CALGARY, April 17, 2015 /PRNewswire/ --
TSXV Trading Symbol: MVN
OTC Trading Symbol: MDLNF
Madalena Energy Inc. (TSXV: MVN) (the "Company" or "Madalena")
is pleased to provide selected financial and operational
information for the three months and year ended December 31, 2014.
Copies of the Company's consolidated financial statements for
the year ended December 31, 2014, the
related management's discussion and analysis and the Annual
Information Form (the "AIF") of the Company for the year ended
December 31, 2014 have been filed
with Canadian securities regulatory authorities and will be made
available under the Company's profile at http://www.sedar.com and
on the Company's website at http://www.madalenaenergy.com.
2014 HIGHLIGHTS
($CDN unless otherwise specified)
Highlights for 2014 included:
- The year was highlighted by the results of the accretive
acquisition made by Madalena in late June
2014 and successful horizontal drilling, both of which were
in Argentina;
- Oil and gas production averaged 4,075 boe/d (Q4-2013 - 1,271
boe/d) and 2,883 boe/d (2013 - 1,087 boe/d) for the fourth quarter
and year, respectively;
- Increase in proved plus probable reserves ("P+P") to 11.5
MMboe, which is primarily driven by the Company's conventional
assets. Net present value of these P+P reserves before tax,
discounted at 10% ("NPV@10%"), increased 297% to $199.4 million;
- P+P Reserves and P+P NPV@10% per common share have increased
72% and 168% respectively;
- Argentina operating netbacks
averaged $32.62/boe in the fourth
quarter (Q4-2013 - $29.28) with
regulated oil prices in Argentina
continuing to remain stable. The Medanito oil price posting for
April 2015 has been set at
US$ 76.00/Bbl compared to a Q1 - 2015
average of US$ 76.30/bbl;
- Funds flow from operations was $4.4
million (Q4-2013 - $1.5
million) and $17.7 million
(2013 -$3.9 million) for the fourth
quarter and year, respectively;
- Exited the year with a positive working capital position of
$11.8 million and no debt;
- Drilled, completed and placed on production two (35% WI)
Sierras Blancas light oil horizontal wells and one (35% WI)
vertical Vaca Muerta shale delineation well;
- Subsequent to the year end, drilled, completed and placed on
production one (35% WI) Sierras Blancas light oil horizontal well
and one Loma Montosa light oil horizontal well (100% WI); and
- Subsequent to year end and following a successful renegotiation
process, Madalena entered into a three year evaluation phase
contract at Coiron Amargo Sur - a key unconventional shale block
for the Company.
SUMMARY FINANCIAL AND OPERATIONAL RESULTS
Three months ended Year ended
December 31 December 31
2014 2013 2014 2013
Financial -
Canadian $000s,
except per share
amounts
Oil and gas
revenue 26,636 5,633 72,945 17,960
Funds flow from
operations[(1)] 4,352 1,493 17,721 3,920
Per share - basic
& diluted[(1)] 0.01 0.00 0.04 0.01
Net loss[(2)] (30,526) (20,529) (36,004) (23,287)
Per share - basic
and diluted[(2)] (0.07) (0.06) (0.08) (0.07)
Business
combinations - - 74,406 -
Capital
expenditures 13,282 13,098 40,537 43,296
Working capital 11,775 7,631 11,775 7,631
Equity
outstanding -
000s
Common shares 539,783 364,029 539,783 364,029
Stock options 25,880 19,530 25,880 19,530
Operating
Average Daily
Sales
Crude oil and
Ngls - Bbls/d 2,991 711 2,036 529
Natural gas -
Mcf/d 6,505 3,366 5,084 3,346
Total - boe /d 4,075 1,271 2,883 1,086
Average Sales
Prices
Crude oil and
Ngls - $/Bbl 87.69 69.50 85.79 72.95
Natural gas -
$/Mcf 4.50 3.52 4.97 3.18
Total - $/boe 71.05 48.16 69.33 45.28
Corporate
Operating
Netbacks[(3)]
$/boe 26.74 16.82 31.29 15.25
(1) This table contains the term "funds flow from operations",
which is a non-GAAP measure and should not be considered an
alternative to, or more meaningful than "cash flows from operating
activities" as determined in accordance with International Financial
Reporting Standards ("IFRS") as an indicator of the Company's
performance. Funds flow from operations and funds flow from
operations per share (basic and diluted) do not have any standardized
meanings prescribed by IFRS and may not be comparable with the
calculation of similar measures for other entities. Management uses
funds flow from operations to analyze operating performance and
considers funds flow from operations to be a key measure as it
demonstrates the Company's ability to generate the cash necessary to
fund future capital investment.
The reconciliation between funds flow from operations and cash
flows from operating activities can be found in "Management's
Discussion and Analysis". Funds flow from operations per share is
calculated using the basic and diluted weighted average number
of shares for the period, consistent with the calculations of
earnings per share.
(2) Includes an impairment charge on the Canadian assets in the
amount of $28.0 million for the three months ended December 31,
2014 (Q4 -2013 - $19.7 million) and $31.2 million for the year
ended December 31, 2014 (Year 2013 - $19.7 million).
(3) Operating netback is a non-GAAP measure calculated as the
average per boe of the Company's oil and gas sales, less
royalties and operating costs.
ARGENTINA OPERATIONS
UPDATE
Puesto Morales (100% WI) Field - Horizontal Drilling of Loma
Montosa Oil Resource Play
- As disclosed in a news release dated April 8, 2015, Madalena successfully drilled and
completed a Loma Montosa horizontal well with a 12 stage frac. The
well tested 860 boe/d and was tied into existing facilities on
April 10, 2015. The well is still
flowing up 5.5" casing with the first twelve days of production
averaging 381 bopd of oil and an estimated 1800 mcf/d of gas for a
total of 681 boe/d. The well is flowing at a wellhead pressure of
510 psi and a watercut of 45%.
- The Loma Montosa formation, with a depth of approximately 1350
meters, is characterized as a tight dolomite with average porosity
of 9 to 12% and permeability of 2 to 5 millidarcies. The vertical
wells offsetting the PMS-1135(h) horizontal have approximately 15
metres of net pay over a 26 metre gross interval.
- The Puesto Morales block is 100% covered with 3D seismic with
over 60 vertical penetrations drilled through the Loma Montosa
formation. Based on internal geological mapping, the Company
believes it has a large inventory of horizontal locations across
this scalable resource play.
Coiron Amargo (35% WI) Block - Block Contract Update &
Sierras Blancas Horizontal Exploitation
- The Coiron Amargo block (34,951 net acres) is divided into two
regions called Coiron Amargo Norte (northern portion of the block)
and Coiron Amargo Sur (southern portion of the block). Coiron
Amargo Norte is currently held under a 25 year exploitation
(development) concession until 2038 with no further firm
commitments remaining on this portion of the block.
- Following a successful block renegotiation process throughout
the second half of 2014 and into the first quarter of 2015, the
Company received approval on April 16,
2015, by way of an official decree signed by the Province of
Neuquén, for a three year evaluation phase contract on Coiron
Amargo Sur (south portion of the block). Coiron Amargo Sur is a key
unconventional shale block located in the heart of the oil window
for the Vaca Muerta shale and is a core asset within the Company's
portfolio. Madalena and its partners have until November 8, 2017 to further evaluate the southern
portion of the block. The Company's share of the work commitment is
US$17.5 million which is to be
incurred by November 8, 2017.
Following this three year evaluation phase contract, Madalena is
eligible to enter into a further exploitation (development)
concession and/or enter into additional evaluation phase periods to
further evaluate Coiron Amargo Sur.
- As disclosed in a news release dated April 8, 2015, the Company's fourth Sierras
Blancas horizontal well at Coiron Amargo Norte CAN-16h is now on
production. The average production over the first 28 days was 450
bopd of oil (158 bopd WI) and 700 mcf/d (245 mcf/d WI) for a total
of 567 boe/d (198 boe/d WI). The well is flowing at 1,378 psi with
a watercut of 15%.
CANADA OPERATIONS UPDATE
- As press released on January 30,
2015, Madalena was advised by Keyera Corp. ("Keyera")
that Keyera's Paddle River gas plant would be shut down for a
minimum period of two months commencing February 1, 2015 due to current economic
conditions and recent commodity price declines in North America. As a result of the gas plant
shut-down, Madalena temporarily suspended production of
approximately 660 boe/d in Western
Canada (40% oil) on February 1,
2015.
- As of April 1, 2015, the Company
was successful in restoring production of 140 boe/d (100%
oil).
- The Company along with Keyera has been evaluating various
alternatives to bring the remaining shut-in volumes (estimated 400
boe/d) in the Paddle River area back on-stream. Madalena expects to
restore the remainder of the Company's Western Canadian production
in the coming months.
- Subsequent to the year end, as a result of the Company
suspending its Canadian production, Madalena's Canadian credit
facility was reduced from $10 million
to $7 million, of which the maximum
draw is currently limited to $3.5
million. In addition to this credit facility, the Company's
acquisition/development demand loan credit facility remains
available to a maximum of $3 million.
Both the credit and acquisition/development facilities are subject
to a periodic review by the bank and the next review is scheduled
for June 30, 2015. To date, the
Company has not secured a credit facility against its Argentina assets which is where the majority
of the Company's production and reserves are located.
RATIONALIZING OF NON-CORE ASSETS AND JOINT VENTURE
OPPORTUNITIES
Madalena is committed to rationalizing select non-core properties
across its portfolio of assets, and in parallel with executing the
Company's 2015 drilling program, continues to actively seek joint
venture opportunities, which would permit it to accelerate the
exploration and development of its properties.
Regulated Argentina Oil AND GAS Price Market
- In Argentina, oil prices are
regulated and set by the Government for product sold into the
domestic oil market, which is where Madalena sells the oil from its
Argentine operations. When world prices fell sharply in the latter
half of 2014 and into 2015, Argentina prices continued to remain
relatively stable. The Medanito oil price posting for April 2015 has been set at US$ 76.00/Bbl compared to a Q1 2015 average of
US$ 76.30/bbl. Madalena's average
discount to this posting for quality and transportation is
approximately US$ 4.00/bbl.
- On February 2, 2015 the
Government of Argentina announced
a new oil incentive program. The program runs from January 1, 2015 to December 31, 2015 and could be extended for one
year. To stimulate production and to provide an additional
incentive to producers to invest further, the Government of
Argentina has set a US$ 3.00/Bbl royalty free bonus payment on all
production for companies which are able to keep their quarterly
production above 95% of its Q4-2014 production levels. For the
first quarter of 2015 Madalena believes it has qualified for this
incentive and is making the appropriate application to receive this
bonus payment on its Argentina
production.
- Natural gas prices in Argentina are fixed by the regulator in
US$/mmbtu. For Madalena's current producing fields, summer prices
have been set at US$ 4.10/mmbtu
October 2014 to April 2015. For the period May to September 2015 which is the Argentina winter, the price generally
increases. Last winter it was US$
5.20/mmbtu and Madalena expects to enter into a similar
contract as last year for the 2015 winter season.
CORPORATE UPDATE
Madalena announces with regret that Mr. Doug Brooks has tendered his resignation from
the Board of Directors. Mr. Brooks has recently accepted the
position of president and chief executive officer with a private,
U.S.-based oil and gas company. Mr. Brooks' employment terms
preclude him from serving on public company boards. Mr. Brooks
remains a strong supporter of Madalena. The Company would like to
thank him for his valuable contributions and wish him well in his
future endeavours. Steven Sharpe,
the Company's Chairman commented: "In the time that he was on our
Board, Doug made a meaningful contribution and was always available
to share his experience and insight. I will miss his wise
counsel."
2015 OUTLOOK
Madalena's current production is approximately 4,000 boe/d (79%
oil and NGL's) with 3,800 boe/d (80 % oil and NGL's) in
Argentina and 200 boe/d (55% oil
& NGL's) in Canada.
Over the last several months, Madalena has commenced
international operational planning related to the drilling of four
strategic resource plays in Argentina and continued horizontal development
of its light oil assets. The four strategic resource plays include
the Loma Montosa oil resource play, Vaca Muerta shale, Lower Agrio
shale, and liquids-rich Mulichinco gas resource play.
The Company has a new 45% WI partner (PlusPetrol) on the Coiron
Amargo Block. Madalena has been involved in numerous technical
meetings sharing information with the new partner and discussing
future plans related to Vaca Muerta shale and Sierras Blancas
development activities. The Company and its partners plan to drill
additional horizontal wells into the Seirras Blancas light oil
formation later in 2015 and in 2016. To date the Company has
drilled, completed and placed on production four successful
horizontals in the Sierras Blancas and has an inventory of
horizontal development wells identified on four main pools on the
northern portion of the block. Madalena and its partners are also
planning to execute the first horizontal multi stage frac on the
block in the Vaca Muerta shale (oil) and expect this to commence
late in 2015.
Madalena has recently executed a strategic data exchange with a
major E&P operator of a block offsetting Curamhuele. The
Company is using this information to plan its re-entry and testing
program of the Lower Agrio shale oil resource play. In particular
Madalena is completing detailed technical analysis on the hydraulic
fracture treatments completed on the Lower Agrio and the
corresponding production test results. The goal is to improve the
treatment design, cost and results. The Lower Agrio is
approximately 225 meters thick at Curamhuele. Concurrently with the
Lower Agrio re-entry operation, the Company intends to deepen and
complete the Mulichinco in another well at Curamhuele. The
Mulichinco is a liquids rich gas resource play (approximately 200
meters thick) comprising the fourth strategic resource the Company
intends to evaluate in 2015.
The Company is well positioned to achieve it stated goals and
objectives to advance four scalable resource plays in Argentina in 2015. With early success on the
Loma Montosa and activity commencing on the Lower Agrio and
Mulchinco over the next two quarters, 2015 will be the Company's
most active year in Argentina.
Madalena currently funds its capital program through existing
working capital and funds flow. As discussed above, to date the
Company has not established a credit facility in respect of its
Argentina assets. To further
enhance the Company's financial flexibility, Madalena is currently
investigating establishing a credit facility secured by its
Argentina assets.
About Madalena Energy
Madalena is an independent, Canadian-based Argentina focused, upstream oil and gas
company.
Madalena holds over 950,000 net acres in five provinces of
Argentina where it is focused on
the delineation of large shale and unconventional resources in the
Vaca Muerta shale, Lower Agrio shale, Loma Montosa oil play and the
Mulichinco liquids-rich gas play. The Company is implementing
horizontal drilling and completions technology to develop both its
conventional and resource plays.
Madalena trades on the TSX Venture Exchange under the symbol MVN
and on the OTC under the symbol MDLNF.
Reader Advisories
Forward Looking Information
The information in this news release contains certain
forward-looking statements. These statements relate to future
events or our future performance, in particular, but not limited
to, with respect to the characteristics of the properties held by
the Company, current and future test and production levels on
recently drilled wells, the strategic value and opportunities
available to Madalena and operational, business development and
financial plans, and opportunities and the ability of Madalena to
execute on such plans and opportunities. All statements other than
statements of historical fact may be forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "approximate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "would" and similar expressions. These
statements involve substantial known and unknown risks and
uncertainties, certain of which are beyond the Company's control,
including: the impact of general economic conditions; industry
conditions; changes in laws and regulations including the adoption
of new environmental laws and regulations and changes in how they
are interpreted and enforced; fluctuations in commodity prices and
foreign exchange and interest rates; stock market volatility and
market valuations; volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations;
uncertainties associated with estimating oil and natural gas
reserves; competition for, among other things, capital,
acquisitions, of reserves, undeveloped lands and skilled personnel;
incorrect assessments of the value of acquisitions; changes in
income tax laws or changes in tax laws and incentive programs
relating to the oil and gas industry; geological, technical,
drilling and processing problems and other difficulties in
producing petroleum reserves; and obtaining required approvals of
regulatory authorities. The Company's actual results, performance
or achievement could differ materially from those expressed
in, or implied by, such forward-looking statements and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur or, if any of them do, what benefits the Company will derive
from them. These statements are subject to certain risks and
uncertainties and may be based on assumptions that could cause
actual results to differ materially from those anticipated or
implied in the forward-looking statements. The forward-looking
statements in this news release are expressly qualified in their
entirety by this cautionary statement. Except as required by law,
the Company undertakes no obligation to publicly update or revise
any forward-looking statements. Investors are encouraged to review
and consider the additional risk factors set forth in the Company's
Annual Information Form, which is available on SEDAR
at http://www.sedar.com.
Meaning of Boe
The term "boe" or barrels of oil equivalent may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet of natural gas to one barrel of
oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Additionally,
given that the value ratio based on the current price of crude oil,
as compared to natural gas, is significantly different from the
energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may
be misleading as an indication of value.
Analogous Information
Certain information in this news release may constitute
"analogous information" as defined in National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities ("NI 51-101"),
including, but not limited to, information relating to areas,
assets, wells and/or operations that are in geographical proximity
to or believed to be on-trend with lands held by Madalena. Such
information has been obtained from public sources, government
sources, regulatory agencies or other industry participants.
Management of Madalena believes the information may be relevant to
help define the reservoir characteristics within lands on which
Madalena holds an interest and such information has been presented
to help demonstrate the basis for Madalena's business plans and
strategies. However, management cannot confirm whether such
analogous information has been prepared in accordance with NI
51-101 and the Canadian Oil and Gas Evaluation Handbook and
Madalena is unable to confirm that the analogous information was
prepared by a qualified reserves evaluator or auditor. Madalena has
no way of verifying the accuracy of such information. There is no
certainty that the results of the analogous information or inferred
thereby will be achieved by Madalena and such information should
not be construed as an estimate of future production levels or the
actual characteristics and quality Madalena's assets. Such
information is also not an estimate of the reserves or resources
attributable to lands held or to be held by Madalena and there is
no certainty that such information will prove to be analogous in
the future. The reader is cautioned that the data relied upon by
Madalena may be in error and/or may not be analogous to such lands
to be held by Madalena.
Initial Production Rates
Any references in this document to test rates, flow rates,
initial and/or final raw test or production rates, early
production, and/or "flush" production rates are useful in
confirming the presence of hydrocarbons, however, such rates are
not necessarily indicative of long-term performance or
of ultimate recovery. Such rates may also include recovered "load"
fluids used in well completion stimulation. Readers are cautioned
not to place reliance on such rates in calculating the aggregate
production for Madalena. In addition, certain Madalena properties
are unconventional resource plays which may be subject to high
initial decline rates. Such rates may be estimated based on other
third party estimates or limited data available at this time and
are not determinative of the rates at which such wells will
continue production and decline thereafter.
Drilling Locations
This press release refers to unbooked drilling locations.
Unbooked locations are internal estimates based on Madalena's
prospective acreage and an assumption as to the number of wells
that can be drilled per section based on industry practice and
internal review. Unbooked locations do not have attributed
reserves. Unbooked locations have been identified by management as
an estimation of our future drilling activities based on evaluation
of applicable geologic, seismic, engineering, production and
reserves information. There is no certainty that Madalena will
drill all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and gas
reserves or production. The drilling locations on which we actually
drill wells will ultimately depend upon the availability of
capital, regulatory approvals, access restrictions, oil and natural
gas prices, costs, actual drilling results, additional reservoir
information that is obtained and other factors. While certain of
the unbooked drilling locations have been derisked by drilling
existing wells in relative close proximity to such unbooked
drilling locations, some of other unbooked drilling locations are
farther away from existing wells where management has less
information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves or
production.
Neither the TSX Venture Exchange nor its Regulation Service
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
please contact: Kevin Shaw,
P.Eng, MBA, President and Chief Executive Officer, Madalena Energy
Inc., Phone: +1(403)-262-1901 (Ext. 230),
kdshaw@madalenaenergy.com; Thomas Love, CA, VP,
Finance and Chief Financial Officer, Madalena Energy Inc.,
Phone: +1(403)262-1901 (Ext. 227), tlove@madalenaenergy.com