Madalena Energy Inc. (MVN), the Calgary-based company drilling in the world’s second-largest shale gas deposit, agreed to acquire Gran Tierra (GTE) Energy Inc.’s oil assets in Argentina for $63 million.
Madalena’s production in Argentina will increase by 3,028 barrels of oil equivalent a day after the acquisition of conventional fields owned by Gran Tierra, the companies said today in separate statements. As of December 2013, Calgary-based Gran Tierra owned 890,000 net acres in the provinces of Salta, Formosa and Rio Negro.
Madalena owns 136,000 acres of shale in Argentina’s Vaca Muerta, which also is the world’s fourth-largest shale oil deposit. Madalena has stakes in three blocks in the prolific Neuquen basin in Argentina and also owns 92,800 acres in Paddle River, Alberta.
“Madalena’s stock has significant upside potential based on its Argentina blocks, which are prospective for Vaca Muerta shale,” Bill Newman, a Mackie Research Capital Corp. analyst in Calgary, said April 30 in a report to clients. He rates the stock a buy.
Gran Tierra’s Argentina assets were reported to be on the sales block Oct. 26 by La Nacion. The Buenos Aires-based newspaper said the company had hired JPMorgan Chase & Co. to seek $100 million for the oil assets.
Madalena will pay $49 million in cash and $14 million with shares, the company said. The acquisition is expected to close by June 30, the companies said.
“The combined assets in Argentina will provide Madalena with a solid operational platform to advance the conventional assets and unlock the Vaca Muerta shale potential,” Gran Tierra Chief Executive Officer Dana Coffield said in the statement.
Dundee Securities was Madalena’s financial adviser on the transaction, while RBC Capital Markets was strategic adviser on the acquisition.
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