Melbana Energy Limited (ASX:MAY) Executive Chairman Andrew Purcell provides an update on the company's exploration wells, drilling program and financing.Melissa Darmawan:
Hello. Melissa Darmawan for the Finance News Network. Joining me from Melbana Energy (ASX:MAY)
is Executive Chairman Andrew Purcell. Andrew, welcome back, and nice to see you again.Andrew Purcell:
Thanks, Melissa. It's good to be back.Melissa Darmawan:
It's great to have you. For those tuning in for the first time, can you give us an overview of the company?Andrew Purcell:
Melbana Energy's an ASX-listed oil and gas explorer. We've been on the boards for more than two decades, and in that time had a number of large projects we've pursued. No different now. We have got a couple of big things on foot that are funded, happening, and the potential for value capitalisation of our share price in this high oil price environment is as good as it could have been.Melissa Darmawan:
Thanks, Andrew. Let's start off with Cuba. Give us an insight into the drilling activity, the oil quality and output figures.Andrew Purcell:
We've got two wells being drilled onshore Cuba that have finally begun. Last month, we started spinning the drill bit and immediately, almost immediately, we had got into oil shales of some significant interval, over 600 metres of it, and free-flowing oil. We weren't expecting it, that wasn't one of the targets that this first well was going to test, but we'll take it in any case, of course.
So, we are through that stage now, and we are about to continue drilling into the subsequent section, which will begin to test our primary targets of this first well. We had defined several prospects that together were about 130 million barrels of prospective resource, and we're 30 per cent of this drilling program. So, it's a very significant target we're going after. And we're greatly encouraged by the discovery, but also by the quality of the oil that we have been recovering to date. So, we're not at the commercial discovery announcement stage yet, but the program's off to a great start, and following this first well, we will immediately move on to a second well, which tests another great big target of 95 million barrels in what was proximate to a historic oil field of even lighter crude.
So, it's a very exciting drilling program. We are all funded. We have good partners. It's happening now. And all that's left for us to do is to have a bit of luck and deliver a good outcome for our patient shareholders, who deserve the success.Melissa Darmawan:
So what's happening back home in WA?Andrew Purcell:
Well, that's a whole other potential price catalyst for our shareholders. Earlier this year, we announced we sold our offshore permit in WA to an American oil and gas company out of Houston, a Fortune 500 company, and they are making a country entry to drill the Beehive prospect that we identified in that permit.
It is a carbonate buildup. It is an untried play type in Australia, but where these play types have been tried elsewhere in the world, and when they have worked, they've tended to work very big. So, we have an independent resource assessment done on the Beehive prospect. Best case estimate, about 400 million barrels of oil equivalent. The upper estimate is 1.4 billion barrels of oil equivalent.
So, we've done a transaction where we've sold the permit. We don't have to keep up with the spend on the drilling of the well. Our American friends are going to pay for all of that, do all of the drilling. We get some upfront cash. So, $7.5 million should be coming into our coffers in the not-too-distant future, we hope. And then, if they're successful in finding something with the well they will drill, our shareholders get a reward again in the form of a US$10 million payment for every 25 million barrels that may be produced in the permit area. So, it's a funded free kick at what might be a potentially massive prize coming up at the end of next year after this Cuban program runs through.Melissa Darmawan:
Thanks, Andrew. Let's take a look at financials. What's your funding position, and what were the results from your capital raising?Andrew Purcell:
Our funding position's good. You know, we did a capital raising recently to meet our share of the drilling budget remaining in Cuba. That was successfully closed September 10. It gives us all the money we need for the projected remaining costs in Cuba. And then we have this funding that we expect to receive from the sale of the Australian permit coming up shortly. That will be used for non-Cuban purposes. We're going to use that for our Australian projects and corporate overheads and business development. So, we're in a good position. No need to raise further funds for the foreseeable future.Melissa Darmawan:
And what's the outlook and strategy from here?Andrew Purcell:
Well, delivering on the two projects that we just discussed. We're an operator of the Cuban drilling program. That's a big responsibility, but it's also one that we welcome because it allows us to manage the program, its pace and its costs. And getting those two wells completed on budget is what's occupying my time and that of our team around me. And then, beyond that, adding more projects into the pipeline. We're heading into a very exciting time for energy projects, given where the oil price is and the gas prices are, and are likely to remain for the foreseeable future. So, we're very keen to get out there and do more business.Melissa Darmawan:
Andrew Purcell, thank you so much for the update. We look forward to hearing from you again.Andrew Purcell:
Thanks very much, Melissa.Ends