(All dollar figures are expressed in
United States Dollars, unless
otherwise noted)
CALGARY, May 8, 2017 /CNW/ - Madalena Energy Inc.
("Madalena" or the "Company") (TSXV: MVN and OTCQX: MDLNF) is
pleased to announce the successful completion of the strategic
alternatives process which it initiated in June of 2016.
On May 8, 2017, Madalena entered
into a series of agreements with Hispania Petroleum S.A.,
("Hispania") a private, family-owned Spanish energy company which
has operated in multiple countries, including Argentina, for three generations. The
agreements provide for a package of debt and mezzanine financing
which, once implemented, are expected to resolve Madalena's
liquidity challenges (the "Working Capital Loan") and provides the
Company access to growth capital for drilling and investment
activities (the "Capex Loan").
Jose David Penafiel, Hispania's
CEO, has been appointed CEO of Madalena, and he and Alejandro Augusto Penafiel will join Madalena's
Board of Directors. In order for new management to successfully
transition and streamline operations, the companies have entered
into a services agreement (the "Services Agreement") whereby
Hispania's personnel, in Argentina
and elsewhere, will be made available to Madalena.
Jose David Penafiel, Madalena's
new CEO, is highly qualified to oversee the next phase of
Madalena's growth. Mr. Penafiel is a University of Oxford graduate and was the General
Manager of Hispania's Argentina
operations for 7 years. During that time, Mr. Penafiel
successfully assisted Hispania's Chairman in negotiations to take
over operatorship of Area Puesto Guardian, and also led successful
negotiations to acquire the 40% stake held by Antrim Energy Inc. in
Area Puesto Guardian in Argentina.
Mr. Penafiel later concluded a farm-in agreement with President
Energy PLC for a 50% stake in Area Puesto Guardian, and sold the
remaining 50% stake of the concession in July 2014. Mr.
Penafiel has managed multiple drilling campaigns in Argentina, as well as unconventional drilling
operations in Texas in the Permian
Basin. Mr. Penafiel brings to Madalena a long history working
in the energy industry, with most of that experience focused in
Latin America.
This transformative transaction provides Madalena with
sophisticated leadership, financially aligned with shareholders and
experienced in working in Argentina, and with committed growth capital.
With leadership concentrated in Argentina, the Company can implement cost
controls and can achieve meaningful efficiencies. The growth
capital will enable the Company to properly develop its
conventional and unconventional assets. In summary, this marks a
new chapter for Madalena, with a renewed focus on operational
productivity and enterprise growth.
Highlights:
The Company has entered into two credit
facilities with Hispania, with a total of $23 million of availability, which will be
utilized on an as-needed basis:
- The Working Capital Loan is a multi-drawdown facility of up to
$6.5 million, which shall be used for
general working capital purposes. Interest accrues at 7% per annum.
Principal and interest on each drawdown is repayable thirty-six
months after an advance of funds;
- The Capex Loan is a multi-drawdown convertible loan of up to
$16.5 million. The loan similarly
accrues interest at 7% per annum, with each drawdown and accrued
interest repayable thirty-six months after drawdown. The Capex Loan
is convertible into units of the Company ("Units") with each Unit
comprised of one common share ("Common Share") and 0.22 of a Common
Share purchase warrant ("Warrant"), with each Warrant entitling the
holder to purchase an additional Common Share. The Capex Loan is
convertible based on a conversion price equal to a 5%
premium to the 20-day volume weighted average price ("VWAP") of the
Common Shares on the last trading date prior to a particular
drawdown ("Conversion Price") in respect of the Common Shares
comprising the Units. The exercise price of the Warrants issued
upon conversion is also at a 5% premium to that 20-day VWAP. These
Warrants expire 18 months after the date of issuance. Both
Hispania and Madalena have the right to convert the whole or part
of the principal and interest owing hereunder into Units on or
before repayment, although Madalena's right to compel conversion is
limited in some circumstances; and
- Both loans are secured, limited to the Company's interests in
the Rinconada-Puesto Morales concession.
The Services Agreement has an initial term of one year, but may
be extended by agreement. Pursuant to the Agreement, Hispania's
personnel will provide:
- technical, operational, strategic and financial advice,
direction and assistance in relation to the operation of Madalena's
oil and natural gas properties, undeveloped lands and related
assets in Argentina;
- advice to Madalena's officers and the board of directors
regarding the business of Madalena; and
- such other services as requested by Madalena from time to
time.
In association with the Services Agreement, Madalena will issue
Warrants to Hispania in six consecutive monthly tranches of
4,758,333 Warrants. These Warrants will have an exercise
price equal to the price of the Common Shares on the last trading
day prior to issuance and will expire 18 months thereafter.
New Focus
The Company is reducing its Canadian
presence as it transfers executive management functions to
Argentina. To that end, Mr.
Steve Dabner, VP Exploration and New
Ventures and Mr. Thomas Love, VP
Finance and Chief Financial Officer will depart the Company. Mr.
Dabner will depart immediately, and Mr. Love, effective
May 31, 2017. The Madalena board of
directors wishes to thank Messrs Dabner and Love for their
significant contributions to the Company.
The Madalena board of directors wishes to extend its gratitude
to its Chairman and Interim CEO, Steven
Sharpe. Without his leadership, commitment and personal
sacrifice, the Company would not have achieved this successful
result, which positions Madalena to grow and prosper. As well as
relinquishing his title as Interim President and CEO, Steven has
expressed his intention to step down as the Chair, and has tendered
his resignation as a Madalena director.
"My work here is done", Steven commented, "The challenges we
have faced over the last while have been truly enormous, but I
believe Madalena's future prospects are bright and its ability to
pursue them assured. I have spent much time with Jose over the last
months as we put this deal together. The Company is in good
hands."
Shareholder Support
Maglan Capital LP, Madalena's
largest shareholder, has expressed its full support of the
transactions with Hispania and the appointment of the new CEO and
directors.
David Tawil, President of Maglan
Capital stated: "We are excited for the next chapter in Madalena's
development. It speaks volumes about the quality of Madalena's
assets and operations, that the Company was able to attract such a
qualified and experienced investor group and leader."
Steven Azarbad, Chief Investment
Officer of Maglan Capital added: "We are committed to working with
the new CEO and the Board to realize the potential which we believe
exists for all Madalena shareholders. We thank Mr. Sharpe and the
rest of the board for their efforts in consummating this
transaction."
About Hispania
Hispania Petroleum began operations in
the 1980's focused initially on trading crude oil and products and
then transitioned into exploration and production. Hispania has had
great success operating in the Russian market with a steady
increase in production since 1992 from the oil fields in the Perm
region that it operates alongside its joint venture partner,
Lukoil. Hispania began its operations in Argentina in 1991 after acquiring Area Puesto
Guardian in the Noroeste basin. Hispania's operations in
Argentina were focused on
redeveloping Puesto Guardian's five oil fields. The company's
redevelopment project was successful by maintaining low operational
costs.
Mr. Jose David Penafiel stated:
"We are excited about the opportunity to focus on Argentina once again. Madalena has solid
production from its existing fields, and holds significant
exploitation potential with the ability to materially grow
production through a clearly thought out near-term drilling and
completion program in its core Vaca Muerta position.
The Hispania group considers Argentina a very fertile location to build a
major hydrocarbon producing business, making material investments
in the local economy, engaging with well-connected partners,
streamlining the local workforce while continuing to benefit the
communities where the Company operates. We expect to achieve rapid
progress in the short- to medium-term in this regard."
Annual and Special Meeting of Madalena
Shareholders
These transactions are subject to certain
regulatory and shareholder approvals. The Company expects to hold
its annual and special meeting of shareholders in June, 2017 to,
among other things, approve the Capex Loan and attend to annual
meeting matters.
About Madalena Energy
Madalena is an independent,
Canadian Argentine focused upstream oil and gas company with
operations in four provinces of Argentina where it is primarily focused on the
delineation of unconventional oil and gas resources. 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, but not limited
to, with respect to matters related to addressing the Company's
liquidity challenges, the Company's future plans and the timing of
certain matters. 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.
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.