MVN Q2 Results SummaryMadalena Energy released its second-quarter results last night.
The company held its investor conference call this morning.
First and foremost, Madalena is operationally solid, generating
$2.5mm EBITDA in the quarter, with increasing revenue and cash and decreasing OpEx and G&A.
Madalena is currently valued at ~
8x EBITDA (EV USD 90mm), giving
NO VALUE to the company’s massive reserves and resources, which are on the cusp of being exploited and beginning to produce.
Madalena has increased its netbacks (net profit per barrel),
from USD 5.95 to USD 15.42 to USD 24 over the past 3 quarters.
Management is looking to further reduce the company’s cost structure and to optimize existing production.
The company currently has more cash (USD 1.27m) than debt (USD 1.1m). And, has full access to capital through USD 23mm undrawn credit line.
Growth Unconventional Production
- Coiron Amargo Sur Este (CASE)- Madalena’s Net Contingent Resources (NCR) is USD 1.456bn (USD 2.67/share). An application has been submitted for a multi-decade concession (e.g. 35 yrs) and drilling plan. The company expects drilling and production will begin in 2H 2018 (fully funded by JV partner, Pan-American Energy). The company expects that the pilot program can achieve even further improved economics (longer laterals, ~2500 meters) than the current NCR assumes, leading to even more profitability.
- Curamhuele- Working on securing a JV partnership. In contrast to the CASE JV, Curamhuele is a “stacked” play, containing multiple drillable formations. Furthermore, the general level of market interest is much higher than when the CASE JV was marketed (improved energy markets). We expect that a JV will be announced within the next few months and that the headline numbers will be dramatic (up-front cash payment, breath of drilling program, etc.).
Conventional Production Growth - Madalena plans to drill for conventional natural gas in Coiron Amargo Norte (Lotena formation), with exploration to begin before year-end. Costs per well are in the USD 3-4mm range with an expected IRR at 40%.
- Actively and conservatively looking at acquisitions for existing conventional production, with a minimum target IRR of 35%
- Access to capital through USD 23mm undrawn line availability and through deep relationships with industry partners and creative financing structures
Argentine stock-listing - Targeted listing on the Argentine stock exchange (BYMA/MERVAL) is proceeding as expected
Forthcoming Catalysts With respect to the next few months, we expect the following flurry of positive catalysts, which will help move Madalena’s stock-price higher, toward our
USD 2/share target-price - details on and approval of pilot drilling plan for CASE
- stock listing and trading on the MERVAL (Argentina stock-exchange)
- details on resources and drilling program for Coiron Amargo Norte (Lotena formation; new conventional natural gas play)
- increased conventional production through asset purchases
- JV announcement relating to Curamhuele