Melbana Energy’s Block 9 project remains on care and maintenance after a partner default and US sanctions on CUPET, despite improved geological understanding from Amistad-2. The company ended FY2026 with $472,504 in cash and warned that additional funding is required to continue.
- $50.2 million net loss after a $35.7 million Block 9 impairment
- Amistad-2 intersected 169 metres of porous reservoir but recovered no oil
- Sonangol’s 70% interest is subject to assignment, pending Cuban approval
- $14.5 million partial repayment received after year-end
- Auditor flags material uncertainty over going concern
Block 9 impairment exposes Melbana’s funding fault line
Melbana Energy Limited (ASX:MAY) has written the accounting value of its flagship Cuba Block 9 asset down to nil, reported a $50.2 million loss and disclosed a material uncertainty over its ability to continue as a going concern. The annual report captures a project caught between technical promise and practical paralysis: Block 9 is on care and maintenance, its former funding partner has defaulted, and US sanctions on CUPET have constrained the banking, insurance and supply chains needed to operate.
The loss was dominated by a $35.7 million impairment of the Block 9 exploration and evaluation asset and a $10.8 million write-down of drilling materials and crude inventory. Melbana says the impairment is an assessment of recoverability at 30 June 2026, not a conclusion that the discovery lacks geological potential or that the company has decided to relinquish its interest. That distinction matters, although it does not remove the commercial problem: future appraisal and development now depend on fresh funding, regulatory certainty and a workable counterparty structure.
Amistad-2 delivered reservoir data, not production
Amistad-2 produced the year’s most useful technical result and its most frustrating operational outcome. The well intersected 169 metres of highly porous net reservoir, with logs indicating good reservoir quality and reasonable oil saturation. Flow testing confirmed high permeability, but recovered no oil; the final test instead produced water at an average rate of 1,220 barrels a day with minimal pressure drawdown.
Melbana’s revised interpretation places the well in a breached forelimb structure from which hydrocarbons may have migrated. New low-cost 2D seismic and LiDAR data helped shape that model and are expected to inform future well targeting, but the company acknowledges that further appraisal, funding and regulatory certainty are still required. Amistad-1 flowing oil naturally to surface when reopened provides a more encouraging data point, while Amistad-11 remains deferred rather than rescheduled.
Sonangol default leaves ownership and recovery unresolved
Sonangol failed to meet its Block 9 funding obligations, prompting Melbana to demobilise personnel and equipment and issue a notice of default. After the cure period expired, Sonangol was deemed to have withdrawn and its 70% participating interest was scheduled for assignment to Melbana. The transfer remains subject to Cuban regulatory approval, so the headline prospect of full ownership is not yet a completed transaction.
The balance sheet shows the other consequence of the default. Melbana carried $22.7 million in receivables from the former joint operation partner at year-end after recognising a $12.1 million allowance against the gross amount owed. It received $14.5 million in partial settlement after 30 June, but the payment did not resolve the outstanding claim. The company says it will continue pursuing recovery, while its forecasts do not assume recoveries until they are reasonably certain.
Sanctions have suspended operations even though Melbana is not designated
The US designation of CUPET as a Specially Designated National on 11 June 2026 created a separate obstacle from Sonangol’s funding failure. Melbana and its subsidiaries were not designated, and Australia does not maintain sanctions against Cuba, but the company says the designation materially reduced the willingness of banks, contractors, insurers and other counterparties to support Cuba-related activity. Melbana suspended direct financial, technical and administrative support to the Block 9 production sharing contract while it sought legal and regulatory guidance.
By year-end, activity had been reduced to maintaining well integrity, securing crude inventory and preserving the company’s position under the contract. A restart would require funding, an acceptable regulatory position, remobilisation of personnel and secure supplies of fuel and consumables. The company has engaged with the US Treasury’s Office of Foreign Assets Control, but says the timing and outcome of the process cannot currently be determined.
Australian portfolio offers optionality, not immediate cash flow
Melbana’s Australian assets remain a lower-cost source of future optionality, but none provides an immediate replacement for Block 9 production. AC/P70 carries unrisked gross best-estimate prospective resources of 2,857 billion cubic feet of gas and 78 million barrels of oil after updated geophysical work, while WA-544-P and NT/P87 include the Hudson prospect and are being marketed for farm-out. The company is also seeking partners for AC/P70 and retains interests in WA-552-P and the Tassie Shoal methanol and LNG projects.
Those projects are intended to be advanced through partnerships, asset sales or other structures that limit Melbana’s capital burden. The company’s operating cash outflow was $4.0 million during FY2026, while cash fell from $5.1 million to $472,504 over the year. Although the post-year-end payment materially improved short-term liquidity, management states that further funding will be needed before it can commit to new exploration or development expenditure.
Bottom Line?
The next decisive event is unlikely to be another geological result. It is whether Melbana can turn the partial Sonangol recovery, a possible 100% Block 9 interest and its Australian farm-out pipeline into enough funding and regulatory clearance to restart work.
Questions in the middle?
- Will Cuban regulators approve the transfer of Sonangol’s 70% Block 9 interest to Melbana?
- How much of the remaining Sonangol receivable can Melbana ultimately recover, and over what timeframe?
- Can the company secure a farm-out, asset sale or other funding source before its reduced cash base is exhausted?