Melbana Energy Limited (ASX: MAY) on 31 December 2018, announced its binding definitive farm-out agreement with Anhui Modestinner Energy Co., Ltd. (“AMEC”) which is the subsidiary unit of Anhui Guangda Mining Investment Co. Ltd. (“AGMI”) regarding the block nine production sharing contract in Cuba.
Under the binding farm-out agreement, AMEC is going to fund 100% in the Block 9 PSC from 1 January 2019 which includes the drilling of three oil wells. The company is expected to drill two wells by 01 November 2019 at Alameda and Zapato which are the preferred exploration targets of Melbana.
The third well is expected to get drilled before July 2020 that depends on the discovery from the previous two wells. The third well will an assessment well on Alameda or Zapato in case there is no discovery at the Piedra prospect. In return to this, Melbana is supposed to maintain 12.5% of profit oil. Melbana holds right to regain the cost involved in the Block 9 back from the cost oil proportionately.
Also, there are multiple terms and condition associated with the farmout agreement such as Cuban and Chinese regulatory approvals, the milestones which include any guarantees and finalization of the Joint Operating Agreement that is accepted by both the parties. The provisions given in the binding farm-out agreement gives operatorship to AMEC if it successfully meets all the terms and condition mentioned in the contract. Meanwhile, AMEC has plans to bring its rig to Cuba in early 2019 to complete the drilling program within the expected time frame.
The official listing date of Melbana is 27 March 1998, and the performance of the company is consistently negative. In 10 years, the performance of the company is -92.63%. The previous one-year performance of the company is 67.44%.
For the FY2018 which ended on 30 June 2018, the company made a net loss of $6.1 million. The balance sheet MAY appears healthy as the company maintains a net asset base of $6.695 million and a debt to equity ratio of 0.6. However, as a result of weak operating performance, there was an increase in the accumulated losses in FY2018. The company has a current asset worth $6.183 million and a total current liabilities of $4.006 million which states that the company will be able to manage the working capital needs and its short-term obligations. The total shareholder’s equity is worth $6.695 million.
By the end of the FY2018, the company has net cash and the cash equivalent worth $3.047 million. By the end of the trading on 2 January 2019, the closing price of the share was A$0.015 which is 0.001 points above its previous trading day’s closing price with the market capitalization of $26.26 million.
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