(Melbana, 2.Jan.2019) — Melbana Energy Limited announced on 31 December 2018 it signed a binding definitive farmout agreement with Anhui Modestinner Energy Co., Ltd. (AMEC), a wholly owned and guaranteed subsidiary of Anhui Guangda Mining Investment Co. Ltd. (AGMI), with respect to its Block 9 Production Sharing Contract (Block 9 PSC) in Cuba.
The binding agreement follows on from the Letter of Intent signed by Melbana and AGMI.
Under the terms of the farmout agreement, AGMI has corporately guaranteed the performance of AMEC
which will fully fund 100% of all costs associated with the Block 9 PSC from 1 January 2019, including the drilling of at least three wells. The first two of these wells will be drilled prior to 1 November 2019 on Melbana’s preferred exploration targets Alameda and Zapato. In the event of a discovery, the third well may be either an appraisal well on Alameda or Zapato or, if no discovery, an exploration well on the Piedra prospect. In all cases, the third well will be drilled prior to July 2020.
AMEC is also responsible for providing any required guarantees and will provide Melbana with 12.5% of any Profit Oil. In the event of a development, Melbana will recoup its Block 9 back costs (approx. US$3.5M) over time from the Cost Oil in proportion to its relative spend versus AMEC. The farmout agreement has a number of conditions precedent, including Cuban and Chinese regulatory approvals, milestone related terms with respect to any required guarantees and finalization of a Joint Operating Agreement acceptable to both parties. Provisions in the agreement allow for an orderly transition of operatorship to AMEC once all contract conditions precedent have been met.
AMEC have indicated a preference to bring their own rig into Cuba in early 2019 to undertake the drilling program to ensure the committed drilling occurs within the agreed timeline.
“We are very pleased to end 2018 by finalising the binding farmout agreement and look forward with great anticipation to drilling our high impact oil prospects in 2019. Alameda and Zapato are significant multi-million barrel targets that will be drilled this year at zero cost to Melbana. Coupled with our recently announced Santa Cruz IOR project and our world class Beehive prospect in Australia, we see huge potential in our portfolio and look forward to an exciting year ahead,” said Melbana Energy’s CEO Robert Zammit.