Why Did Cue Energy’s Profit Halve Despite 10% Revenue Growth in FY2025?

Financial Performance Overview

Cue Energy Resources Limited has reported its annual results for the year ended 30 June 2025, revealing a mixed financial picture. The company achieved a 10.4% increase in revenue to $54.8 million, buoyed by steady production volumes and improved pricing across its diversified portfolio spanning Australia, Indonesia, and New Zealand. However, net profit after tax declined sharply by 52.1% to $6.32 million, weighed down by rising production costs and higher amortisation expenses.

Operational Highlights

Production volumes remained broadly consistent with the prior year at 602 thousand barrels of oil equivalent. In Australia, revenue from onshore assets rose 11%, supported by the successful commissioning of two new Mereenie wells and higher contracted gas prices. The Maari asset in New Zealand saw a 23% revenue increase, driven by an additional crude oil lifting during the year. Indonesia’s Mahato PSC contributed a 19% revenue uplift, reflecting increased sales volumes and ongoing development drilling with 14 new wells completed under the approved Field Development Optimisation Plan.

Cost Pressures and Profitability

Despite the revenue growth, production costs surged to $29 million from $20 million in the previous year. This increase was largely due to intensified field activities at Mahato and Mereenie, including the operation of additional wells and associated infrastructure. The higher costs, combined with timing effects on inventory sales at Maari and increased amortisation, contributed to the significant decline in net profit. The company’s EBITDAX, a key performance metric excluding exploration and other non-operating expenses, decreased slightly to $30.3 million from $32.8 million.

Cash Flow and Dividend

Cue generated strong net cash from operating activities of $23.8 million, reflecting the quality of its production base and portfolio diversification. However, net cash outflows from investing and financing activities, including capital expenditure on new wells and dividend payments, led to a reduction in cash and cash equivalents to $10.8 million at year-end. The Board declared a final unfranked dividend of 0.5 cents per share, adding to the interim dividend paid earlier in the year, underscoring its commitment to shareholder returns despite profit pressures.

Strategic and Risk Considerations

The company continues to advance development projects, notably the Mahato PSC’s ongoing drilling program and the planned Paus Biru gas development in Indonesia, pending regulatory approvals and contract negotiations. Cue also faces risks from commodity price volatility, foreign exchange fluctuations, regulatory changes, and operational interruptions, which could impact future financial performance. The company maintains a strong balance sheet with no debt, providing flexibility to navigate these challenges.

Outlook

While FY2025 results reflect cost headwinds and profit compression, Cue Energy’s stable production, diversified asset base, and disciplined capital management provide a solid foundation for growth. The company’s focus on operational efficiency and development opportunities will be critical as it seeks to enhance shareholder value in a volatile energy market.