Melbana Energy's finally approaching its first oil shipment. Could it turn the stock around?

Melbana Energy's finally approaching its first oil shipment. Could it turn the stock around?

Jonathon Davidson

The Market Online, Australia

Melbana Energy (ASX:MAY) has jumped 5.7% on low volumes intraday Wednesday on the back of long-awaited news: as part of a trial shipment, at least, Melbana will be exporting oil. From Cuba.

Who the buyer is – which is, to me at least, what’s most interesting here – wasn’t disclosed. And who the buyers is, seeing as the Government of Cuba have a larger hand in this project than Melbana does, wouldn’t really matter for the company.

(Still, the mind is left to imagine.)

At any rate, the company (or the Block 9 project) currently has over 15,000bbl sitting in a government-led Cuban storage facility 50km away by road, and Melbana predicted on Monday a shipment will be ready next month.

Assuming the shipment will be for all oil in storage, that implies around US$960,000 (A$1.48M) in sales, using a Brent Crude price of US$64bbl, and assuming it’s that straightforward.

Oil sales aren’t that straightforward, and the price the Cuban government scores for each barrel could be below or above US$64bbl, but let’s stick with this back-of-the-envelope number.

Melbana has a 30% stake in the project, and assuming that translates to a like-for-like 30% take of proceeds, that means Melbana ends up with around A$450K.

What the unfamiliar cynical investor may wonder is how long it took Melbana to get 15,000bbl in storage – in other words, how fast the Alameda-2 wells are flowing.

At least some familiar investors on HotCopper were pleased with the news. For those unaware, Melbana Energy has long commanded a strong base of user interest, which is at least partially because it’s an Australian oil company operating in Cuba.

The stock, however, has not reflected such strong interest in recent times. A string of technical issues and repeated delays – as well as raising – have left the stock with a few red flags that mightn’t be doing it justice. (There are 3.4B shares on issue, for one.)

MAY last traded at 2.8cps.

Jonathon Davidson

The Market Online, Australia

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