RE:4th Q Update - Committments Renegotiation & Production IncToday, Madalena Energy announced multiple significant updates with respect to its drilling plans and obligations and current and expected production, which meaningfully improve the company’s already solid balance-sheet and immediately boost near- and medium-term cash-flows.
In short, WITHOUT ANY additional major production bumps or M&A (e.g. production phase of CASE JV, Curamhuele JV reached, CAN drilling, asset purchases), the company is well on its way to generating
USD 20+mm of run rate annual EBITDA by year end 2019. Madalena is currently valued at less than
3x that amount while giving no credit to the company’s blockbuster shale assets in Coiron Amargo and Curamhuele !
Production Update- as a result of Palmar Largo transaction announced on Nov 27
- 4Q18- 1,730 boe/d (up from 1,590 in 3Q14, and up from previous Q4 projection of 1,624 boe/d)
- 1Q19E- 2,025 boe/d
Pricing Update - 4Q18- USD 53.93/barrel (down from USD 56.54/barrel in 3Q18)
Drilling Commitments - Puesto Morales- Madalena renegotiated USD 49mm of drilling commitments, committing to one vertical exploratory well for USD 2mm
- El Vinalar- Madalena assigned its interests in the block that was losing money to a 3rd party (without any remaining liability), and as a result the company will write off USD ~4mm of current liabilities relating to decommissioning obligations
Drilling Plans - Workovers in Surubi and Palmar Largo in 1Q19 to increase existing conventional production
- Coiron Amargo Sur Este- preparing for spudding of first shale well (five wells in phase 1) with JV-partner, Pan American Energy
- Coiron Amargo Norte - planning to drill conventional gas well in 1Q19 with partner, Vista Oil
The company has announced the following additional target dates:
- Feb 15- FY2019 production guidance, capital budget and work plan
- Feb 28- YE18 reserves update
- Apr 11- 4Q18 financial results
Generally, this update is evidence of the sophistication of Madalena’s leadership, and we expect that management and the Board will continue to provide the market with updates and transparency.
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 of pilot production in CASE
- JV announcement relating to Curamhuele
- stock listing and trading on the BYMA (Argentina stock-exchange)
- increased conventional production through asset purchases
- details on resources and drilling program for Coiron Amargo Norte (Lotena formation; conventional natural gas play)