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TSXV Trading Symbol: MVN
OTC Trading Symbol: MDLNF
CALGARY,
June 25, 2014 /CNW/ - Madalena
Energy Inc. ("Madalena" or the "Company")
(TSXV: MVN and OTC: MDLNF), is pleased to announce
that it has closed the acquisition (the "Acquisition") of
the Argentinean business unit of Gran Tierra Energy Inc. ("Gran
Tierra").
The Acquisition is highly accretive and includes
Proved and Probable ("2P") reserves of 6,513 Mboe at
December 31, 2013, estimated current
production of approximately 3,300 Boe/d (~78% oil), 11 exploration
and production blocks comprising approximately 890,000 net acres
and a fully functional independent business unit in Argentina, with an experienced technical and
operational team. The purchase price was US$63 million, payable in US$49 million cash and 29,831,537 common shares
of Madalena ("Common Shares") at a deemed issue price of
CDN$0.51 (US$0.469).
The Acquisition provides Madalena with a solid
platform for growth which more than triples the Company's
production base and significantly increases cash flow from its
Argentinean assets. Madalena's current corporate production
is estimated to be approximately 4,900 Boe/d (~72% oil and NGLs),
~80% of which is from Argentina.
Associated cash flow is expected to be reinvested into both high
impact conventional opportunities in Argentina and to accelerate the delineation of
the Company's unconventional shale and tight sand resources within
the Neuquén basin. Madalena now has a strong portfolio of
assets with exposure to a low decline stable production base, an
extensive inventory of low risk development drilling opportunities,
a seismically and technically defined conventional portfolio of
assets, and significant unconventional shale (Vaca Muerta, Lower
Agrio and Los Monos shales) and tight sand resources.
Madalena estimates annual cash flow from
operations of US$35 - US$45 million
over the next twelve months which is expected to provide the
Company with the ability, when combined with cash on hand and
available credit, to execute a US$50 - US$60
million capital program over the next 12 to 18 months while
maintaining a strong balance sheet. Madalena will provide
additional go-forward guidance in due course following
consideration of a consolidated budget by the Madalena board of
directors.
Acquisition Highlights
- Acquisition cost per flowing boe of approximately
US$19,091, based on current
estimated production of 3,300 Boe/d;
- Reserve life index of 5.41 years, based on current
estimated production and adjusted 2P reserves;
- Recycle ratio of approximately 2.1x, based on Q1-2014
operating property netbacks of US$33.93/Boe and acquisition costs of
approximately US$16.12/Boe;
- Key producing infrastructure, including batteries and
pipelines;
- Approximately 890,000 net acres of developed and
undeveloped land; and
- Lands have an average working interest of approximately
83%, and the net production acquired is more than 94%
operated.
The following is a summary of production, land
and reserves information that is relevant to Madalena, prior to,
and following, the Acquisition:
|
Madalena(1) |
Acquisition(2) |
Adjustments(3) |
Pro Forma |
Current
Production(6) |
|
|
|
Oil and NGLs (Bbl/d) |
960 |
2,610 |
- |
3,570 |
Gas (Mcf/d) |
3,840 |
4,150 |
- |
7,990 |
Boe (Boe/d) |
1,600 |
3,300 |
- |
4,900 |
Oil and NGLs (%) |
60 |
79 |
- |
72 |
Land (net acres) |
239,000 |
890,000 |
- |
1,129,000 |
RESERVES(4) |
|
|
|
|
Proved |
|
|
|
|
Oil and NGL (Mbbl) |
1,350 |
4,248 |
(612) |
4,986 |
Gas (MMcf) |
8,032 |
5,599 |
(510) |
13,121 |
MBOE (6:1) |
2,689 |
5,181 |
(697) |
7,173 |
Proved plus Probable |
|
|
|
|
Oil and NGLs (Mbbl) |
2,373 |
6,295 |
(900) |
7,768 |
Gas (MMcf) |
13,651 |
7,615 |
(900) |
20,366 |
MBOE (6:1) |
4,648 |
7,563 |
(1,050) |
11,161 |
|
|
|
|
|
Proved FDC(5)
(US$MM) |
20 |
46 |
(21) |
45 |
Proved plus Probable FDC
(US$MM) |
33 |
77 |
(35) |
75 |
|
|
|
|
|
Accretion Analysis |
Madalena |
Acquisition |
Pro Forma |
Accretion |
Diluted Shares (MM) |
413.5 |
127.9 |
541.4 |
- |
Proved Reserves
(Boe per MM Common Shares) |
6.5 |
40.5 |
13.3 |
104% |
2P Reserves
(Boe per MM Common Shares) |
11.2 |
59.1 |
20.6 |
83% |
Current Production
(Boe/d per MM Common Shares) |
3.9 |
25.8 |
9.1 |
134% |
Notes: |
1. |
Based on the independent reserve
reports of Madalena evaluating the crude oil, natural gas liquids
and natural gas reserves of the Company as at December 31, 2013
prepared by an independent reserves evaluator in accordance with
National Instrument 51‐101 ‐ Standards of Disclosure for Oil and
Gas Activities ("NI 51-101") and the COGE Handbook. |
2. |
Based on the independent reserve
reports of Gran Tierra evaluating the crude oil, natural gas
liquids and natural gas reserves of Gran Tierra as at December 31,
2013 prepared by an independent reserves evaluator in accordance
with NI 51-101 and the COGE Handbook. |
3. |
Adjustments to the acquisition
reserves were made pursuant to internal management estimates
conducted by a qualified reserves engineer. Adjustments
consisted of reduced PUD locations due to rescheduling or removal
of proven undeveloped and probable locations on the subject assets
and acreage consolidations. |
4. |
Reserves are "gross reserves", being
working interest share of reserves before the deduction of
royalties owned by others. |
5. |
"FDC" means future development
costs. Madalena converted to US$ at 0.92US/CDN. |
6. |
Based on field estimates. |
Rationale for the Acquisition
- Highly accretive on all metrics and more than triples the
Company's production base.
- Strong cash flow from the conventional asset bases that can be
directed towards accelerating development of Madalena's
unconventional shale oil and gas plays in Argentina.
- Strengthens Madalena's Argentinean operations by adding a fully
integrated professional and operating team "on the ground" in
Argentina.
- Enhances and improves the Company's flexibility regarding the
future delineation of, or transactions associated with, Madalena's
current unconventional shale assets in Argentina.
- Strategically positions Madalena as a strengthened and emerging
oil and gas producer.
- Improves Madalena's access to exploration and production
services in Argentina.
Advisors
Dundee Securities Ltd. has acted as financial
advisor to Madalena with respect to the Acquisition. RBC Capital
Markets has acted as strategic advisor to Madalena with respect to
the Acquisition.
Proa-3 Well Results on the Surubi Block in
Formosa Province, Argentina
The Surubi Block is located within the Noroeste
Basin of Argentina. Madalena
Energy has an 85% working interest and is the operator. Recursos y
Energia de Formosa S.A. retains the remaining 15% working
interest.
Gran Tierra recently drilled, completed, tested
and placed on-stream the Proa-3 development well. The well was
drilled to a depth of approximately 3,920 metres and encountered
oil in the Palmar Largo formation, as targeted. The well was
perforated in the Palmar Largo formation between the depths of
3,858.5 metres and 3,866.5 metres and was subsequently tested.
Following the perforating and initial clean-up
flow, bottomhole pressure gauges were set and the well was flow
tested on three increasing choke sizes of 10, 12 and 16mm for 8
hours each. Oil rates and flow pressures stabilized for each choke
setting at the following levels: 1,100 bbls/d oil at 505 psi, 1,240
bbls/d oil at 410 psi and 1,540 bbls/d at 300 psi, respectively.
The water cut was stable throughout the flow test at approximately
3%. The well was then shut-in to record pressure build-up. Pressure
gauges were subsequently recovered and the well was placed on
production on June 16, 2014.
The Proa-3 well is currently producing at gross rates of between
600 to 700 bbls/d of oil.
Oil production from the Proa-3 well has been
included in the total corporate production rates estimated above at
rates less than the test and initial production rates disclosed to
account for expected declines. The Company plans to manage
production from this well to maximize oil recovery from the Proa
Palmar Largo oil pool.
About Madalena - International and Domestic
Assets (Pre-Acquisition)
Madalena is an independent, Canadian-based,
international and domestic 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 14 large land
blocks within five provinces 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
conventional and resource plays.
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, in particular, but not
limited to, with respect to the Acquisition, including the
characteristics of the Argentinean business unit being acquired and
other expectations related thereto, including pro forma cash flow
and current and future production levels, the strategic value and
opportunities available to Madalena and the ability of
Madalena to execute its business plan following the completion of
the Acquisition. Statements relating to "reserves" are also deemed
to be forward looking statements, as they involve the implied
assessment, based on certain estimates and assumptions, that the
reserves described exist in the quantities predicted or estimated
and that the reserves can be profitably produced in the future. 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 operational
activities to be conducted by the Company. 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.
Non‐GAAP Measures
This document contains the term "cash flow"
and "net backs", which do not have a standardized meaning
prescribed by Canadian generally accepted accounting principles
("GAAP") and therefore may not be comparable with the calculation
of similar measures by other companies. Madalena uses cash flow and
net backs to analyze financial and operating performance. Madalena
feels this benchmark is a key measure of profitability for
Madalena. This term is commonly used in the oil and gas industry.
Cash flow is not intended to represent operating profits nor should
it be viewed as an alternative to cash flow provided by operating
activities, net earnings or other measures of financial performance
calculated in accordance with GAAP. Cash flows are calculated as
cash flows from operating activities less changes in non‐cash
working capital.
Information Regarding Disclosure on
Reserves
The reserve estimates contained herein are
estimates only and there is no guarantee that the estimated
reserves will be recovered. In relation to the disclosure of
estimates for individual properties, companies or business units,
as adjusted, such estimates may not reflect the same confidence
level as estimates of reserves and future net revenue for all
properties, due to the effects of aggregation.
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.
Initial Production Rates
Any references in this document to test
rates, flow rates, initial and/or final raw test or production
rates, early production, test volumes 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
rates referred to herein 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. Particular reference is
made to the Proa-3 results referred to herein. While Madalena is
very encouraged by the initial results from this well, the testing
information and the initial production information disclosed herein
should be considered preliminary and may not be indicative of the
well's long term performance.
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.
THE SECURITIES OFFERED HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS. THIS PRESS RELEASE SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL.
SOURCE Madalena Energy Inc.