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

My name is Alex Paull from the Investor Stream, and I'll be your host today. Presenting for you this morning is Melbana Energy Executive Chairman, Andrew Purcell; and Chief Commercial Officer, Chris McKeown, who will review plans for the development of the Amistad Unit 1B as well as discussing results of the recently drilled Alameda-3 appraisal well. Both Andrew and Chris will give a brief overview on this progress, and we'll be on hand to address any questions following the presentation. We have been [ inundated ] questions, which is greatly appreciated. [Operator Instructions] You can download a copy of the presentation by navigating to the handouts pane in the control panel. Finally, a copy of the webinar will also be available on Melbana's website and circulated to many platforms later today. But for now, I'd like to throw it over to Andrew to keep things off for us. Andrew, the floor is yours.

Thank you very much, Alex. Good to be back with you again. Thanks for setting the quorum up. I'm going to give a very short introduction speech on a presentation that, I guess, some of the issues I think many of you are most interested in, we'll have a quick look what's been happening, what the forward plan is, but the point is to get through that set the framework so we leave as much time as possible for Q&A at the end. So Alex, if we could go on to the next page. We all know the layout of the subsurface, I'll assume most of us have been following the story for a long time. I'll first just give a recap of the Alameda-2 appraisal well that we finished last year. That was the upper reservoir, broken into a number of units, as shown on this diagram. Next page, please, Alex. The drilling of that well happened very well, very quickly, very safely, inside, time and budget. We managed to do all the TD -- all the tests, the DST, we've got the TD. And we found oil in a number of the units, but the most interesting one was Unit 1B. That flowed at a very good rate in the DST of relatively very light and sweet oil for Cuba. And that's the thing that we have then subsequently received a contingent resource for 48 million barrels of oil. From that date, that's been the focus for our team on getting that into production first and while giving up that is progressing later on in the presentation. But if we go forward, Alex, to the next slide. That's the lower 2 reservoirs, the Alameda and Marti, which were the subject of the most recent appraisal well Alameda-3 that just completed. Next slide, please, Alex. That was a different tail as we're all aware now, although, thankfully, as always, I'm happy to say, in Cuba, safely drilled the well. We got to target [ in total ], but not without a number of challenges. Drilling large deep wells sometimes inclined to do. We went a long time, over time and budget, and we did manage to do the testing of those lower 2 reservoirs. So technically, pick to all the objectives of the world, but commercially that was what we were after. We were after flow tests from those 2 deeper reservoirs because of the oil that we know exist down there and which flowed rather enthusiastically to surface and the original well, Alameda-1. Now the offset between Alameda-1 and Alameda-3 is minimal. And we haven't been able to get a flow to surface and that has been a surprise and a disappointment to a number of observers of our company, not least ourselves, our partners and the Cuban regulators, all of whom were expecting a different outcome. So the question is why? And that's the bit that we now need to turn our attention to while we get on with developing the upper sheet before we come back and apply the techniques that we're looking to at the moment to decide what's best to do here? The well is suspended, and therefore, we have no immediate need to go back in there and do anything without considering it well. Next slide, please, Alex. Otherwise, as I said, the real focus for Chris and myself and the rest of the team on the ground here is getting the production from Unit 1B started. In that respect, we've been busy all year, getting everything in line for that to happen. We've made a lot of advances on the logistics train, tank storage allocation at the terminal, permitting of the additional drilling pads. We socialized the Unit 1B development plan with our partners and the regulators. We have mission to export all of the joint ventures entitlement to oil from Cuba so we can send it out of the country and get paid offshore. And that has been a very satisfying process to see the interest that we've received in our project for this new supply of well-demanded oil in the markets. In parallel, we've been running a farm-out process with an advisory group that we appointed in this part of the world, in Latin America, to attract farminees into the project that can both assist us with the development of the field, but also the objective of a farmout process is to have somebody come in and pay for the next step of the work. And that process is coming to a conclusion now. Chris will talk a little bit more soon, but in parallel, we're also having discussions with oil traders for the offtake of the oil and looking at commercial arrangements with them as well in return for the right to take off some of the oil. And there's always, as part of the financing solution, we're very thankful and happy to have a very large national oil company at a 70% partner that has been underwriting most of the expense of the work to date. Next slide, please, Alex. So the question mostly at the front of our minds, and I know most of yours is what happened in Alameda-3? Well, we had a long, difficult well, and that was despite all of the learnings from the previous well and all of the expertise that input into the well design, the drilling operations, not only internally, but through our partners and regulators. And that was a challenge for us from almost the get go. We had whole stability issues. We had up drilling conditions, particularly given the hole sizes, and -- you know the side track, we had stuck tools, but we overcame all of those things eventually and got to TD. We managed to get some very good quality logs in all the sections to [ good pause ]. They're all suggestive of some very good sections for permeability. And the fact that despite all of that suggestion, data from the logs and the previous learnings from Alameda-1 that we failed to flow to the surface from both of those sections, from both of those geologically independent sections, it points to there being something going on with reservoir damage, perhaps with what happened, how we drill it, the fluids that we used, maybe the time and haul given all of the additional delays we incurred, course of the problems I mentioned above. But that is a stuff we're working through now. We've, as I said earlier, suspended the well. We're just going to step back and have a look at all that data that we come -- that's coming out of the hole now, compare it back to the logs, compare it back to the geochemistry learnings that we're going through and consult widely. We're interested in the feedback of our partners and the regulators. But there's also a number of experts globally in these types of reservoirs, these carbonates, a particular type of problem to sometimes solve and we're not stopping from going out to where that expertise lies to have a look at what happened in that data. And we're incorporating all of that into the reviews we're doing at the moment to come up with a remediation or next stage plan in the well to go back and get that oil out [ that's been now it is there ]. Next page, please, Alex. Forgive me, there is a bit of delay here. I am in Cuba at the moment and perhaps you weren't aware. So there is a bit of a time lags. The main thing while that studies are going on and indeed, regardless of what the results were from the Alameda-3 well. Our focus has been, as I said at the AGM last year, is to start exporting oil from Cuba this year. And that's a goal that we're still committed to. We are in the process of getting ready to recommence production from Unit 1B. There has been a drop in production from the 1B reservoir. Initially, we floated at 1,200. You'll recall that peak load at 1,900 when no choke was on it, and then we shut it in. And after a period of time, it had been shut in, we went back and opened it up, and it was at 300. So there's immediate change in the reservoir's performance for reasons that we've been looking into. And we believe we have some leading candidates as to why that is the case, particularly from learnings from our Cuban partners that have a lot of experience in this upper sheet, in these carbonates and have experienced similar drops in flow rates due to reservoir damage issues. And their learnings of how to fix them are very high in our priority list of what we're going to try next, but we are going to finish our study process before we do anything. But Unit 1B is the beginning. What we have is a plan and our development of Unit 1B to, in the short term, drill another 7 wells up in the Unit 1B on this 2D seismic control. That's going to happen over the course until the end of 2025, and we'll do a continuous program. And hopefully, you got to repeat of the 0 issues. We had drilling that initial Amistad well to down to the bottom of Unit 1B, we did it quickly. We did it well inside our best estimate of time and budget. So we hope those wells can go quickly without issue, and then we got 7 more producers online quickly. And that program will then continue beyond 2025 once we have 3D seismic to control the placement of the additional wells. And that is in total designed to recover the highest confidence oil we have from the contingent resource that we were awarded by our independent resources certifier, that's 16 million barrels. Then beyond that, we're going to go for the rest of it, too, but we want to start with the program and it's going for the lowest risk oil that we know is in that upper sheet that's easiest to recover. From there, we have all of the options in the world available to us. Once we've got that reservoir up and running reliably and exports happening and revenue flowing, then there is the deeper sheets to go back. And once we've done our work earlier, we'll be looking back at those to add to the field's capacity to produce oil, but it's not the immediate priority. The immediate priority is to get Unit 1B up and going. Next sheet, please, Alex. I'd just put a simple cartoon in there to show the locations of the additional wells. The diagram in the top right is probably a bit hard for you all to see. But the Alameda pad, the 1 that we currently are drilling off is in that circle on the top right. The new pads are all offset to the West and South and Southwest. So those additional pads are all being permitted up at the moment. It gives us a number of different areas to attack the 1B structure at optimum points, and the trajectories of the wells have been selected to allow us to get maximum interception of Unit 1B. It's important to remember that Unit 1B in the Amistad well was behind casing and we perforated it at what we consider to be optimum areas, of course, from the logs. But that was a very large net pay area. And the objective with the new production wells is to not have any casing. Let's just open up the whole hole across the whole productive interval and let it all flow. Open hole initially and -- as the Cubans do, and have a liner ready to insert it if we have whole stability issues. But let's let it show us what it could really do when we don't have to have contingencies built into the well for reaching different depths and trying different things as all of our wells to date have had to do because they're scientific appraisal wells. Now it's time to just build production wells as quickly and as cheaply as possible. Next slide. We get into the logistics side of things from day 1 from where we are. There's a deepwater oil terminal about 80 kilometers to the west, which we'll be trucking our production to along highways, good single roads, flat to rain, no issues with moving trucks out to there, and that will be perfect initially because it means we don't need any infrastructure. We can just start filling the tanks on the wheel pad, trucking them out to the storage facility at the port, and from there, once we fill those tanks up, we call the traders to come and pick up the oil. We're very thankful to CUPET and the assistance they have been giving us. As always, they are very cooperative and helpful partner in this project. They've got tanks available at the deepwater port that they've allocated to our exclusive use. So we don't have to mingle our oil with their production. We're going to bypass their other offer to move the oil initially to their battery at [ Ciro Redondo ] sort of underneath the box that says truck route, which is closer and then use the pipeline that they have between there and the port to move our oil in batches because it's just 1 more degree of complexity in the short term that we want to spend more time studying to get our oil out as fast as possible. But in the medium term, that's going to be a much shorter trucking route as the volumes increase and it gives us processing facilities there that they'll be able to use to move the oil down to the port. Next slide. This is a diagram of the port. You can see the tanks down in the bottom left, we've been allocated 1 of the larger ones there at the moment. But there are smaller ones we'll use in the short term that are available for the initially low volumes of oil that we'll be producing because Step 1 is to get a cargo out. And the reason for that is to test our logistics train, to test our commercial arrangements with the offtake counterparties, the moving of oil, the selling of oil, we're getting paid for the oil offshore, that is something that is good on theory, but we understand how it's going to work, but let's test it. That's good to do it initially with whatever size cargo we can get going, and then build up to the bigger, more economical size cargoes in the year ahead as the other wells come online and we get to the target production rate from this first stage of the Unit 1B development that we're aiming for. Next slide. A simple diagram showing the work streams that are underway at the moment. As we sit here today in July, we're doing a number of studies, of course, on the simulation formation damage on Unit 1B that I mentioned earlier. Other parts of the team are working on the export facilities, the trucking arrangements, the storage arrangements on sites and at the port. And a part of the team here in Cuba is doing all the permitting and getting ready for the construction of those pads that's coming up once the wet season starts to die down, although I must say there's not been much evidence of it this year thus far, knock on wood. So that trial export that I mentioned, we're going to get out by the end of the year. That's our goal. And in parallel to that trial export, we're doing work to repair and get the larger tanks that have been allocated to us to a standard that consuming regulators and ourselves to happy would before we start filling those tanks early in the new year with a hope of first good slice total cargo going out by the end of Q1 next year. Next slide. I think this is a slide better spoken to by my colleague, Chris, on the call because he's been the one doing the heavy lifting on all of these commercial arrangements. So Chris, perhaps a quick summary of what this data means on this page.

So as Andrew mentioned before, we've been moving things along in parallel because the ultimate aim is to export the oil because we know that it's a good quality oil and it's attractive to market and that will be done under an agreement with the parties. So we've got the right to export that the entire joint ventures' oil. So that's been an excellent alignment between us all. And working closely with the engineering team on all the agreements required for that to get the trucking and the storage, et cetera. And then finally, as well as talking to oil traders about them buying the oil, and many of these oil traders actually entered into agreements where they will essentially provide funding for the development and the acceleration of the development. And we're doing that in parallel with discussions with potential farminees. And that farminees process, as was mentioned earlier, is at the advanced stage and in the term sheet stage now. So it's all about moving it all together in parallel because ultimately it's about making oil from producing -- and making money from producing the oil, and that's we're working really closely with the engineering team on. So yes, that's enough on that.

Next slide. Thanks, Alex. That brings us to the end of the short presentation. So over to you, Alex.

Thanks very much. Look, Chris, Andrew, really appreciate you taking the time to present. [Operator Instructions] To start, we'll start with some of the submitted questions first. Andrew, do you think the quality of the oil contributed to the inability to flow? Or was fracture permeability impacted by Marti, or is it just low permeability?

We don't know until we finish our work. The oil quality is good. We know that from the first well seeing it come out over the shakers even though we couldn't get an uncontaminated sample. It was flowing at such a rate that people was coming out over the shake as well on top of the margin, it looked like. We've managed to get samples this time from Marti, although in contaminated samples or separated, dehydrated, clean, its 20 API, again-ish, so it's not maybe viscous oil, but that's not the issue. And the logs, so certainly in some sections even more than others, good permeability throughout. So watch this space. We each have our suspicion. There's a number of opinions as to what happened. But I think we've got everything correct down there other than how we drilled it may have affected the formation and we have to learn from those lessons to do it better next time.

Is it possible for oil from Marti and Alameda to flow to the surface either assisted or unassisted?

Marti, we know it's possible. As I said, it flowed at us in Alameda-1 from both of those reservoirs unassisted and quite vigorously.

And what input did Sonangol have in the drilling of the Marti well?

They're complete. They're our partners. So as operator, it's our job to put together a drill plan, that drill plan is listed with our partners, challenged. We have workshops or drilling the well on paper where we go through it and the contingencies we might have to employ if A or B happens. Then we have regular technical meetings with them, and then ad-hoc technical meetings with them when issues happen in the drilling of the well where we tap into and use the brains trust that exists in that organization to decide the best course of action at any decision point in the well.

And in your view, did you stop too soon with Marti and Alameda just a flash in the pan instead of a long steady producer?

We've got too soon. I mean we stock 40 meters higher than where Alameda got to -- long-term observers or remember that Alameda-1 when it got down to that last 40 meters in the Marti reservoir, the pressures got extremely high and borderline dangerous. So we stopped a little bit higher. I don't think that's an element of it, no. And the rest is, I think we've answered.

Andrew, we've had 1 question from Tony Camilleri. Tony, you should be off mute. The floor is yours. Having some issues with Tony asking his question, so we'll move on with the questions. Now in terms of the remediation steps, why did Amistad Unit 1B's flow rates reduced to approximately 300 barrels a day over the 9-plus days extended flow test?

Didn't reduce over the extended flow test. The initial DST flow test floated on choke, [ whole funded ] sustainably. We then shut the well in. We went away to do other things. We came back some months later. And when we opened it up again, it was at 300 barrels a day. The [ good part ] is how we shut in the well, I think, is the leading candidate. These carbonates are, they're probably dorky rock. So you've got to be very gentle with them. And the way we shut it in is just of reservoir -- near well more reservoir damage. And that is a learning that the Cubans have had a lot on these upper sheets. Their preferred solution is to run what's called an acid wash. And what it does is it gets in there and it ungums the works near the wellbore so the oil has a migration path back into the wellbore. And so that's a leading candidate for how we will remediate it. But to answer the question, I think that's the reason for the drop in that flow rate.

So when will remediation of Unit 1B be executed? And what covenants levels do you have that this will work?

We're planning to kick it off very soon. Once the pad site has been reconfigured for the testing and the logistics train or the transport of the oil and storage at the remote end is ready, before the end of this quarter. Confidence levels, you've got to be confident in this game, Alex, because they keep throwing the surprises at you. But I don't find this to be uncharted territory in this upper sheet. This is where the Cubans have produced 100% of their oil in their history. This is their home too, and they are giving us very good advice.

So why don't you go back to the old Marti system and drill a sidetrack or lateral bore in Alameda-3?

Yes. That's the old Marti system know that it really was not a good formulation for well control purposes. The Marti system we have this time is much better at that. A sidetrack out of Alameda-3 and Unit 1B, I've asked the same where we can challenge my team with the same I did, and it's possible, and it's not no, but it would mean that means making a decision on the ability to go back and do what we want to do in Alameda and Marti at a later date. And getting into Unit 1B again with another well is quick and easy. So it's not a good trade-off, I don't think.

And what's the view of Sonangol and CUPET on A3 -- on the Alameda-3 remediation plan?

Like us, surprise and disappointment, and learnings. I think they're both very experienced national oil companies who have portfolios of projects, and they're more saying flat about issues when they happen in drilling than we are because this is our game. This is everything to our company. And so we are very -- and we're operator. So we're a point. Their attitude is comforting often to me when things happen is like, well, let's work the problem. How do you think we should fix it? And I'm very appreciative. Well, that has on my team.

Thanks, Andrew. [Operator Instructions] Now in terms of the development plan, Andrew, how many wells are going to be drilled into the Amistad reservoir by when and how will they be funded?

First stage is those 7 wells I mentioned that we want to get in starting soon and get the 7 drilled before -- well before the end of next year, if we can, but the target is by the end of next year. The funding of those we're looking to 2 sources, farminees, who want to be part of this large discovery in the upper sheet; and the oil traders, who Chris mentioned, talking to us about facilities to finance that work in return for the right to offtake the oil.

Now I've just allowed Frank Cunningham to ask a question for the purpose of this webinar. Frank, I've just taken you off mute. You should be able to ask a question if you take yourself off mute. Frank, have you gone?

Just a question around the 3D seismic. What's the timing on that? And is there an ability with that to look at the deeper structures as well as the structure sort of a more shallow?

Our 3D seismic plan was part of the forward work program to kick off shortly. I have put a delay to that because what we're going to do with the next stage is the funding has to come from third-party sources, and everybody wants to see some production and earnings to get this business model in Cuba self-sustaining before we started spending on more exploration work. And I know my exploration manager would squirm to hear me say that because the 3D seismic is an essential way to not only optimally position the additional Unit 1B wells beep on next year, but yes, it is going to be valuable for not only positioning those wells and lateral wells in the forward plan down the road in the upper sheet, but also to give us better understanding of the subsurface in the deeper sheets. Geos have had to do everything they've done based on a number of vintages of 2D seismic, which, in heavily folded geologies, is even more complicated than it would be otherwise. They've done a great job, but we need to give them the tools that they know how to really get the most out of.

When it does go ahead, will we get a view of the structures further to the, what is it, eastern block down as well, where we were -- the part of where we?

Yes. Not quite as far as [indiscernible]. The area of interest is more to the north, west and south of the pad where we're at the moment because those have more immediate understanding and greater appeal to us in the short term.

Now Andrew Forsyth, I've taken you off mute. So you should be able to take yourself off mute and ask a question if you want to. Andrew Forsyth, you're off mute and you can ask your question to Andrew and Chris, if you like.

Thanks for the update, Andrew. Just one question, do you have an understanding of when the net growth piece should come out for Marti/Alameda?

I think that's work that will come out as part of the natural course of the interpretation of the logs we've just received, Andrew. It normally takes months by the time the guys do all their work and analysis and then we present it to our partners, et cetera. And it's ultimately not as high priority for me -- for them at the moment as what we're doing in the production in the upper sheet and the understanding of what went wrong in Alameda-3 to come up with a remediation plan.

And also, just wondering, so the first consignment of oil is being sent out. How much ore do you want to send out the first time because obviously...

Less. Yes, that depends. I want to get a shipment out. It doesn't matter how large it is at a minimum size to fill a postal tanker that [ applied ] the waters of the Caribbean. So 5,000, 10,000 barrels of that order is enough to send to a refinery to allow them to do what they do and us to demonstrate the commercial chain and for them to properly analyze the use of the oil.

And therefore, the plan is to then announce commerciality after that point? Or just wait on seeing how that goes makes sense?

No, that won't be the final decision point for us for commerciality. For us, it's demonstrating more than 1 producing well, I think is an important [ that we will ] in addition to establishing that oil sales pathway.

And again confirming, have the extra drill pad been confirmed? Have they been approved in that sense?

No, they have begun to be approved. We've got a number of them. We don't need them all approved at once, obviously. But the first ones, the first priorities, they've received their initial approvals for us to start construction. And the rest are at different stages of approvals. But approvals in Cuba is like clockwork. It's not like Australia. The process takes a statutory amount of time when you work through the process in that time and you can put it into your [ slide rule ] and it pops out when you need it.

A couple of more submitted questions, then we'll go back to the floor. How are you transporting the oil from A to B? And is CUPET coming to the party on required infrastructure?

And additionally, we're tracking. That's -- we're very lucky to be close to the oil terminal. It's sealed roads all the way, as I said. There's trucking contractors as well as the national oil company available to us. It's minimal infrastructure required from us. They pick it up on our site and drive it to the terminal. They dump it into the tanks and CUPET have definitely committed to the party by providing available storage tanks for us to use, dedicated storage tanks with flow connections to the port from the tanks, access to the pipelines, to the processing facilities at the battery, it's a sheer pleasure to be working in this country with such a regulator.

And so what is the plan for the sheer at 1 rig over the next 6 months?

They really -- we've believed it now to get it off the pad, so we can do our production. They've gone up to drill a gas well, another gas well for their plant. Their gas plant near to the west of Varadero, that's a 30-day program for them, and then the rig is available again as early as late September.

Thanks, Andrew. We'll go back to the floor. Andrew Scott, I've just taken you off mute. If you want to ask a question of Andrew and Chris, please take yourself off mute and do so.

Can you just tell me what's on offer to the potential farminees? And is there an offer from the JV that is the way it's structured? And flowing from that, how do you see your position in terms of financial liabilities through to the point where you start to receive sustainable cash flows coming in?

[ High met ] deals can be structured in more ways and you and I have had a hot breakfast. But what we're looking for is the attraction to the partner where we have got to by getting a 50-odd million barrel contingent resource award, that's as close as you get to having reserves with the missing bit being the financing of the field, and that's the bit we're asking farminees to solve. You've got an existing oil business in many countries, and there's examples across Latin America. You've got infrastructure for producing oil and experience doing so. We could benefit from that experience in building the oilfield. Here is a 50 million-barrel discovery ready to be developed. We derisked it. You come in and you pay for the field's development, and we'll negotiate you having a percentage interest in the field.

So that's you negotiating or you and Sonangol negotiating?

We're negotiating as operator on behalf of the Block 9 in debtors, ourselves and Sonangol. As I said before, everything we do, we talk very closely with our partners because they have a lot of experience, and so it's a great benefit to us to get their input.

Now Tony Camilleri, I've just unmuted you. If you want to ask a question of Andrew and Chris McKeown, you can have you. Tony, have we got you? Tony, you are live on the webinar. We must be having some issues with Tony. We could hear you, but we couldn't quite get you across. Now Dan Pickering has offered to -- offer a question for Andrew and Chris. Dan, I've just taken you off mute if you wanted to ask a question.

I was just wondering, do you take [ white line ] pressures across both Alameda and Marti, and were they got a consistent gradient across each zone?

Chris, that's your question.

Yes. Well, what I'd say is we definitely did all the logging that we've needed to do. In terms of actually analysis, that's something we're working on.

Thanks, Chris. We'll go back to the submitted questions to finish off. We've got a few more to get through as well as some more questions from the floor. Now, Andrew, where are we at on an oil sell contract?

Chris, they want to address you.

Yes, it's a little bit of love for me. It's been an excellent experience and that we're getting some oil samples that we've had as assay. So we've got that undertaken that shows the type of API of the oil, the sulfur content of the oil, the acid content of the oil and the metals in the oil. And essentially, this is a crude it's attractive regionally and globally. There's quite a lot of desire for these crudes across Latin America and Europe and also in Asia. And that's something that the first step was to get the assay done. And then we've been talking to oil traders about the attractiveness of this crude. And as I said, it is attractive to them. And the scale of this project is of significance. As Andrew mentioned, we've got 48 million barrels to see, and not to ignore the 90 million barrels perspective as well and the other units that we just announced this morning, we've got 32 million barrels in other reservoirs in the Structure 2. So this is a sizable project for them. And so we're at that kind of term sheet stage with traders and working through the process of coming to landing and some of the agreements with that. And also looking at the ways of working with the traders about things like a structured finance. Again, this is something that these groups have got extreme experience and they've done it a lot of times around the planet. And yes, so we're getting close.

Thanks, Chris. When will you be issued with the production license?

When we ask for it. When we asked for it when we presented plan, that's acceptable to the regulators. But that's what we did a couple of months ago here in Cuba. We had workshops for a week, firstly, with our partners, [indiscernible] partners. Sent across a large delegation for a week of presentations by myself and my colleagues from Australia on the development plan. That was then socialized with the regulator, incorporating comments from our partners in anticipation of presenting the request or a -- well, you call it a production license, we don't need any such thing under a PSC or we do need to do with the sale of the regulator. We think we have this now. We think there's oil that we can produce and we'd like your permission to produce it in this way. And that was something we were planning to do this month while I was here. But with the results of Alameda-3, we'll just take our foot off the accelerator a bit there and get more studies going on what happened in Alameda-3. And probably the decision point for that now is once we get the next well into Unit 1B, having 2 wells producing is, for me, in addition to the commercial offtake arrangements that we want to see the oil sold, I think they're the last things that to go into a financial and a final investment decision.

Thanks, Andrew. We'll just go to the floor for 1 last time for the webinar. James Karakatsanis, I've just unmuted you. So if you want to take yourself off mute and you can address a question to Andrew and Chris.

The Phase I Unit 1B development wells, the 7 proposed there, what's your confidence in that resource coming in as expected given that if I'm looking at Slide 13, it looks like some of those well pads are spread across different structures.

And they're all on the same structure. They're all connected, at least it's the same connection of oil, even if the structures have different highs or lows. So that Unit 1B is being drained from different positions in the warm structure. And for the confidence side of things, it's the highest confidence we have relative to everything we're doing. Given this is how, as I've said, CUPET has been producing oil for its entire history from these upper sheets. They're easier to drill. They're uncomplicated. We've done it now several times. And every time we've had the same results drilling down to these upper sheets. So there's reason to believe without allowing our friend, Mr. Murphy, to hear what we're saying to each other that this is going to be the lowest risk of anything we're doing in Cuba.

And let's just say everything goes to plan with those development miles, you get the finance, you're sort of up and running, what's the project economics look like just on a high level in terms of free cash flow?

Well, there's a couple of analysts that have done all this work. I don't know if you have access to some of those brokerage firms, they packed resources very kindly. There's some researchers at Petro Capital. The economics are very compelling for 2 reasons. One is that there is very little infrastructure requirement, and therefore, the cost of production is first quartile, very low local standards. And the second is that the quality of the oil, like Chris said, is in demand. And so that being buoyant global oil prices with a very low cost of production. And I would overlay 1 additional variable there is that the fiscal terms of the PSC in Cuba are also very generous in that they allow us as a priority to use a large percentage of initial oil revenues to repay ourselves past costs as well to give us enhanced care of early production. So without getting into [ some of the ] numbers here, they're compelling. I mean economics are compelling.

And sorry, just 1 last question. What's your biggest concern or risk do you see with this development going forward?

Well, the unknown is always the biggest risk and that's why we take a lot of time planning and thinking and benefiting from experience. But we're now a very experienced operator in Cuba. And we've been here in a number of years and have done a lot of wells. Our drilling contract has been here for a decade and produced 200 million barrels in that time and has all that accumulated experience in-house. We have a regulator that's supportive. It's a resource project at the end of the day and it's like any project. Things go wrong, but I think this is the lowest risk way to commercialization that we have come up with for Unit 1B in Cuba, and I'm confident we'll deliver.

Fantastic, Andrew. Well, we'll finish off with a couple of corporate questions as well. We're running short on time. Are Sonangol still in it for the long term?

I have no reason to believe they're not. They spend a lot of money and it would be most unusual for someone to want to walk away from a 50 million-barrel discovery.

And is it capital raised now inevitable after Marti and Alameda failed to flow?

No, no, no. We're not doing a capital raise. We -- you see from our quarterly, we put out today that we've got $12 million of corporate cash. So as an organization, we're well funded for years. When we're going to get somebody else to pay for the next stage of the work program, we'll do bits and pieces within our means -- on Sonangol and ourselves, but our objective has got some -- we've done the heavy lifting. We've derisked this project. We found 50 million barrels. People are looking for oil everywhere more than they ever were in the last 5 years. The whole pendulum has swung back to fossil fuels given all of the other initiatives are taking longer and costing more than what people expected. People are looking for it aggressively. And so getting someone else to pay for the future work program is our job and one that we're going to deliver. We're not going to pay for it ourselves.

So what's the company's actual cash position? And can you explain to the listeners like we're 2 years old, how are the mechanics of the Sonangol arrangement works?

The cash position we released today, on June 30, we had about $12 million. The arrangement with Sonangol is we're partners. They're 70% partner, we're a 30% partner and we're the operator. So we come up with a plan, we presented to them. Once it's agreed, they pay 70%, we pay 30%.

I think that satisfies the 2 years old criteria for that question, Andrew. Thank you. Two more to finish.

That's [indiscernible] someone else to pay for it all.

Is the category outstanding cash calls from the JV partner in the quarterly report money that Sonangol owes, or is this a debt facility? And how far behind is Sonangol with the JV contributions to Melbana?

[ They're probably -- it's ] not a debt facility. They are amount called on our partner under the approved budget. And Sonangol is reasonably up to date. I think, at the moment, I haven't got my CFO on the call, but I think they -- the position they owed as of 31 March was about $30 million. We received $20 million from them during the quarter. We made some more calls, and I think, quarterly today has the position at about $27 million, which is most -- all of I think now, all of the remaining funds needed for the completion of the last well.

Thanks, Andrew. And one final question. When do you expect updated resource figures for the Amistad formation?

We had 1A resource figures received from our certifier recently and we put them in today's quarterly with an additional, what was it, Chris, 32 million barrels of perspective -- 32 million barrels of perspective oil, just Unit 1A. So there's a lot of oil up there and there's upper unit.

Thanks, Andrew. Look, that's all the time we have today. Thank you all for joining me. I would also like to thank Andrew and Chris for presenting and taking the time to answer some questions. Thank you all for the high level of questions. We were [ inundated ] with questions today. And apologies if we didn't get to your question, but it shows the high level of engagement amongst Melbana shareholders. As I mentioned before, a recording of the webinar will be on Melbana's website and social media platforms later today. Andrew, Chris, before I let you go, do you have any final comments to leave with us today?

Yes. I know there's a lot of disappointment out there. But what we're doing in Cuba is uncharted territory in these deeper reservoirs. Remember that I'm on the same page as all of you. I am a big shareholder in this company, too. So everything I do and everything I have my group of exports around me do is completely aligned with all of you. So trust us, we're committed to getting the results we need and we're not stopping until we get there.

Fantastic. That wraps it up for us here. Thank you, everyone. Have a great day.