CALGARY, Feb. 22, 2016 /CNW/ – Madalena Energy Inc. (“Madalena” or the “Company”) (TSXV: MVN and OTCQX: MDLNF) is pleased to announce the results of its independent reserve reports as at December 31, 2015.
On February 9, 2016, the Company announced the proposed sale of its non-core Canadian properties. The reserves for the Canadian properties are included for reference but the majority of the discussion and analysis in this news release is focused on the Company’s core business in Argentina, where Madalena holds over 950,000 net acres across 12 blocks.
Year End 2015 Reserves Highlights:
- Consolidated (Argentina and Canada) Proved plus Probable (“2P”) are 11,366 MBoe compared to 11,494 MBoe last year;
- Argentina Proved plus Probable (“2P”) reserves have increased 8% from 8,480 MBoe to 9,134 MBoe;
- Argentina 2P reserve replacement ratio was 158%;
- 2P BTax NPV 10%, which is primarily supported by the Company’s conventional assets, is $175,980,000 or $0.32/share and does not include any material value for the Company’s unconventional assets in the Vaca Muerta shale and Lower Agrio shale which are included in the independent resource evaluations; and
- Consolidated oil and liquids now account for 78% of the 2P reserves up from 72% last year.
Highlights of the Independent Resource Evaluation:
As disclosed in a news release dated November 4, 2015, the Company completed an independent assessment of its Contingent and Prospective Resources effective September 30, 2015, the results of which are summarized below:
- The Company initiated and conducted independent resource evaluations on three of its twelve blocks in Argentina;
- Best Estimate Contingent Resources attributed to the Vaca Muerta shale at the Coiron Amargo block of 91.5 MMBOE (152.4 MMBOE Unrisked);
- Best Estimate Contingent Resources on the Valle Morado block of 75.3 Bcf (Unrisked 117.1 Bcf);
- On the Curamhuele block, Lower Agrio shale Best Estimate Risked Prospective Resources of 99.4 MMBOE (Unrisked 365.4 MMBOE);
- Also on the Curamhuele block, Vaca Muerta shale Best Estimate Risked Prospective Resources of 92.6 MMBOE (Unrisked 1,157.1 MMBOE);
- Madalena’s Total Contingent Resources are 105.2 MMBOE (172.7 MMBOE Unrisked); and
- Madalena’s Total Prospective Resources are 192.0 MMBoe (1,522.5 MMBOE Unrisked).
The resource reports were prepared by Ryder Scott Company L.P. and GLJ Petroleum Consultants, independent qualified reserves evaluators, with an effective date of September 30, 2015 and in accordance with the National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) and the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook“). Readers are directed to the November 4, 2015 news release for additional details on the resource reports, including, without limitation, classifications of the most specific category of resources other than reserves in accordance with NI 51-101 and for the definitions of the various resource categories used herein.
The December 31, 2015 reserve report now includes 0.8 MMBOE of tight oil Probable Reserves related to the Vaca Muerta at Coiron Amargo.
There are no Proven or Probable reserves assigned to the Company’s February 16, 2016 announced sweet light oil Lower Agrio shale discovery at Curamhuele.
The reserve reports were prepared in accordance with the definitions, standards and procedures contained in NI 51-101 and the COGE Handbook by McDaniel & Associates Consultants Ltd. (“McDaniel Report”) for Canada and GLJ Petroleum Consultants (“GLJ Report”) for Argentina. The McDaniel Report and GLJ Report contain several cautionary statements that are required by NI 51-101 and the reserves information presented is subject to the contents of the full reports. Additional information on the Company’s reserves, as required by NI 51-101, will be filed prior to April 30, 2016 on SEDAR (www.sedar.com). The following tables summarize the Company’s reserve information as set out in the McDaniel Report and the GLJ Report:
Reserves Summary – Company working interest before royalties using forecasted prices as at December 31, 2015.
Light and |
||||
Medium Oil |
NGL’s |
Gas |
BOE 6:1 |
|
Mbbl |
Mbbl |
MMcf |
Mboe |
|
CANADA |
||||
Proven Developed Producing |
113 |
17 |
344 |
187 |
Proven Developed Non Producing |
120 |
53 |
1,311 |
391 |
Total Proven Developed |
232 |
70 |
1,655 |
578 |
Proven Undeveloped |
– |
– |
– |
– |
Total Proved |
232 |
70 |
1,655 |
578 |
Probable |
325 |
248 |
6,485 |
1,654 |
Total Proved + Probable |
557 |
318 |
8,140 |
2,232 |
ARGENTINA |
||||
Proven Developed Producing |
2,867 |
47 |
2,301 |
3,298 |
Proven Developed Non Producing |
525 |
1 |
186 |
557 |
Total Proven Developed |
3,392 |
48 |
2,487 |
3,855 |
Proven Undeveloped |
1,448 |
3 |
716 |
1,570 |
Total Proved |
4,840 |
51 |
3,203 |
5,425 |
Probable |
3,082 |
39 |
3,528 |
3,709 |
Total Proved + Probable |
7,922 |
90 |
6,731 |
9,134 |
CONSOLIDATED |
||||
Proven Developed Producing |
2,980 |
64 |
2,645 |
3,485 |
Proven Developed Non Producing |
645 |
54 |
1,497 |
948 |
Total Proven Developed |
3,625 |
118 |
4,142 |
4,433 |
Proven Undeveloped |
1,448 |
3 |
716 |
1,570 |
Total Proved |
5,073 |
121 |
4,858 |
6,003 |
Probable |
3,407 |
287 |
10,013 |
5,363 |
Total Proved + Probable |
8,480 |
408 |
14,871 |
11,366 |
Strong growth in Argentina reserves was offset by a reduction in Canadian reserves due primarily to economic factors.
The majority of the Proven Undeveloped reserves in Argentina are attributed to two (0.7 net) Sierras Blancas (light oil) conventional horizontal wells at Coiron Amargo and six (100% working interest) horizontal multi frac wells in the Loma Montosa resource play (light oil) at Puesto Morales. The remaining Proven Undeveloped and Proven Developed Non-producing reserves are from various recompletion projects at Coiron Amargo, Puesto Morales and Surubi in Argentina.
Probable reserves are attributed to six additional (100% working interest) horizontal multi frac wells at Puesto Morales in the Loma Montosa resource play (light oil) and three (1.05 net) wells at Coiron Amargo for Vaca Muerta shale (oil) horizontal multi frac re-entries. The Company and its partners intend to drill and complete a Vaca Muerta horizontal multi frac well at Coiron Amargo in 2016.
Summary of Net Present Values of Future Net Revenue(1)
Forecasted Prices and Costs(2)
Before Income Taxes, Discounted at (%/year)
As at December 31, 2015 |
|||
0% |
10% |
15% |
|
M$ |
M$ |
M$ |
|
CANADA |
|||
Proven Developed Producing |
236 |
424 |
446 |
Proven Developed Non Producing |
1,983 |
1,525 |
1,318 |
Total Proven Developed |
2,219 |
1,949 |
1,764 |
Proven Undeveloped |
– |
– |
– |
Total Proved |
2,219 |
1,949 |
1,764 |
Probable |
8,523 |
2,450 |
796 |
Total Proved + Probable |
10,742 |
4,399 |
2,560 |
ARGENTINA |
|||
Proven Developed Producing |
78,651 |
68,264 |
63,304 |
Proven Developed Non Producing |
23,229 |
15,567 |
13,049 |
Total Proven Developed |
101,880 |
83,831 |
76,353 |
Proven Undeveloped |
40,353 |
17,696 |
11,147 |
Total Proved |
142,233 |
101,527 |
87,500 |
Probable |
134,159 |
70,054 |
52,984 |
Total Proved + Probable |
276,392 |
171,581 |
140,484 |
CONSOLIDATED |
|||
Proven Developed Producing |
78,887 |
68,688 |
63,750 |
Proven Developed Non Producing |
25,212 |
17,092 |
14,367 |
Total Proven Developed |
104,099 |
85,780 |
78,117 |
Proven Undeveloped |
40,353 |
17,696 |
11,147 |
Total Proved |
144,452 |
103,476 |
89,264 |
Probable |
142,682 |
72,503 |
53,780 |
Total Proved + Probable |
287,134 |
175,980 |
143,044 |
1) |
It should not be assumed that the present value of estimated future net cash flows shown above are representative of the fair market value of the reserves. |
2) |
Based on McDaniel’s forecasted prices for Canada and GLJ’s forecasted prices for Argentina as of January 1, 2016. |
3) |
GLJ Report for Argentina was completed in US$ and has been converted to Canadian dollars based on the December 31, 2015 exchange rate of 1 CDN: 0.7225 US. |
4) |
Tables may not add due to rounding. |
The Argentina 2P NPV 10% declined slightly (7%) from last year’s 185 MM$ due to limited new drilling activity and a 13% decline in forecasted future oil prices in Argentina. The positive results from the wells drilled in Argentina in 2015 was the main factor for the increase in 2P reserves which offset most of the decline in forecasted future oil prices. Approximately 66% of the 1P NPV 10% is Developed Producing. Total Proved represents 59% of the 2P NPV 10%.
Summary of Forecasted Prices
The following table summarizes the forecasted benchmark prices for the McDaniel Report (Edmonton Light and Alberta AECO) and GLJ Report (Brent, Argentina crude and gas) as at December 31, 2015.
Edmonton |
Alberta |
Brent |
Argentina |
Argentina |
|
Light |
AECO CDN$ |
Crude |
Crude |
Gas US$ |
|
CDN$/bbl |
per mmbtu |
US$/bbl |
US$/bbl |
per mmbtu |
|
2016 |
56.60 |
2.70 |
45.00 |
67.50 |
4.50 |
2017 |
66.40 |
3.20 |
54.00 |
67.50 |
4.50 |
2018 |
72.80 |
3.55 |
61.00 |
67.50 |
4.59 |
2019 |
80.90 |
3.85 |
67.00 |
67.50 |
4.68 |
2020 |
83.20 |
3.95 |
73.00 |
67.50 |
4.78 |
2021 |
88.20 |
4.20 |
78.00 |
69.10 |
4.87 |
2022 |
93.30 |
4.45 |
83.00 |
73.85 |
4.97 |
2023 |
98.70 |
4.70 |
88.00 |
78.60 |
5.07 |
2024 |
100.70 |
4.80 |
91.39 |
81.82 |
5.17 |
2025 |
102.60 |
4.90 |
93.22 |
83.56 |
5.27 |
2026 |
104.70 |
5.00 |
95.08 |
85.23 |
5.38 |
thereafter |
+ 2%/yr |
+ 2%/yr |
+ 2%/yr |
+ 2%/yr |
+ 2%/yr |
Summary of Reserves and Resources
Proved plus Probable reserves, Best Estimate Contingent Resources and Best Estimate Prospective Resources, as set out in the independent evaluations described herein and in the Company’s November 4, 2015 news release, expressed in MMBoe are illustrated here.
Please see the Company’s November 4, 2016 news release for additional important information related to its resources.
Argentina Reserves Reconciliation
Proved |
Proved + Probable |
|||||
Mstb |
MMcf |
MBOE |
Mstb |
MMcf |
MBOE |
|
Opening Reserves |
4,463 |
4,131 |
5,152 |
7,071 |
8,459 |
8,480 |
Production |
(1,003) |
(1,415) |
(1,239) |
(1,003) |
(1,415) |
(1,240) |
Acquisition |
– |
– |
– |
– |
– |
– |
Additions |
800 |
189 |
832 |
1,817 |
258 |
1,860 |
Revisions |
631 |
298 |
681 |
129 |
(570) |
34 |
Closing |
4,891 |
3,203 |
5,425 |
8,013 |
6,732 |
9,134 |
Reserve Replacement Ratio |
122% |
153% |
1) |
Tables may not add due to rounding. |
2) |
Reserve Replacement Ratio is calculated as total reserve additions net of revisions (including acquisitions net of dispositions) divided by annual production. Madalena’s Argentina production averaged 3,394 Boe/d in 2015. |
Positive revisions (13%) on the Proved reserves were the result of better performance on the Surubi property and higher per well reserve bookings for the Loma Montosa undeveloped wells at Puesto Morales, partially offset by minor negative revisions at Coiron Amargo. Proved plus Probable reserve revisions were less than 0.5% as negative gas revisions at Puesto Morales due to high fuel gas usage was offset by positive oil revisions on other properties. In 2015, the Company participated in four wells (2.7 net) at 100% success rate. Reserve additions come primarily from new wells at Puesto Morales and Vaca Muerta shale horizontals at Coiron Amargo. Although the Curamhuele well was drilled in 2015 and the capital was spent in 2015, there were no reserves assigned in the reserve report for the Lower Agrio shale since the well test, on the recently announced oil exploration discovery, occurred after December 31, 2015.
Future Development Capital and Drilling Inventory
The following table summarizes the Future Development Capital (“FDC”) and the year over year change in the FDC for the Company’s Argentina properties for the 1P and 2P reserves in the GLJ Report:
Proved US MM$ |
Proved plus Probable US MM$ |
|||
Undiscounted |
Discounted 10% |
Undiscounted |
Discounted 10% |
|
2014 |
32.4 |
26.9 |
69.0 |
61.7 |
2015 |
43.2 |
37.7 |
92.7 |
79.4 |
Change |
10.8 |
10.8 |
23.7 |
17.7 |
The Company anticipates it can lower the FDC per well for all of its operations in Argentina as the country has recently reduced import restrictions allowing for better and more competitive access to services and due to economies of scale as the operation shifts to development drilling. Madalena will continue to implement North American drilling and completion techniques which are also expected to result in improved efficiency and reduced costs.
Given the nature of the resource plays (conventional and unconventional), the Company has a large inventory of drilling locations. The following table summarizes the drilling inventory that is contemplated in the GLJ Report as well as the Company’s current unbooked locations for select Argentina properties:
Proved |
Proved + Probable |
Unbooked |
Unbooked |
|
Net Wells |
Net Wells |
Gross Wells |
Net Wells |
|
Coiron Seirras Blancas |
0.7 |
0.7 |
4 |
1 |
Coiron Vaca Muerta |
1.1 |
514 |
180 |
|
Puesto Morales |
6.0 |
12.0 |
36 |
36 |
Other |
0.9 |
6 |
6 |
|
Curamhuele Lower Agrio |
570 |
513 |
||
Curamhuele Vaca Muerta |
150 |
135 |
||
Total |
6.7 |
14.7 |
1,280 |
871 |
1) |
See Reader Advisory at the end of this release for a discussion on Unbooked locations. |
2) |
Unbooked locations for Coiron Amargo Vaca Muerta are based on the GLJ Resource Report effective September 30, 2015 and represent four Hz multi frac wells every 640 acres in the mapped area. |
3) |
Unbooked locations for Curamhuele Lower Agrio are based on the GLJ Resource Report effective September 30, 2015 and represent eight Hz multi frac wells every 640 acres in the mapped area. |
4) |
Unbooked locations for Curamhuele Vaca Muerta are based on the Ryder Scott Resource Report effective September 30, 2015 and are based on an initial scoping study of 150 Hz multi frac wells. |
5) |
Unbooked locations for Puesto Morales are based on Madalena’s management mapped primary targets reflecting four Hz multi frac wells every 160 acres. |
Oil and Gas Pricing Update
Oil prices in the regulated domestic market in Argentina remain strong and above the Brent oil benchmark price. The Medanito posted price for the Company’s Argentina oil production is currently US$ 67.50/Bbl.
Natural Gas is also contracted until April 30 (end of Argentina summer) at US$ 4.20/MMbtu. The Company anticipates entering into a winter contract (May to October) in Argentina at a price of US$ 5.20/MMbtu or higher based on last year’s winter gas contract.
Health, Safety, Environment (“HSE”) and Corporate Social Responsibility (“CSR”)
Madalena has a comprehensive HSE management plan for its employees and all contractors. In 2015 the Company continued to see major improvements in its key performance benchmarking indicators. For the 625,000+ person hours worked, there was only one lost time incident for a contractor involved in a service rig operation. Also, in 2015 the Company recorded only one minor spill by a contractor trucking fluid on behalf of Madalena. The spill was promptly cleaned up with new contractor procedures implemented to prevent similar incidents from taking place in the future.
The Company is most proud of its CSR initiatives in Argentina. The Company is actively involved in supporting the communities in which it operates, through a number of initiatives including local employment programs, access to health care and improvement in the quality of services, education, water quality and technical assistance on sustainable agricultural production. In 2015 the Company was asked by the local authorities to share its CSR plans and help other area operators achieve similar results.
Conference Call for Interested Parties
Madalena will host a conference call to discuss the updated reserves report on Tuesday February 23, 2016 at 9:00 am MST (11:00 am EST). To participate in the conference call, please call:
1-888-390-0546 (toll free North America)
1-416-764-8688 (Toronto & International)
Conference ID: 19277837
An updated corporate presentation will be placed on the Company’s website.
About Madalena Energy
Madalena is an independent, Argentina focused, upstream oil and gas company.
Madalena holds over 950,000 net acres in four 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 OTCQX under the symbol MDLNF.