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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Canadian Small Cap With Giant Potential In Argentina’s Shale Plays

Canadian Small Cap With Giant Potential In Argentina’s Shale Plays

One of four significant resource plays for small-cap Canadian explorer Madalena has been described as a “sleeper” that has now awakened, with successful horizontal well testing in the Loma Montosa light oil formation in Argentina - showing 860 barrels of oil equivalent per day from a shallow and scalable resource play.

On 8 April, Madalena Energy Inc. (TSXV: MVN and OCT:MDLNF) announced the completion and testing at a key horizontal well in the Loma Montosa formation at Puesto Morales (31,254 net acre block), which is one of four strategic resource plays in the company’s attractive Argentina portfolio.

The Loma Montosa well was drilled and cased to a total depth of 2,600 meters and a horizontal length of 1,095 meters, flowing a total of 860 boe/d including 480 barrels of oil per day plus 2,300 mcf/d of gas. Over the last five days, 2,140 barrels of oil plus gas volumes were produced here. As a nice surprise, the well has been flowing at high rates up 5.5. inch casing (versus a smaller sized production string) which is unexpected for this depth of reservoir – pointing to a significant prize which Madalena has de-risked.

The Loma Montosa oil resource play is one of Madalena’s high-impact plays that, with successful well testing, is a game-changing play for the small-cap company, which is the only small-cap left in Argentina today with prime shale in the oil window and a deep portfolio of attractive resource plays.

The company has also finished drilling and completion operations at a fourth horizontal well in Argentina’s Sierras Blancas at Coiron Amargo, in which it has a 35% working interest. The well was drilled to a total depth of 4,214 meters with a horizontal lateral section of 1,011 meters, and testing began on 15 March. The well was tied into production facilities on 27 March at a total rate of 600 boe/d, including 480 barrels of oil per day and 730 mcf/d of associated gas.

But it is the Loma Montosa that everyone is eyeing right now. Success here has set the company up for a large, scalable oil-in-place play at Puesto Morales, and could potentially be a company-maker.

With the Loma Montosa being a 100% working interest and shallow in depth, this highly commercial and scalable light oil resource bodes a large inventory of horizontal locations across the 31,254 net acre block at Puesto Morales. Successful small-caps in both North America, and internationally, attract the attention of the major oil companies when scalable resource plays (with large resources plus large inventories of horizontal locations) are de-risked.

Madalena has no shortage of large energy companies surrounding its prime unconventional shale assets and its key resource plays like the Loma Montosa. To unlock the Loma Montosa light oil play, Madalena is using North American horizontal multi-frac technology to increase recoveries and unlock the prize.

The oil resource itself is defined by over 60 historic vertical wells that have been drilled thru the Loma Montosa oil resource and 16 vertical producers from the Loma Montosa itself. There is also historic production from 16 verticals to date with the key to unlocking the Loma Montosa’s sizeable, scalable reserves, being horizontal technology….much like the Cardium or Bakken oil plays in Canada but at USD $76/bbl today in Argentina. And this is only one of four strategic Argentina plays for Madalena this year. The other three include the prized Vaca Muerta shale and the Lower Agrio shale—both oil plays—and the liquids-rich Mulichinco which is similar to the Montney play in Canada.

All told, Madalena holds over 950,000 net acres across five provinces in Argentina, which is poised be the venue for the next North American-style shale and resource boom. With Elections taking place in October 2015 and Madalena positioned as a prime Argentina-focused player and an attractive suite of unconventional and conventional assets, the future looks very bright for MVN.

Argentina is home to 27 billion barrels of recoverable oil and 802 trillion cubic feet of natural gas and its two shale basins could end up being bigger than the Eagle Ford and Bakken. But adding to the attraction is another significant aspect at a time of slumping oil prices: For producers in Argentina, the price of oil is fixed at $76 per barrel respectively, well above international prices and the regulators are looking at incentivizing prices further with a $3/bbl incentive program. On the gas side, operators are also seeing contracts worth around $7.5 per million British Thermal Units (BTU) on new development projects.

Not only is Argentina shaping up to the be the next big-time shale and resource venue globally, but Madalena’s acreage is right in the middle of massive unconventional development and appraisal activities of some of the world’s biggest companies, including ExxonMobil (NYSE: XOM), Royal Dutch Shell (NYSE: RDS.A), Total (NYSE: TOT), Petronas, Wintershall, Chevron (NYSE: CVX) and Argentina’s state-owned YPF. All this positioning and drilling activity has significantly de-risked Madalena’s resource plays and acreage spread, and makes it a target for takeover as the company continues to evolve in Argentina.

There has been talk of this company potentially doubling its share price this year, even if it struck oil and had success on one of its four company making strategic plays in Argentina—now with the Loma Montosa success, Madalena is well on its way.

By. James Burgess of Oilprice.com

Legal Disclaimer/Disclosure: Madalena Energy is an Oilprice.com client. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

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