Report
Independent Research

Melbana Energy Limited (ASX: MAY)

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HIGH IMPACT DRILLING
With four fully funded high impact wells expected to be drilled on two potentially company
making projects over the next two years, Melbana Energy (“Melbana” or the “Company”) is
now realising the fruition of a period where it has built up an unrisked Prospective Resource
base of 1.1 Bboe.
Three of the wells are to be drilled in the Block 9 Production Sharing Contract (“PSC”) on the
northern coast of Cuba, with two of the wells planned for 2019 and one for 2020; the Company
is finalising a farm-out agreement with Chinese group Anhui Guangda Mining Investment Co
Ltd (“AGMI”), with execution expected in December - this will leave the Company with a
free carried interest in all Block 9 activities. Cuba presents a highly prospective yet under
drilled opportunity - Block 9 is along trend from and over similar structures to the major Cuban
producing areas including the 11 Bbbl Varadero Oil Field, and areas currently operated by TSXlisted
Sherritt International, the only other western player in Cuba.
In Australia, the Company is awaiting the results of processing of a recently completed 3D
seismic survey over the substantial Beehive prospect in the Bonaparte Basin of Western
Australia. With a diameter of 18 km, the Company has stated that Beehive is the largest
undrilled single structure prospect in Australia, and bears geological and structural similarities
to the giant Tengiz Oil Field in Kazakhstan. The survey was 100% funded by Santos and Total, as
part of an option to farm-in to 80% of WA-488-P - should they elect (solely or jointly) to exercise
the option, Melbana will be carried for 20% through all activities up to the completion of the
initial well, with Melbana’s share of costs to be recouped from any future production - Melbana
will not be required to repay costs should commercial production not eventuate.
In addition to the two key projects Melbana has significant upside in the Santa Cruz incremental
oil recovery opportunity in Cuba, with execution of the agreement with Cuba Petróleo Union
(“CUPET”), the national oil company) expected in December. Also in Australia it has long life
environmental permits to develop offshore gas processing facilities at Tassie Shoals in the
Bonaparte Basin, 300 km NW of Darwin - these could provide an opportunity to treat nearby
stranded gas reserves. It needs to be noted that such a long life permit would not be granted
if applied for today, thus making this unique.
KEY POINTS
�� High quality, under-explored projects: In Block 9 and Beehive Melbana has high quality,
potentially company making projects that have seen little or no drilling, but are located in
in highly prospective areas, near to current producers.
�� Carried for major expenditure: The Company is carried for the costs of the upcoming
planned drilling, however will still retain significant value in Block 9 and Beehive should the
drilling prove successful.
�� Experienced Board and Management: Key personnel in Melbana have extensive
experience in all facets of the oil and gas game, and in addition hold shares in the Company
thus aligning their interests with those of other shareholders.
�� Well funded: With net cash of A$5.27 million, Melbana is well funded in the short term.
�� Steady news flow: Given the planned activities, particularly drilling, the next two years
should provide steady news flow.
VALUATION SUMMARY
�� We have completed a sum of the parts NAV valuation for Melbana, with a risked value of
A$113 million, or A$0.059/share as shown below. The per share valuations are based on
the current share structure, with no allowance for any future capital raising.
�� We see upside in this, particularly with success at Beehive (A$39.7 million, A$0.021/
share), which we have risked at 7.5% and Block 9 (A$61.6 million, A$0.033/share), with an
average risk weighting of 16.5%.
�� Key catalysts for price movements will be execution of agreements and positive drilling
results.
Underlying
Melbana Energy

Provider
Independent Investment Research
Independent Investment Research

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