Annual Report 2024 Melbana Energy Limited ABN 43 066 447 952
Contents 02 Company Overview 02 Chairman’s Letter 04 Highlights 06 Operating Review 10 Board of Directors 12 Financial Report 12 Directors’ Report 34 Governance and Risk 37 Auditor’s Independence Declaration 38 Consolidated Statement of Profit or Loss and Other Comprehensive Income 39 Consolidated Statement of Financial Position 40 Consolidated Statement of Changes in Equity 41 Consolidated Statement of Cash Flows 42 Notes to the Consolidated Financial Statements 68 Consolidated Entity Disclosure Statement 69 Directors’ Declaration 70 Independent Auditor’s Report 76 Shareholder Information 79 Glossary of Key Terms 80 Corporate Directory
About Melbana Energy Melbana Energy is an Australian ASX listed, independent oil and gas company that has a portfolio of attractive exploration, appraisal and development stage opportunities in Cuba and Australia. Our mission is to create a world class E&P company by using the skills of our people to identify and successfully develop attractive oil and gas exploration and project development opportunities. 01 Melbana Energy Limited Annual Report 2024
It is with pleasure that I present to you the 2024 Annual Report for Melbana Energy Limited, yet another busy year for your Company. During the reporting period we completed the appraisal of the three oil bearing formations we had previously discovered in our Block 9 PSC, onshore Cuba. This marks the end of a successful exploration program commenced back in 2021, the best result of which (so far) is the definition of a Contingent Resource of 46 million barrels1 of relatively highquality and easily accessible oil at a location close to existing oil field infrastructure. The next stage of this project’s development is to export the first trial cargo of oil from Cuba before the end of this calendar year. To meet this aggressive but achievable goal has meant driving a number of parallel work streams. These included obtaining the necessary approvals to export and sell Block 9 oil production offshore, establishing an offshore subsidiary for marketing this production, agreeing offtake terms with international commodity traders, developing the necessary logistical capabilities to transport the oil domestically and ship it internationally and negotiating access to the Cuban national oil company’s processing facilities, oil terminal and supertanker base. In addition, preparations for drilling the first production wells into the shallow Unit 1B reservoir have continued apace. We plan to kick that program off in late 2024 once permitting and civil works are completed. In the interim, we plan to undertake workover of the existing Unit 1B completion in our Alameda-2 appraisal well. Our previously stated ambition of 5,000 barrels of oil per day by the end of 2024 is now probably not achievable given we were unable to complete Alameda-3 as another production well. However, a successful workover of the existing completion in Unit 1B and the first couple of additional Unit 1B production wells will hopefully see us reach that goal in the first or second quarter of next year. 02 Melbana Energy Limited Annual Report 2024 1 Independent best estimate (P50), 100% share. Chairman’s Letter
The promise of a substantial reward for our considerable efforts to date in Cuba remains very much alive and we and our partners remain committed to delivering it as soon as possible. The Alameda-3 appraisal of the deeper two reservoirs was a disappointment, of course. We know those structures contain moveable hydrocarbons accompanied by considerable formation pressure, so the task before us is to take these learnings and adapt our drilling practices to recover these accumulations without damaging the reservoirs. The results of the workover techniques we will soon trial in the Amistad structure, some of which have been successfully applied previously on similar formations in Cuba, will be informative. It is important to remember, however, that the stable (choked) 1,200 barrels per day of production we initially measured from Unit 1B was delivered through perforated casing and only over 20% of the net pay. The next production wells are designed to allow production from the entire net pay (346 metres TVD). The promise of a substantial reward for our considerable efforts to date in Cuba remains very much alive and we and our partners remain committed to delivering it as soon as possible (whilst also sharing your frustration at the unexpected obstacles that appear to test our patience). We have also found time during the reporting period to add to our portfolio of exploration plays here, in offshore Australia, targeting large possible accumulations of hydrocarbons. We have a good track record of identifying such targets then presenting our analysis of them to larger players better funded to test our ideas, hence we continue to work up and market our ideas, but progress has been slow these past few years given the Federal Government’s lack of enthusiasm for new fossil fuel projects. We suspect that the slower and more expensive transition to the new energy economy coupled with the projected looming shortfall of the gas needed to fuel this transition is forcing a practical re-examination of this position. Significantly, Melbana was one of only a handful of companies to be offered new acreage for the first time in several years. Our Company now has an attractive portfolio of opportunities and we are well positioned to take advantage of the returning enthusiasm for upstream exploration. Finally, I commend our team for their excellent technical work and diligent application of their efforts to realising our goals. It has been a challenging year but a significant reward is within our reach. A lesser team would not have achieved what we have achieved. Andrew Purcell Chairman 03 Melbana Energy Limited Annual Report 2024
04 Melbana Energy Limited Annual Report 2024 Highlights Cuba Block 9 Cuba Cuba The Alameda-1 exploration well, completed in 2022, identified three vertically stacked and geologically independent oil-bearing formations (called Amistad, Alameda and Marti). The recently completed two well appraisal program was designed to collect more information on the oil quality in these formations, their production and geological characteristics and the capabilities of the oil processing facilities and related oil storage and logistics. ALAMEDA-22 (Our first appraisal well) had the objective of testing the different sections (called Units 1, 2 and 3) of the Amistad (shallowest) structure. Highlights include: – Successfully reached target total depth on time and on budget; – Unit 1 shown to comprise two different productive units, Unit 1A and Unit 1B; – Unit 1A: 12° API oil recovered at surface without assistance; – Unit 1B: 19.8° API low (<3%) sulphur oil recovered at surface without assistance at a controlled rate of 1,235 BOPD; Block 9 Appraisal Program Completed 2 Also referred to as Amistad-1.
05 Melbana Energy Limited Annual Report 2024 Tassie Shoal Methanol LNG Projects AC/P70 WA-488-P NT/P87 WA-544-P Australia 3 Previous independent estimate 88 million barrels of Prospective Resource for entire Amistad structure (100% share, best estimate). 4 100% share, best estimate. 5 Internal estimate - 100% share, best estimate. – Unit 2: No oil encountered at the tested location; – Unit 3: 16.9° API oil unable to be recovered at surface without assistance, implied flow rate of 750 BOPD; – Unit 1B: Completed as a production well then shut in to allow for drilling of the Alameda-3 appraisal well. Subsequently put on extended production to better understand reservoir performance and capability of surface operations. Restarted flow of 300 BOPD suggests reservoir damage; – Net Pay for the Amistad structure calculated to be 346 metres TVD (615 metres TVD when natural fracturing incorporated); – Updated3 independent estimates of resource volumes4: – Unit 1A: 32 million barrels of Prospective Resource – Unit 1B: 46 million barrels of Contingent Resource 90 million barrels of Prospective Resource – Melbana was one of only a handful of recipients to be awarded a new offshore exploration permit in the first offshore acreage release in years; – Hudson Prospect (100%) - Advisor appointed to seek a partner to fund next stage of exploration work on a structure estimated5 to hold a Prospective Resource of either 466 BCF of gas or 90 million barrels of oil. Request for additional time to allow a new partner time to receive permits to conduct next state of exploration program formally approved; – AC/P70 (100%) – Interpretation and mapping of reprocessed seismic survey received significantly progressed. Request for additional time to complete studies and attract a partner formally approved; and – WA-488-P (contingent cash and royalty interest) – Operator received environmental approval to drill an exploration well. Application made for additional time to meet drilling commitment. Significant progress with offshore exploration opportunities Australia ALAMEDA-3 (second appraisal well) had the objective of testing the two deeper reservoirs (called Alameda and Marti): Results highlights include: – Successfully reached target total depth but neither on time nor budget due to operational and drilling issues; – Management of these issues resulted in down hole conditions unlikely to be conducive to optimum reservoir performance; – Neither reservoir successfully flowed oil to surface, despite being minimally offset to Alameda-1 trajectory where extensive accumulations of energetic and moveable hydrocarbons were encountered; – Cores and high quality logs were obtained, indicating highly fractured reservoir; and – Well suspended whilst studies undertaken to determine possible causes of unexpected results and to formulate reservoir workover strategies.
Cuba Block – 9 (Melbana 30%) We are into the next phase of developing our high-impact Cuban oil discovery. The next step is to get oil on a boat by mid FY2025 and to continue to drill development wells in the Alameda structure in Block 9. Every trip to Cuba provides a learning opportunity. Whilst driving several potential investors down the road from Havana to the Alameda-3 drilling area earlier in 2024, they were surprised by the number of well heads, nodding donkeys and obvious oil and gas activity along the side of the highway. When added to the obvious pride our technical team and drilling contractor have in the field operations, it combines to make potential investors sit up and take notice. Melbana is not alone in recognising the potential of Cuba but retains first mover advantage and access to some of the most prospective acreage in the country. Some learnings however are less welcome than others. Whilst there has been success at Alameda-2 and plans are progressing at pace to develop that reservoir interval, the drilling and testing of the deep horizons at Alameda-3 was slow, challenging and ultimately, disappointing, with no flow obtained to surface. The Company’s analyses indicate there is a resource worth chasing in the deeper reservoirs, but for now, the focus will be on developing the shallow Amistad Unit 1B reservoir and bringing as much oil to market as quickly as possible. On the plus side, the Amistad Unit 1B reservoir has now been certified to hold a contingent resource6 of 46 million barrels of oil (2C) and a further 90 million barrels of prospective resource (2U), with 32 million barrels of prospective resource (2U) in the shallower Amistad Unit 1A reservoir. Operating Review 6 100% best estimate. 06 Melbana Energy Limited Annual Report 2024
In Cuba, the government continues to be very supportive of the Company’s plans: while working on our field development plan the Company identified oil storage constraints and the government responded proactively with an offer of access to government-owned oil tank storage infrastructure at the supertanker port at Matanzas, a very welcome development. The Company continues to work hard on several fronts, including talking to providers of new funding and finalising plans and commercial agreements for oil trucking, storage, shipping and sales to make the plan of bringing first oil to world markets by mid FY2025 a reality. Upper Sheet Development all systems go Alameda-2 was spudded in June 2023 and reached total depth on 3 July 2023. The well was drilled ahead of time and within budget and had no significant complications or HSE issues. The well was focused on logging, coring and flow testing the Amistad Units-1A, 1B, 2 & 3 units with the following results: – The Amistad Unit 1A test recovered 40 barrels of 12° API oil with 3,783 cP viscosity at surface; – Moveable oil of a similar quality to Amistad Unit 1A was confirmed in Unit 3 and testing indicated the potential to flow at about 750 bopd; – The Amistad Unit 2 test did not demonstrate moveable hydrocarbons to surface at the location tested; – The Amistad Unit 1B test recovered 19° API oil with 30 cP viscosity at surface from a perforated section of less than 20% of the total Net Pay for Unit 1B (when incorporating fractures); and – Stabilised unassisted flow to surface was measured at 1,235 barrels of oil per day, peaking at 1,903 barrels of oil per day. An EPT was then conducted. Production was run for a total of 10 days, with 20 tanker loads of oil produced and delivered to offsite storage, successfully testing export logistics. Flow peaked at 1,183 barrels of oil per day but averaged 300 barrels of oil per day, significantly less than the stabilised flow in the original test. Analysis of the EPT results suggests the reservoir formation was damaged, possibly during completion operations: at press, the Company is planning a workover program aimed at restoring the higher flow rates observed during the original test. The Amistad Unit 1B section was completed for future production, whilst Amistad Units 1A and 3 were suspended for potential future development and production. The Company’s independent resource certifiers updated the Amistad Units 1B and Unit 1A resource certification to 46 million barrels (2C) and 90 million barrels (2U) for Amistad Unit 1B and 32 million barrels (2U) for Amistad Unit 1A. The Company is now focussed on near-term commercialisation of the Amistad Unit 1B discovery. The proposed phased development plan is for a series of new Amistad Unit 1B production wells to be drilled based on existing 2D seismic to develop the 1C resource (16 million barrels) with subsequent development wells to be located via new 3D seismic. A complete assay of Amistad Unit 1B oil confirmed that the oil has API gravity of 19.8° and sulphur content of <3% and has been proven to be attractive to international oil refineries. Production is initially planned to be delivered by truck to the Matanzas Supertanker port, located a short distance from Block 9, where it will be stored in a dedicated tank awaiting export via ship. 07 Melbana Energy Limited Annual Report 2024
Operating Review continued Commercial discussions regarding offtake options and forward development plans are well advanced with both oil traders and potential farminees. The goal remains to achieve the first export of oil before the end of 2024. More thinking required for Marti and Alameda reservoirs The Alameda-3 well was spudded on 15 December 2023 and reached Total Depth of 3880mMD on 17 June 2024. The well was significantly delayed due to operational challenges: a side track at 2908m due to hole stability issues and an inflatable external casing packer running tool was stuck for some time in the 7” liner section (TD 3642m). The objective of the Alameda-3 well was to test the lower two geologically independent oil-bearing reservoirs intercepted by the Alameda-1 well (these reservoirs being designated Alameda and Marti respectively). The goal of the well was to prove up the nearly 179 million barrels of best estimate Prospective Resource certified for these lower two reservoirs. Wireline logging, including FMI, of both the Alameda and Marti reservoir sections was undertaken, indicating a naturally highly fractured reservoir and over 100m of conventional (not fracture dependent) pay in the Alameda reservoir. Flow testing was then undertaken on both the Marti and Alameda reservoirs. The objective of the testing was to determine oil quality and flow rates for the reservoirs to gain a broader understanding of the reservoirs’ production characteristics. In both tests, there were positive indications of high pressure at surface, however minimal returns were observed at surface: the complete removal of drilling mud and downhole fluids from the test string was not achieved, and oil did not flow to surface. Although no uncontaminated oil samples were obtained in either the Marti or Alameda reservoirs, oil samples were recovered on reverse circulation of the test string in the Marti reservoir and were analysed to have API of 19° with 2.3% sulphur. 08 Melbana Energy Limited Annual Report 2024
The inability of the well to flow did not fit with previous observations and expectations, given wireline and FMI over both intervals indicated substantial fracturing in the Marti reservoir interval and good quality conventional (i.e. not fracture dependent) pay in the Alameda reservoir interval. The well is currently suspended, test string removed, and pressure gauges extracted, and the rig has been demobilised from site to reduce costs. The Company continues to study the results of all available data and analogous wells. If these studies suggest that the lack of flow was likely due to reservoir formation damage, the Company intends to design and execute a potential future workover plan. Moving forward, we are drawing on our network of international and local expert knowledge to ensure critical lessons learned are captured for incorporation into future activities. 09 Melbana Energy Limited Annual Report 2024
10 Melbana Energy Limited Annual Report 2024 Andrew Purcell Executive Chairman Andrew Purcell founded the Lawndale Group (formerly Teknix Capital) in Hong Kong over 15 years ago, a company specialising in the development and management of projects in emerging markets across heavy engineering, petrochemical, resources and infrastructure sectors. Prior to this, Mr Purcell spent 12 years working in investment banking across the region for Macquarie Bank and then for Credit Suisse. Mr Purcell also has significant experience as a public company director, both in Australia and across Asia. Peter Stickland Non-Executive Director Peter Stickland has over 30 years’ global experience in oil and gas exploration. Mr Stickland was CEO and subsequently Managing Director of the Company from 2014 until January 2018 and then became a Non-Executive Director. Previously, Mr Stickland was CEO and subsequently Managing Director of Tap Oil Limited (ASX: TAP) from 2008 until late 2010 during which time he oversaw the evolution of the company into a Southeast Asia/Australia focused E&P company. Prior to joining Tap Oil, Mr Stickland had a successful career with BHP Petroleum (now part of Woodside) including a range of technical and management roles. Mr Stickland is also a life member of the Australian Energy Producers Limited (AEP). Michael Sandy Non-Executive Director Michael Sandy is a geologist with over 40 years’ experience in the resources industry – mostly focused on oil and gas. In the early 1990s he was Technical Manager of Oil Search Limited, based in PNG. He was involved in establishing Novus Petroleum Ltd and preparing that company for its $186m IPO in April 1995 and over 10 years, he held various senior management roles with the Company. Subsequently Mr Sandy has been the principal of energy consultancy company Sandy Associates P/L, has set up and taken companies to IPO and has built extensive experience on the boards of listed and unlisted companies, including Tap Oil, Burleson Energy and Hot Rock. Board of Directors See pages 22 to 23 for further information.
12 Directors’ Report 34 Governance and Risk 37 Auditor’s Independence Declaration 38 Consolidated Statement of Profit or Loss and Other Comprehensive Income 39 Consolidated Statement of Financial Position 40 Consolidated Statement of Changes in Equity 41 Consolidated Statement of Cash Flows 42 Notes to the Consolidated Financial Statements 68 Consolidated Entity Disclosure Statement 69 Directors’ Declaration 70 Independent Auditor’s Report 11 Melbana Energy Limited Annual Report 2024 Financial Report
Directors’ Report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Consolidated Entity’) consisting of Melbana Energy Limited (referred to hereafter as ‘Melbana’, the ‘Company’ or ‘Parent’) and the entities it controlled at the end of, or during, the year ended 30 June 2024. Directors The following persons were Directors of Melbana Energy Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Andrew Purcell (Executive Chairman) Michael Sandy (Non-Executive Director) Peter Stickland (Non-Executive Director) Principal activities The principal activities of the Consolidated Entity during the year were oil and gas exploration in Cuba and Australia together with development concepts for the Tassie Shoal Methanol and LNG Project. Dividends There were no dividends paid or declared during the current or previous financial year. Review of operations International Operations Cuba - Block 9 (Melbana 30%) During the reporting period, the Company completed the drilling, logging and testing of its Alameda-2 well, including definitive oil discovery tests of the Amistad Unit 1A and Unit 1B reservoirs. The Amistad Unit 1B, tested in DST4 was most notable with an average rate of 1235 bopd being achieved with no formation water. Oil samples from DST4 indicated a high‑quality crude of API 19°. Following test operations, the well was completed as a future Unit 1B producer using standard oilfield practices and the drilling rig stacked on location for upgrades. An EPT was conducted on Alameda-2 over a 38-day period comprising flow and shut-in periods, SGS and a MPLT survey. Flows during the EPT averaged approximately 300 bopd with no formation water and several oil samples were obtained for further analysis. Analysis of the EPT results suggests the reservoir formation was damaged, possibly during completion operations. The EPT also provided highly encouraging information. It confirmed that the majority of flow was from the deeper fractured reservoir section and indicated some flow contribution from behind uncemented casing, further extending the most likely oil column in Unit 1B. Extended testing also provided data on the logistics of oil transport from location with 20 tanker loads being sent to off-site storage. Alameda-2 has provided a wealth of geological, reservoir performance, engineering and commercial information and delivered confirmation of the oilfield’s commercial potential. The definitive discovery and subsequent analyses are forming the basis of new development plan concepts. The Joint Operation is now focussed on near-term commercialisation of the Amistad Unit 1B discovery and recently received an updated resource certification for the Amistad Unit 1B and Amistad Unit 1A reservoirs (see Table 1,2,3 & 4). Melbana is developing a well workover program that aims to restore the higher flow rates observed in the Alameda-2 Unit 1B production well during the original DST prior to it being killed and shut in for an extended period. Laboratory analysis of fluid and rock samples recovered from this unit, analytical reservoir modelling and Cuban experience of successfully remediating reservoirs that have behaved similarly in the past have been useful inputs to the selection of the preferred well workover strategy to return the flow to levels observed in the original DST. The initial field development plan, focused on the relatively shallow Unit 1B of the Amistad sheet, was reviewed with the Company’s Joint Operation partner, Sonangol and the Cuban regulator in a series of workshops and field trips held in Cuba in May 2024. 12 Melbana Energy Limited Annual Report 2024
The proposed phased field development plan (see Figure 1) is to rapidly commercialise the Alameda field by drilling and producing from simple, low-cost production wells drilled into the Unit 1B reservoir using existing 2D seismic. This phased development of the 1C resource (16 million barrels) will generate early revenue whilst the Company prepares to acquire 3D seismic data to optimally locate subsequent development wells and develop the entire reservoir volume more efficiently. This plan would also continue to appraise, de-risk and upgrade the contingent and prospective resources estimated by the Company’s independent reserves and resources certifier. The Company’s core goal and focus remains to achieve a first export of oil before the end of calendar year 2024. PAD-2 Marti-5 Alameda PAD-2S PAD-3 PAD-8 PAD-9 PAD-4 PAD-4N Top Unit-1B Depth Structure Phase 1 Development Area Phase-1 Extension No Contours Labels Figure 1 - Planned Unit 1B wells targeting 1C resource in eastern part of Alameda field As part of this process to achieve early exports, a complete assay of Unit 1B oil was sourced from specialist laboratories which confirmed that Unit 1B oil from the Amistad sheet has API gravity of 19.8° and sulphur content of 2.7%. The assay results indicate that the crude is marketable to refineries that specialise in such crudes. Meetings have been held with potential oil purchasers who indicated that the crude has a relatively high share of the more valuable crude components in the distillation range of 65° to 350°C, which broadly corresponds with the production of gasoline, jet/ kerosene and diesel. The percentage of oil in this range is ~40% compared with <30% typical for crudes of similar API. Over the past year, Melbana’s engineering team have continued to optimise their plans for the development of the Amistad Unit 1B reservoir through to first oil production. Initial production is now planned to be delivered by truck to the Matanzas Supertanker port, located a short distance from Block 9, where it will be stored in a dedicated tank awaiting export. McDaniel & Associates Consultants LLC (Mc Daniel), a Canadian based independent certifier of oil and gas reserves and resources assessed a Contingent Resource with a Sub-Categorisation of Development Pending for Unit 1B in the eastern part of the Alameda structure and provided a Prospective Resource Category (but with a Chance of Discovery of 70% if an appraisal well was drilled) for Unit 1B in the western part of the structure. 13 Melbana Energy Limited Annual Report 2024
McDaniel also assessed a Prospective Resource Category for Unit 1A (but with a Chance of Discovery of 70%) that could be similarly derisked by drilling an additional appraisal well and testing on pump in that area. The total resources for Unit 1A and Unit 1B are summarised in Tables 1, 2, 3 & 4. Table 1 – Amistad Unit 1B: Summary of OIIP Estimates OIIP – Unrisked9 Gross (100%) Chance of Discovery8 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Contingent Resources7 Amistad Unit 1B East Development Pending 130 331 909 100% Prospective Resources Amistad Unit 1B West Prospect 229 656 1,831 70% OIIP – Unrisked9 Melbana’s Interest (30%) Chance of Discovery8 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Contingent Resources7 Amistad Unit 1B East Development Pending 39 99 273 100% Prospective Resources Amistad Unit 1B West Prospect 69 197 549 70% Table 2 – Amistad Unit 1B: Summary of Resources Estimates Resources – Unrisked10 Gross (100%) Chance of Discovery8 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Contingent Resources7 Amistad Unit 1B East Development Pending 16 46 129 100% Prospective Resources Amistad Unit 1B West Prospect 29 90 264 70% Resources – Unrisked10 Melbana’s Interest (30%) Chance of Discovery8 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Contingent Resources7 Amistad Unit 1B East Development Pending 5 14 39 100% Prospective Resources Amistad Unit 1B West Prospect 9 27 79 70% Directors’ Report continued 7 The key contingencies which prevent the Contingent Resources from being classified as Reserves include finalisation of the draft development plan and associated economics, internal and joint venture and regulatory approvals, contractual arrangements and commitment to project finance. 8 The Chance of Discovery (COD) does not include the chance of development, which McDaniel estimates to be 80%. Quantifying the COD requires consideration of both economic contingencies and other contingencies such as legal, market access, political, social licence, internal and external approvals and commitment to project finance and development timing. As many of these factors are as yet unknown, they must be used with caution. 9 Volumes listed are in-place estimates and the recoverable estimates are shown in a separate table. 10 Volumes listed are full life volumes, prior to any cutoffs due to economics. 14 Melbana Energy Limited Annual Report 2024
Table 3 – Amistad Unit 1A: Summary of OIIP Estimates OIIP – Unrisked9 Gross (100%) Chance of Discovery11 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Prospective Resources Amistad Unit 1A Prospect 292 711 1,788 70% OIIP – Unrisked9 Melbana’s Interest (30%) Chance of Discovery11 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Prospective Resources Amistad Unit 1A Prospect 88 213 536 70% Table 4 – Amistad Unit 1A: Summary of Resources Estimates Resources – Unrisked10 Gross (100%) Chance of Discovery11 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Prospective Resources Amistad Unit 1A Prospect 11 32 88 70% Resources – Unrisked10 Melbana’s Interest (30%) Chance of Discovery11 Maturity Low (P90) MMbbl Best (P50) MMbbl High (P10) MMbbl Prospective Resources Amistad Unit 1A Prospect 3 10 26 70% Alameda-3 was spudded on 15 December 2023 and drilled to Total Depth of 3880mMD during the reporting period. The well was significantly delayed due to drilling operations issues: the well was sidetracked at 2908m as a result of hole stability issues and an inflatable ECP running tool was stuck for some considerable time in the 7” liner section (TD 3642m). Specialist milling and fishing tools and personnel successfully retrieved the fish and subsequent casing integrity logs and pressure testing confirmed the integrity of the 7” liner. Wireline logging, including FMI, over both the Alameda and Marti reservoir sections were undertaken, indicating a naturally highly fractured reservoir and over 100m of conventional (not fracture dependent) pay in the Alameda section. Flow testing was then undertaken on both the Marti and Alameda reservoirs. The Marti reservoir was tested via a 4-½“ slotted liner over the interval 3642-3880mMD with a packer set at 3531mMD. The Alameda reservoir was tested via perforation of the uncemented casing between 3272mMD and 3450mMD (see Figure 2). The objective of the testing was to determine oil quality and flow rates for the reservoirs, which are separated by effective seal rocks (see Figure 3), to gain a broader understanding of the reservoirs’ production characteristics. Both reservoirs were tested individually in a part of the geological section interpreted to contain the highest porosity and productivity interval, as indicated by conventional log analysis and FMI. 11 The Chance of Discovery (COD) does not include the chance of development, which McDaniel estimates to be 50%. Quantifying the COD requires consideration of both economic contingencies and other contingencies such as legal, market access, political, social licence, internal and external approvals and commitment to project finance and development timing. As many of these factors are as yet unknown, they must be used with caution. 15 Melbana Energy Limited Annual Report 2024
Both tests demonstrated positive indications of high pressure at surface. In the case of the Alameda test, immediately upon firing the perforation guns there was positive indication of pressure at surface, which confirmed the perforations had been successful. The pressure then quickly built to 3034 PSI. Test gauges were opened on various choke sizes and shut in periods were performed to build pressure. However, minimal returns were achieved at surface from either test and the complete removal of drilling mud and downhole fluids from the test string not achieved: oil did not flow to surface. 13-3/8” Casing Shoe 7” liner Shoe Unit-3 Alameda-N Marti-I 4-1/2” Slotted Liner DST-1 Open Hole DST-2 Alameda N Sheet tested as a single zone with perforations opposite most likely highest productivity interval as indicated by wireline logs TD 3880mMD 9-5/8” Casing Shoe Figure 2: Positioning of the Alameda and Marti reservoirs where flow testing was undertaken at depth Figure 3: Depth of the Alameda and Marti reservoirs Directors’ Report continued 16 Melbana Energy Limited Annual Report 2024
Although no uncontaminated oil samples were obtained in either the Marti or Alameda reservoirs, oil samples were recovered on reverse circulation of the DST string in the Marti reservoir and were analysed to have API of 19° with 2.3% sulphur. The inability of the well to flow did not fit with previous observations and expectations; wireline and FMI over both intervals indicated substantial fracturing in the Marti reservoir interval and good quality conventional (i.e. not fracture dependent) pay in the Alameda reservoir interval. The well was suspended, the DST string removed and pressure gauges extracted with the rig demobilised from site to reduce costs. The Company continues to study these results and all available data and analogous wells, including the Company’s Alameda-2 well, which could contribute to a potential future well workover plan if the issue is considered most likely due to a treatable reservoir formation damage mechanism. International and local expert knowledge is being drawn upon to analyse samples and data, and to ensure critical lessons learned are captured for incorporation in future activities. Australian Operations WA-488-P (Melbana contingent cash and royalty interest) The Company sold its 100% interest in permit area WA-488-P to the Australian subsidiary of a US oil major in November 2021. The purchaser became the Operator and made a country entry to drill the giant Beehive Prospect located within the WA-488-P exploration permit. The Beehive Prospect was independently estimated to contain a Prospective Resource12 of 388 million barrels of oil equivalent (boe) (Best Estimate, 100% basis)13 and a high estimate of 1.6 billion boe. Melbana revised these estimates14 to a Prospective Resource12 of 416 million boe (Best Estimate, 100% basis) with a high estimate of 1.4 billion boe following its assessment of the 3D seismic data acquired across the prospect in 201815. Under the terms of the sale and purchase agreement, the Company is entitled to receive contingent future payments of USD5.0 million (subject to the purchaser making certain future elections with regards to the permit) and USD10.0 million for each 25 million barrels of oil equivalent in the event oil is produced from the permit area should the exploration well be a commercial success. Beehive received environmental approval for its drilling program during the period and the new Operator has a permit to drill within the next 12-18 months, subject to rig availability. The Company has no exposure to the cost of this exploration well. Beehive will test a large Carbonate Platform Prospect similar to that defined by the Company in the adjacent exploration permits NT/P87 and WA-544-P. 12 This estimate should be read with reference to the footnote “Notes regarding Contingent and Prospective resource estimates” on page 36. 13 See ASX announcement dated 7 August 2018. 14 See ASX announcement dated 24 August 2020. 15 See ASX announcement dated 14 August 2018. 17 Melbana Energy Limited Annual Report 2024
Figure 4 – The location of WA-488-P relative to the Company’s other licence areas WA-544-P and NT/P87 WA-544-P and NT/P87 (Melbana 100%) These permit areas, containing the undeveloped Turtle and Barnett oil discoveries, were granted to the Company in 2020 under the Australian Government’s 2019 Offshore Petroleum Exploration Acreage Release. They are in shallow water (20 to 40 metres deep) and located about 300 kilometres southwest of Darwin, Australia. The Blacktip gas field lies to the northwest and its pipeline transects the northern boundary of NT/P87, allowing potential access to the Darwin LNG facility and/or the east coast gas market. The exploration permits host similar Carbonate Platform opportunities with similar resource potential as the adjacent WA‑488-P exploration permit, which contains the Beehive drilling Prospect. During the reporting period the Company was granted an 18-month suspension and extension to the primary term of these permits and reported a Prospective Resource of over 466 bcf of gas or 90 million barrels of oil (unrisked best estimate recoverable, 100%) for the Hudson Prospect. The Company is continuing with its efforts to find a farm-in partner for the Exploration Permits. Directors’ Report continued 18 Melbana Energy Limited Annual Report 2024
AC/P70 (Melbana 100%) On 16 February 2022, the Company announced that it had been granted petroleum exploration permit AC/P70, located in the Territory of Ashmore and Cartier Islands, for an initial period of six years. Melbana made an application for this permit under the Australian Government’s 2020 Offshore Petroleum Exploration Acreage Release (See Figure 5). Figure 5 – Location of Exploration Permit AC/P70 Since being awarded the permit, the Company has licensed various datasets and undertaken considerable work to better understand what exploration opportunities might exist there. The undeveloped Vesta-1 oil discovery (drilled in 2005) lies within the permit area and an appraisal well drilled in 2007 identified a gas cap. During the reporting period the Company undertook and completed reprocessing of the 500km2 legacy Pantheon 3D seismic survey. Seismic interpretation and mapping work on the new reprocessed volume is underway. The Company intends to farm out the exploration permit prior to the February 2027 drilling commitment. AC/P51 (Melbana contingent cash and royalty interest) During the reporting period a third party surrendered petroleum exploration permit AC/P51. The Company had no direct interest in this permit area nor any financial liability to it, but it did have a small indirect cash interest, contingent on certain elections being made by the titleholders. Tassie Shoal (Melbana 100%) The Company has Australian Government environmental approvals to construct, install and operate two stand-alone world scale 1.75 Million tonnes per annum (Mtpa) methanol plants - collectively referred to as the Tassie Shoal Methanol Project - and a single 3 Mtpa LNG plant - known as the Tassie Shoal LNG Project - on Tassie Shoal, an area of shallow water in the Australian waters of the Timor Sea approximately 275 km northwest of Darwin, Australia. These environmental approvals are valid until 2052. These projects uniquely provide a development option for discovered but undeveloped gas resources in the region. Progress for these projects is dependent on securing access to proximate gas supply on suitable commercial terms. No material progress was made in this regard during the reporting period. 19 Melbana Energy Limited Annual Report 2024
Results for the year The net profit after tax of the Consolidated Entity for the financial year was $3,259,760 (2023: net loss after tax of $1,001,999). The profit for the year was mainly due to the reimbursement from the joint operating partner to the Company for cost overruns incurred on past wells due to administrative delays to the program by the joint operating partner of $6,856,227. During the year, the Consolidated Entity incurred net operating cash outflows of $3,670,961 (2023: outflows of $3,126,076) net investing cash outflows of $18,666,009 (2023: outflows of $13,363,748) and net financing cash inflows of $nil (2023: inflows of $15,766,348). The successful drilling and commercialisation of any oil and gas discoveries in Cuban and Australian exploration permits and/or the development/sale of the Consolidated Entity’s methanol and LNG Projects could ultimately lead to the establishment of a profitable business or result in a profit to the Company if an asset sale occurs. While the Consolidated Entity is in the exploration/appraisal stage of drilling for hydrocarbons in its offshore Australian exploration permit and overseas acreage and in the project development phase for its other offshore Australian interests, funding will be provided by asset sales, equity capital raised from the issue of new shares and/or farm out or joint development arrangements with other companies. Review of financial position The net assets increased by $2,938,574 to $55,931,168 at 30 June 2024 (30 June 2023: $52,992,594). During the year, the Consolidated Entity capitalised $26,044,200 (2023: $8,140,867) on exploration, mainly in relation to Block 9 in Cuba. The main driver of the Consolidated Entity’s financial condition is the Profit after tax earned of $3,259,760 (2023: Loss of $1,001,999). The working capital position as at 30 June 2024 of the Consolidated Entity results in an excess of current assets over current liabilities of $10,910,423 (30 June 2023: $33,859,932). The cash balances, including term deposits, as at 30 June 2024 were $12,322,890 (2023: $34,976,625). Corporate The Consolidated Entity’s future prospects are centred on its ability to secure quality exploration, development and producing opportunities and seeking to maximise the value to shareholders of its current portfolio, identifying and securing additional value-accretive projects, and/or undertaking a corporate transaction. Funding for the coming Financial Year is sufficient to meet the Company’s forecast corporate costs, however additional funding is required to meet the field development and other work program commitments. Discussions with several potential new partners who have demonstrated interest in participating in the development of Block 9 are currently underway as well as potential purchasers of the oil expected to be produced and sufficiently advanced that the Consolidated Entity expects to progress with the planned field development activities successfully. In the event that the Consolidated Entity cannot meet its share of work program commitments through funding structures currently being negotiated, the Consolidated Entity may look to raise additional funding through a capital raise. An unsuccessful capital raise may require permits to be surrendered or to potential asset sales. Significant changes in the state of affairs On 4 July 2023 the Company reported its maiden estimate of Prospective Resources for the Hudson Prospect a carbonate build up located in licence areas WA-544-P and NT/P87 (Melbana 100%). The Company’s internal estimates are that there is a Prospective Resource of either 466 billion cubic feet (Bcf) of gas or 90 million barrels of oil (unrisked best estimate recoverable, 100%). On 4 August 2023, during the drilling of the Alameda-2 appraisal well, the Company reported an increase in Logged Net Pay for Amistad Units 1A, 1B reservoirs to 243m (from 84m previously). On 15 August 2023, the Company further reported results from Alameda-2 that moveable oil was observed in the Amistad Unit 3 reservoir indicating potential to flow at about 750 barrels of oil per day, with total Net Pay for the Amistad interval estimated to be 346 metres TVD, increasing to 615 metres TVD when natural fracturing was incorporated. On 28 August 2023, the Company announced that during testing of the Amistad Unit 1B in the Alameda-2 well, a peak flow rate of 1,903 barrels of oil per day was achieved, with a stabilised average flow rate of 1,235 barrels of oil per day. The oil was significantly lighter (19° API) and lower viscosity (30 cP) oil compared to other units in the Amistad reservoir. On 11 September 2023, the Company announced the issuance of 17,031,840 performance rights as part of the staff Long Term Incentive (LTI) scheme. Directors’ Report continued 20 Melbana Energy Limited Annual Report 2024
On 2 November 2023, the Company announced the completion of an EPT operation from the Amistad Unit 1B reservoir in the Alameda-2 appraisal well. Production was run for a total of 10 days, the flow peaked at 1,183 barrels of oil per day, and 20 tanker loads of oil were produced and delivered to offsite storage. On 6 November 2023, the Company announced that a member of the Board of Directors, Andrew Purcell, acquired 1,574,000 FPO shares, increasing his holding in the Company to 236,200,097 securities. On 15 December 2023, the Company announced the commencement of the drilling of the Alameda-3 appraisal well. The primary objectives of the well were the appraisal of the two deeper and geologically independent Alameda and Marti reservoirs discovered by the Company in 2022. These reservoirs were estimated to contain a combined 179 million barrels of Prospective (recoverable) Resource (Unrisked Gross Best Estimate). On 5 February 2024, the Company announced the issuance of 16,115,750 performance rights to one of its Key Management Personnel (KMP) as part of the staff Long Term Incentive (LTI) scheme. On 12 February 2024, the Company announced that the primary term work conditions for WA-544-P and NT/P87 (Melbana 100%) had been suspended for 18 months and the terms of the Permits similarly extended by 18 months. On 25 March 2024, the Company announced that McDaniel and Associates had upgraded the Amistad Unit 1B resource estimate to contain 46 million barrels of Contingent Recourses and 90 million barrels of Prospective Resources (100% share, best estimate). On 18 April 2024, the Company announced that the Alameda reservoir section Total Depth (TD) was called at 3645 mMD in the Alameda-3 appraisal well. On 17 June 2024, the Company announced that TD was reached in the Alameda-3 appraisal well at 3880mMD. Well test operations were run in the Marti reservoir over a 238mMD interval, with oil observed on the drill string and high formation pressure observed. No uncontaminated oil samples were able to be obtained at surface. On 27 June 2024, the Company announced the successful perforation of casing between 3272 and 3450 mMD in the Alameda reservoir in the Alameda-3 appraisal well. Drill string fluids were unable to be recovered during flow testing, and no uncontaminated oil samples were obtained. Oil samples were recovered on reverse circulation of the DST string and were sent for lab analysis. Resource upgrades During the reporting period the Company made significant announcements pertaining to the upper sheet Amistad Unit 1A and Unit 1B oil-bearing formations encountered by both the Alameda-1 exploration well and Alameda-2 appraisal well in its Block 9 PSC onshore Cuba (see Table 1,2,3 & 4 above).16 Matters subsequent to the end of the financial year On 15 July 2024, the Company announced that a member of the Board of Directors, Michael Sandy, acquired 1,000,000 FPO shares, increasing his holding in the Company to 7,300,000 securities. On 15 July 2024, the Company announced that a member of the Board of Directors, Peter Stickland, acquired 1,000,000 FPO shares, increasing his holding in the Company to 14,827,419 securities. On 16 July 2024, the Company announced that a member of the Board of Directors, Andrew Purcell, acquired 4,500,000 FPO shares, increasing his holding in the Company to 241,100,097 securities On 31 July 2024, the Company announced the resignation of Cate Friedlander and appointment of Uno Makotsvana as Company Secretary. On 11 September 2024, the Company announced the approval of Block 9 Amistad field development stating that the Company remains on target to exporting its first trial cargo of oil by the end of calendar year 2024. On 19 September 2024, the Company announced that one of its wholly owned subsidiaries had been granted petroleum exploration permit WA-552-P located offshore Western Australia in the Dampier Sub-basin of the Northen Carnarvon basin. No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Consolidated Entity’s operations, the results of those operations, or the Consolidated Entity’s state of affairs in future financial years. 16 Independent certifier McDaniel and Associates, see ASX announcement dated 1 August 2022. 21 Melbana Energy Limited Annual Report 2024
Likely developments and expected results of operations The Consolidated Entity will continue to pursue its interests in: – Block 9 PSC in Cuba in partnership with Sonangol. Appraisal drilling results from Alameda-2 have demonstrated the presence of significant intervals of moveable hydrocarbons in the shallowest Amistad reservoir and these are being studied to inform a field development proposal for the exploitation of the resource therein; – EOG Australia is making preparations for the drilling of its Beehive-1 exploration well in WA-488-P in the Joseph Bonaparte Gulf in northern Australia which may begin in the following reporting period. The Consolidated Entity has no exposure to the cost of the drilling of this well or to the permit but is entitled to receive cash and royalty interests contingent on future elections made by EOG Australia in WA-488-P and commercial success from the drilling of the exploration well; – Permit areas NT/P87 and WA-544-P by seeking a farmout partner to fund the acquisition of a 3D seismic survey to further derisk the Hudson Prospect; – Permit areas AC/P70 by seeking a farmout partner to fund the future work program leading to the planning and drilling of an exploration well; and – Its other permit areas and licences. Health Safety and Environmental regulation The Consolidated Entity holds participating interests in a number of oil and gas areas. The various authorities granting such tenements require the licence holder to comply with the terms of the grant of the licence and all directions given to it under those terms of the licence. Your Board of Directors believe that all workplace injuries are avoidable. Policies and procedures are in place to ensure employees and contractors conduct all activities in a safe manner. Melbana has adopted an environmental, health and safety policy and conducts its operations in accordance with international best practice, where reasonably practicable. There have been no known breaches of any tenement conditions, no lost time due to injury during the reporting period. There was a minor recordable but non reportable spill during the reporting period. Information on Directors Name: Andrew Purcell Title: Executive Chairman Qualifications: B Eng, MBA Experience and expertise: Andrew Purcell founded the Lawndale Group (formerly Teknix Capital) in Hong Kong over 15 years ago, a company specialising in the development and management of projects in emerging markets across heavy engineering, petrochemical, resources and infrastructure sectors. Prior to this, Mr Purcell spent 12 years working in investment banking across the region for Macquarie Bank and then for Credit Suisse. Mr Purcell also has significant experience as a public company director, both in Australia and across Asia. Other current directorships: AJ Lucas Group Limited (ASX: AJL), GB Energy Ltd Former directorships (last three years): None Special responsibilities: Member of the Remuneration and Nomination Committee and a member of the Audit and Risk Committee Interests in securities: 236,600,097 fully paid ordinary Shares Directors’ Report continued 22 Melbana Energy Limited Annual Report 2024
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