Madalena Energy Inc. (MVN and MDLNF) is pleased to announce that it has entered into agreements with Pan American Energy LLC, Sucursal Argentina (PAE) relating to its 90% working interest (WI) in the Coiron Amargo Sur Este (CASE) block. Concurrent with this transaction, Madalena and PAE have entered into an agreement whereby PAE will provide a limited recourse loan to Madalena of up to $40 million, to be drawn-down as required to fund certain capital expenditures.
Transaction Highlights:
- Madalena will receive cash payments of an aggregate of $10 million by closing;
- Madalena will transfer a 55% WI and operatorship to PAE, retaining a 35% non-operated WI in CASE;
- a 2017 work program (Work Program) will be undertaken by PAE, with a net benefit to Madalena of
$5.6 million; and
- Madalena to obtain a limited recourse loan of up to $40 million, to be drawn-down as required to fund
certain capital expenditures.
Payment
Madalena will receive a refundable deposit within two business days with the balance of the $10 million due upon
closing, which is expected to occur within 90 days. Within that period, the parties must obtain the approvals of Gas
y Petroleo del Neuquen Sociedad Anomina (GyP) and the Province of Neuquen, Argentina.
Working Interests and Operatorship
PAE will become the operator at CASE, with resulting WI in the block as follows:
PAE 55%
Madalena 35%
GyP 10%
Work Program
The Work Program will consist of either two horizontal multi-frac completions in the Vaca Muerta shale formation
or one horizontal multi-frac in the Vaca Muerta and one deep Grupo Cuyo sandstone gas test, utilizing existing
cased wellbores on the block.
Loan
PAE has agreed to provide up to $40 million to Madalena to be drawn-down as required to fund certain capital
expenditures. This limited recourse loan will bear interest at 7% per annum and is repayable in 5 years.
Benefits to Madalena
This transaction delivers a number of positives for the Company. It provides significant assistance to addressing the
liquidity and working capital challenges which Madalena has been facing. As well, Madalena stands to benefit from
its relationship with a well-established, experienced operator which will provide the necessary capital and
expertise so that the CASE block can be efficiently developed.
Strategic Alternatives Update
The strategic alternatives process previously announced continues. The Company, along with its financial advisor,
Evercore Group LLC, is in discussions with a number of parties who have expressed interest in other aspects of
Madalena’s operations. As indicated previously, there can be no assurance that such transactions will be
consummated.
