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

Andrew, great to chat again. Melbana's update on Tuesday confirmed the presence of moveable oil in Unit 3 of the Alameda-2 well.

Firstly, how would you interpret these results? And why do you think that differs from the market interpretation?

We took logs across this whole Alameda-2 section and confirmed a substantial net pay interval, more than 600 meters vertical in the formation and used layman's language. That means 600 meters of reservoir rock capable of storing oil. Net pay is an order of magnitude less than that considered significant usually in our business globally. So -- but in addition to the logs, testing demonstrated the presence of moveable oil, Unit 1A flow to surface unassisted, which was noteworthy, given how shallow it was and so low pressure, it is up there. And then testing of Unit 3, the deeper section indicates the potential for it to flow at about 750 barrels a day, making it among the better-performing vertical shallow wells in Cuba. That did not flow to surface is not surprising given its quality and the formation pressure and the column of water it had to displace above it, a little bit of assistance -- a vertical well like that could be brought on quite easily with the pump or artificial lift like Bayu-Undan, SK E&S. People probably seeing in parts of the U.S. if that's driven around out there. The Cuban producers don't produce it that way. They learned a long time ago the better way to produce these shallow formations, given the heavily fracture, is to drill horizontal wells through them and intercept those fractures at right angles that maximizes the flow rate naturally using those fractures up to 3x what you get from a vertical well. At Alameda-2, the well we just drilled is a vertical well, near vertical well, as it had to be because we were testing these 4 different sections vertically down to get all the information we needed during the fracture orientation, for example, I just spoke about it. We had to design optimum wells to produce from these shallow sections. So given these results, it's now well worth our while to study how best we can exploit this easily accessible and shallow and significant resources. Not inventing the wheel to do this. This is how Cuba produces almost all of its 40,000 barrels per day of production currently. Answer to the second part of your question, why did the market interpret it differently. I guess they're interpreting differently because of our lack of emphasis on the shallow reservoirs today. They're steady rather than exciting producers and our shareholders are in this for something else as we are. We've come to Cuba with the thesis that there is lighter oil at any deeper reservoir sections, and we got a very pricing derisking of that thesis last year with our Alameda-1 exploration well. And on our way back to appraisal with our next well, our Alameda-3 well, that's the main game. And that's what we're keen to get to. This is on the way, and it seems to be a price. There seems to be a project here and it'd be crazy to ignore the opportunity that presents us.

Thanks, Andrew. So given the location of the Unit 3 intercepts, 200 meters up deep and about 500 meters to the south of Alameda-1. How will this broader oil-bearing formation inform the next round of planning for the drill program?

Good point to repeat, Alex, though on that, we intercepted Unit 3, 500 meters away and 200 meters up from where we intercepted it in Alameda-1 last year. And that means we haven't reached the side of this bottle of hydrocarbon yet. And that's consistent with what other data tells us like the seismic et cetera. This is a large, as I said, shallow, oil-bearing, moveable oil bearing formation. This demanding that we included in our field development scenarios now, and that's the most immediate impact of what we've announced.

And just finally, Andrew, could you just provide a quick summary of the company's next round of near-term operational priorities for the ongoing appraisal program at Alameda-2?

Near term, near term is the completion of this appraisal well program. We're testing Unit 2 and Unit 1B in this upper sheet at the moment and hope to have that completed very soon. We'll then have a complete understanding of this upper sheet and can park that, take the lessons learned, start talking about -- what can we do with this to bring on some early production quickly and cheaply as part of our development scenario now we know there's movable oil there. But really get after this resources as quickly as possible, we need to complete the study picture, finishing the appraisal well program. We've designed something specifically around the lessons we learned last year. This first well, we completed Alameda-2 to TD, ahead of schedule, without any material incident, which just shows that once you had the opportunity to redesign a well that you've already drilled a foot into the formation, specific for the conditions you've encountered, things can run very smoothly. And now the same thing will apply. I'm very confident to the next well, and we just get down there and get the results we need and get all the data we want and we really know what we have here to get after. And I think the market will be very keen to see what we get in this next well.

Thanks, Andrew. Look, I appreciate the insights and look forward to further updates in due course. Thanks for joining me.

Thank you, Alex.