Melbana Energy Limited (MAY.AX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's webinar. My name is Sam Jacobs from Investor Stream. I'll be hosting today's presentation from Melbana Energy's Executive Chairman, Andrew Purcell, who will also be joined by the company's Chief Geoscientist, Errol Johnstone. Today's presentation will provide an update on the company's drilling preparations for the Alameda-2 appraisal well, with further insights from Mr. Johnstone on the objectives of the planned drill program and the geology of the 3 independent oil reserves encountered to date. After the presentation, we'll commence a live Q&A session, where attendees will have the opportunity to ask questions directly. [Operator Instructions] And then following the live Q&A, we'll run through some written questions that were submitted prior to the webinar. A copy of the webinar will also be available on Melbana's website and social media platforms later today, so you can revisit the live version once it's completed. But for now, I'll throw it over to Andrew and Errol to kick things off. Andrew, the floor is yours.

Thanks, Sam. Good morning, everyone, or good morning for our part of the world. [ It depends ] where you're joining from, I guess. Thanks very much for taking the time out of your day to join us on this webinar. We thought it might be a very useful forum to answer the questions that people have been asking about our program in Cuba, now that we're on the cusp of beginning the appraisal well. I remember when I asked my colleague, Errol, to join us as well because it's Errol's insights that took us into Cuba. I think nothing speaks better than Errol when explaining what was the thesis, what we found [ up ] running [ reviews ], and I'm kind of keeping to a [ clears ] shortest possible leash. And so we don't get too heavy into the deep dark arts of geophysics and geology, but there's some slides that I think you might find informative. So if we can go to the next page on the agenda, please. What I propose to do when I put this presentation together initially was to give an update on the preparations for the drilling program in Cuba. But given the list of questions that have come through and the details [ which ] you all want to know, I think I'll just skip over that and leave us to the live Q&A and suffice to say at this point, that everything is on track. As we've said in our announcements recently, we are heading over to Cuba Tuesday since in this part of the month we are on the ground, making sure operations are organized and everything is under control and people know their roles, and there's no hiccups at the last minute, which there always are. But it's a good [ saying ]. We're experienced drilling in Cuba, it's the same contractors. I don't envisage any issues in getting this program underway on schedule. So then what we would like to do now is to hand over to Errol to give us a bird's eye appraisal view of why Cuba, what's going on there, what we found and what our [ running rate is ]. Over to you, Errol. Thank you.

Well, thank you, Andrew. Good morning, ladies and gentlemen, and welcome to our webinar today. And what I want to try and do is give you a bit of a geological overview of what we've been doing in Cuba. And I thought I'd start with a bit of a tectonic explanation of what the whole Cuban foldbelt is about. I don't know if anyone can see my cursor. Can you see a cursor there, Andrew?

I can, Errol.

That's very handy. So we have the Central American Arc system through here. And this Arc system rolls back to the east as it sags into the mantle of the earth through the lower cretaceous, sub-cretaceous, paleocene, miocene, oligocene, monocene. And where it is today is out here in the Lesser Antilles. So the movement of this Arc through the Caribbean has to do with actually moving to the east mostly, but moving to the north as well. And as the Arc system impinges upon the lower regions of the North American proton sitting up through here, through the Bahama Banks platform down here, it starts to roll up the open of the Bahama Banks rocks, which is all the carbonates you see kicking off the Bahama Banks platform. And they all get rolled up into the foldbelt here on the North Cuban side. So it's the consuming of the downgoing slab, so this American slab is slipping underneath the Arc systems. It rolls back to the north and east, and that causes [ a fallgrum ]. So what this sets up in cartoon view here is an upper plate succession of rocks, which is the Caribbean Arc. Up here in the top right corner, you see the Caribbean Arc system. And it's got a 4 Arc slab that starts to impinge upon the outer reaches the down-going North American Bahamas plate here on the lower plate succession. So this whole succession out through here of the Bahama Banks sees rocks from the Jurassic all the way through to the recent, a big stack of carbonites in platform setting here. And the [ open ] of that platform tipping off into the deeper water contains all the finer grain carbonite rocks [ so ] we actually see it's been clipped off the lower edge of this and rolled up into the [ foldbelt ] here. And you see the succession of cartoon shows how this impinging plate is pushing on the distal reaches of this down-going slab and scraping off all the distal carbonates into progressively more proximal carbonates and building this foldbelt. Now what this actually does as the upper plate starts to ground and can't push any more, the previous slide showed that we actually split off this whole process through this Caiman trough here. So the Caiman trough cracks open, and on it goes. This is the Haiti area through here, it's still a very lively trough that particular transform fault and off goes the Arc to the east. Well, this abandons the foldbelt here on the northern margin. So what we see now is an abandoned foldbelt that sits here with the suture between the upper and lower plates here in red, dividing upper plate volcanic rocks only in the South from the downgoing lower plate rocks which are composing the foldbelt in the north. You see that [ map view ] through here. This is a suture between the upper plate rocks and the lower plate rocks and the complexities in the lower plate actually lead us to see that there is, in fact, a lower sheet in the lower plate and an upper sheet in the lower plate. And it's the destruction of these 2 plates that forms the prospects that we've been looking at. So as we push into this distal pile of sediment, we actually create a blind propagating tip of the foldbelt in the big Triangle Zone. I hope everyone can see the Triangle Zone is pushing towards a blind detachment. And in the Canadian Rockies, you see these things are all seismic where you start to see diverging reflectors on both sides of a propagating tip of deformation right here, and that can be shown in the [ interpret ] section with the big triangle zone and a building duplex of thrust sheets here, punching into this blind detachment and peeling back the upper sheet. So upper sheet rocks, we [ sort of ] viewed as being less prospective, and we want to really get into the lower sheet rocks, which are underneath this blind propagating tip of this triangle zone. And this is where the Jumping Pound field in Alberta, Canada actually is in this [ speck ] of [ fresh ] sheets behind the propagating tip. So if you come to a line in Cuba, where we see coming across the fold and from the Bahamas here in the far right of the section, we see all the sediments tipping into the basin and then a big destructive pile sitting out to the left. Well, viewed as the Jumping Pound example would suggest, you can actually see a propagating blind tip coming in here. Now this particular wedge, if you like, acts like a big chisel. And as it's punching in to the foldbelt from the right to the left, along this detachment, it peels back the upper rocks into this series of structures here, which have occupied the Cubans. They've been drilling these sorts of structures and having very modest success in fairly distal [ tall reservoir ] quality rock. So what our initial thesis was, we need to get underneath all of this. We need to be drilling structures that have been emplaced from the lower sheet punching into the blind detachment on the lower side of the triangular wedge. So this forms the imbricated stack of sheets that we then decided to drill an exploration well back in this location on the leading edge of this triangle zone to encounter multiple sheets of potentially lower sheet rocks, which will be better quality reservoir. And this was the play that we were pursuing with Alameda-1 [ starting ] somewhere on the leading edge of that triangle zone, attempting to encounter these sorts of rocks [ to be sitting ]. And of course, this seismic line over Alameda. And we see 2 wells here. We see the initial old Marti 5 well, the old Russian well that was started out here in the foreland zone, and it failed to recognize this big triangle zone sitting here. And once again, I draw your attention to the fact that this is a great big triangle zone, pushing towards detachment in and around here and structuring up rock, so we got [ bicks ] increasing to the left of [ strain ]. And we can see that stepping up into this stack of sheets through here would be a good site to put the well. So Alameda sat here and drilled down through the upper sheet carbonates, on down in through the end sheet, which is this big section in through here. And then through into the higher fresh I sheet, which was actually intersected over at Marti 5 where they recovered oil from the I sheet through here. And we wanted to see whether the I sheet would come back in underneath this and be stacked and repeated above itself here in the Alameda structure. And this worked out exactly as we actually forecast. We encountered oil in the N sheet through here, which is a repeat of what we saw in the I sheet underneath, and punched over this thrust and up into the top. Now none of these rocks are actually present here in the Marti 5 well. And our surprise was the upper part of Marti 5 actually was all just clastics here. And we instantly encountered oil bearing carbonates in this part of the section. And this was a surprise, because what we've seen is there's a clipping of a back end of this great big duplex has moved over the top of our stack on the seismic section on this purple fault. And it's now placed rocks that belonged to the back end of the N sheet over the top of the whole stack here to be encountered here in the Alameda-1 well. So we were surprised, but pleasantly surprised, to encounter oil in an extra sheet of rocks over the top, which we hadn't forecast [ to be present ]. So here's a little cartoon that sort of captures some of the thoughts I've been sharing. I hope it's all clear. I know there's a delay in how the slides refresh. Hopefully we're there now, Andrew, are we there?

All good, Errol. [ See pack ].

All good. What you see now the impinging ophiolite forearc tongue of the subduction zone coming in over the top, pushing on the edge of the outer layer of the Bahama Bank succession, which I've cartooned in here to be Jurassic rocks in blue, early cretaceous rocks in green tones and then the latest tertiary rocks in the light blue tones [ the step at the harmless ] platform. Now all these rocks out through here occupy a fairly extensive [ opren ]. And as we start to push on this [ within ] the first thing we do is push in this triangle zone, a big wedge, which breaks off a piece of this fault somewhere here and plunks out a succession of these rocks up and over the top of the piece in the [ foreland ]. Just like that. So what happened here is we clipped off the outer piece. We moved the ophiolite edge in. We pushed this upper bit over the top. So we've got a complete repeated section here now. And this is this mid level detachment we actually want to get underneath. The next phase of this is to break off the piece of the lower succession again and punch it in underneath that slab and fold it. So we've now got a folded slab of what was emplaced in the first place. And the next thing that happens is this is pushing further on this, and it breaks through a fault through here. This becomes that important purple fault. And you see the purple fault move [ to ] succession out over the top like this. So repeating that upper sheet emplacement, if you want, through here, [ where ] this whole piece belonged to the back of this in the first place. And now you start to see the N sheet structure growing underneath and the Amistad series of sheets have been placed on top. Now the Amistad series of sheets get folded up through here and completely destroyed and lots of these different anticlines form above the purple fold, all of which need to be separately investigated and drilled. So there's potential that exists south in through here behind where we've drilled Alameda. Alameda drilled through this piece of the upper sheet, encountering oil in what's now called the Amistad part of the upper sheet, on in through the N sheet and the next piece to clip off is the I sheet underneath. So chop off this piece, push it blind into the detachment and refold all these rocks. That's what happened right there. So that's now built the entire succession of rocks that you've been intersected at Alameda. You've drilled through the upper sheet succession on in through the rocks subcrop beneath the fault in through Zone 3, if you like, and then on into the N sheet and the I sheet. The next thing that happens is the ophiolites go over the top and then get completely eroded in the Alameda setting. So a quick look at that again, just tapping through them. I'll take you back to how that worked. Just to get an idea of how a foldbelt is built from a flat succession of sediments, progressively clip off 1 big slab, put it on top, clip off another piece underneath, refold that, move the stuff over the top, clip off another piece under that, and add to the foldbelt and eventually builds the succession of rocks that we actually see here in 1 piece of the seismic line. So we've only seen the front end of all this in the seismic. So we build a model out of this, and this is what the model tends to show. We show the well at Marti 5. It only intersects oil in the lower zone, the I sheet. We crossed a couple of pretty important faults, and we get the piece of the I sheet that we see here has been intersected by Alameda-1, but there's much more to the I sheet that exists down to the south. And we haven't drilled into any of this until we site a well back here [ and ] such to the south of Alameda-1. So [ compress ] these zones is back underneath the duplex to the south. So we're in the leading edge of some of [ N zones ]. We've discovered oil in the N sheet between the sealing detachments. And these sealing detachments are the ophiolite muds in here that we've reported from time to time. We're in the VegaAlta. The VegaAltas are these green tones. And there are several of them because how the sheets were all emplaced one upon the other. So between the VegaAltas, we actually get separate reservoir zones, separate regimes of pressures, potentially separate regimes of oil quality and certainly separate regimes of reservoir quality. So it becomes important to our program to actually describe and test the reservoir quality and prospectivity of each of these sheets in each of these domains to be able to talk about what's recoverable oil and what's not. So we've got several zones. We've got the zones above the purple fault are all the Amistad units 1 and 2, the zone immediately below the purple fault is Amistad unit 2, then you cross a VegaAlta and you get into Amistad Unit 3. All of our zones are going to be intersected by our new well Alameda-2, which is going to start right next to Alameda-1 and drill all those units in. It's going to sneak up dip a little bit to have a look at this unit a bit higher on the structure. You have to wait to Alameda-3 to actually see what we want to drill all the way through this down into the N sheet and I sheet and going to collect and test these zones. But what's impingent on this is if we recover oil from these zones down here, we've now proven oil way down dip from a large a decline in this [ stuff ] into the south. So just to close, I want to show a seismic line [ that ] this is from our bag of tricks here in the technical department. We've got an old dynamite line to the South which keys off the end of the higher quality line we were showing you a moment ago at Alameda-1. But what you can see is the nose of the greater Alameda N sheet structure here, sneaking into the page, and it's clearly part of a much larger slab of rocks that sits to the south in this greater Alameda structure, where we would need to come back to the south and drill wells back in this location to investigate that sheet. Obviously, oil in the upper sheet above the purple fault here in the Amistad collection of reservoirs has [ friends ] that sit back behind other faults above the purple fault back under here. Now that ophiolite slab will exist back here, but it's been punched out into the air and it's been removed from this particular terrain. So we don't expect to have to drill through ophiolites, but there is always a risk of encountering ophiolites the further you come back to the south. Obviously, it's much deeper rocks to be investigated, but all of this needs better quality seismic and hence, we won't know much about that until we actually record a proper coverage 3D over these data. So I hope -- that concludes my little cameo, I hope that I've tried to give you some real data, a better look at the real rocks, a better look at the models we're pursuing and the reasons we're drilled Alameda and the reasons we're planning to drill the [ perfecious ] wells we're adding now.

Thanks very much, Errol. That was very helpful. I hope everybody enjoyed that 101, and you can turn your exam papers over now, everybody. And maybe we stop sharing presentation for the Q&A section that we can get into.

Yes. Thanks, Andrew. Okay, everyone. So let's go through to the live Q&A. We've got an attendee, [ Andrew Forsythe ] online with his hand raised.

Errol. Just wondering what's the potential for the growth section in Amistad to increase the net across the 1,400 meters of gross [ smeth ends ] with the drill coming up?

Well, I can jump in, Errol, if you like. I think the question it turns largely around the [ longing ]. There's a large gross interval we encountered in the first time we drilled these wells, the logs were unable to be gathered in some of the most productive sections we encountered because of the rugosity and the wellbore didn't allow the probes to make any contact. So if we can have a kind of wellbore that's primarily designed for that, we should be able to get good logs and therefore, that should lead to a higher conversion of the gross to net and therefore big resource figures.

I think the key thing here, Andrew, is the drilling of that upper section was all designed in huge hole to try to have the [ clacing ] options to get us to the end of the I sheet targets for Alameda-1. So we were never in a position in that large hole to properly evaluate that upper reservoir in the Amistad. [ Insofar as ] carbonate sheet, we run into it after 500 meters. So this new well is designed to actually start off in a much smaller hole where the logs will be much heavier and I'll be able to record the [Technical Difficulty].

Yes. It's just Sam the moderator here. I think we may have just lost Andrew at the end, but thank you for those answers. We'll keep an eye out for anyone else who puts their hand up for the live Q&A. [Operator Instructions] For now, we might kick over to some of the written questions that were submitted to Andrew and Errol prior to today's webinar. So some of the questions that came through, there are a group of questions, Andrew, that surrounded the drill rig. Can we just address the drill rig that's currently located at a third-party site? And will that have a delay on drilling operations, do you think? And thus delay the mobilization back to the Alameda well pad? Can you just provide some context around that?

Sure. No, I would imagine we'll have a delay. We've been given a projected completion date. The well is spudded. It's an important well for Cuba, too. The electricity grid in Cuba is almost entirely oil-fired. And they have a gas peaking turbine, which is low on gas, which is a material contributor to the stability of the grids and this well is going to put another gas well into that turbine, so it's important well for Cuba. In working with our scheduling, we might have -- if everything goes perfectly, it might cost us a week or 2 on our spud date, but nothing material, and it's a short simple well, and they'll be coming straight to us once they've completed it. And the scheduling for that is, as I said, we should be -- I'll know more next week when we're on the ground, I'll catch up with the contractors, but they're planning to have it finished by the middle of next month, about the 20th. They'll be mobilizing to us.

Yes. Thanks, Andrew. So just tying that into another question, based on those dates that you provided. At the moment, you envisage drilling can commence by around the end of Q1.

No, mobilization will commence by the end of Q1. We'll be commencing drilling in April.

Yes, understood. Thanks. Perhaps turning to the exploration side of the project from these written questions. One question that was submitted was, despite the impressive wide-angle shots of the Alameda pad, how many barrels per day are they going to be able to truck off of A-1, and are plans in place for this capacity to be increased prior to pipeline build to aid cash flow?

Yes, we've done -- we're prepared for production. And it's sort of an on-demand requirement. We've got on-site storage capacity, quite a bit of it. We are planning to fabricate more storage capacity to accommodate the eventual [ D put ] appraisal well 2. But Cuba lives on trucking oil around the country. So it's got a very substantial fleet and we can turn on as much as we need to, and they will be only too happy to turn up and truck it away. There are also other contractors in Cuba that have all taken -- provide it to the mining sector and the refineries, et cetera. So there's enough installed logistics capability already that we are talking to, and we can rely on depending on what we [ need gather ]. But the longer-term solution, I think that's the question, [ what too is ] the longer-term solution is to put in place infrastructure, permanent infrastructure for moving on the oil, but [ mainly ] the results of the appraisal well -- but we're modeling up what our expectations are and what the existing [ line of ways ] are and where the routes are in order to take the oil [ where ] in the future.

Thanks, Andrew. Yes. And just following on from that on the exploration side, based on the A-1 learnings to date, how long do you think broadly that it will take to reach total depth on A-3 in a best case scenario?

Well, it's not a race for TD [ to total that ] the point is to appraise the well. We had a pretty good drilling progress last time, our projected drilling time was right. If you take out the flat times we had from the surprises, good surprises often, that we were presented with the actual drilling time was to plan. This time, what we're doing with the purchase well design based on what we know is there, not what we just projected might be there, is to test these reservoirs independently, properly, completely and work our way down through each of these productive joints. So I think how long we're going to test each section for depends on what we find. So there's a natural tension between wanting to get results and therefore, publish reserves and get that bit done, with getting as much scientific information out of this appraisal well that can [ follow ] the next stage of the field development. And give the geoscientists more information, as you heard, but the running [ ring ], the step-out opportunities, [ so balance ] with the production need and trying to marry everyone's wish list together means there won't be putting a definitive number in place now, just objectives.

Thanks, Andrew. So turning from the written questions back to the live Q&A. We've got attendee [ Ben Evans ] has raised their hand to ask you a question.

Just a quick 1 on the appraisal program. We don't appear to have an official license for production from the Cuban government. Please correct me if I'm wrong there. But have they imposed a figure of maximum barrels you could possibly extract during the flow test of Alameda-2? And [ as a follow so ] to that question, will it be left on extended flow tests? Or will they move to a production license depending on the results?

Thanks, Ben. If I can get them an order, the PSC, we are governed by a production sharing contract. It compensates production. We [ have ] certain elections once we have certain results, and we can then declare a commercial field. And once we make a declaration, we can produce [ what--there are no ] limits on the well we can produce. And we have no need for further licenses to produce oil, other than what's already governing under the contract we have in place. [ There might have been an end ] to your question that I missed. Hopefully that answers them.

Yes. It was just about -- would it be staying on extended flow tests as the results prove?

Yes, it can be. The Cubans are very keen to have oil. And we're keen to get into production as soon as possible to fund our future ambitions. It doesn't necessarily have to be turned off. I mean we've got a lot of well being drilled off the same path after this one. It's [ definitely into ] deeper targets, but they're offset sufficiently. So apart from safety considerations, but we've thought through those. We can have lead 1 on and drill the other well if it's possible.

Thanks, Ben. Thanks for that question. We just have another live question up here in the live Q&A, so scrolling down to attendee [ Frank Cunningham ].

Okay. Interesting what you had to say, Errol, in your presentation. I guess, to both [ Errol ] and Andrew, what rights do Melbana have to step further south and explore those zones of interest?

We have a very large contract area. And I think that the southern boundary of our permit area at the top of [ mahead arrow ] is well beyond the area that we were looking to step out to, to test the extent of the structures. Errol?

Yes. All of those zones on that seismic line I showed you that old dynamite mine to the south. The entire [ strike link ] of that dynamite line is within our acreage of the Block 9 [ lust ]. So if we are to find any form of movement [ of like ] covers anywhere [ near ] Block 9 at any level, we can happily exploit them. So the drilling of wells in the southern part of the Alameda complex is completely within the current field limits to Block 9.

Thanks, Frank. Yes. So Andrew and Errol, perhaps turning back to a written question. Moving from the exploration side to distribution, one of the questions submitted was: Melbana's stated intention is to truck any future oil to Varadero oil processing facility. The company has previously indicated that there's a pre-existing easement or access way from the area of the Alameda prospective production well to Varadero. What do you think is going to be required or needs to occur to warrant pursuit of a pipeline direct to Varadero should access be available?

Well, we [ are to go to ] Varadero, we [ might go ] South to San Fuegos, the refinery there. It depends on the quality of the oil, the production volumes. Initially, it's trucking. And as I said earlier, that is a logistical capability that Cuba has in spades, and that will do us initially. But once we have the results and the [ cullities ] we need fixed infrastructure, and our mind has already turned to that.

Thanks, Andrew. Okay. Just turning back to the live Q&A. Attendee John Staples has their hand up.

Yes, it's just a short simple question. Where do you see -- projecting ahead, what do you see going on with Melbana, say, this time next year or even in '24, '25?

The biggest priority for us following this appraisal well program, the one I'm already into the weeds on planning is field development. A discovery of this size, once appraised, the great prize for us is to get as much of this oil produced and sold as quickly as possible, and that's going to mean not doing things by sequential wells. That's going to mean having a work program that contemplates multiple development wells and step-out exploration wells. A seismic program I think Errol will find very helpful to help us firm up some of these theories before we stick drill bits into the ground. And then to find the best setup targets and the best opportunities and [ other ] structure. So things get ramped up and get very busy indeed from here, on the assumption of a successful appraisal well, which is 1 base assumption for planning the future.

Thanks, John. Thank you, there, Andrew. So we'll just continue with the live Q&A. Attendee [ Ben Evans ] has his hand up again.

Yes, 2-part question. One should be pretty easy. The other one, hopefully, a little bit more in depth. Errol, do you think there will be a need for a [ third esargen ] program across the block or certain parts of the block at any point in the near future to be able to help you guys achieve what you want to achieve? [ That's I'll wait later ].

Yes. Absolutely. As soon as possible, these old dynamite lines have given us as much as we can have. Realistically, now, we need to move into the modern era, and we have additions ready to guide the group if that's [ actually to be required ].

Okay. And second part of the question, sorry, is to you, Andrew. Can we get a final amount of the cost at Zapato 1? If we've got any money that we need to recruit from the JV partner for, that, and what our current financial position has gone into the appraisal program. Sort of just missed it, I guess, for the last quarterly, and that's sort of winding up so late.

Well, we all haven't finished the initial 2-well appraisal exploration program. Last year, there's still -- I think we're all done but just a little bit of P&A of the first well. We'll remove the wellhead [ off Alameda 1 ]. And then it's technically all completed and all the expenditure and payments for the initial drilling program is [ in pen ] a small amount left of the overall well budget. But that's in the rear, their rear vision mirror for us now, and our partners and ourselves have approved this year's appraisal budget, and that's what we're on to. The last quarterly, I think you asked, I think it showed we've got a very healthy amount of cash, it was about $40 million we reported as of 31 December. So we're in a very good position to go forward and do the work we want to do to appraising discoveries.

Yes. So I think the -- in one of the early announcements for this appraisal program, you sort of quoted a low 40s -- $40 million figure going into the appraisal. So that's still current?

Yes. And we think we can get that up [ better ] in time. But these wells are still a bit specialized in that they are doing many things, appraising many zones independently. So there's a lot more specialization and expertise and equipment [ frite ] to do all this, than we would have just [ throwing around ] when you start knocking out multiple development [ rush ].

Sorry, Ben, I might have just cut you off at the end there. Just continuing the live Q&A, I think we've got another follow-up question from [ Frank Cunningham ].

I think I hit the wrong button by mistake. Sorry about that.

Yes. No, you're back on live now for Andrew and Errol.

No, I think I hit the raise my hand. Sorry.

No. No problem. Thanks, Frank. My apologies, guys. So just getting back into the written questions after that live Q&A session. Andrew, there's a couple of questions here on distribution, we've sort have been through queries on the state of the rig and the exploration program. One question on distribution was, for anybody with experience in flow testing, storage, trucking and logistics, it's definitely feasible to transfer 1,000 to 2,000 barrels a day during the testing process via tankers in the road network. But as this figure increases, it can become trickier. Do you see any potential pitfalls for the operation if Melbana needs to scale up significantly in a period of time, i.e., to 5,000 or 10,000 barrels a day if the pipeline isn't ready for some time?

I think we've talked about how Cuba has a great installed logistics distribution capacity. This is what they do. They move oil around the country all the time by truck.

Yes. And as a quick follow up to that. I understand it's contingent on the appraisal results. But has there been any movement on a refurbishment of the pipeline? And is it possible to give a figure of barrels per day that it was operating before it was mothballed, or would we be looking at a total replacement using the same easement?

Yes to all of the above. We have done some desktop work with my personal experiences with another engineering firm that I chair is we built plenty of cross-country pipelines here in Australia in that company. It's always easier -- the hardest bit of pipelines is the right of way, getting all the permissions, putting them in the ground, land acquisitions. But once something is there, going in and replacing it, putting something in the same footprint, is much easier. So we need to be informed by volumes in the future, and we're thinking out as to what might be required [ for interim ] qualities because south is an option with a refinery one set of qualities, north is another option for the tank farms and the deepwater ports if we're going to export, so lots of contingencies. At the moment, we need to collapse them into a little bit more knowledge.

Thanks. So just continuing with the written questions. Perhaps from distribution to sales, there's a couple of questions sort of on the broader sales outlook. One is, while obviously not guaranteed at this time, [ however ] we're assuming that in due course, it's announced that Melbana has commercially salable quantity of oil in play. What's the process? And is it likely to be a lengthy 1 in dealing with the Cuban government and any JV partners in getting the sales of that oil underway to third parties?

No. We put everything in [ day des ] as I said earlier.

Yes. Understood. Okay. We've just got a couple more on the live Q&A. I might return back to [ Andrew Forsyth ] to ask the first question.

Just wondering with Errol, is the discovery so far, has it been fully mapped on seismic? Or is it partially off seismic? And what is the potential aerial closure size in that sense? Is it over 10 square kilometers or 20 or 30 square kilometers or much larger than that?

First of all, the limited grid that we have of high -- let's say, modest quality seismic. The share grids from the 2000s, that defines the front part of the Alameda discovery. And it's sufficient to say what's in the upper sheet. The upper sheet covers a certain acreage, which translates into the published reserves that we've released to the market. That closure is contained within the current 2D grid. The deeper section goes off grid to both the east and west. And so clearly, there is more to know in both of those directions for the I and the N sheet contributions to this discovery. And of course, they are the lion's share of the big reserves. So there's no doubt that there is need for more seismic to complete the mapping of this structure. That said, there is sufficient closure to find to satisfy McDaniel's, our certifier, that we have a good handle on what's in place here within that. And added to reserves to that, which would be shown by more seismic and more mapping is actually out there in the blue sky. Which has not been realized yet, because what we follow after mapping and seismic would be actually needs for a well to the west and the east to appraise the extent of the oil in both those directions. So it's highly likely that it will become part of the separate [ mains and orients ] in both of those directions. It's interesting to also realize that both of those cases are actually in Block 9. And we did talk about the very large [ grace ] structure, which is to the east of Alameda as it stands. We've had our certifier look at that, and obviously, there's more seismic required, but that's prospectively very attractive to us. So the answer is, is there is more seismic that's needed to complete the mapping of the holistic resource, but we have enough to be able to talk about what's been certified to date.

Thanks, Andrew. Continuing the live Q&A, we've got attendee [ Christopher Best] also has their hand raised.

You'll have to excuse me if my question is a little bit [ end curious ] but you guys have pointed to [ 6 billion ] barrels in situation with a 5% recovery. And can you just give us an idea if that [ 6 billion ] can be expanded, like as far as the resource and the chances of your obviously getting a better recovery rate than [ 12% ].

Well, I can take it. I think I've outlined several large structures that are as large or bigger than Alameda. And let's not forget the unfinished business on Zapato. And further out from Zapato is an even large structures [ again ]. All of these things have different reservoir regimes. In fact, the ones in front of Zapato [ and gulf ] at least are trying to drill through the leading edge of the ophiolites and encountering the rocks underneath. We were trying to get into a better reservoir [ prolance ] from a depositional standpoint, and that still is unfinished business. If we can encounter 20% [ porosity ] plus carbonates oil well, why wouldn't you want to start there. But like you've got to make do with what you have. And so pretty happy with 12% [ links ] carbonates, and let's make a go of that. Well, there's big structures behind to the south of this as well. So obviously, better reservoir enables you to up your recoveries, and this is not something that the Cubans are used to, because they're very used to production from fractured [ bikrites ], which are very fine-grained stuff and porous by quality in the offshore. Now if we find better reservoir quality, then the recovery could easily be somewhere between 5% and 10% happily. And if you can even get it up, if you want to introduce some sort of fracking or enhanced CO2 flood recoveries. These sorts of things can increase those by certain of [ succession ] in the Permian, West Texas are getting up to around 25% recovery from such rocks. So upping the recoveries is really the big deal and it should be possible with the application. Let's remember, we're actually onshore here. So all these technologies would be available to us going forward. And as far as getting better reservoir quality, well, that's a [ phasing ] situation.

I would just answer your question far more simply: there's a lot of running room and there's good potential for the recovery to be greater than the 5% that our independent certifiers have given us, because that's the [ cumulative ] average to date based on the shallow heavier oil[ that makes a drips] in different rocks.

Thanks, Christopher. So yes, just turning again back to our list of written questions submitted prior to the webinar. There's 1 directly for Errol. Errol, during question time at the PSA luncheon last year, you mentioned CUPET might not allow time to flow test all upper sheet zones separately with the preference for accelerating production. Do you have to push for this? And how great an impact might this have to the ultimate upper sheet reserve figures?

Well, our certifier wants to have recoveries and proven production from the zones that we're assessing. And they don't need a lot to be able to say that it's actually going to flow, and potentially they can work with that. So the flow times don't have to be terribly lengthy, but you do have to record flows from each sheet you're calculating reserve in, or you can't move it from the possible category into the proved category. So that's a pretty important step. As far as CUPET, well, they are pretty impatient to get this thing moving. So they don't want to see us sitting around flow testing for a year. So obviously, the balance that Andrew has said, when does a flow test stop and the thing is less to produce it, right? But we haven't had to push for anything. I mean CUPET have been very cordial. They come and help us every opportunity, and I think they'll listen to whatever we think needs to happen to have responsible production move forward from this field. This is important [ find for them ].

Thanks, Errol. So we've got some more attendees with their hands raised, so we'll round things out with the live Q&A. First of all, turning to [ Richard Carter ].

Just a couple of queries, questions for Errol. Errol, one of the things as Andrew has mentioned, post the appraisal drilling, you want to get into production fairly quickly. What's the thinking on choosing a stand-alone close-space 2D survey over the prospective areas prior to a 3D to allow you to start to move on production as soon as you can?

Good question. I mean there's pros and cons of all of that, the biggest con is you have to get a crew into the country to do anything at all. And to get a crew into the country, you have to specify what do you expect them to be able to do. And because we have a great need for the mapping of the details of these reservoirs because particularly small-scale faults need to be defined and the numbers of sheets and detachments need to be seen and defined, a 3D is the answer to the technical question because of the dips you're trying to migrate in 3D space. You're trying to actually put all the energy into the ground and get it all back to where it's supposed to be, and that's a 3D migration problem. And that's the biggest single uplift that we think you're going to really see here in the seismic space, because the 2D seismic is a, poorly oriented, it's not at right angles to the foldbelt, so the existing 2D is not as good as it could be. To shoot more 2D is once again going to delineate prospects, but then you've got to drill them. So you're getting out ahead of yourself a little bit here because you can only drill -- there's only a certain amount of equipment in country, we've got to soak it all up drilling appraisal wells in Alameda. So there's no point defining prospects until you can drill and to properly locate these step-out wells in Alameda, we really need that 3D migration. So a 3D [ green ] is very easy to see being more important than more 2D at this stage.

Okay. One other query, I noticed in one of your recent releases to the market that the Amistad Unit 2 had -- you've seen fractures in that unit. I was wondering if this was -- these were fractures seen with the FMI data as per the Alameda showing that those very good open fractures or whether this was proposed to see fractures from the caliper log, [ mud cake ] buildup, things like that, lots of drilling fluids into the formation.

Well, I believe we've seen evidence for fractures in all of our zones, and I'm not surprised given that we're on the leading edge of the Triangle Zone.

Thanks, Richard. We've got some more attendees with a question. So I'll turn to [ Bruce Harris ]. [Operator Instructions] So I might turn to our next attendee with their hand raised. Just scroll down the list here. And attendee [ Glenn Winchester ], we'll turn to you.

Just following from a previous question about availability of rigs and supplies in Cuba. Can you see down the track because of the delays we've had with getting mud and actually getting the rig backwards and forwards, will there be a need for another rig? Or is that out of the question?

No, there's very much a need for more rigs and there are other rigs available in country. We're having discussions with the owners of those rigs. Once we've got a development program planned in the future, I can foresee us moving to bringing more rigs into the country. It will support contractors mobilizing more rigs. We need -- I think it's at peak, for example, we've probably had, I think, over 7 or 8 rigs going at once at one time in Cuba. That's the sort of thing we need to get to.

Okay. I've just got 1 more question regarding Beehive. If Beehive should be successful and you get royalties from that, that money won't be -- you can't use that money in Cuba. Is that correct?

Yes, that's right. We've drawn a line between a pocket for our work with EOG and our interest in that well, and what we're doing in Cuba EOG is a Texan oil company. So naturally, given sensitivities in the U.S. and Cuba, we don't want to embroil them unnecessarily in any geopolitical issues. So yes, they're separate.

So hopefully, Alameda will be self-sufficient and provide sufficient funds without any more capital raising?

Indeed. That's what we all hope.

Thank you, Glenn. Turning to our next attendee, [ Jason Ornhart ].

Andrew, it seems that Errol is really keen to the 3D seismic survey. Is that something that's readily available in Cuba or will that have to be brought into the country? And if so, would we be looking at a program 2023 while we're doing appraisals or more likely to a 3D in 2024?

It definitely needs to be brought into the country, and it won't be this year. Planning work has only just begun as to what we want to do next and where we want to look at, and this will take a while to organize. So it will be back end of next year at the earliest before Errol's going to get this program going. Yes, I'm sorry [ mal u sent ] but...

We'll be looking at close to 2 years before we'd get a full 3D mapping of the area so we can really quantify what is actually down there.

Look probably realistically, yes. But we've got plenty of things we're doing in the meantime. We can put more wells in the ground based on what we've got already.

I think that's something I was very careful to share with Andrew when we made this discovery. We said look, there's plenty we can do with the data we have with defining the limits of resources. But the detailed information we need going forward to properly locate directional wells is going to be needing the 3D, because you see every 2D line, you're limited to what you can do along that profile. So that controls the direction you're drilling [ by some ].

Yes. Thanks, Errol. Attendee, we're close to finishing up. I'll just check with attendee [ Bruce Harris ], we had some technical difficulties there before. Bruce, your microphone is live now. [Operator Instructions] I think we're still struggling to pick Bruce up there. So perhaps, Andrew, you might just round out with a written question. One of the written questions that came through was broadly, the -- just on a broad time line for reserve announcements, how long do you think broadly reserve announcements will take for all 3 reservoirs following successful campaigns for A2 and A3?

So I think they'll be a cascaded series of announcements from our certifier once we give them all the data from the appraisal program. Typically, they take 2 or 3 months, in my experience, to come back with their report. And that's as much guidance as I can give at the moment. I think pretty much as simple as that.

Well, that takes us just over the hour mark. I think -- so that will conclude the webinar proceedings. Thanks to Andrew and Errol for your presentation and also for that Q&A period. I think there were some good questions, and what Andrew and Errol wanted to do here was provide a forum for direct dialogue with investors and shareholders who follow the company. So we certainly hope that, that was achieved today. As we said earlier, a recording of the webinar will be available on Melbana's website and social media platforms and the usual channels to revisit. So Andrew, are there any quick comments that you wanted to add just before we go?

Thanks, everyone, for your patience and for your interest in our company, and I look forward to keeping you all fully appraised of the appraisals as we get through it this year. So it's a very exciting time for our company.

Yes. Thanks again, Andrew and Errol, and thanks to the attendees for your questions. That will wrap it up now. So bye, everyone.

Goodbye. Bye.