Key Petroleum gains funding support while awaiting Queensland exploration approvals

Funding runway remains the central question

Key Petroleum Limited (ASX:KEY) has finished FY2026 with more cash than a year earlier, but not enough financial certainty to remove the company’s funding overhang. The Cooper Eromanga Basin explorer reported a net loss of $380,253, operating cash outflows of $443,879 and a working capital deficit of $250,316 at 30 June 2026.

Cash and cash equivalents rose to $239,299 from $94,066, helped by $595,217 in net equity proceeds during the year. But the balance was equivalent to only a little over half of the year’s operating cash outflow. The company’s own accounts say it may need further funding, reduced expenditure or deferred activity to meet future corporate and exploration requirements.

Auditor highlights material uncertainty

Hall Chadwick WA Audit issued an unmodified audit opinion, while separately drawing attention to a material uncertainty related to going concern. Key Petroleum recorded a second consecutive annual loss and the directors’ cash-flow forecast to September 2027 indicates that additional funds may be needed if planned operations are to continue.

The company points to several supports for its going-concern assessment: the cash balance at year-end, its ability to raise equity, a post-year-end placement of 3,384,286 shares at $0.073 each for approximately $247,053 before costs, and a letter of support from major shareholder China Create Capital Holding Group. The report also says the company is considering settling $85,933 in outstanding directors’ fees through the issue of shares.

ATP approvals still govern exploration timing

Key Petroleum’s exploration strategy remains tied to eight Potential Commercial Area applications covering ATP 920 and ATP 924 in Queensland. The applications, submitted in February 2025, were still under assessment at the reporting date, with changes aimed at strengthening protections for the Lake Eyre Basin’s rivers and floodplains contributing to delays in tenure extensions.

The company says it has completed preparatory work, including environmental approvals and agreements with landholders and Native Title parties, and is focused on the Alfajor Prospect and other subblocks not affected by the exclusion-zone changes. Yet exploration and development activity remains conditional on regulatory approvals, while outstanding exploration and tenure commitments total $4.46 million, including $360,062 due within one year.

Loss narrows as portfolio remains pre-revenue

The annual loss narrowed from $484,245 in FY2025, with corporate and employee-related expenses lower than a year earlier. Revenue was effectively absent: the group recorded only $1,708 in interest income and no dividends, production income or other operating revenue.

Capitalised exploration costs increased modestly to $1.464 million from $1.418 million, with no impairment recognised. That accounting value remains dependent on the successful development or sale of the relevant petroleum interests, and the company plans to assess new petroleum acreage during the second half of 2026 while it continues pursuing the existing approvals.