Melbana Secures Commitments for $4.5MM Placement

Melbana Energy Ltd. said Thursday it had secured firm commitments that would enable it to issue about 411.76 million shares at a price of AUD 0.017 per share for a total of AUD 7 million ($4.5 million) before costs.

Expected to be settled August 26, the capital raise will fund a drilling campaign onshore Cuba and “general corporate purposes”, according to regulatory filings by the Sydney-based oil and gas company.

The volume of new ordinary shares to be issued is within Melbana’s 15 percent placement capacity, the company said. “The placement shares will rank equally with existing company shares”, it added.

The placement price represents a 22.7 percent discount to the last closing price of its shares on the Australian Securities Exchange (ASX) on August 18. Melbana’s stock had been suspended August 19 and resumed Thursday at the company’s request.

“Each placement share will have one Attaching Option with an exercise price of AUD 0.02 (representing a 17.6 percent premium to the issue price) and expiring one year from the date of issue”, Melbana said. “One additional Bonus Option will be issued for every two Attaching Options exercised, with an exercise price of AUD 0.03 (representing a 76.5 percent premium to the issue price) and expiring three years from the date of issue”.

The issue of the options is subject to shareholder approval. “The company proposes seeking the listing of Attaching Options, subject to applicable ASX Listing rules”, Melbana said. “The Bonus Options will be unlisted”.

All Melbana directors agreed to buy into the placement for a total of AUD 120,000, also subject to shareholder consent.

Bell Potter Securities Ltd. and PAC Partners Securities Pty. Ltd. were joint lead managers for the placement. Dentons acted as legal advisor to Melbana.

Part of proceeds would be spent on drilling the Amistad-2 production well in Cuba’s Block 9, where Melbana is operator with a 30 percent stake and Sociedade Nacional de Combustiveis de Angola EP is partner with a 70 percent ownership.

Mobilization to the well is expected to start this weekend, while drilling is scheduled to start next month after delays. It would take about three weeks to reach the planned total depth of 1,125 meters (3,690.94 feet).

“The well would then be completed open-hole and tested through the production tubing. If successful, Amistad-2 would then be tied into a dedicated on-site production facility for long-term production”, Melbana said in a separate ASX announcement Thursday.

“Several logistical challenges have been encountered in recent months in Cuba, in part due to hurricane damage impacting port operations, but these are now largely resolved and the scheduling impact absorbed into the new schedule.

“The widely reported power outages in Cuba are also impacting local communities and industry. As a result, Melbana’s preferred drilling rig was once again redirected to drill a gas well to provide fuel for additional electricity generation, thereby resulting in a delay to the scheduled spud date for Amistad-2”.

Amistad-2 sits approximately 850 meters southwest of and 200 meters up-dip to the already producing Alameda-2.

“Production [at Alameda-2] is being maintained at a low rate to gather data about reservoir performance over the long run and to ensure no interference with Amistad-2”, Melbana added.

“More than 30,000 barrels of oil are now in storage. Additional production from Amistad-2 would accelerate the rate of build in crude inventory, allowing for bigger cargoes more frequently”.

Melbana said it had decided against trialing crude export from Cuba earlier this year due to port issues. “The impact of conflicts in other parts of the world on shipping rates also made the shipment of a relatively small cargo potentially uneconomic, which outweighed the advantages of testing the company’s operational and transactional plans for exporting oil and receiving payment”, it said.

“These conditions have now largely normalized and work has resumed towards an initial trial export before the end of the year when there is a sufficient volume of oil in storage to fill a larger vessel, which is expected to deliver improved unit economics.

“Proceeds from oil sales will be entirely applied towards the cost of approved Block 9 works”.

Block 9 spans 2,344 square kilometers (905.02 square miles) on the north coast of Cuba, 140 kilometers (86.99 miles) east of Havana and in trend with the multi-billion-barrel Varadero oilfield, according to Melbana.

A 2018 assessment by McDaniel & Associates declared 15.7 billion barrels best-estimate oil in place and 676 million barrels best-estimate prospective resource, according to Melbana. Last year Melbana announced a prospective resource of 90 million barrels after results from an appraisal well.

To contact the author, email jov.onsat@rigzone.com