Madalena Energy (MVN-MDLNF) - Q3 resultsMadalena Energy released its third-quarter results on Wednesday..
The company held its investor conference call yesterday.
Madalena continues to operate very successfully within its current production base and under an avg realized crude price of $56/barrel during the quarter.
On a normalized basis, Madalena is generating
$10mm EBITDA annually (the company stated that the production drop reported in Q3 has already been recouped and is targeting $2.5mm EBITDA in Q4).
Madalena is currently valued at ~
8x EBITDA (EV USD 80mm), giving
NO VALUE to the company’s massive reserves and resources, which are on the cusp of being exploited and beginning to produce.
The company is looking forward to some BIG developments and catalysts over the next few months.
With operating free-cash-flow and access to additional capital (
e.g. full access to USD 23mm undrawn, convertible credit line from management), the company is very well positioned to grow massively (in production and in valuation) over the upcoming quarters.
Growth Unconventional Production
- Coiron Amargo Sur Este (CASE)- Madalena’s Net Contingent Resources (NCR) is USD 1.456bn (USD 2.67/share). In September, the company and its JV partner (Pan-American Energy; PAE) received a 35-year unconventional, development concession. Drilling and production will begin in 1Q 2019 (fully funded by PAE). 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 (natural gas and condensates). 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 - 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
- Madalena plans to drill for conventional natural gas in Coiron Amargo Norte (Lotena formation). Costs per well are in the USD 3-4mm range with an expected IRR at 40%. Moreover, in CAN, there is Vaca Muerta shale too.
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 beginning of pilot drilling for CASE
- stock listing and trading on the BYMA (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