AGMI is a Chinese company providing oilfield services and equipment both in China and internationally, with assets in excess of US$1 billion, oil production of 6,000 barrels/day and over 1000 employees.
The terms of the LOI state that AGMI will fully fund the drilling of a minimum of three exploration wells in Block 9, one on each of Melbana’s three highest ranked and high impact targets (Alameda, Zapato and Piedra) prior to July 2020, with two exploration wells to be drilled prior to November 2019.
Block 9 map showing location of key drilling targets
Melbana chief executive officer Robert Zammit said: “We are very pleased to have agreed LOI terms for the Block 9 farmout with AGMI where the minimum commitment to fully fund the drilling of our three preferred high impact prospects occurs at no further cost to Melbana shareholders.
“As AGMI proceeds with further activity in the block, Melbana will also be fully carried for all further activity and costs, including any appraisal, development, production costs and bank guarantee obligations while earning a 12.5% share of the profit oil under the Block 9 PSC and recovering its back costs of approximately US$3.5 million in the event of a commercial development.”
The farmout follows from the recently released prospective resource assessment of Block 9 by independent expert McDaniel & Associates Consultants, who have significant Cuban experience certifying reserves for Sherritt International (TSE:S).
McDaniel’s assessment identified a best estimate oil in place of 15.7 billion barrels and prospective resources of 718 million barrels of oil equivalent from three prospects and 16 leads.
Zammit added: “AGMI is prepared to commit significant resources to complete a drilling and development program in Cuba and has substantial experience operating onshore in multiple jurisdictions.
“We have a mutual understanding of the opportunity that Block 9 provides for significant oil discoveries and we look forward to finalizing a binding agreement late in the current quarter.”