Madalena Announces Closing of Transformational and Strategic Acquisition in Argentina and Proa-3 Well Results on Surubi Block

Madalena Announces Closing of Transformational and Strategic Acquisition in 
Argentina and Proa-3 Well Results on Surubi Block 
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE 
U.S./ 
TSXV Trading Symbol: MVN
OTC Trading Symbol: MDLNF 
CALGARY, June 25, 2014 /CNW/ - Madalena Energy Inc. ("Madalena" or the 
"Company") (TSXV: MVN and OTC: MDLNF), is pleased to announce that it has 
closed the acquisition (the "Acquisition") of the Argentinean business unit of 
Gran Tierra Energy Inc. ("Gran Tierra"). 
The Acquisition is highly accretive and includes Proved and Probable ("2P") 
reserves of 6,513 Mboe at December 31, 2013, estimated current production of 
approximately 3,300 Boe/d (~78% oil), 11 exploration and production blocks 
comprising approximately 890,000 net acres and a fully functional independent 
business unit in Argentina, with an experienced technical and operational 
team. The purchase price was US$63 million, payable in US$49 million cash and 
29,831,537 common shares of Madalena ("Common Shares") at a deemed issue price 
of CDN$0.51 (US$0.469). 
The Acquisition provides Madalena with a solid platform for growth which more 
than triples the Company's production base and significantly increases cash 
flow from its Argentinean assets.  Madalena's current corporate production is 
estimated to be approximately 4,900 Boe/d (~72% oil and NGLs), ~80% of which 
is from Argentina. Associated cash flow is expected to be reinvested into both 
high impact conventional opportunities in Argentina and to accelerate the 
delineation of the Company's unconventional shale and tight sand resources 
within the Neuquén basin.  Madalena now has a strong portfolio of assets with 
exposure to a low decline stable production base, an extensive inventory of 
low risk development drilling opportunities, a seismically and technically 
defined conventional portfolio of assets, and significant unconventional shale 
(Vaca Muerta, Lower Agrio and Los Monos shales) and tight sand resources. 
Madalena estimates annual cash flow from operations of US$35 - US$45 million 
over the next twelve months which is expected to provide the Company with the 
ability, when combined with cash on hand and available credit, to execute a 
US$50 - US$60 million capital program over the next 12 to 18 months while 
maintaining a strong balance sheet. Madalena will provide additional 
go-forward guidance in due course following consideration of a consolidated 
budget by the Madalena board of directors. 
Acquisition Highlights 


        --  Acquisition cost per flowing boe of approximately US$19,091,
            based on current estimated production of 3,300 Boe/d;
        --  Reserve life index of 5.41 years, based on current estimated
            production and adjusted 2P reserves;
        --  Recycle ratio of approximately 2.1x,based on Q1-2014 operating
            property netbacks of US$33.93/Boe and acquisition costs of
            approximately US$16.12/Boe;
        --  Key producing infrastructure, including batteries and
            pipelines;
        --  Approximately 890,000 net acres of developed and undeveloped
            land; and
        --  Lands have an average working interest of approximately 83%,
            and the net production acquired is more than 94% operated.

The following is a summary of production, land and reserves information that 
is relevant to Madalena, prior to, and following, the Acquisition:
                        Madalena(1) Acquisition(2) Adjustments(3) Pro Forma
    Current Production(6)                                                  
    Oil and NGLs
    (Bbl/d)                     960          2,610              -     3,570
    Gas (Mcf/d)               3,840          4,150              -     7,990
    Boe (Boe/d)               1,600          3,300              -     4,900
    Oil and NGLs (%)             60             79              -        72
    Land (net acres)        239,000        890,000              - 1,129,000
    RESERVES(4)                                                            
    Proved                                                                 
    Oil and NGL (Mbbl)        1,350          4,248          (612)     4,986
    Gas (MMcf)                8,032          5,599          (510)    13,121
    MBOE (6:1)                2,689          5,181          (697)     7,173
    Proved plus
    Probable                                                               
    Oil and NGLs (Mbbl)       2,373          6,295          (900)     7,768
    Gas (MMcf)               13,651          7,615          (900)    20,366
    MBOE (6:1)                4,648          7,563        (1,050)    11,161
                                                                           
    Proved FDC(5)
    (US$MM)                      20             46           (21)        45
    Proved plus
    Probable FDC
    (US$MM)                      33             77           (35)        75
                                                                           
    Accretion Analysis     Madalena    Acquisition      Pro Forma Accretion
    Diluted Shares (MM)       413.5          127.9          541.4         -
    Proved Reserves
    (Boe per MM Common
    Shares)                     6.5           40.5           13.3      104%
    2P Reserves
    (Boe per MM Common
    Shares)                    11.2           59.1           20.6       83%
    Current Production
    (Boe/d per MM
    Common Shares)              3.9           25.8            9.1      134%
    Notes:
    1.     Based on the independent reserve reports of Madalena evaluating
           the crude oil, natural gas liquids and natural gas reserves of
           the Company as at December 31, 2013 prepared by an independent
           reserves evaluator in accordance with National Instrument
           51‐101 ‐ Standards of Disclosure for Oil and Gas
           Activities ("NI 51-101") and the COGE Handbook.
    2.     Based on the independent reserve reports of Gran Tierra
           evaluating the crude oil, natural gas liquids and natural gas
           reserves of Gran Tierra as at December 31, 2013 prepared by an
           independent reserves evaluator in accordance with NI 51-101 and
           the COGE Handbook.
    3.     Adjustments to the acquisition reserves were made pursuant to
           internal management estimates conducted by a qualified reserves
           engineer.  Adjustments consisted of reduced PUD locations due to
           rescheduling or removal of proven undeveloped and probable
           locations on the subject assets and acreage consolidations.
    4.     Reserves are "gross reserves", being working interest share of
           reserves before the deduction of royalties owned by others.
    5.     "FDC" means future development costs.  Madalena converted to US$
           at 0.92US/CDN.
    6.     Based on field estimates.

Rationale for the Acquisition
        --  Highly accretive on all metrics and more than triples the
            Company's production base.
        --  Strong cash flow from the conventional asset bases that can be
            directed towards accelerating development of Madalena's
            unconventional shale oil and gas plays in Argentina.
        --  Strengthens Madalena's Argentinean operations by adding a fully
            integrated professional and operating team "on the ground" in
            Argentina.
        --  Enhances and improves the Company's flexibility regarding the
            future delineation of, or transactions associated with,
            Madalena's current unconventional shale assets in Argentina.
        --  Strategically positions Madalena as a strengthened and emerging
            oil and gas producer.
        --  Improves Madalena's access to exploration and production
            services in Argentina.

Advisors

Dundee Securities Ltd. has acted as financial advisor to Madalena with respect 
to the Acquisition. RBC Capital Markets has acted as strategic advisor to 
Madalena with respect to the Acquisition.

Proa-3 Well Results on the Surubi Block in Formosa Province, Argentina

The Surubi Block is located within the Noroeste Basin of Argentina. Madalena 
Energy has an 85% working interest and is the operator. Recursos y Energia de 
Formosa S.A. retains the remaining 15% working interest.

Gran Tierra recently drilled, completed, tested and placed on-stream the 
Proa-3 development well. The well was drilled to a depth of approximately 
3,920 metres and encountered oil in the Palmar Largo formation, as targeted. 
The well was perforated in the Palmar Largo formation between the depths of 
3,858.5 metres and 3,866.5 metres and was subsequently tested.

Following the perforating and initial clean-up flow, bottomhole pressure 
gauges were set and the well was flow tested on three increasing choke sizes 
of 10, 12 and 16mm for 8 hours each. Oil rates and flow pressures stabilized 
for each choke setting at the following levels: 1,100 bbls/d oil at 505 psi, 
1,240 bbls/d oil at 410 psi and 1,540 bbls/d at 300 psi, respectively. The 
water cut was stable throughout the flow test at approximately 3%. The well 
was then shut-in to record pressure build-up. Pressure gauges were 
subsequently recovered and the well was placed on production on June 16, 2014. 
 The Proa-3 well is currently producing at gross rates of between 600 to 700 
bbls/d of oil.

Oil production from the Proa-3 well has been included in the total corporate 
production rates estimated above at rates less than the test and initial 
production rates disclosed to account for expected declines. The Company plans 
to manage production from this well to maximize oil recovery from the Proa 
Palmar Largo oil pool.

About Madalena - International and Domestic Assets (Pre-Acquisition)

Madalena is an independent, Canadian-based, international and domestic 
upstream oil and gas company whose main business activities include 
exploration, development and production of crude oil, natural gas liquids and 
natural gas.

Internationally, Madalena holds 14 large land blocks within five provinces in 
Argentina where it is focused on the delineation of large petroleum in-place 
shale and unconventional resources in the Vaca Muerta and Lower Agrio shales, 
in addition to multiple tight sand plays. The Company is also implementing 
horizontal drilling and completions technology to high impact conventional and 
resource plays.

Domestically, Madalena's core area of operations is located in the Greater 
Paddle River area of west-central Alberta where the Company holds 
approximately 195 gross (153 net) sections of land (approximately 78% average 
W.I.) encompassing light oil and liquids-rich gas resource plays. Madalena's 
primary domestic focus is to exploit its large inventory of horizontal 
drilling locations on its Ostracod oil and emerging oil & liquids-rich gas 
resource plays.

Madalena trades on the TSX Venture Exchange under the symbol MVN. Basic 
corporate information, recent news releases and regularly updated corporate 
presentations are available on the Company's website at www.madalenaenergy.com

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, but not limited to, with respect to the 
Acquisition, including the characteristics of the Argentinean business unit 
being acquired and other expectations related thereto, including pro forma 
cash flow and current and future production levels, the strategic value and 
opportunities available to Madalena  and the ability of Madalena to execute 
its business plan following the completion of the Acquisition. Statements 
relating to "reserves" are also deemed to be forward looking statements, as 
they involve the implied assessment, based on certain estimates and 
assumptions, that the reserves described exist in the quantities predicted or 
estimated and that the reserves can be profitably produced in the future. 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. In particular, this news release contains 
forward-looking statements pertaining to operational activities to be 
conducted by the Company. 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.

Non‐GAAP Measures

This document contains the term "cash flow" and "net backs", which do not have 
a standardized meaning prescribed by Canadian generally accepted accounting 
principles ("GAAP") and therefore may not be comparable with the calculation 
of similar measures by other companies. Madalena uses cash flow and net backs 
to analyze financial and operating performance. Madalena feels this benchmark 
is a key measure of profitability for Madalena. This term is commonly used in 
the oil and gas industry. Cash flow is not intended to represent operating 
profits nor should it be viewed as an alternative to cash flow provided by 
operating activities, net earnings or other measures of financial performance 
calculated in accordance with GAAP. Cash flows are calculated as cash flows 
from operating activities less changes in non‐cash working capital.

Information Regarding Disclosure on Reserves

The reserve estimates contained herein are estimates only and there is no 
guarantee that the estimated reserves will be recovered. In relation to the 
disclosure of estimates for individual properties, companies or business 
units, as adjusted, such estimates may not reflect the same confidence level 
as estimates of reserves and future net revenue for all properties, due to the 
effects of aggregation.

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.

Initial Production Rates

Any references in this document to test rates, flow rates, initial and/or 
final raw test or production rates, early production, test volumes 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, the rates referred to herein 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. 
 Particular reference is made to the Proa-3 results referred to herein. While 
Madalena is very encouraged by the initial results from this well, the testing 
information and the initial production information disclosed herein should be 
considered preliminary and may not be indicative of the well's long term 
performance.

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.

THE SECURITIES OFFERED HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT 
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES 
ABSENT REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS. THIS 
PRESS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN 
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN ANY STATE IN 
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL.



SOURCE  Madalena Energy Inc. 
Kevin Shaw, P.Eng, MBA President and Chief Executive Officer Madalena 
Energy Inc. Phone: (403) 262-1901 (Ext. 230) kdshaw@madalenaenergy.com 
Thomas Love, CA VP, Finance and Chief Financial Officer, Madalena Energy Inc. 
Phone: (403) 262-1901 (Ext. 227) tlove@madalenaenergy.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/June2014/25/c8780.html 
CO: Madalena Energy Inc.
ST: Alberta
NI: OIL MNA  
-0- Jun/25/2014 19:59 GMT
 
 
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