TSXV Trading Symbol: MVN
OTC Trading Symbol: MDLNF
CALGARY, May 29, 2014 /CNW/ - Madalena Energy Inc.
("Madalena" or the "Company") (TSXV: MVN and OTC:
MDLNF) is pleased to announce the filing on SEDAR of the
unaudited interim consolidated financial statements and related
Management's Discussion and Analysis ("MD&A") for the three
months ended March 31, 2014. Selected
financial and operational information is outlined below and should
be read in conjunction with Madalena's unaudited interim
consolidated financial statements and related MD&A which are
available for review under the Company's profile at www.sedar.com
and on the Company's website at www.madalenaenergy.com.
FIRST QUARTER 2014 HIGHLIGHTS AND OUTLOOK
- Current production is approximately 1,600 boe/d;
- Q1 - 2014 production averaged 1,141 boe/d, an increase of 31%
from Q1-2013;
- Operating netbacks averaged $29.61, an increase of 93% from Q1 -2013;
- Capital expenditures were $12.5
million or 26% of Madalena's $48
million 2014 capital budget. Expenditures for the balance of
the year will be directed to a combination of high impact
horizontal wells in the Sierras Blancas light oil play,
unconventional Vaca Muerta shale wells, re-entries for
unconventional reservoirs at Curamhuele and horizontal wells on the
Canadian assets. Funding will come from existing working capital,
cash flow, FX gains, and if necessary, the Company's existing
credit facility;
- At Coiron Amargo, Madalena and its partners have a drilling rig
scheduled to mobilize to the block in June
2014 to continue drilling a combination of high impact
horizontals and Vaca Muerta shale delineation wells;
- In Q1-2014, Madalena shot an approximately 75 square kilometer
3D seismic survey on the Curamhuele block. Processing and merging
of this data is currently underway and once finished, Madalena will
have coverage on the entire northern portion of the Curamhuele
block;
- Raised $23 million in
February 2014; and
- Exited the quarter with $19.5
million in working capital and unutilized credit facilities
of $13 million.
SUMMARY FINANCIAL AND OPERATIONAL RESULTS
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Three months
ended
March 31 |
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2014 |
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2013 |
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Financial - Canadian $000s,
except per share amounts |
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Oil and gas revenue |
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6,306 |
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3,609 |
Net income (loss) |
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297 |
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(2,320) |
Per share - basic and diluted |
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0.00 |
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(0.01) |
Capital expenditures |
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12,548 |
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16,975 |
Working capital |
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19,463 |
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12,364 |
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Equity outstanding - 000s |
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Common shares |
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396,886 |
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316,091 |
Stock options |
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19,530 |
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20,697 |
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Operating |
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Average Daily Production |
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Crude oil and condensate - Bbls/d |
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529 |
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316 |
Natural gas - Mcf/d |
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2,978 |
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2,677 |
NGLs - Bbls/d |
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114 |
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109 |
Total - boe /d(1) |
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1,141 |
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872 |
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Average Sales Prices |
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Crude oil and condensate - $/Bbl |
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85.02 |
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78.63 |
Natural gas - $/Mcf |
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5.84 |
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3.29 |
NGLs - $/Bbl |
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66.43 |
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58.79 |
Total - $/boe(1) |
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61.38 |
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45.99 |
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Operating Netbacks(2) |
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$/boe(1) |
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29.61 |
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15.37 |
(1) |
"boe/d" means barrels of oil equivalent ("boe") per day.
Refer to - "Reserves and
Other Oil and Gas Disclosure" in Advisory. |
(2) |
Operating netbacks is considered a non-GAAP term. Operating
netbacks are
calculated by subtracting royalties, transportation, and
operating costs from
revenues before other income. |
International Operations - Neuquén Basin,
Argentina
Coiron Amargo Block
- Industry activity in and around Madalena's Coiron Amargo block
(approximately 34,950 net acres), including developments in the
greater Loma La Lata and Loma
Campana areas, has seen a significant step change from
initial exploration and appraisal drilling in 2012 to an
accelerated exploitation / development phase in the unconventional
Vaca Muerta shale through 2013 and into 2014. Over 150 Vaca
Muerta shale wells have been drilled in and around this area and a
number of significant joint ventures (or other transactions) have
been announced over the last 14 months. These largely involve large
integrated exploration and production companies such as YPF,
Chevron, Shell, Total SA, Wintershall, Petrobras and others. YPF
and Chevron have announced a 140 well drilling program in 2014
targeting the Vaca Muerta shale to the west of Madalena's acreage
and they expect to increase production from the Vaca Muerta shale
in this area to approximately 80,000 bbls/d by 2017. Madalena's
Coiron Amargo block is strategically positioned within this area of
intense Vaca Muerta shale resource development and Madalena
continues to execute its business plan in this area.
- The Coiron Amargo block is divided into a North and South
region with active drill programs being executed in both areas.
Coiron Amargo Notre (the northern portion of the block) is
currently under a 25 year exploitation (development)
concession. The southern portion of the block, Coiron Amargo
Sur, is currently under an exploration contract which was extended
until November 8, 2014 by way of an
official decree signed by the Province of Neuquén in Argentina on November
12, 2013. Subsequent to November 8, 2014, Madalena has the ability to
extend Coiron Amargo Sur through further exploration, evaluation
and/or exploitation (development) phases.
- The focus of Madalena's business plan for the Coiron Amargo
block includes:
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i) |
Continue to advance the Company's Vaca Muerta shale activities
with a combination of new delineation wells and completion
techniques (stimulations and/or multi-stage fracs); |
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ii) |
Drill, complete, test and tie-in a number of high impact
horizontal wells targeting Vaca Muerta sourced light oil from the
Sierras Blancas reservoir; and |
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iii) |
Technically assess deep gas potential on the block in response
to offsetting industry activity. |
- Recently, the Company has intensified its focus on the Vaca
Muerta shale given the magnitude of the unconventional resource
across the Coiron Amargo block. The block is strategically
positioned within the Neuquén basin in the shallower portion of the
Vaca Muerta oil window. Industry activity continues to
increase offsetting the Coiron Amargo block where Madalena drilled
the CAS.x-14 and the CAS.x-15 vertical wells in Coiron Amargo Sur
for the Vaca Muerta shale in 2013. The CAS.x-14 and CAS.x-15
wells were drilled and cased encountering approximately 105 and 114
meters respectively of Vaca Muerta shale on logs. Completion
(stimulation work and/or multi-stage frac) activities on these
wells are expected to commence in Q2 - 2014.
- Madalena has implemented a balanced business strategy between
unconventional shale delineation and high impact horizontal
drilling. Accordingly, Madalena has successfully implemented North
American based horizontal technology and experience on the Coiron
Amargo block. The Company's first implementation of horizontal
technology internationally saw the CAN.xr-2(h) well re-entered,
drilled and completed horizontally in the Sierras Blancas light oil
reservoir which is a high deliverability conventional reservoir
sourced from the Vaca Muerta shale. The CAN.xr-2(h) well has now
been producing since late 2013 and has exceeded management's
expectations. Cumulative gross oil production for Q1-2014 was
approximately 62,500 barrels of oil or approximately or 700 bbls/d
(not including associated solution gas volumes). In early
April 2014, the well was tied into a
permanent pipeline system to the central plant and gas dehydration
and compressor facility and, accordingly, associated solution gas
volumes will be realized as sales in future quarters.
Madalena has a 35% working interest in the CAN.xr-2(h) well.
- Encouraged by the results of the CAN.xr-2(h) horizontal,
Madalena has commenced a multi-well horizontal drilling program for
2014. The CAN-15(h) well, in which the Company has a 35% working
interest, was recently drilled horizontally in the Sierras Blancas
light oil reservoir in the Coiron Amargo block to a total measured
depth of 3,750 meters with a horizontal lateral section of
approximately 692 meters in length. This well is the second
horizontal well drilled into the Sierras Blancas conventional light
oil reservoir on the Coiron Amargo block. The well was
subsequently cased and completed with a 4.5" slotted liner and a
multi-rate production test was carried out through temporary
production facilities. Throughout the multi-rate production test,
the CAN-15(h) well flowed without artificial lift equipment and was
tested for approximately 75 hours at various choke settings ranging
from 6 mm to 12 mm in size with the following flow rates observed
during the test:
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i) |
With the production test only being carried out on a portion of
the horizontal lateral section as planned, the highest rates were
achieved on a 12 mm choke setting, when the CAN-15(h) well was
flowed at a rate of 1,393 bbls/d of oil with 3,301 mcf/d of
associated natural gas for a total of 1,943 Boe/d (72% oil) over a
5 hour period and at an average flowing pressure of approximately
1,263 psi. |
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ii) |
On an 8mm choke setting, the CAN-15(h) well was flowed at a
rate of 745 bbls/d of oil with 1,990 mcf/d of associated natural
gas for a total of 1,077 Boe/d (69% oil) over a 29 hour period and
at an average flowing pressure of approximately 1,629 psi. |
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iii) |
During the test period of 75 hours, the total gross produced
cumulative volumes were approximately 2,553 barrels of oil and
approximately 7,210 mcf of natural gas, for a total of
approximately 3,754 barrels of oil equivalent (68% oil)
gross. No significant flowing pressure declines were
observed throughout the testing period and water cuts ranged from
0% to 3% throughout the test period. |
- Madalena and its partners have a drilling rig scheduled to
mobilize to the block in June 2014 to
continue drilling a combination of high impact horizontals and Vaca
Muerta shale delineation wells.
Curamhuele Block
- The greater El Trapial / Curamhuele region is an evolving area
within the Neuquén basin which is seeing increased exploration and
appraisal activity for unconventional shale plays and tight sand
reservoirs. Chevron has recently announced that a second focus area
for Chevron in the Vaca Muerta shales is the El Trapial block which
is adjacent and to the east of Madalena's 90% working interest
Curamhuele block. At El Trapial, Chevron is drilling and
testing four exploration wells in 2014 to further assess the
unconventional shale potential. Others, such as YPF are also
drilling on lands offsetting Madalena's Curamhuele block for
unconventional shale and tight sand plays.
- The primary zones of interest across the Curamhuele block are
the unconventional Vaca Muerta shale, Lower Agrio shale and liquids
rich Mulichinco sands. The block is also prospective for other
conventional reservoirs.
- To satisfy a portion of the 2014 block commitments, Madalena
has recently shot an approximately 75 square kilometer 3D seismic
survey at Curamhuele. Processing of this data is currently
underway. The Company plans to merge this newly acquired data with
the existing 125 square kilometer 3D survey on the block.
This will provide 3D seismic coverage on the entire northern
portion of the Curamhuele block.
- To satisfy the remaining 2014 block commitments, Madalena plans
to execute two high impact re-entries of the Yp.x-1001 and Ch.x-1
wellbores. Through these re-entries, Madalena plans to test an
estimated 200 meter thick tight Mulichinco sand liquids-rich gas
play and an estimated 225 meter thick oil zone in the Lower Agrio
shale (which is a second emerging unconventional shale play in
Argentina). In response to
offsetting industry activity, Madalena is also evaluating the Vaca
Muerta shale across the block.
- The Company continues to examine opportunities in respect of a
possible a joint venture or other transaction to accelerate
exploration and development activities on the block. RBC Capital
Markets, Madalena's exclusive advisor to its Neuquén basin assets,
is in communication with a broad spectrum of parties to solicit
interest in a joint venture or other transaction with the
Company.
Cortadera Block
- On January 15, 2014, the
Corporation announced that, on the Cortadera Block, the joint
venture partnership consisting of Apache Corporation, Gas y
Petroleo del Neuquén SA and Madalena had signed an amended contract
agreement to formalize a multi-year extension of the initial
exploration period and inclusion of subsequent exploration periods.
Subsequent to that agreement and following an application and
approval process, the first exploration period for Cortadera was
extended by way of an official decree which was signed by the
Province of Neuquén in Argentina.
This extension provides the partnership until October 26, 2014 to satisfy the remaining work
commitments on the block, which involves an upcoming re-entry of
the CorS.x-1 well. Under the amended agreement, and subsequent to
conducting the upcoming re-entry work, the partnership at Cortadera
has the option to enter into a second exploration period extending
to October 25, 2018 and a third
exploration period extending to October 25,
2021, or extend the Cortadera Block through potential
further evaluation and/or exploitation phases.
- Madalena and its new block partner YPF S.A. (acquired through
YPF's recent purchase of the Apache subsidiary in Argentina) plan to re-enter the previously
drilled CorS.x-1 Vaca Muerta test well to evaluate the uphole
Mulichinco tight sand play (or other zone of interest). Madalena
expects that its share of any costs for the work performed will not
be significant due to YPF's continued earning obligations which
include carrying Madalena for the majority of the anticipated
costs.
DOMESTIC OPERATIONS - Greater Paddle River Area,
Alberta,
Canada
- Domestically, Madalena's core area of operations is located in
the greater Paddle River area, where the Company holds
approximately 195 gross (153 net) sections of land (approximately
78% average working interest) in west-central Alberta that support light oil and
liquids-rich gas resource plays. Madalena entered the
domestic E&P space in November, 2012 and executed horizontal
drilling activity in 2013 with a focus of bringing increased
production and cash flow into the Company;
- Q1 - 2014 production from Madalena's Canadian based domestic
assets was 833 boe/d. Due to the installation of pumping units on
three of its four previously flowing producing oil wells, the
Company experienced significant temporary downtime during the
Quarter. All field work associated with the installation of these
pumping units has now been completed and production has been
restored and brought back online at these three locations.
With these pumping units now in place, Madalena is better
positioned to optimize its domestic production through the
remainder of 2014.
- On April 1, 2014 Madalena placed
its recently drilled Paddle River 12-31 horizontal Ostracod oil
well (100% WI) on production. The IP30 of the well was 212 boe/d
(75% oil and NGLs) which is consistent with management's
expectations. As part of Madalena's inventory of horizontal
Ostracod locations, the Company has a number of offsetting
development locations to the 12-31 Ostracod well;
- Madalena's domestic focus is to exploit its inventory of
horizontal development locations on its Ostracod oil,
Notikewin/Wilrich liquids-rich gas and other emerging oil and
liquids-rich gas resource plays in the area. Madalena also
holds more than 100 net sections (100% W.I.) which are prospective
for the Duvernay shale.
About Madalena - International and Domestic Assets
Madalena is an independent, Canadian-based,
domestic and international upstream oil and gas company whose main
business activities include exploration, development and production
of crude oil, natural gas liquids and natural gas.
Internationally, Madalena holds three large
blocks within the Neuquén basin in Argentina where it is focused on the
delineation of large petroleum in-place shale and unconventional
resources in the Vaca Muerta and Lower Agrio shales, in addition to
multiple tight sand plays. The Company is also implementing
horizontal drilling and completions technology to high impact
international plays and is currently focused on a conventional oil
play in the Sierras Blancas formation. Madalena holds approximately
132,200 net acres on the Coiron Amargo (34,950 net acres),
Curamhuele (50,600 net acres) and Cortadera (46,650 net acres)
blocks.
Domestically, Madalena's core area of operations
is located in the Greater Paddle River area of west-central
Alberta where the Company holds
approximately 195 gross (153 net) sections of land (approximately
78% average W.I.) encompassing light oil and liquids-rich gas
resource plays. Madalena's primary domestic focus is to exploit its
large inventory of horizontal drilling locations on its Ostracod
oil and emerging oil & liquids-rich gas resource plays.
Madalena trades on the TSX Venture Exchange
under the symbol MVN. Basic corporate information, recent news
releases and regularly updated corporate presentations are
available on the Company's website at www.madalenaenergy.com
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, including, without
limitation, with respect to the expected timing of closing for
certain financings, expected operational activities, including
drilling, completion, re-entry, evaluation and seismic activities,
and the timing thereof and matters pertaining to Madalena's efforts
to seek a joint venture partner for certain assets. 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. In particular, this news release
contains forward-looking statements pertaining to planned
operational activities to be conducted by the Company. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future. 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 www.sedar.com
Reserves and Other Oil and Gas
Disclosure
Any references in this news release to test
rates, flow rates, initial and/or final raw test or production
rates, early production, test volumes behind pipe 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, the Vaca Muerta shale is an unconventional resource play
which may be subject to high initial decline rates.
All calculations converting natural gas to
barrels of oil equivalent ("boe") have been made using a conversion
ratio of six thousand cubic feet (six "Mcf") of natural gas to one
barrel of oil, unless otherwise stated. The use of boe may be
misleading, particularly if used in isolation, as the conversion
ratio of six Mcf of natural gas to one barrel of oil is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. 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 on a 6:1
basis may be misleading as an indication of value.
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.
SOURCE Madalena Energy Inc.