Summary of Melbana (MAY), page-2

Cuban Jurisdiction

Cuba is located in the Southern region of the Gulf of Mexico, which is currently one of the world’s largest under-explored petroleum mega provinces. Cuba has been lightly explored with modern-day exploration technologies however the country does have a rich exploration history. The principal zone of exploration has occurred along the narrow belt in the north coast (where Block 9 sits) and in the regions immediately offshore where tectonically thickened Jurassic-Cretaceous carbonate sources and reservoir sections have formed a supercharged hydrocarbon system.

The current US trade embargos are only imposed on American citizens, which limits their US engagements and operations in Cuba. Non-US international companies have been operating in Cuba with the most prominent being the Canadian company, Sherritt International. Sherritt has a rich 30-year oil and gas exploration and production history in Cuba with blocks including the Varadero oil fields which is located next door to Melbana’s Block 9.

The Biden administration is currently exploring new policies that would reverse many of the detrimental actions undertaken by the Trump administration which restricted US citizens from travel, trade and other forms of outreach. The Obama administration had expanded contacts when it re-established diplomatic relations with Havana in 2015. It is important to note that Melbana is a company registered in Australia and the current US sanctions do not apply. Melbana has been able to source resources and equipment from firms outside the US.

Last month in July, large gatherings of Cuban citizens protested against the government for its inability to address Cubans' deepening economic crisis as well as the resurgence of COVID in the country. Oil discoveries by Melbana would bring major economic development to the country through foreign investment as well as addressing the major oil supply deficit currently occurring. In 2019, Cuba produced just 45,000 barrels of oil equivalent per day which only covered 50% of the nation's demand. This significant deficit has led Cuba to import most of its oil supply from Venezuela. Yet due to the economic and political instability of Venezuela over the recent years, importation amounts have slowly been declining, placing a greater strain on the Cuban economy.

To attract more foreign investment into the country, in 2014 the Cuban government passed the Foreign Investment Act which reduced tax rates and provided tax holidays for the first 8 years of operations. As one of the first movers after the Act in 2015, Melbana gained numerous advantages by securing the most attractive exploration blocks as well as establishing highly supportive relationships with the Cuban government and CUPET.

Risks

US Trade Embargo on Cuba

COVID related delays

Lack of discovery or limited discovery

Downturn in international oil prices

Cuban Government

High SOI (2.3b) with further dilution from the current capital raise (2.6b)

Limited Liquidity

Other Oil & Gas Assets

Cuba - Santa Cruz oil field - 100%

Santa Cruz is a shallow offshore oil field in the northern region of Cuba, located just 45k east of Havana. This northern fold bet is along the trend that is responsible for the vast majority of Cuba’s oil and gas production. Although the oil field is offshore, the target has been previously drilled using deviated wells from onshore sites.

Santa Cruz was originally discovered by Sherritt and Pebercan in 2004 with production commencing in 2006. Early resource estimates indicated up to 100 MMbbl of recoverable oil, from a ~20 km2 structure with a significant 250m oil column. Santa Cruz reportedly produced over 1 MMbbl in its first year, and by 2013 had produced 7.4 MMbbl from 18 wells.

In 2018, Melbana finalised a contract with CUPET, gaining an exclusive right to negotiate a long-term contract that would see the oil fields become operational again. Melbana is currently in an initial study period of technical work, assessing potential recoverables and has engaged a Canadian consultant with extensive Cuban experience to identify possible debottlenecking opportunities.

Australia – Beehive prospect (WA-488-P) - Royalty payments

The WA-488-P exploration permit contains the giant Beehive prospect, one of Australia’s largest undrilled hydrocarbon prospects, with a best prospective resource estimate of up to 416 million barrels of oil. The chance of success is 20%.

In April this year, Melbana sold the WA-488-P permit to EOG Resources, one of the largest US oil and gas production companies. As per the contract of the sale, MAY will receive US$10m for every 25 million barrels of oil produced (roughly US$166m).

Melbana estimates that subject to regulatory approvals of the transaction, EOG will begin drilling the Beehive sometime during 2022

Australia - AC/P50 & AC/P51 - Royalty payments

In 2018, Melbana sold its 55% interest to their joint venture partner Rouge Rock. The terms of the divestment provided Melbana with an interest in any future farm out or sale of the permits.

In May 2021, Santos and Malaysia’s SapuraOMV acquired the AC/P50 permit and as a result, Melbana received an upfront cash payment and retained its entitlement to a 10% share of any future royalties that Rouge Rock would receive. Drilling of the P/50 prospect is expected to begin sometime during 2022

The Purchasers of AC/P51 also have the right to acquire the permit AC/P51 which if exercised, Melbana would be entitled to receive similar cash consideration and contingent royalties.

Australia – Tassie Shoal Projects - 100%

The Tassie Shoal project is a unique opportunity where Melbana would establish a Methanol and LNG treatment facility for the stranded gas assets in the Northern Territory offshore areas of the Bonaparte Basin. The development of the facilities have gained Federal environmental approval until 2052.