Ann: Cuba Block 9 Farmout, page-29

Also let's not forget the recently lodged presentation for the Santa Cruz IOR. Looking to lock in a long term contract within the next few months......potential for near term revenue. With Melbana getting into Cuba on the ground floor and building strong relations with the government and CUPET, could we see other leases/deals coming from left field? If AGMI take up the April drill slot this would coincide with Total/Santos's decision to drill Beehive, making for a big 2019......as a few have stated on the Cuba farmout, some clarity around terms of "profit oil" wouldn't go astray for investor confidence/understanding. However, from my experience with other companies, in a success case there will be set percentages of oil assigned to royalties, capex/opex and profit etc. We'd be recieving some form of revenue from day dot of production and depending on the life of the field and decline rate there's potential for profits to ramp up significantly in due course (all just speculation until the rotary lie detector starts spinning though). Whatever PSC terms were struck, time to production would be the same regardless.

I'm of the opinion this was a very good deal for MAY holders when considering all of the factors at play. We now carry zero risk and zero ongoing costs in Cuba, only potential for upside and possibly an income stream in the short term to keep paying the bills (and negate the need for future CR's)......then there's the Buzz around Beehive to come.

IMO RZ just put his first run on the board and I'll give him credit where credit is due, seems he's focused on building a near term income stream and lowering the carried risk, perhaps an approach many LT's here aren't used to but that's a great long game to play imo. The biggest hurdle for small cap oilers is getting to production, minimising downside risk while keeping enough leverage in assets for a decent return on success.....seems we're starting to find that balance. An option may have been to retain a bigger percentage of Block 9, however that would've required raising more capital for drilling/appraisal/production......more dilution. So essentially, the 12.5% "royalty" deal is in essence akin to retaining 30-40% of Block 9 anyway......it's a great deal when you look at the long term and consider this deal removes all risk going forward. Most cash strapped small cap oilers are lucky to retain a 2-5% royalty over producing fields.