The Early Winner of Argentina's Shale Story

LONDON, March 2, 2015 /PRNewswire/ --

Defying today's market trends, Canada's Madalena Energy (TSXV:MVN, OTC:MDLNF) reports a 149% increase in proved reserves in its conventional plays, while its massive unconventional shale assets in the hotspot of Argentina where oil producers are getting an amazing $76-$77 per barrel.

Earlier this month, Madalena impressed investors with an independent report showing a 149% increase in proved reserves, from 2,603MBoe to 6,490 MBoe, and a155% increase in proved plus probable (2P) reserves, from 4,505 MBoe to 11.494 MBoe.  Overall, 1P and 2P reserves per common share have increased 68% and 72%, respectively.

This is pure growth that is hard to find in today's market, but the real upside is that Madalena's stock is trading well below the estimated $200 million NPV10, net present value, of Madalena's conventional reserves.

And we're not only looking at upside across four conventional resource plays, which is impressive in itself. We're looking at massive assets in the heart of the next shale boom-Argentina. The clincher is this: If you do the math, investors would effectively be getting in on drilling in Madalena's unconventional shale assets for free.

Argentina is brilliant, and here's why: Oil producers are getting around $76-77/bbl for their supplies in Argentina. With West Texas Intermediate (WTI) trading at about $50/bbl, Argentina's prices are extremely attractive. Oil and gas companies have surely latched on to the fact that prices in Argentina are pegged.

In this heartland, Madalena is a junior company with what amounts to a supermajor play. It has put together 1 million net acres across Argentina (this is in addition to its 150 net sections in Western Canada).

Argentina is home to 27 billion barrels of recoverable oil and 802 trillion cubic feet of natural gas, primarily in and around multiple prolific shale basins in the central Neuquen province, including the prized Vaca Muerta shale.

The assets in Argentina are wedged between some major global players who are drilling, drilling, drilling, including Chevron Corp. (CVX:NYSE), YPF, Wintershall, Petronas, Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE), Exxon Mobil Corp. (XOM:NYSE) and Total S.A. (TOT:NYSE) 

Madalena has a 90% working interest in the Curamheule block, which is right next to a major discovery made in August by state-owned YPF in the Agrio shale. The block is estimated to hold over 1.5 billion barrels of recoverable oil and natural gas liquids. ExxonMobil has also made two major discoveries on its Vaca Muerta acreage, near Madalena acreage.

Driven by the Vaca Muerta and Lower Agrio shales in Argentina, Madalena is managing to de-risk its unconventional shale assets, plus its strategic resource plays in Argentina's Neuguen Basin.

Madalena is the only junior left here to reap the benefits of supermajor drilling operations surrounding its prime acreage and has captured much attention in these dismal oil market days.

New drilling plans promise to create significant returns for shareholders. Madalena has put together ambitious plans to drill this acreage this year, and uniquely in these dire oil times, it is fully funded to do so.

This is a multi-bagger win for investors, as Madalena has not only secured large acreage positions on prolific conventional plays, massive unconventional shale assets and multiple large in-place horizontal resource plays, with the 2015 strategy adding the transformational play of Argentina-it also enjoys a solid financial position.

There are two things investors really need to know here. Firstly, Madalena has positioned itself such that if anyone new wants a decent stake in Argentina's shale heartland they will have to go through Madalena-anything else would mean getting through a supermajor driller.

Secondly, the company is undervalued. Its stock is trading well below its conventional-only reserves value of ~$200M in NPV10. Again, at current trading levels, this means investors get in on Madalena's Argentina shale drilling for free. Madalena is trading at less than 3 cents per barrel-but sitting on an astounding 3 billion boe of net recoverable resources and drilling in four strategic resource plays this year.

Adding to the lure, Madalena's balance sheet is brilliant: we're looking at zero debt and a market cap that is just above $100 million despite the fact that the company is sitting on assets that could be worth 4-10 times this value. The window of opportunity for investors is now. The share price could double this year-even with only one successful well in Argentina.  

By. James Burgess of Oilprice.com

SOURCE Oilprice.com