Melbana advances potential multi-billion-dollar Cuban oil opportunity
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Melbana will begin drilling a highly prospective oil play in mid-2021 that could ultimately be worth billions to the company.
Melbana Energy (ASX:MAY) has taken another step closer to the start of drilling at its Block 9 project in Cuba with the award of a contract for the supply of long-lead items and construction of the first well pad largely complete.
The company has a 30 per cent stake in Block 9, where drilling will test four targets estimated to host about 236 million barrels of oil (best case estimate).
In Melbana’s favour is the fact that it is drilling in an area that has previously flowed oil to the surface. And success would make the company’s share of this resource worth billions of dollars.
Executive chairman Andrew Purcell says it’s an opportunity on a scale rarely offered by junior oil companies to its shareholders.
Alameda-1 is the highest-ranked prospect in Block 9 and lies in a similar structural position to the largest oil field in Cuba, Varadero, approximately 35km away.
The well will test three targets that have been independently assessed to have a total prospective resource of 143 million barrels of oil and have been ascribed a 32 per cent chance of success.
The probability is higher than usual in oil and gas exploration as Alameda-1 is targeting the same structure drilled in the 1980s by CUPET, Cuba’s national oil company, with a well called Marti-5.
Marti-5 recorded oil shows over an 850m gross interval and recovered a lighter oil than typically found in Cuba.
Zapato-1 will be the next well to be drilled, with the program testing a single target near to the shallower Motembo oil field, which has historically produced a high-quality light oil.
The well is estimated to host a prospective resource of 95 million barrels of oil.
In late 2019, Melbana inked a lucrative partnership agreement with Angolan national oil company Sonangol for Block 9.
Under the farm-in agreement, Sonangol can earn a 70 per cent stake in the project by funding 85 per cent of the costs of drilling the Alameda-1 and Zapato-1 wells.
Sonangol also paid $5m to Melbana for past costs it has incurred in Cuba, an amount that is expected to largely cover Melbana’s 15 per cent funding commitment for the two wells.
Melbana just reported $16.5m of cash on hand to fund these operations after Sonangol settled January cash calls.
These funds, along with Melbana’s contribution for its working interest, are being used to advance planning, civil works and the procurement of long-lead items of inventory.
This article was developed in collaboration with Melbana Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.