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Argentinian Vaca Muerta shale boom starts again; Madalena Energy in the frame

Wednesday, April 5, 2017 10:17
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(Before It's News)

New incentives have reignited foreign investment into the exciting Vaca Muerta shale play in Argentina and Canadian junior Madalena Energy Inc  (CVE:MVN) is likely to be a big beneficiary.

President Mauricio Macri has done much to improve the business climate, including in January this year, natural gas pricing incentives for production from new wells.

A new deal with unions has also reduced labour costs.

Big players pumping in cash….

It all means big players like Argentine energy group  YPF, Total, Shell (LON:RDSB), Chevron,  Dow and Pan American Energy, (PAE), plan to invest a combined US$5 billion this year alone in the Vaca Muerta shale play (VM), increasing to around US$15 billion per year starting in 2018.

As an example, on March 30 this year,  YPF, Total, PAE and Wintershall announced a US$500 million investment to develop the Aguada Pichana block.

Total will operate the east block and will invest US$300 million, while PAE will operate the west block and invest US$200 million.

This is nearby to Madalena’s blocks in the Vaca Muerta.

To give a  cost cutting example, energy group YPF has slashed its average horizontal well cost at its Loma Campana block by around half to US$8.2 million in Q4/16 from US$16.6 million in 2014, notes analyst Bill Newman at Mackie Research.

He reckons this all bodes well for Madalena, which is trading far below  its closest VM shale peer – Andes Energia

Andes has a similar production and land base to Madalena yet is much more leveraged with a market capitalization of around $345 million versus Madalena’s $85 million, he notes.

Madalena partner re-enters the VM play..

Last month, Madalena’s partner PAE re-entered the Vaca Muerta and kicked of drilling at the Coiron Amargo Sur Este shale block, in which Madalena holds a 35% working interest.

This is due to be a 1,500 metre horizontal well at a depth of around 3,200 metres, which will then be stimulated with up to 19 stages of hydraulic fracs. 

As part of the farm out deal inked this year,  PAE will fund 100% of the cost of the two well program up to the first US$16 million which is a net benefit to MVN’s of US$5.6mln.

Madalena received total cash of US$10 million from PAE and Madalena transferred a 55% interest and operatorship in CASE to PAE.

MVN retained a 35% interest in the CASE block as well as its 35% interest in the Coirón Amargo Norte block- the other region of the Coirón Amargo block.

Madalena shares are currently changing hands at $0.15.

Story by ProactiveInvestors


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