Oil explorer Melbana Energy fully funded to drill three+ more wells

By Justin Ware. Published at Oct 8, 2018, in Energy

Melbana Energy (ASX:MAY) has signed a non-binding Letter of Intent (LOI) with Anhui Guangda Mining Investment Co Ltd (AGMI).

The LOI is in respect to AGMI’s Block 9 Production Sharing Contract in Cuba, with AGMI to perform the following:

  1. Fully fund the drilling of a minimum of three exploration wells in Block 9 prior to July 2020, with two exploration wells to be drilled by November 2019. These include one on each of Melbana’s three highest ranked and high impact targets (Alameda, Zapato and Piedra).
  2. Replenish the current cash backed bank guarantee for US$2.275 million provided by MAY for the benefit of Cupet (Cuba’s State oil company), with an equivalent bank guarantee using its own banking facilities.
  3. Fully fund 100% of all exploration, appraisal, development and production activity and costs, providing any additional required bank guarantees for Block 9 while the group remains a participant in the Block 9 PSC (20+ years remaining).
  4. At its election, assume managerial control of Block 9.

In the event of a successful development, MAY will recover costs of ~US$3.5 million from the verified cost recovery pool, as well as 12.5% of the profit oil.

MAY and AGMI wish to complete a binding definitive agreement by December 1 this year, with AGMI considering utilising the April 2019 drilling slot available to MAY.

The LOI comes off the back of a recently released prospective resource assessment of Block 9 by the independent McDaniel & Associates Consultants, which have significant experience in certifying reserves in the Cuban region.

McDaniel & Associates Consultants, which have performed several assessments for TSX listed Sherritt International, have identified a best estimate Oil in Place of 15.7 billion barrels and Prospective Resources of 718 million barrels of oil equivalent from a further three prospects and 16 leads.

The assessment included a best estimate prospective resource of 270 million barrels of oil in the five target objects contained within MAY’s preferred high impact exploration prospects Alameda (3 objectives in well), Zapato and Piedra.

MAY does remain a speculative investment and investors should seek professional financial advice if considering this stock for their portfolio.

MAY CEO Robert Zammit commented on the LOI, “We are very pleased to have agreed LOI terms for the Block 9 farmout with AGMI where the minimum commitment to fully fund the drilling of our three preferred high impact prospects occurs at no further cost to Melbana shareholders.

“As AGMI proceeds with further activity in the block, Melbana will also be fully carried for all further activity and costs, including any appraisal, development, production costs and bank guarantee obligations while earning a 12.5% share of the profit oil under the Block 9 PSC and recovering its back costs of approximately US$3.5 million in the event of a commercial development.”

View Our Investment Portfolios

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!