Cuba Block 9: Operations Update 9 April 2024, page-135

@mad max

Most of this information is already out there (some as ASX announcements, some as operational updates via the company's website), but some of it is guesswork (which is why a lot of people are getting frustrated here). So to answer (or attempt to answer) each question you raise:

(1) what’s the rough date when they will reach total depth

Section Depth (Section N, Alameda) is prognosed to be 3,586 mMD. Based on the current drill rate (see answer to your second question regarding current depth), we could reach section depth anytime between now and the end of April. As for final TD, it is estimated to be 3,835 mMD, in the Marti Reservoir (Section I), 249m below the top of the Marti seal. Final TD could take a further 6 weeks (from Section TD) given that the 7" liner and external casing packers need to be set in Alameda first. So, realistically, we could be taking 15th June or thereabouts. But this is pure guesswork on my behalf, and perhaps others can come up with a more accurate estimate than I can.

(2) what depth are they at now

As at 9th April (8 days ago) they were at 3,310 mMD, having just taken the second core sample from Section N (Alameda). On 12th March they were at 3,045 (and drilling ahead through Alameda). Those 28 days covered only 265 metres, but includes the first core being taken (at 3,210), so you can assume that the drill rate is only about 12 metres per day, taking into account necessary stoppages etc. This is way, way behind the original (P90) estimate, with no explanation given by the company (hence all the wild theories being thrown around by the All-Knowing HotCopperites). So based on this rather turtle-like drill rate, we may only be at 3,406, but realistically could be anywhere between 3,310 and 3,585. The fact that we have not received an operational update probably confirms that we are not yet at section depth.

(3) have they drilled thru any significant oil zones thus far with this drill

Yes. Alameda (Section N) is "significant" as it is likely that A3 (the current well) will end up producing from the lower part of Alameda (which is probably why they have taken two cores 100 metres apart at 3,210 and 3,310). We don't have observations from those core samples yet, but may get something in the next week or two. The absolute fallback position (if the lower sheets disappoint) is that A3 can also access the upper Units (in Amistad).

(4) what’s the expection of API at lower depths

By lower depths I presume you mean Sections N and I. A1 did not produce test results (some of the HotCopper Wise & Wonderful keep harping on about that), but did have pressure "observations". Previous drills by CUPET (particularly Marti-5) observed a range of lower sheet APIs, ranging from 24 (original, official measurement) up to 38 (measurement of oikl escaping from capped well, but I am not sure how "official" that particular measurement is). So we need to go on consensus a bit here, and I think most will agree that the API for the "lower depths" will be somewhere at or greater than 24 (sort of in the range of 24-34, maybe).

(5) are they in a position to store and sell the oil straight away

I think the underlying question is "can they commercialise it" (i.e. "show me the money"). On 20th December 2023 the company announced that "Discussions were underway with potential oil buyers". I am not aware of any further announcements regarding those discussions. But the company has noted - several times - that even the Alameda-2 Unit 1B oil (API 19, low sulphur, recoverable unassisted at slow rate but can be assisted or horizontally recovered, etc.) was saleable and quite "normal" (for want of a better term) with other Cuban discoveries. See, for example, the comparison chart they published, which indicates that this "heavy" oil is quite commercial.



Of course, if the API and pressure levels of Alameda and Marti and higher (particularly Alameda, as they company previously noted that they would most likely produce out of Alameda upon completion of A3), then all the better. But for now, our "base" (minimal) case is that what we have is commercial.

(6) what value per barrel will they get based on a API of say 18 -20

Ask ten people this, get ten answers. I think the most sensible thing to do is look at the valuation assumptions from the likes of Evolution capital, who in their report dated 31st July 2023 noted the following:



Their assumptions at that time were based on the API observations coming from A2, but did not include the a wider field analysis or resource upgrade (which was to come recently from McDaniel & Associates). They are using very conservative recovery rates, and a heavy risk discount (which also has been wound-back by McDaniel, as the changes of discovery have been increased, etc.). Perhaps also have a look at the announcement of 25th March 2024, where the company stated -



(7) what’s the plan after this drill campaign

The only published information on this (that looks roughly reliable - although I personally doubt the timelines, given the slowness of the current drill) is on page22 of the 20th December 2023 Investor Webinar Presentation (see https://www.melbana.com/site/investors/asx-releases). it provides a "conceptual development" plan (but note carefully the asterisk used as this is subject to some assumptions). It is as follows -



The "5,000 bopd by the end of 2024" number has been mentioned several times, and is probably a good question to raise when we next have a webinar with AP. Either way, the company has not backed down from its 15,000 bopd conceptual development targets, which would require multiple drills from multiple pads (hence the footnote regarding regulatory approval).

I am pretty sure that some others out there can add colour to my guesswork, and welcome the input or challenge to the above.

Hope this helps.

best regards
Kit.