CALGARY, Feb. 16, 2016 /CNW/ - Madalena Energy Inc.
("Madalena" or the "Company") (TSXV: MVN and
OTCQX: MDLNF) is pleased to announce the initial results of its
completion and testing of the Lower Agrio shale formation on its
90% working interest operated block at Curamhuele in
Argentina.
Highlights
- Successfully completed the vertical exploration well
(Yapai.x-1001) with four hydraulic fractures at depths of 3,731,
3,647, 3,566 and 3,457 metres, the upper three intervals being
within the Lower Agrio shale and the lowest interval containing
both the Lower Agrio shale and Mulichinco tight sand
formations;
- All four frac intervals are believed to have penetrated the
primary target in the Lower Agrio shale;
- Pumped an aggregate of approximately 430,000 pounds of sand and
13,700 barrels of frac water over four days;
- Flowed back on controlled choke settings (3 mm to 8 mm) over
eight days a total of 1,609 Bbls of oil and 5,444 Bbls of
water;
- Flowed at 408 Boe/d over last 24 hours on a 9.5 mm
choke, comprised of 350 Bbls/d oil, 389 Bbl/d water (47% oil cut)
and 350 mcf/d of gas at a flowing pressure of 1,050 psi;
- The oil is light sweet oil with a field estimated gravity of 40
API;
- Recovered approximately 40% of the hydraulic fracture fluid to
date; and
- Continued to record an increase in the oil cut and a
corresponding decrease in the water percentage throughout the
test.
Kevin Shaw, President and CEO,
commented:
"We are extremely pleased with the results from this vertical
exploration well at Curamhuele and oil discovery in the Lower Agrio
shale. Ultimately this Lower Agrio shale play, like the Vaca Muerta
shale, will be developed with Horizontal Multi frac wells which are
expected to yield considerably more than a typical vertical
well."
Curamhuele Block (90% Working Interest ("WI") Neuquen Basin,
Argentina)
Madalena has a 90% WI and is the operator in the 56,216 (50,595
net) acre exploration concession at Curamhuele. On
November 9, 2015, the Company
successfully deepened the Yapai.x-1001 well to evaluate the Lower
Agrio shale and the Mulichinco tight sand formations. The
Company drilled approximately 550 metres of the Lower Agrio
formation with the bottom 270 metres having strong and steady oil
and gas shows. The well required heavy weight mud (40% over
normal) to control the flow while drilling. The wireline log
analysis of the Lower Agrio shale estimates a zone of interest of
greater than 164 metres with an average porosity of 7.7% and
confirmation of brittle shale with minimal clay content.
On January 26, 2016, Madalena
initiated completion operations on the Yapai.x-1001 well and
finished the fourth hydraulic fracture treatment on February 4, 2016. Flow-back commenced on a
controlled 3 mm choke for the first four days after which the choke
was gradually increased to test the potential of the well.
The well continued to clean up with an increasing oil cut and a
corresponding decrease in the percentage of water during the
testing period. The Company estimates that the water being
recovered is a mixture of water based load fluid and formation
water.
Due to the high reservoir or pore pressure in the Lower Agrio,
the well continued to flow up 5" casing at strong fluid rates
during the testing period. The Company is in the process of
installing facilities for a long term test. Production will
be trucked and processed with oil sales being recognized at the
current Argentina Medanito price of US$
67.50/bbl and solution gas will be flared at this time.
The Company cautions that although the initial test results are
very encouraging, they are preliminary and may not necessarily be
indicative of the long term performance or of ultimate recovery
from the well. The relatively low gas rates throughout the
test suggest that the Mulichinco tight sand formation is not yet
contributing significant rates of gas and condensate and the oil
volumes being produced are believed to be coming solely from the
Lower Agrio shale. This could be in part due to the lower
reservoir pressure of the Mulichinco which would delay the
production response or a less effective hydraulic fracture
treatment in that zone. The Company intends to continue
additional testing operations, fluid sampling and production well
logging to evaluate the opportunity to optimize the deliverability
of the well.
Curamhuele Block - Reserves and Resources
There were no reserves assigned to the 2014 year end reserve
report for the Lower Agrio shale or Mulichinco tight sand formation
and since the production test occurred after December 31, 2015, there will be no reserves in
the pending 2015 year end reserve report which will be released
later this month.
On November 4, 2015 the Company
released independent third party best estimates (P50) effective
September 30, 2015 (prior to the
drilling of the Yapai.x-1001 well) for Contingent and Prospective
Resources. The Company's interest best estimate in the Lower Agrio
shale is Unrisked Prospective Resources of 365 MMBoe
(or Risked Prospective Resources are 99.4 MMBoe). In addition
to the Lower Agrio shale at Curamhuele, the Company's interest best
estimate in the Vaca Muerta shale is Unrisked Prospective
Resources of 1,157.1 MMBoe (or Risked Prospective Resources of
92.6 MMBoe). Please see the reader advisory at the end of this
release for further information on Prospective Resources.
Curamhuele Block - Next Steps
Given the significant inventory of opportunities Madalena has at
both Puesto Morales in the Loma Montosa light oil resource play and
Coiron Amargo in the Vaca Muerta shale and Sierras Blancas light
oil development, the Company intends to actively pursue a strategic
partner to help further delineate the Lower Agrio shale and Vaca
Muerta shale resources and further assess the Mulichinco tight sand
formation on the Curamhuele property.
The Company has met its commitment to drill and complete the
Yp.x-1001 well prior to September
2016 and will soon commence discussions with the Province of
Neuquén and its 10% partner the provincial oil company, Gas y
Petroleo del Neuquén S.A., to secure a new block contract allowing
for further advancement of the property.
Coiron Amargo Block (35% WI, Neuquen Basin, Argentina) – Sierras Blancas Horizontal
Development Update
Madalena and its partners have successfully drilled their
seventh horizontal well in the conventional Sierras Blancas
formation with a total lateral length of 763 metres. The
first 478 metres (63%) has been completed and tested over a five
day (120 hour) period. Average production was 596 Bopd and
350 mcf/d gas at 17% water-cut for a total 654 Boe/d. During
the last nine hours, the choke was increased from 8 mm to 10 mm and
the well produced at a rate of 729 Bopd and 330 mcf/d at 18%
water-cut for a total of 784 Boe/d at a flowing pressure of
800 psi. The well has now been tied in to existing production
facilities.
Five of the existing seven horizontal Sierras Blancas wells have
additional net pay which will ultimately be completed for
production. Madalena and its partners intend to recomplete
two of these wells in 2016 and test the effectiveness of higher
volume lift equipment.
About Madalena Energy
Madalena is an independent, Canadian-based Argentina focused, upstream oil and gas
company.
Madalena holds over 950,000 net acres in four provinces of
Argentina where it is focused on
the delineation of large shale and unconventional resources in the
Vaca Muerta shale, Lower Agrio shale, Loma Montosa oil play and the
Mulichinco liquids-rich gas play. The Company is implementing
horizontal drilling and completions technology to develop both its
conventional and resource plays.
Madalena trades on the TSX Venture Exchange under the symbol MVN
and on the OTCQX under the symbol MDLNF.
Reader Advisories
Forward Looking Information
The information in this news release contains certain
forward-looking statements. These statements relate to future
events or our future performance, in particular, with respect to
the characteristics of the properties held by the Company,
production levels, and operational, business development and
financial plans, and opportunities and the ability of Madalena to
execute on such plans and opportunities. All statements other than
statements of historical fact may be forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "approximate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "would" and similar expressions. These
statements involve substantial known and unknown risks and
uncertainties, certain of which are beyond the Company's control,
including: the impact of general economic conditions; industry
conditions; changes in laws and regulations including the adoption
of new environmental laws and regulations and changes in how they
are interpreted and enforced; fluctuations in commodity prices and
foreign exchange and interest rates; stock market volatility and
market valuations; volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations;
uncertainties associated with estimating oil and natural gas
reserves; competition for, among other things, capital,
acquisitions, of reserves, undeveloped lands and skilled personnel;
incorrect assessments of the value of acquisitions; changes in
income tax laws or changes in tax laws and incentive programs
relating to the oil and gas industry; geological, technical,
drilling and processing problems and other difficulties in
producing petroleum reserves; and obtaining required approvals of
regulatory authorities. The Company's actual results, performance
or achievement could differ materially from those expressed in, or
implied by, such forward-looking statements and, accordingly, no
assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur or, if any of
them do, what benefits the Company will derive from them. These
statements are subject to certain risks and uncertainties and may
be based on assumptions that could cause actual results to differ
materially from those anticipated or implied in the forward-looking
statements. The forward-looking statements in this news release are
expressly qualified in their entirety by this cautionary statement.
Except as required by law, the Company undertakes no obligation to
publicly update or revise any forward-looking statements. Investors
are encouraged to review and consider the additional risk factors
set forth in the Company's Annual Information Form, which is
available on SEDAR at www.sedar.com.
Meaning of Boe
The term "boe" or barrels of oil equivalent may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet of natural gas to one barrel of
oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Additionally,
given that the value ratio based on the current price of crude oil,
as compared to natural gas, is significantly different from the
energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may
be misleading as an indication of value.
Analogous Information
Certain information in this news release may constitute
"analogous information" as defined in National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities ("NI 51-101"),
including, but not limited to, information relating to areas,
assets, wells and/or operations that are in geographical proximity
to or believed to be on-trend with lands held by Madalena. Such
information has been obtained from public sources, government
sources, regulatory agencies or other industry participants.
Management of Madalena believes the information may be relevant to
help define the reservoir characteristics within lands on which
Madalena holds an interest and such information has been presented
to help demonstrate the basis for Madalena's business plans and
strategies. However, management cannot confirm whether such
analogous information has been prepared in accordance with NI
51-101 and the Canadian Oil and Gas Evaluation Handbook and
Madalena is unable to confirm that the analogous information was
prepared by a qualified reserves evaluator or auditor. Madalena has
no way of verifying the accuracy of such information. There is no
certainty that the results of the analogous information or inferred
thereby will be achieved by Madalena and such information should
not be construed as an estimate of future production levels or the
actual characteristics and quality Madalena's assets. Such
information is also not an estimate of the reserves or resources
attributable to lands held or to be held by Madalena and there is
no certainty that such information will prove to be analogous in
the future. The reader is cautioned that the data relied upon by
Madalena may be in error and/or may not be analogous to such lands
to be held by Madalena.
Initial Production Rates
Any references in this document to test rates, flow rates,
initial and/or final raw test or production rates, early
production, and/or "flush" production rates are useful in
confirming the presence of hydrocarbons, however, such rates are
not necessarily indicative of long-term performance or of ultimate
recovery. Such rates may also include recovered "load" fluids used
in well completion stimulation. Readers are cautioned not to place
reliance on such rates in calculating the aggregate production for
Madalena. In addition, certain Madalena properties are
unconventional resource plays which may be subject to high initial
decline rates. Such rates may be estimated based on other third
party estimates or limited data available at this time and are not
determinative of the rates at which such wells will continue
production and decline thereafter.
Curamhuele Block – Lower Agrio Shale Formation (Neuquén
Basin, Argentina)
The Company has a 90% WI and is the operator in the 56,216
(50,595 net) acre exploration concession.
The Lower Agrio has been tested on the block with a
conventional well completion and directly offsetting with a multi
frac vertical well completion. Based on the limited
information and results to date, the Lower Agrio has been
classified as Undiscovered with the estimated recoverable portion
classified as Prospective Resources. Given the Company is
actively testing the prospect through a planned unconventional
completion, the Prospective Resources have been sub-classified as a
Prospect which has a higher degree of certainty than a Lead or a
Play. The GLJ Report is summarized as follows:
|
Madalena Company
Interest
|
|
Low
Estimate
|
Best
Estimate
|
High
Estimate
|
|
|
|
|
|
|
|
|
Undiscovered
Petroleum Initially In Place (UPIIP) (MMBbls)
|
2,376.6
|
4,606.3
|
6,796.4
|
Unrisked
Prospective Oil (MMBbls)
|
144.9
|
328.2
|
568.5
|
Unrisked
Prospective Gas (Bcf)
|
73.9
|
223.2
|
483.2
|
Unrisked
Prospective BOE 6:1 (MMBOE)
|
157.2
|
365.4
|
649.1
|
|
|
|
|
|
|
|
|
Risked Prospective
Oil (MMBbls)
|
39.4
|
89.3
|
154.6
|
Risked Prospective
Gas (Bcf)
|
20.1
|
60.7
|
131.4
|
Risked Prospective
BOE 6:1 (MMBOE)
|
42.8
|
99.4
|
176.5
|
Definition: "Prospective Resources" - Those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from undiscovered accumulations by application of
future development projects. Prospective resources have both an
associated chance of discovery and a chance of development.
Risks and Significant Positive and Negative Factors
As discussed, the Lower Agrio has been identified as
Prospective Resources. The Chance of Discovery for this
unconventional shale play has been defined as the product of the
probability of source, maturity, trap or seal, and reservoir
properties. The estimated numerical value for the Chance of
Discovery is 68%. Based on the interpreted superior reservoir
characteristics for the bottom section of the Lower Agrio, the
Chance of Development is estimated at 40%. The Chance of
Commerciality is the product of the Chance of Discovery and Chance
of Development and therefore, the Prospective Resources have been
multiplied by 27.2% to arrive at a Risked Prospective Resources
estimate. At the time of the report Madalena anticipated first
commercial production to occur mid-year 2016 following the
successful completion of the Yapai.x-1001 well. The recovery
method is based on Hz MF wells. Scoping economics were based
Vaca Muerta type curves (assumed to be similar to Lower Agrio) with
an estimated cost of US$ 12 million
per well. A scenario of 570 Hz MF wells was run.
Significant positive factors for these Prospective Resources
estimate include:
- Existing wellbore penetrations with oil shows and tests
indicating a relatively thick shale with total organic carbon
> 3% and porosity of 4-10%;
- 3D seismic coverage across half of the block;
- Significantly over pressured reservoir based on mud weights
and bottom hole pressure tests; and,
- Stacked development scenarios with two Hz MF wells per
spacing unit improve capital efficiencies.
Significant negative factors for these Prospective Resources
estimate include:
- Depth (3,600-3,800 m) and complexity of drilling
operations;
- Surface topography being in the foothills of the Andes and
more remote to the oil and gas service industry; and
- No immediately proximate analogs.
Curamhuele Block – Vaca Muerta Shale Formation (Neuquén
Basin, Argentina)
In addition to the Lower Agrio as discussed above, Curamhuele
is prospective for the Vaca Muerta. Although there are no
Vaca Muerta penetrations on the block there are offsetting wells
with indicated hydrocarbons. Based on these logs and
geological mapping using 3D seismic along with the basin wide
knowledge on the Vaca Muerta reservoir, Ryder Scott Report
estimated UPIIP and correspondingly estimated Prospective Resources
being the recoverable portion of the UPIIP. Due to the
limited information and the early stage exploration efforts the
Prospective Resources have been further sub-classified as a
Lead.
A summary of the Prospective Resources from the Ryder Scott
Report is presented in the following table:
|
Madalena Company
Interest
|
|
Low
Estimate
|
Best
Estimate
|
High
Estimate
|
|
|
|
|
|
|
|
|
Undiscovered
Petroleum Initially In Place (UPIIP) (MMBbls)
|
7,884.0
|
9,642.6
|
11,762.1
|
Unrisked
Prospective Oil (MMBbls)
|
174.6
|
666.9
|
1,207.8
|
Unrisked
Prospective Gas (MMcf)
|
662.4
|
2,941.2
|
8,095.5
|
Unrisked
Prospective BOE 6:1 (MMBOE)
|
285.0
|
1,157.1
|
2,557.1
|
|
|
|
|
|
|
|
|
Risked Prospective
Oil (MMBbls)
|
14.0
|
53.4
|
96.6
|
Risked Prospective
Gas (MMcf)
|
53.0
|
235.3
|
647.6
|
Risked Prospective
BOE 6:1 (MMBOE)
|
22.8
|
92.6
|
204.6
|
- There is no certainty that any portion of the resources will
be discovered. If discovered, there is no certainty that it
will be commercially viable to produce any portion of the resources
referred to in the table above.
- The portion of the estimate of UPIIP that is not classified
as Prospective Resources is currently classified as Undiscovered
Unrecoverable Petroleum Initially In Place.
- Tables may not add due to rounding.
- The Prospective Resources have been sub-classified as a
Lead.
- Risks are based on Chance of Discovery 32%, Chance of
Development 25% for an aggregate risk of 8%.
Risks and Significant Positive and Negative Factors
As discussed, the Vaca Muerta has been identified as
Undiscovered Resources at Curamhuele. The geological chance
of success in a shale play is based on risk factors that are
different than the four risk factors used in conventional reservoir
(timing and migration, source rock, reservoir and trap or
seal). In the shale play the shale is the source, reservoir
and trap. The risk in a shale play is generally defined as
presence of shale, significant organic content, thermal maturity,
producibility and continuity. Therefore, the Chance of
Discovery is the product of these five independent risks. For
the Vaca Muerta at Curamhuele, the estimated numerical value for
the Chance of Discovery is 32%. The Ryder Scott Report
currently estimates the Chance of Development at 25%.
Additional well information and test data along with a better
understanding of infrastructure issues will be required to improve
the Chance of Development. The Chance of Commerciality is the
product of the Chance of Discovery and Chance of Development and
therefore, the Prospective Resources have been multiplied by 8% to
arrive at a Risked Prospective Resource estimate. The
recovery method is based on established technology of Hz MF
wells. Scoping economics were based on Vaca Muerta type
curves with an estimated cost of US$ 13.5
million per well. A scenario of 150 Hz MF wells was
run. Commercial production could be achieved with one well
however, the Company has not yet scheduled a well for the Vaca
Muerta as it is focusing on the Lower Agrio at this time.
Significant positive factors for these Prospective Resources
estimate include:
- 3D seismic coverage across half of the block;
- Significant gross thickness at 700 – 800 m;
- Stacked development scenarios with two to four Hz MF wells
per spacing unit improve capital efficiencies; and
- Basin wide development of the Vaca Muerta.
Significant negative factors for these Prospective Resources
estimate include:
- Depth (4,000+ m) and complexity of drilling
operations;
- Surface topography being in the foothills of the Andes and
more remote to the oil and gas service industry; and
- No offsetting commercial analogs.
Neither the TSX Venture Exchange nor its Regulation Service
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Madalena Energy Inc.