Madalena Energy has signed an operation agreement with Recursos y Energía Formosa (REFSA) over the Palmar Largo Concession in Formosa, Argentina.
The Palmar Largo Concession’s average gross production during last quarter was 640 Bbls/d with a YTD operating netback of US$22 per barrel and with the agreement Madalena’s net production is expected to increase by approximately 550 Bbls/day
2 Year Operation Agreement with a 1 year extension provided that Madalena fulfills its US$2M Investment Commitment
The Investment Commitment consists of 2 workovers in 2 wells in order to increase production and certain facility improvements
Madalena will operate 100% of the Palmar Largo Concession and will be required to pay the existing 12% royalty on production revenues to the Province and an additional 5.32% of production revenues is to be paid to REFSA under the agreement
Madalena will receive 82.68% of production revenues under the agreement and will be responsible for the operation costs of the field.
Madalena operates two adjacent areas (El Chivíl and Surubí) which will allow the realization of significant synergies among the three areas
In 1992, YPF as title holder entered into a Joint Venture Agreement with Pluspetrol SA, Norcen International Limited, CGC SA and Dong Won Co Ltd. with the purpose of exploring, exploiting and developing the Area Palmar Largo.
In 2005, Gran Tierra Energy (whose Argentine operations were acquired by Madalena Energy Argentina SA in 2014) acquired a 14% participation interest in the Joint Venture from Dong Won.
Palmar Largo’s 25 year concession expired in December, 2017. No agreement on the extension of the concession was reached between the operator, High Luck, and the Province, and as a result the Province issued Provincial Decree 301 dated November 5, 2018 which established a) the 25 year Palmar Largo Concession awarded to YPF expired; b) the Concession area was transferred to the Province and c) the Concession was awarded to REFSA.
Madalena’s three areas in the Province (Palmar Largo, Surubí and Chivíl) cover a surface of 422,960 acres.
The 2018 3rd Quarter average daily production of Palmar Largo was approximately 640 bbls from 8 producing wells. The associated gas is used in the field as fuel gas and for the gas lift system. Madalena expects a significant uplift in production from the 3 workovers planned in Palmar Largo and Surubi.
Madalena president and CEO Jose David Penafiel said: “The Operation Agreement recently entered into with REFSA which ultimately allows Madalena to increase its net production by approximately 550 barrels per day effective December 1st clearly shows how the Company’s new strategy is working. Since the current management took over in May 2017, our strategy has centered on operational efficiency, and that focus has made us a more effective organization.
“Our hands-on oversight and participation has not only captured value through costs savings, but has led to this accretive bolt-on opportunity, where REFSA has acknowledged the company as an operator of choice because we are efficient. We will continue to adhere to our key values of patience, prudence, and discipline, and are confident that more growth opportunities will materialize in the future.”
Source: Company Press Release