$50.3m revenue, $4.4m profit and 4.5 MMboe of 2P reserves

Cash generation holds up as profit declines

Cue Energy Resources Limited (ASX:CUE) finished FY2026 with the kind of balance sheet that gives an oil and gas junior room to manoeuvre: $15.7 million in cash, no debt and $19.8 million of net operating cash flow. Revenue was $50.3 million, down from $54.8 million, while net profit after tax fell to $4.4 million from $6.3 million.

The statutory result absorbed $4.4 million of impairment charges in Maari and Sampang, a $4.2 million write-off connected to the Paus Biru development and $1.9 million of takeover defence costs. On Cue’s unaudited EBITDAX measure, which excludes those items and other adjustments, earnings were $28.5 million, compared with $30.3 million a year earlier.

The board declared a final unfranked Conduit Foreign Income dividend of 0.25 cents per share, taking the FY2026 total to 0.50 cents. That represents roughly $3.5 million returned to shareholders for the year, a modest distribution alongside the company’s cash-funded development plans.

Reserves decline puts the growth program under scrutiny

Cue’s 2P reserves fell from 5.5 million barrels of oil equivalent to 4.5 MMboe at 30 June 2026, after production and net downward revisions. The company’s previously reported 2P reserves reduction was driven by updated technical and commercial assessments, with Mereenie down 0.4 MMboe and Maari and Sampang each down 0.2 MMboe. Mahato provided a partial offset, adding 0.2 MMboe through identified infill drilling opportunities.

The portfolio also carries several qualifications. Cue has decided to leave the Sampang PSC when its licence expires in December 2027, prompting the removal of 2.4 MMboe of Paus Biru and Jeruk contingent resources. Mereenie oil sales have been suspended since mid-June because of revised oil specification requirements, while the annual report says Sampang production was affected by delayed compression.

Palm Valley and Mahato supply the near-term catalysts

Onshore Australia offers Cue its clearest contracted growth path. Drilling began on Palm Valley well PV14 in July, with a second appraisal well, PV15, part of a program expected to take about four and a half months. First gas from PV14 is targeted for October 2026, subject to the appraisal program’s success. The wells are intended to support a Northern Territory Government gas agreement providing for up to 3.2 petajoules of Cue’s share of firm supply through to the end of 2034, under fixed pricing with CPI escalation and take-or-pay provisions. That long-term Palm Valley gas contract had previously been presented as support for two new wells.

Indonesia is the other major workstream. Mahato’s PB field produced 198 Mboe net to Cue, 5% above FY2025, and five development wells were brought into production during the year. The PB-41 and PB-42 wells were completed after year-end, with PB-42 reaching 520 barrels of oil per day. Cue expects approval of the OPL3 Phase 3 development plan in the first half of FY2027 and plans to progress the GA-1 exploration well in the second quarter.

Horizon now controls the strategic direction

The annual report formalises the change that reshaped Cue after year-end: Horizon Oil Limited (ASX:HZN) completed its acquisition of a 57.03% interest on 2 July 2026. Five directors resigned and four Horizon-linked directors joined the board, with Bruce Clement taking the chair. The shift followed the Horizon takeover control that had been reported alongside Cue’s drilling and cashflow update.

The new controlling shareholder inherits a producing, debt-free portfolio but also a business carrying $24.7 million of net unfunded restoration provisions, unresolved Mereenie oil sales arrangements and an unquantified Indonesian transfer-tax liability arising from the indirect change of control. The next test is whether Palm Valley’s appraisal wells and Mahato’s next development phase can replace depleted reserves quickly enough to justify continued distributions and a more ambitious growth strategy.