It has taken some time for it to all sink in. Heres my take homes from yesterdays AGM.
All those bagging AP can shove a sock in it. He and his team are genuine and super committed. They have put their heart and soul into this.
They have busted a gut to get us to
here - remember this is 10 years in the making, since Errol and co first cast eyes on piles of paper sitting in dusty boxes in a Havana warehouse. And this is what i mean by
here...
1/ Sonangol, the 70% JV partner, has asked Melbana to operate. Go look at who is Sonangol. Look at their capabilities. The fact they put their $$ and trust in AP and the team should ring like a fog horn in your ears. This is no longer a speculative outfit. This is a serious business being born and taking its first steps. And, we have a first class team on this.
2/ Cuba is happy with Melbana. One of the hardest things to do is to be successful and retain favour and trust in a third world country. And look at how the Cubans have embraced Melbana. So that tells you AP and the team are doing the right thing by the regulators and government....in a country that has a long history in oil resource development...so the Cubans know a thing or two and they've seen players come and go, and to have their vote of confidence says a lot about AP and the team.
3/ The discoveriesThere are basically
three discoveries over the one area...Amistad (bonus); Marti; and Alameida. Each of these is potentially shaping up to be a billion barrel (recoverable) resource. Then you need to consider the geology repeats across the whole of block 9...there are 19 or so prospects mapped so far. And for those bagging Zapato...you wouldn't know shit from clay...they already hit oil in Zapato...they just need to hit that same oil in the carbonates sitting under the ophiolites - so best to keep your mouths shut and wait for when that gets revisited.
4/ The team. When you land a whale, its not one person that brings it in... We saw a lot of the folks yesterday. Not just the board (which is a lean board). Im talking about operations and corporate/business development folks. They're all seasoned oil and gas professionals. They're not cutting their teeth on this stuff. They've been around and they are putting their smarts and experience into practise here. You dont put a team like that together if you have no oil...
5/ Business development. These guys are all active. Building capability in country. Both equipment and staff. Looking to leverage hardware and capital from interested parties in the region. They're canvassing everything from drill rigs, to oil field equipment, transport etc. The most obvious thing here is that the company needs to work fast to develop these discoveries. And to do that you need capital in whatever shape or form it comes in...and probably the best news i heard is they're telling low ballers to take a walk.
6/ Amistad forward program. My back of envelope calcs tell me we could be looking at a billion barrels (300MM to Melbana) for Amistad alone...assuming an RF of 10%. Go have a look at the (conceptual) forward program for Amistad (below)...each of those circles is a development well for Unit 1B in the Amistad....I count around 40 of them. At 1,500 bopd each?... the most important thing? low sulphur, 19deg API - its good stuff. Don't listen to the tools bagging the oil quality.
The important things to note about the conceptual program below:
- its for Amistad 1B ONLY.
- They have prepared this after the flow testing....so it tells me the flow testing data, AND the existing seismic, supports this level of development in Unit 1B
- they look like vertical wells to me. so they're not complicated horizontal wells. theyre easy quick and cheaper to drill.
- number of wells per year i suspect is constrained by current rig availability. If you had a rig dedicated to this program, you could easily drill 6-10 per year...think of what that does to cash flow generating potential.
- Lets say it costs around $10M per hole, $3M is Melbanas share....they could easily fund another 4 without going to market. if they do a deal of some sort, they could ostensibly fund their share organically.
- the biggest consideration in scaling up? getting the oil from the well head to transport point. They are only 15 km from the coast with established nearby storage and bulk load out infrastructure ...they have a few options...including the ready to go trucking option. But with the volumes contemplated, a pipeline will factor into the picture at some stage. Choosing the best pipeline option will be their toughest challenge.
- Once they get some metrics on the Marti and Alameida ...this might change...big time...
7/ Alameida 3 well. Its going to spud in Dec sometime. Its trajectory will mimic Alameida 1.
- The team is designing the well to intersect the high pressure Unit 3 in the Amistad reservoir. That will be flow tested on the way down.
- They will drill and case the Alameida.
- They will then drill to TD just shy of the high pressure zone in the Marti. Flow test the Marti through a liner.
- Then they will come back up and perforate the casing in the Alameida and flow test it.
So there are three major catalysts to be encountered in Alameida 3. The beauty about it is we know each of the targets are there. We saw the evidence over the shakers and in the flare during Alameida 1. This time we know the ground conditions...and can plan ahead.
8/ Australia the basket case. ..the Aust govt and the lobby groups that run them, have done its best to thwart oil and gas development in the NT (my view)...so despite having some good ground and good positions, Melbana can only look at its Australian assets as secondary at best..
Selling now? you have got to be out of your mind.