Tamboran Resources Corp: Form 10-Q for the period ended Dec 31, 2024

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our

condensed consolidated financial statements, the accompanying notes to the condensed consolidated financial statements

and other financial information included in this report and in our Annual Report on Form 10-K for the year ended June 30,

2024. For further information on items that could impact our financial condition and operating performance, see the section

entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, and “Cautionary Note

Regarding Forward-Looking Statements” in this report.

The following tables present selected financial information for the periods presented (dollar amounts in

thousands):

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Results of Operations for the Three Months Ended December 31, 2024 and 2023

Revenue and other operating income. We have not yet commenced natural gas production, therefore, we did not

earn any revenue and other operating income during the three months ended December 31, 2024 and 2023, respectively.

Compensation and benefits, including stock-based compensation. Compensation and benefits, including stock-

based compensation, increased by $1.2 million during the three months ended December 31, 2024, as compared to the

three months ended December 31, 2023, due primarily to the restricted stock units granted in August 2024 and increased

headcount as compared to the comparative period.

Consultancy, legal and professional fees. Consultancy, legal and professional fees decreased by $1.4 million

during the three months ended December 31, 2024, as compared to the three months ended December 31, 2023, due to

professional fees related to implementation of the scheme of arrangement and IPO readiness incurred in the comparative

period in 2023 with no comparable activity during the three months ended December 31, 2024.

Loss on remeasurement of assets classified as held for sale. The Group did not recognize a loss on assets

classified as held for sale during the three months ended December 31, 2024 as the value of the rig sold during the period

had been reduced to the lower of its carrying amount and the fair value less costs to sell in the prior quarter. For the three

months ended December 31, 2023 the Group recognized a loss on assets classified as held for sale amounting to $0.03

million as a result of the sale of rig 301 during the comparative period.

Accretion of asset retirement obligations expense. For the three months ended December 31, 2024, an expense for

accretion of asset retirement obligations of $0.2 million was recognized. The recognition of such an expense was due to the

accretion of asset retirement obligation liabilities in relation to all EPs, inclusive of EPs 76, 98, 117, 136 and 161, as well

as the SPCF pad.

Exploration expense. Exploration expense decreased by $1.0 million during the three months ended December 31,

2024, as compared to three months ended December 31, 2023, due to increased topographical, geographical and

geophysical studies and other indirect expenditure in the comparative period.

LNG feasibility study expense. During the three months ended December 31, 2024, the Group incurred expenses

of $3.2 million related to certain studies and pre-front-end engineering and design services related to the proposed NT LNG

facility.

Checkerboard fee. During the three months ended December 31, 2024, the Group incurred an expense of $6.0

million related to the satisfaction of certain payment obligations to DWE under the TB1 Joint Venture Agreement. This

obligation was satisfied through the issuance of common stock, subsequent to shareholder approval received in November

General and administrative. General and administrative costs increased by $0.3 million during the three months

ended December 31, 2024, as compared to the three months ended December 31, 2023, as a result of increased expenses

related to headcount, travel, insurance, and office and administrative fees.

Interest income, net. Interest income, net increased by $0.5 million during the three months ended December 31,

2024, as compared to the three months ended December 31, 2023, due to interest received from term deposits using IPO

proceeds during the period ended December 31, 2024 which did not exist during the comparative period.

Foreign currency translation. For the three months ended December 31, 2024, we recognized a foreign currency

translation loss of $29.2 million, primarily due to the weakening of the Australian Dollar as of December 31, 2024, as

compared to September 30, 2024. In the three months ended December 31, 2023, we recognized a foreign currency

translation gain of $13.7 million, primarily due to the strengthening of the Australian Dollar as of December 31, 2023, as

compared to September 30, 2023. Foreign exchange gains and losses resulting from the settlement of foreign currency

transactions and from the translation at fiscal year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized on our condensed consolidated statement of operations and comprehensive loss.

Income tax expense. We have no income tax expense due to operating losses incurred for the three months ended

December 31, 2024, and 2023. We have provided a full valuation allowance on our net deferred tax asset because

management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax

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assets during a foreseeable future period. Management will continue to assess the potential for realizing deferred tax assets

based upon income forecast data and the feasibility of future tax planning strategies and may record adjustments to the

valuation allowance against deferred tax assets in future periods, as appropriate, that could have a material impact on the

condensed consolidated statement of operations and comprehensive loss.

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Result of Operations for the Six Months Ended December 31, 2024 and 2023

Revenue and other operating income. We have not yet commenced natural gas production, therefore, we did not

earn any revenue and other operating income during the six months ended December 31, 2024 and 2023, respectively.

Compensation and benefits, including stock-based compensation. Compensation and benefits, including stock-

based compensation, increased by $2.1 million during the six months ended December 31, 2024, as compared to the six

months ended December 31, 2023, due primarily to the restricted stock units granted in August 2024 and increased

headcount as compared to the comparative period.

Consultancy, legal and professional fees. Consultancy, legal and professional fees decreased by $1.1 million

during the six months ended December 31, 2024, as compared to the six months ended December 31, 2023, due to

professional fees related to related to implementation of the scheme of arrangement and IPO readiness incurred in the

comparative period in 2023 with no comparable activity during the three months ended December 31, 2024.

Loss on remeasurement of assets classified as held for sale. The Group recognized a loss on assets classified as

held for sale amounting to $0.4 million during the six months ended December 31, 2024, due to the write down of rig 403

to the fair value less costs to sell. In contrast, a loss on assets classified as held for sale amounting to $0.03 million was

recognized during the six months ended December 31, 2023, due to the sale of a smaller rig, rig 301.

Accretion of asset retirement obligations expense. For the six months ended December 31, 2024, an expense for

accretion of asset retirement obligations of $0.5 million was recognized. The recognition of such an expense was due to the

accretion of asset retirement obligation liabilities in relation to all EPs, inclusive of EPs 76, 98, 117, 136 and 161, as well

as SPCF for the new well and related well pads drilled during the period. As the Group drilled two additional wells and

established the SPCF site during the six months ended December 31, 2024, the expense for the current period has increased

marginally from that of the comparative period.

Exploration expense. Exploration expense decreased by $0.9 million during the six months ended December 31,

2024, as compared to six months ended December 31, 2023, due to increased activity for topographical, geographical and

geophysical studies and other indirect expenditure in the comparative period.

LNG feasibility study expense. During the six months ended December 31, 2024, the Group incurred expenses of

$3.2 million related to certain studies and pre-front-end engineering and design services related to the proposed NT LNG

facility.

Checkerboard fee. During the six months ended December 31, 2024, the Group incurred an expense of $6.0

million related to the satisfaction of certain payment obligations to DWE under the TB1 Joint Venture Agreement. This

obligation was satisfied through the issuance of common stock, subsequent to shareholder approval received in November

General and administrative. General and administrative costs increased by $1.2 million during the six months

ended December 31, 2024, as compared to the six months ended December 31, 2023, as a result of increased expenses

related to headcount, travel, insurance, and office and administrative fees.

Interest income, net. Interest income, net increased by $1.3 million during the six months ended December 31,

2024, as compared to the six months ended December 31, 2023, due to interest received from term deposits using IPO

proceeds during the period ended December 31, 2024 which did not exist during the comparative period.

Foreign currency translation. For the six months ended December 31, 2024, we recognized a foreign currency

translation loss of $17.0 million, primarily due to the weakening of the Australian Dollar as of December 31, 2024, as

compared to July 1, 2024. In the six months ended December 31, 2023, we recognized a foreign currency translation gain

of $8.3 million, primarily due to the strengthening of the Australian Dollar as of December 31, 2023, as compared to July

1, 2023. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the

translation at fiscal year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are

recognized on our condensed consolidated statement of operations and comprehensive loss.

Income tax expense. We have no income tax expense due to operating losses incurred for the six months ended

December 31, 2024, and 2023. We have provided a full valuation allowance on our net deferred tax asset because

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management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax

assets during a foreseeable future period. Management will continue to assess the potential for realizing deferred tax assets

based upon income forecast data and the feasibility of future tax planning strategies and may record adjustments to the

valuation allowance against deferred tax assets in future periods, as appropriate, that could have a material impact on the

condensed consolidated statement of operations and comprehensive loss.

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Liquidity and Capital Resources

We are a development stage enterprise and will continue to be so until commencement of substantial production

from our natural gas properties. We do not expect to generate any revenue from production until 2026, at the earliest,

which will depend upon successful drilling results, additional and timely capital funding, and access to suitable

infrastructure. Until then our primary sources of liquidity are expected to be cash on hand, net proceeds from our IPO, and

funds from future private and public equity placements, debt funding and asset sales.

We expect to incur substantial expenses and generate significant operating losses as we continue to develop our

natural gas prospects and as we:

• complete our current appraisal drilling and testing program;
• develop and commercialize our assets, including the SPCF, development of pipelines, the proposed NT LNG

facility and other infrastructure;

• opportunistically invest in additional natural gas assets adjacent to our current positions; and
• incur expenses related to operating as a public company and compliance with regulatory requirements.

Our future financial condition and liquidity will be impacted by, among other factors, the success of our

exploration and appraisal drilling program, the number of commercially viable natural gas discoveries made, the quantities

of natural gas discovered, the speed with which we can bring such discoveries to production, and the actual cost of

exploration, appraisal and development of our prospects.

For the remainder of fiscal year ended June 30, 2025, we estimate that we will need to invest approximately $50.0

million to progress our development plans. We expect our existing cash on hand to be sufficient to fund our planned

fracture stimulation and flow testing of SS-2H ST1 and SS-3H. However, we may require significant additional funds

earlier than we currently expect in order to execute our strategy as planned. Additional funding may not be available to us

on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our

stockholders. For example, if we raise additional funds by issuing additional equity securities, further dilution to our

existing stockholders will result. If we are unable to obtain funding on a timely basis, we may be required to significantly

curtail one or more of our planned activities. We also could be required to seek funds through arrangements with

collaborators or others that may require us to relinquish rights to some of our assets which we would otherwise develop on

our own, or with a majority working interest.

Cash and Cash Equivalents

The following table summarizes our key measures of liquidity for the periods indicated (in thousands).

As of December 31, 2024, we had $59.4 million of cash and cash equivalents. This balance represents a decrease

of $15.3 million from June 30, 2024, due to incoming funds from the greenshoe option exercised in July 2024, the sale of

rig 403 in October 2024, R&D tax credits received in December 2024, and cash calls received throughout the period which

are offset primarily by spending on operations on the SS-2H, SS-2H side track, and SS-3H pilot wells during the six

months ended December 31, 2024.

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Capital Commitments

We had the following five-year capital commitments as of the periods indicated (in thousands), which are not

recognized as liabilities or payables on the condensed consolidated balance sheet:

Sweetpea

As of December 31, 2024, the Company’s wholly owned subsidiary, Sweetpea committed to spend $21.9 million

related to two licenses, EP 136 with total commitments of $13.2 million and EP 143 with total commitments of $8.7

million over the following five years.

A renewal application for EP 136 was submitted to the Department of Mining and Energy (“DME”) (formerly the

Department of Industry, Tourism and Trade) in September 2023, and approved in July 2024, granting a five-year extension

for the period July 24, 2025 to July 23, 2030 with a minimum work program commitment of $13.2 million.

A variation application for EP 143 was submitted to DME in August 2024, and approved in October 2024. The

total minimum work program commitments remain the same at $8.7 million with activity and associated spend being

transferred within the license term.

EP 161

For the EP 161 working interest, we are obligated to contribute our share of expenses to uphold our stake in this

permit, for which Santos Limited is the operator. Our commitment through March 2026 is approximately $2.5 million

based on the minimum work requirements. There are no minimum commitment requirements after March 2026.

Beetaloo Joint Venture

The terms of the Beetaloo Joint Venture necessitate specific minimum work obligations through May 2028. These

commitments include an expected spend of $70.4 million related to drilling and multi-stage hydraulic fracturing of four

wells, 2D seismic survey, and subsurface studies, with expenditure across EP 76 of $10.1 million, EP 98 of $49.3 million,

and EP 117 of $11.0 million . An application was submitted to DME on September 26, 2024 to vary the year 2 and 3 work

program, and is currently pending resolution.

Midstream

Procurement of the long lead items for the SPCF compressor package and dehydration package were placed in

June 2024 with progress payments of $1.2 million required prior to the end of calendar year 2025.

Other Commitments and Contingencies

On December 19, 2024, TR Ltd., as guarantor, entered into the Facility Agreement with TR West, as borrower,

each a wholly owned subsidiary of the Company, as obligors, and Macquarie, as lender. The Facility Agreement provides

TR West with Facility A amounting to A$25,000,000 in availability for performance bonds, and includes potential

additional Facility B and Facility C each amounting to A$5,000,000. Availability under the Facility B and Facility C is

subject, among other conditions, to the Company raising additional capital in the amounts of at least A$62,500,000 and

A$75,000,000, respectively. All Facilities terminate on December 19, 2027. The obligations under the Facility Agreement

are unconditionally guaranteed on a senior secured basis by TR Ltd.

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As of December 31, 2024, there was A$6,360,000 of letters of credits issued under the Facility Agreement. As of

December 31, 2024 there was A$18,640,000 of unused credit under Facility A and A$10,000,000 of unused credit under

Facility B and Facility C.

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Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Net Cash Used in Operating Activities

For the six months ended December 31, 2024, net cash used in operating activities was $8.9 million during which

we incurred a net loss of $22.3 million, compared to net cash used in operating activities for the six months ended

December 31, 2023, of $10.5 million, during which we incurred a net loss of $11.3 million. The net loss for the six months

ended December 31, 2024, included the non-cash impacts of depreciation and amortization, stock-based compensation, loss

on remeasurement of assets classified as held for sale, accretion of asset retirement obligations, checkerboard fee and

foreign exchange differences. Additionally, in the six months ended December 31, 2024, net favorable changes in

operating assets and liabilities totaled $3.1 million, primarily consisting of a $2.4 million increase in accounts payable and

accrued expenses due to timing of our pay cycle during the fiscal period and a $0.7 million decrease in prepaid expenses

and other assets.

Net Cash Used in Investing Activities

For the six months ended December 31, 2024, net cash used in investing activities was $35.8 million compared to

$27.0 million for the six months ended December 31, 2023. In the period ended December 31, 2024, there was spend on

exploration and evaluation activities of $42.1 million in connection with the drilling of the SS2-H, SS-2H ST1 and SS-3H

pilot wells, expenditure of $6.6 million related to the detailed design of the SPCF, partially offset by proceeds from the sale

of assets held for sale of $8.0 million for rig 403 and R&D tax credits of $6.2 million.

Net Cash from Financing Activities

For the six months ended December 31, 2024, net cash received in financing activities was $31.4 million

compared to $64.2 million received for the six months ended December 31, 2023. This change was primarily due to the

receipt of $7.4 million in gross proceeds from the greenshoe option exercised in July 2024, $30.3 million attributable to

contributions from noncontrolling interest holders to fund their share of cash calls, partially offset by transaction costs of

$0.5 million.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our

condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of

our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the

reported amounts of certain assets, liabilities and related disclosure of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenues and expenses during the reporting period. The following critical

accounting policies relate to the more significant estimates and assumptions used in preparing the consolidated financial

statements.

The impact of, and any associated risks related to, estimates and assumptions are discussed within Management’s

Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Condensed

Consolidated Financial Statements, if applicable, where estimates and assumptions affect the Company’s reported and

expected financial results.

There have been no other material changes in critical accounting estimates at December 31, 2024 from those

described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.

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Evaluation of Disclosure Controls and Procedures

As of December 31, 2024, our principal executive officer and principal financial officer concluded that we

did not maintain effective internal control over financial reporting due to the material weakness that was disclosed in

our Annual Report on Form 10-K for the year ended June 30, 2024.

As discussed in Part II, Item 9A, “Controls and Procedures” in our Annual Report on Form 10-K for the

year ended June 30, 2024, we identified the following deficiencies in our internal control over financial reporting,

which in the aggregate, constituted a material weakness:

i) lack of sufficient evidence retained of the performance of internal controls,

ii) insufficient resources in key accounting and finance roles leading to inadequate segregation of duties,

iii) lack of manage access and manage change IT general controls over the cloud-based enterprise resource

planning system, and

iv) accounting for complex transactions in accordance with U.S. GAAP.

Status of Remediation Efforts

In response to the material weakness identified and described above, our management, with the oversight of

the Audit & Risk Management Committee of our Board of Directors, will continue to dedicate significant efforts and

resources to further improve our control environment and to take steps to remediate this material weakness. As part

of our plan to address this material weakness, we are performing a full review, with the assistance of external

consultants, of our processes and internal controls. We have implemented a new enterprise resource planning system

to better support our financial reporting and internal control framework. We have implemented, and plan to continue

to implement, new controls and processes. We will also provide training to control owners, supported by external

consultants, as appropriate, in support of an effective internal control framework, including how to sufficiently

document and evidence the operation of internal controls. We have also hired a Vice President of Information

Technology and a Financial Reporting Manager with extensive knowledge in their respective fields to assist in the

remediation of the above control deficiencies. We will continue to hire accounting and finance personnel, or engage

technical specialists, who possess the required technical knowledge to ensure reporting requirements are met and

segregation of duties are maintained.

While we have begun implementing a plan to remediate this material weakness, we cannot predict the

success of such plan or the outcome of our assessment of this plan at this time. If our steps are insufficient to

successfully remediate the material weakness and otherwise establish and maintain an effective system of internal

control over financial reporting, the reliability of our financial reporting, investor confidence in us, and the value of

our common stock could be materially and adversely affected. We can give no assurance that the implementation of

this plan will remediate this deficiency in internal control or that additional material weaknesses in our internal

control over financial reporting will not be identified in the future. Our failure to implement and maintain effective

internal control over financial reporting could result in errors in our financial statements that could result in a

restatement of our financial statements, or cause us to fail to meet our periodic reporting obligations. For as long as

we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will

not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404.

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Changes in Internal Control Over Financial Reporting

Except for the implementation of our remediation plans in connection with our ineffective disclosure

controls and procedures described above, there were no changes in the Company’s internal control over financial

reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended

December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control

over financial reporting.

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There have been no material changes in risk factors for the quarterly period ended December 31, 2024 from those

described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.