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TSXV Trading Symbol: MVN
CALGARY, May 28, 2012 /CNW/ - Madalena Ventures Inc. ("Madalena" or the "Company") (TSX Venture: MVN) today announced that it has filed its unaudited financial statements and related management's discussion and analysis ("MD&A") for the three month period ended March 31, 2012 on www.sedar.com and on its website www.madalena-ventures.com. All amounts are in Canadian dollars ($) unless otherwise stated.
Highlights in the three months ended March 31, 2012 include:
- Successful completion and testing of the Company's first large scale hydraulic fracture stimulation treatment of the Vaca Muerta formation on the Coiron Amargo Block;
- Extension of the Company's large acreage position in the Neuquen Basin and conversion of the northern 108 km2 of the 404 km2 Coiron Amargo Block to a 25 year exploitation concession;
- Commenced testing the Vaca Muerta formation at the CorS X-1 deep gas exploration well on the Cortadera Block;
- Continued preparations for regions first fracture stimulation of the Lower Agrio shale; and
- Completed public offering in the first quarter of 2012 for gross proceeds of $67,500,000.
Coiron Amargo Block (35% working interest)
In May 2012 the Company completed drilling the CAN 5 development well located within the CAN X-1 Sierras Blancas structure discovered in the second half of 2010. The well was drilled to a total depth ("TD") of 10,525 feet and has been cased to TD. Based on electric logs the entire Vaca Muerta formation interval encountered was 345 feet and in the Sierras Blancas formation, the well encountered a potential gross hydrocarbon column of 45 feet. After drilling the CAN 5 well the Company immediately commenced drilling the CAN 7 development well location within the CAN X-3 Sierras Blancas structure. The CAN 7 well is currently drilling ahead at approximately 7,500 feet. The Corporation plans to complete both the CAN 5 and CAN 7 development wells once drilling operations at CAN 7 are completed. The completion rig will also be used to install pumping equipment at CAN X-1.
Other new infrastructure to increase production and improve operating netbacks from the area has recently been completed. Final tie-in of a pipeline from the northern development area to the Loma Jarillosa Este gas processing facility on an adjacent block was completed by the facility operator the week of April 15, 2012. In addition, a water disposal well has been completed which is expected to significantly reduce fluid transportation costs from the area.
In the non-conventional Vaca Muerta formation, flow testing of the CAS X-1 well in the southern portion of the block continues where it is anticipated that pumping equipment will be installed during the third quarter.
In February 2012 the Company drilled and cased to TD the CAS X-4 exploration well as a potential oil discovery. Located approximately nine kilometers south east of the CAS X-1 discovery well, a full diameter core was taken through most of the interval which will be used to optimize future wells in the Vaca Muerta formation. A hydraulic fracture stimulation program for the formation will be prepared after extensive laboratory analysis of the core is completed.
In March 2012, the Company drilled and cased to TD the CAS X-2 vertical exploration well in the center of the block. Based on electric logs the entire Vaca Muerta formation interval encountered was 435 feet thick and in the Sierras Blancas formation, the well encountered a potential gross hydrocarbon column of 68 feet. In April 2012, the Sierras Blancas formation, located below the Vaca Muerta formation, was flow tested with rates between 100 and 200 bopd over a five day period. The well has been equipped for artificial lift and will be placed on pump. The CAS X-2 well confirms the existence of hydrocarbons in the Sierras Blancas formation in the central portion of the block in addition to previous discoveries in the north and south.
In March 2012 an application by the Coiron Amargo joint venture to convert the northern 108 km2 of the 404 km2 block to a 25 year exploitation concession was approved by the Province of Neuquén. In addition, the exploration period for the remainder of the block was extended to November 8, 2013. The extension of the block will require additional work commitments of US$ 33.5 million (Madalena share - US$ 11.7 million). The exploration block qualifies for an additional one year extension period at the end of the exploration period in the fourth quarter of 2013.
A total of 8 wells are expected to be drilled in 2012 targeting both conventional and unconventional resources. Drilling of the CAS X-3 and CAS X-5 exploration wells is expected to commence in August and September 2012, respectively. While testing multiple horizons, these wells are primarily intended to provide a more comprehensive delineation of the Vaca Muerta characteristics over the block to assist in development. In addition, a 100 km2 3D seismic program is planned for the southwest corner of the block and a portion of the eastern side of the block not yet covered by 3D seismic.
Cortadera Block (40% working interest)
In March 2012 Apache completed a two stage hydraulic fracture stimulation of the Vaca Muerta formation in the CorS X-1 vertical exploration and testing of the Vaca Muerta formation continues. Currently we are awaiting specialized equipment required in this high pressure environment in order to add the initial frac stage to the testing. Further work to assess additional uphole formations (Quintuco, Mulichinco, and Agrio zones) is expected to be carried out following the Vaca Muerta test. Also in March 2012, a resolution was passed approving Apache's application to qualify the Cortadera exploration block for Gas Plus pricing. The Gas Plus program was launched at the end of 2008 to stimulate investments in and production of natural gas and oil through providing incentives for new production of natural gas or oil.
The Company has agreed a work program with provincial authorities to extend the initial exploration period of the Cortadera Block beyond the initial expiry date of October 26, 2011 and is optimistic that formal approval of the extension will be forthcoming. A 3D seismic program is planned for later in the year following testing of the CorS X-1 well.
Curamhuele Block (90% working interest)
The Company is continuing preparations to complete a hydraulic fracture stimulation in the over pressured Lower Agrio shale formation. The thick Lower Agrio shale on the block is believed to be prospective for oil based on tests of light oil from three existing wells in the Agrio formation and on outcrop work. Various well equipment required to perform the fracture stimulation has been ordered and purchased. The planned operation is expected to commence in June 2012 and would be the first hydraulic fracture stimulation of the Lower Agrio shale in the Neuquén Basin.
In March 2012 the exploration period for the block was extended to November 8, 2013. The extension of the block will require additional work commitments of US$ 17.6 million (Madalena share - US$ 17.6 million). The exploration block qualifies for an additional one year extension period at the end of the exploration period in the fourth quarter of 2013.
In March 2012, the Company issued 54,000,000 common shares at an issue price of $1.25 per share for gross proceeds to Madalena of $67,500,000. The Company is in a strong financial position to move forward with its 2012 drilling program and meet the commitments associated with its recent block extensions.
FINANCIAL AND OPERATING INFORMATION
|Three Months Ended|
|Funds used in operations(2)||(750,102)||(920,717)|
|Funds used in operations per share(2)||-||-|
|Cash flow from (used in) operating activities||472,909||(599,039)|
|Cash flow from (used in) operating activities per share||-||-|
|Net loss per share||-||(0.01)|
|Oil production (barrels per day)||62||138|
|1)||All amounts per common share are basic and diluted amounts per share|
Funds used in operations and funds used in operations per common share
Non-GAAP measurements - see the discussion under Non-GAAP Measurements
contained in the Company's MD&A.
RESULTS OF OPERATIONS
Oil and gas revenue for the quarter ended March 31, 2012 was $396,773 compared to $562,488 for the corresponding period in 2011. The Company's share of oil production from the Coiron Amargo Block in the quarter ended March 31, 2012 was 5,587 barrels (62 barrels per day) compared to 12,710 barrels (138 barrels per day) for the corresponding period in 2011. Net production declined from the corresponding period in 2011 due to a reduction in the Company's working interest in the block from 52.5% to 35% and wells waiting on pumping equipment.
The Company realized a net loss of $1,167,365 for the quarter ended March 31, 2012 compared to $1,744,505 for the corresponding period in 2011. Net loss decreased primarily due to lower general and administrative expenses and share-based payments expense partially offset by lower oil revenue and higher operating costs from the Coiron Amargo Block. Total comprehensive income increased to $202,201 for the quarter ended March 31, 2012 compared to a loss of $2,597,167 for the corresponding period in 2011 due to the decrease in net loss above as well as income on translation of foreign operations.
At March 31, 2012 Madalena had working capital of $70,593,691 compared to $14,442,910 at December 31, 2011. Working capital increased as the Company issued 54,000,000 common shares at an issue price of $1.25 per share for gross proceeds to Madalena of $67,500,000.
The Company had negative funds from operations in the quarter ended March 31, 2012 totaling $750,102 compared to negative funds from operations of $920,717 for the corresponding period in 2011. Funds used in operations decreased as a result of lower general and administrative expenses partially offset by lower oil revenue and higher operating costs.
Madalena is an independent, Canadian-based, international upstream oil and gas company whose main business activities include exploration, development and production of crude oil, natural gas liquids and natural gas. The Company currently has production and exploration operations in Argentina and is focused on international oil and gas opportunities in South America. Madalena is publicly traded on the TSXV under the symbol "MVN".
Forward Looking Statements and BOE equivalents
The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry ; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements. Investors are encouraged to review and consider the additional risk factors set forth in the Company's Annual Information Form, which is available on SEDAR at www.sedar.com.
Any references in this news release to test rates, flow rates, initial and/or final raw test or production rates, early production and/or "flush" production rates are useful in confirming the presence of hydrocarbons, however, such rates are not necessarily indicative of long-term performance or of ultimate recovery. Such rates may also include recovered "load" fluids used in well completion stimulation. Readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. In addition, the Vaca Muerta shale is an unconventional resource play which may be subject to high initial decline rates.
All calculations converting natural gas to barrels of oil equivalent ("boe") have been made using a conversion ratio of six thousand cubic feet (six "Mcf") of natural gas to one barrel of oil, unless otherwise stated. The use of boe may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Dwayne H. Warkentin
President and Chief Executive Officer
Madalena Ventures Inc.
Phone: (403) 233-8010 ext 229
Anthony J. Potter
Vice President, Finance and Chief Financial Officer
Madalena Ventures Inc.
Phone: (403) 233-8010 ext 233