• Independent Reserves Expert McDaniel & Associates completes prospectivity assessment of Block 9 in Cuba and Beehive Prospect in Australia
• Block 9 best estimate Oil In Place increased by 24% to more than 15.7 billion barrels of oil and recoverable Prospective Resources increased by 13% to 718 million barrels of oil
• Underexplored Block 9 onshore acreage provides opportunity for a significant discovery
• Beehive best estimate Prospective Resources assessed as 388 million barrels of oil equivalent with 25% improvement in Chance of Success

Melbana Energy Limited provides the following update on the resource assessment for Cuba Block 9 (Melbana 100% and operator) and Beehive Prospect located offshore Australia in WA-488-P (Melbana 100%1 and operator).

Independent expert McDaniel & Associates (Canada), who have significant Cuban experience certifying reserves for TSX listed Sherritt have completed their independent assessment of prospective resources in Block 9 and the Beehive Prospect in Australia.

For Block 9, the assessment identifies an increase in best estimate Oil in Place of 24% to more than 15.7 billion barrels and an increase of recoverable Prospective Resources of 13% to 718 million barrels of oil equivalent from three prospects and 16 leads. The assessment includes a 17% increase in the aggregate of best estimate prospective resources to 236 million barrels of oil from the four targeted objectives contained within Melbana’s preferred initial two well program of Alameda and Zapato.

The assessment also confirmed the giant potential of the Beehive Prospect, with best estimate Prospective Resources of 388 million barrels of oil equivalent with a significant improvement in Chance of Success to 20% (from 16%).

Melbana Energy’s CEO, Robert Zammit, said:
“The independent assessment by McDaniel & Associates has confirmed the world class prospective resources in Block 9 with a best estimate of 718 million barrels, which in our view is unparalleled globally in terms of onshore prospectivity coupled with the relatively low cost of exploration and the ability to turn discovery wells into producing wells compared to offshore opportunities . This report demonstrates the tremendous opportunity for Melbana to make a significant discovery in Cuba. We continue to focus on progressing our drilling readiness and the farmout of this premium acreage and look forward to updating shareholders of our progress as our commercial discussions progress.

Beehive has been confirmed as one of the largest oil prospects offshore Australia with a best estimate of 388 million barrels of oil equivalent and a high estimate of over 1.5 billion barrels. Importantly, the Independent Assessment has resulted in a significant improvement in the Chance of Success for Beehive.”

Overview of Block 9 PSC, Onshore Cuba

Block 9 PSC (Block 9) covers 2,380km² onshore of the north coast of Cuba. It is in a proven hydrocarbon system with multiple producing fields within close proximity, including the Majaguillar and San Anton fields immediately adjacent to it and the multi-billion barrel Varadero oil field further west. Block 9 contains the Motembo field, the first oil field discovered in Cuba. Melbana is prequalified as an onshore and shallow water operator in Cuba and was awarded Block 9 on 3 September, 2015. Melbana’s established position in Cuba provides it with a strong early mover advantage.

Alameda Prospect - highest ranked prospect in Block 9
The Alameda Prospect is currently the highest ranked exploration target in Block 9 PSC. Alameda is a large structure located in the western part of Block 9 and is in a similar structural position to the Varadero field, the largest oil field in Cuba, approximately 35km away.

The proposed Alameda-1 well which will test a combined exploration potential of over 2.5 billion barrels Oil-in-Place and 140 million barrels of recoverable oil of recoverable oil on a 100% unrisked, best estimate basis and 279 million recoverable barrels aggregate high side potential.

The primary objective at Alameda ranges in depth from approximately 3,000 to 3,700 meters. The presence of oil in the Alameda structure is supported by the Marti-5 well drilled within the prospect closure in a down flank position nearly 30 years ago and which recovered 24° API oil and had numerous oil shows extending over a 850 metre gross interval from the Lower Sheet section.

This exploration well has been designed as a mildly deviated well, with a total measured depth of 4,000m to enable the well to penetrate three independent exploration objectives; the primary Alameda objective as well as the shallower N and Amistad (formerly U1) objectives.

While characterised as an exploration well, the chance of success at Alameda-1 benefits from two old wells, Marti-2 and Marti-5, both of which recovered oil from Amistad/ U1 and Alameda objectives respectively. The Amistad/U1 objective is a structure indicated on seismic as being updip of the tested oil recoveries in the Marti-2 well. Alameda-1 is estimated to take approximately 80 days to drill. In the event of a discovery at Alameda there would be significant follow up potential, with a number of additional leads in close proximity.

Zapato Prospect
The proposed Zapato-1 well location is in the central portion of Block 9 and is designed to test a Lower Sheet closure in close proximity to the shallower Motembo oil field, which has historically produced a high quality light oil. The Zapato feature has a crest at approximately 2,000 metres and is a robust structure with nearly 1,000 metres of vertical relief.

Recently completed gravity and magnetic study commissioned by Melbana and undertaken by Cuba’s specialist technical laboratory CEINPET over the Zapato prospect has indicated a strong gravity and magnetic alignment with the structural interpretation Melbana’s technical team derived from seismic and surface data. This result is supportive of Melbana’s assessment of the prospectivity of Zapato as a large carbonate duplex structure along strike from the Motembo discovery which produced light 56oAPI oil.

Block 9 has high quality detailed pre-existing gravity and magnetic data sets. In the type of geology present in Cuba it is common to use a combination of seismic, magnetic and gravity data sets to define prospectivity.

Carbonate duplex structures such as Zapato are being targeted by Melbana due to their potential to contain Varadero style oil accumulations and are able to be identified using this technique by their combined gravity and magnetic response which differentiates them from low prospectivity intervals.

WA-488-P Background

Seismic Survey
The Beehive 3D Seismic Survey was operated by Australian energy company Santos pursuant to an Operations Services Agreement and is fully funded by French major Total and Santos. The Beehive 3D Seismic Survey acquisition area was approximately 600 km² with a larger operational area around it to allow for vessel turns and testing of equipment. The operational area is located in the Joseph Bonaparte Gulf, approximately 225 km west-southwest from Darwin 65 km from the closest land at Cape Domett (in Western Australia), and 60 km from Yelcher Beach in the Northern Territory. Water depths in the acquisition area ranged from approximately 30 to 50 m. The survey was a typical 3D survey using methods and procedures similar to others conducted in Australian waters.

Commercial
Total and Santos have an option (exercisable together or individually) to acquire a direct 80% participating interest in the permit in return for fully funding the costs of all activities until completion of the first well in the WA-488-P permit. Beehive is located close to several existing facilities including Ichthys project and Blacktip field and pipeline offering several options for future gas monetization. In the event of a commercial discovery, Melbana will repay carried funding from its share of cash flow from the Beehive field. Melbana will have no re-payment obligations for such carried funding in the event there is no commercial discovery and development in WA-488-P.

Technical
The Beehive prospect is potentially the largest undrilled hydrocarbon prospect in Australia. It is a Carboniferous age 180km² isolated carbonate build up with 400m of mapped vertical relief, analogous to the giant Tengiz field in the Caspian Basin. It is located in 40m water depth suitable for a jack up rig, within ~75km of shore and developable by either FPSO or pipeline to existing infrastructure. This play type is new and undrilled in the Bonaparte Basin with no wells having been drilled to this depth in the basin.

The carbonate reservoir is also interpreted to be the same age as the 2011 Ungani-1 oil discovery in the Canning basin, which tested at 1,600 bopd demonstrating a high quality reservoir. Beehive is a much larger build up than Ungani and has excellent access to the Lower Carboniferous source rock in adjacent depocentres.

Beehive is currently defined by a tight grid of 2D seismic data. The acquisition of the new 3D seismic survey over Beehive will provide potential for further de-risking of the prospect and facilitate consideration of a preferred location for the Beehive-1 exploration well.

The acquisition of a new 3D seismic survey over Beehive will provide potential for further de-risking of the prospect and will facilitate consideration of a preferred location for the Beehive-1 exploration well. Potentially the largest undrilled hydrocarbon prospect in Australia, the Beehive prospect is characterised as having significant prospective resources.