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.
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:
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.
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."
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."
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.
SOURCE: Madalena Energy Inc.
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