Saturday, September 19, 2015

Madalena Forges Ahead in Argentina

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While oil prices in the U.S. plummeted below $39, Canadian explorer Madalena Energy has forged ahead with a strong Q2 showing and preparations for its first horizontal multi-stage frack in Argentina, where oil prices defy the market at an amazing U.S.$77.

Madalena’s strong showing is not only spurred by high oil prices in Argentina and the country’s U.S. $11 million-plus incremental incentivized oil programs, but the company has a strong balance sheet, has kicked off a three-well, back-to back horizontal program and is now preparing to launch a new high-impact well to test two major resource plays. It’s also planning its first horizontal multi-stage frack well in the prized Vaca Muerta shale offsetting the activities of supermajor Shell (RDS.A) which is ramping up horizontal drilling right on Madalena’s border.

And as Argentina’s oil prices are coming in at $75-$77 despite low global prices, the effect is reverberating widely, incentivizing oil companies to put more money into the country’s oil and gas sector, which in turn means steady job creation.

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 All told, Madalena holds over 950,000 net acres across five provinces in Argentina, which is poised to be the venue for the next North American-style shale boom 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 natural gas and oil is fixed at $7.5 per million British Thermal Units (BTU) for new gas developments and U.S.D $75 to $77 per barrel respectively, well above international oil prices.

Not only is Argentina shaping up to the be the next big-time shale venue, but Madalena’s acreage is right in the middle of massive unconventional exploration activities of some of the world’s biggest companies, including ExxonMobil (NYSE: XOM), Royal Dutch Shell (NYSE: RDS.A), Total (NYSE: TOT), Petronas, Pan American Energy, Wintershall, Chevron (NYSE: CVX) and Argentina’s state-owned YPF.

Great article that gives an update on what Madalena is doing in Argentina. Even though oil prices are low in the rest of the world, Argentina mandates a price floor and that incentivizes oil companies to invest and produce in Argentina. Their are upcoming elections in Argentina and all the major candidates have said they will continue to support the domestic oil and gas industry as they all have a goal of Argentina becoming energy independent. My view on Madalena has not changed, I expect they will be taken out by a larger company at some point. Their properties are all surrounded by oil majors like Exxon and Chevron. As the Vaca Muerta play continues to de-risk someone is going to step up and buy these guys out. This continues to be one of my best speculative plays.

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