4th Q Update - Committments Renegotiation & Production IncMadalena Provides an Operational Update for the Fourth Quarter 2018, Highlighting a Near-Term Commitment Reduction and Production Increase
BUENOS AIRES, Argentina, Jan. 10, 2019 (GLOBE NEWSWIRE) -- Madalena Energy Inc. ("Madalena" or the "Company") (TSXV: MVN, OTCQX: MDLNF) is pleased to announce the Company’s fourth quarter operational update.
Madalena’s President and CEO Jose Penafiel commented: “We are pleased to report a significant reduction in our capital and decommissioning commitments, thanks to: i) the renegotiation of our commitments at Rinconada – Puesto Morales, and ii) the assignment to a third party of our interest in the El Vinalar concession. At the same time, we are happy to confirm a significant increase in production occurred in December, driven by our previously announced signing of an Operation Agreement with Recursos y Energa Formosa SA, giving us a 100% interest in the Palmar Largo concession. We continue to work towards finalizing our operating plans and budget for the year, but we can provide a preview of what we expect to be a very active year operationally in 2019, with both workover and drilling operations expected to commence in this quarter.”
Production
Q4 2018 production was approximately 1,730 barrels of oil equivalent ("boe/d") (86% crude oil) before royalties, an increase of 8.8% from 1,590 boe/d in the prior quarter (87% crude oil). December production averaged 2,100 boe/d. A significant increase from prior months was driven by the signing of a new operation agreement giving Madalena a 100% interest in production from the Palmar Largo concession starting December 1, 2018 (as previously announced on November 27, 2018). This new agreement was also the key driver for production averaging above the Q4 guidance for 1,624 boe/d provided in November.
For Q1 2019, management expects production to average approximately 2,025 boe/d (91% oil).
Realized Pricing
Madalena’s fourth quarter average oil, NGLs and gas sales price was approximately $53.93 per boe (representing 78.6% of the Brent oil price of $68.60 per barrel), as compared with the third quarter 2018 average price of $56.54 per boe (representing 74.60% of the Brent oil price of $75.84 per barrel).
Operations Update
Rinconada – Puesto Morales; 100% operated
In June 2015, Madalena was granted a new 10 year exploitation concession for the Puesto Morales area.
As part of the terms and conditions of the extension, the Company had agreed to firm commitments of US$49.3 million in activities on the block over the next 10-year period.
US$24.7 million remained outstanding as of December 31, 2018. In order to keep the concession in good standing and to remain in compliance with the commitments, the company held negotiations with the Province of Rio Negro during both 2017 and 2018 with respect to extending the commitments. On January 4, 2019, the Secretary of Energy approved a re-schedule and conversion of the remaining commitments and updated the exploration and development plan. For 2019, a vertical exploratory well with an approximate cost of US$2 million is to be drilled during the second half of the year. The remaining commitments have been re-scheduled for 2020 and 2021.
Palmar Largo and El Surubi
A workover is planned for the Proa-3 light oil well (Surub, 85% operated interest) in Q1/19. Synergies with the recently acquired adjacent Palmar Largo block (100% operated) are under evaluation, with the possibility the same rig may perform two workovers in this block following the Proa-3 workover.
Coiron Amargo Sur Este (CASE); 35% non-operated
Purchase and Service Contracts awarding is ongoing in preparation to spud the first Vaca Muerta horizontal multifrac well of phase 1 (five wells) of the eight well Pilot Plan.
Coiron Amargo Norte (CAN); 35% non-operated
A drilling location of one Lotena Gas Well is under discussion among partners in order to obtain drilling permits in time to drill it in the first quarter of 2019.
El Vinalar; previously 100% operated, now divested
In December, the Company signed an agreement assigning Madalena’s entire interest in the non-core and non-producing El Vinalar concession to a private Argentine oil and gas company. As a result, Madalena will be able to write off current liabilities related to decommissioning obligations in an expected amount of approximately $4 million.
Upcoming News Events
The Company expects to announce its full year 2019 production guidance, capital budget and work plan on or about February 15, our year-end reserves update on or about February 28, and its 2018 year-end financial results on or about April 11, 2019.