be made regarding future development and production costs, commodity prices, exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic assumptions used to estimate the reserves change from period to period, and as additional geological data is generated during the course of operations. Reserves estimates are prepared in accordance with the Consolidated Entity’s policies and procedures for reserves estimation, which conform to guidelines prepared by the Society of Petroleum Engineers. (v) Restoration (rehabilitation or rehab) provisions Provisions for future environmental restoration are recognised where there is a present obligation as a result of exploration, development, production, transportation or storage activities having been undertaken, and it is probable that an outflow of economic benefits will be required to settle the obligation. The estimated future obligations include the costs of removing facilities, abandoning wells and restoring the affected areas in accordance with the terms of the respective permits and relevant legislation in the various jurisdictions in which the Consolidated Entity operates. There is inherent uncertainty in the definition of the works undertaken, technology used to complete the works, the estimation of the relevant costs associated with the defined works and the timing of settlement of restoration obligations. Factors that also impact the restoration provision include changes in interest rate and foreign exchange rates. Details of restoration provisions are disclosed in note 12. (vi) Capitalised exploration and evaluation costs Exploration and evaluation costs have been capitalised on the basis that the consolidated entity expects to commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest. Factors that could impact the future commercial production at the fields include the level of reserves and resources, future technology changes, which could impact the cost of mining, future legal changes and changes in commodity prices. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. (vii)Development assets Development costs have been capitalised on the basis that the Consolidated Entity expects to commence commercial production in the future, from which time the costs will be amortised in proportion to the depletion of reserves. Key judgements are applied in considering costs to be capitalised that are expected to be recovered either through successful development or sale of the relevant assets. The primary assumption made in respect of development assets is that these assets will be able to be realised through the successful development of the relevant tenement or through its sale. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. 50 Cue Energy Resources Limited Annual Report 2026
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