A$2.283m cash and 3.61 quarters of funding as Lion prepares to drill

Bula Karang drilling moves within weeks

Lion Energy Limited (ASX:LIO) is heading into its most consequential operational milestone of the year with the Bula Karang-1 exploration well now scheduled to spud on 10 November. The rig has left West Java, the well pad and access road are complete, major drilling contracts are in place and equipment quality checks have been finished.

“Bula Bay area existing oil fields and location of Bula Karang prospects and follow up prospects in the event of success.”

“Section showing well plan to drill the attractive Bula Karang Reef Prospect with the well spudding onshore and deviated to test the offshore target.”

Caption and image © Lion Energy Limited. From “Quarterly Activities Report”, 28 Oct 2026.

The well is targeting a P50 prospective resource of approximately 12 million barrels of oil and carries a stated 38% geological chance of success. Those are exploration estimates, not discovered or recoverable reserves. Drilling and evaluation are expected to finish in early December, subject to vessel arrivals and operating conditions, with initial testing planned if the well produces positive indications.

Lion’s campaign follows the OPIC drilling funding deal, under which OPIC funds 88% of qualifying drilling costs up to a US$5.6 million cap. Lion retains a 45% interest in the East Seram PSC and says the current gross well cost is about US$6.7 million, leaving its estimated contribution above the cap at roughly US$495,000.

Asset sale lifts cash before the campaign

That contribution is being supported by Lion’s completed sale of its 2.5% indirect interest in the Seram Non-Bula PSC to Vista Energy Pte Ltd. The transaction carried headline consideration of about US$1.2 million, with the final US$0.97 million, or A$1.39 million, received during the quarter. The sale completes Lion’s exit from the non-core interest and removes one more asset from the portfolio as it concentrates on East Seram.

Cash and cash equivalents rose to A$2.283 million at 30 September from A$889,000 three months earlier. The quarterly cash movement was not driven by operating income: Lion recorded A$479,000 of net operating cash outflow, while investing activities generated A$1.925 million, including A$1.362 million from disposals. Its reported cash-based funding estimate was 3.61 quarters, based on relevant quarterly outgoings of A$633,000.

Convertible note creates a December funding question

The balance sheet still carries a fixed near-term consideration. Lion’s fully drawn, unsecured A$1.6 million convertible note is interest-free and matures on 31 December 2026. Holders can convert at 1.5 cents a share up to maturity, subject to applicable laws and ASX rules; otherwise the maturity represents a cash obligation. The filing does not state how the note will be settled.

Lion has also discontinued its green hydrogen development activities, including the Port of Brisbane project, and says it is disposing of related equipment and exiting associated commitments. The company says it has no remaining material exposure to the hydrogen business, leaving the Bula Karang well and the wider East Seram portfolio as the central demands on management attention and capital.

Near-term attention therefore splits between the drill bit and the balance sheet. A successful well could support testing and a potential extended well test planned for early 2027, currently targeted for March subject to results and equipment availability. Before that, the December note maturity will show whether Lion’s improved cash position is sufficient for the next step or whether another financing decision arrives alongside the drilling results.