Melbana Energy Limited Annual Report 2022

Drilling ahead then continued in November 2021, with some interruptions whilst awaiting the delivery of certain materials, to 2,592 mMD2, at which depth the decision was made to log the section and set casing. Oil and gas shows were subsequently encountered from 2,865 mMD to 2,971 mMD before drilling ahead through an effective seal into the N sheet (subsequently redesignated Alameda), at which point strong oil shows were observed at surface along with elevated gas readings. Drilling ahead continued in early February 2022 to 3,590mMD (3,420mTVD)3, at which depth a decision was made to call section total depth to preserve the oil found in this section. Wireline logging of this section showed extensive natural fracturing and high down hole pressures across a gross reservoir interval of 560mMD (495 mTVD) for an estimated net pay of 100mMD (88 mTVD). Drilling of the next section continued in early March 2022 into the I (now Marti) section, with strong oil shows and free oil and gas again being encountered at surface within the drilling mud system. Drilling paused at 3,769 mMD when a high-pressure zone was encountered, resulting in a strong influx of hydrocarbons into the wellbore. Once well control was re-established, drilling continued through continuous excellent oil shows to a total depth of 3,916 mMD when a further significant influx of oil and gas entered the well bore at higher pressure. Total depth was called at 3,916 mMD on 17 March 2022, despite not having reached the bottom of the potential reservoir section, as this was considered the prudent course of action. Logging operations were then run over the almost 300mMD gross interval encountered in this Marti section, resulting in an estimate of approximately 52 mTVD of net pay in aggregate across a logged gross reservoir interval of about 240 mTVD. An attempt to flow test this Marti section a little higher than the highest pressure zone encountered at the bottom of the well bore was commenced in mid-April 2022 but was unsuccessful due to further strong influx of oil into the well bore. A subsequent attempt to similarly repurpose an exploration well into a testing environment to conduct preliminary tests in the higher Alameda (previously N) structure proved similarly unsuccessful due to the high mud weight that had to be built up to contain the highly energised oil interval encountered in the deeper Marti structure. Alameda-1 was safely suspended in late April 2022 with the intention being to return to it to conduct properly planned flow tests following the completion of Zapato-1. Zapato-1 Zapato-1, the second exploration well of the two well Block 9 exploration drilling program, was spudded on 21 May 2022, Cuban time. Zapato-1 was located near the historic Motembo oil field (which was discovered in the late 19th century and reportedly contained at surface a very light oil of 50 – 64.5º API) and was designed to target a single formation estimated to commence at a depth of about 2,650 metres. The planned total depth for the well is 3,150metres. As of the end of the reporting period, drilling had progressed to a depth of 1,666 metres and was making slow but steady progress through the hard volcanics prognosed to exist above the target carbonate section. Block 9 ForwardWork Program The Company plans to appraise the oil-bearing intervals encountered whilst drilling Alameda-1 – the three units encountered in the upper sheet (Amistad units) and the two additional independent deeper oilbearing intervals (Alameda andMarti reservoirs) – commencing immediately upon completion of Zapato-1 (and depending on the results of that well and the receipt of necessary partner and regulatory approvals). Concept studies for the development of Block 9, in general, have also commenced. Cuba - Santa Cruz (Melbana 100%, subject to receiving final regulatory approvals) No material progress was made during the reporting period towards the receipt of final regulatory approval for the binding contract Melbana has entered into for the Santa Cruz oil field. The Santa Cruz oil field has produced at least 7.4 million barrels from 18 wells since its discovery in 2004. The Company notes that Cuba is subject to various sanctions imposed on it unilaterally by the United States of America (US). Although these sanctions are intended to only apply to US citizens and corporations, their indirect scope is effectively larger thereby requiring the Company to allow for their impact on operations in Cuba. Australian Operations WA-488-P (Melbana contingent cash and royalty interest) The sale of permit WA-488-P to EOG Resources Australia BlockWA-488 Pty Ltd (EOG Australia) was approved by the National Offshore Petroleum Titles Administrator on 22 November 2021. The Company announced on 24 November 2021 that it had received fromEOG Australia an initial payment of US$7.5 million in consideration for the sale. The Company is entitled to further payments fromEOG Australia totalling US$5.0million (subject to the purchaser making certain future elections with regards to the permit) and a royalty of US$10.0million for each 25 million barrels of oil equivalent in the event oil is produced from the permit area should the exploration well be a commercial success. Drilling of a well on the Beehive Prospect is planned for 2023, subject to rig availability and approval of the environmental programwhich EOG Australia has submitted to the regulator. The Company has no exposure to any future costs associated with this permit, including to the cost of drilling the exploration well. WA-544-P and NT/P87 (Melbana 100%) In November 2020 the Company was awarded petroleum exploration permits as a result of applications it had made under the Australian Government’s 2019 Offshore PetroleumExploration Acreage Release. These permits, designated as WA-544-P and NT/P87, were awarded for an initial period of six years each 2 metres, measured depth 3 metres, total vertical depth 9 Melbana Energy Limited Annual Report 2022