News Column

Madalena Announces Re-Pricing of Bought Deal Offering

June 20, 2014



By a News Reporter-Staff News Editor at Energy Weekly News -- Short Form Prospectus Distributions. Madalena will apply to list the Subscription Receipts and the Common Shares thereunder on the TSX Venture Exchange.

The gross proceeds from the Offering will be held in escrow pending the satisfaction of all conditions to the completion of the Acquisition (other than funding), provided that the closing date of the Acquisition is on or before July 31, 2014, upon which time each Subscription Receipt will entitle the holder to receive a Common Share, without further payment or action on the part of the holder, upon the closing of the Acquisition. If the Acquisition is not completed on or before July 31, 2014 or it is terminated at an earlier time, then the purchase price for the Subscription Receipts will be returned to subscribers, together with a pro rata portion of interest earned on the escrowed funds.

Completion of the Acquisition and the Offering are subject to certain conditions including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange. Closing of the Offering is expected to occur on or about June 24, 2014 and the Acquisition is expected to close on or about June 30, 2014.

Madalena estimates pro forma consolidated annual cash flow from operations of US$35 - US$45 million over the next twelve months with the Corporation having 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 subsequent to the closing of the Acquisition and the approval of a consolidated budget by the Corporation's board of directors.

Pro forma the Acquisition and the Offering and after all transaction costs, the Company estimates positive working capital of approximately US$5.0 million.

Updated Acquisition Highlights Acquisition cost per flowing boe of approximately US$19,091, based on current estimated production at the expected closing date of the Acquisition 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 lands; 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 and the Offering: 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 - 7990 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: 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. 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. 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. Reserves are "gross reserves", being working interest share of reserves before the deduction of royalties owned by others. "FDC" means future development costs. Please see the end of this news release for important information on FDC. Madalena converted to US$ at 0.92US/CDN. Based on field estimates.

Keywords for this news article include: Energy, Oil & Gas, Natural Gas, Financial Services.

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Source: Energy Weekly News


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