Resource World Magazine

www.resourceworld.com 57 F E B R U A R Y / M A R C H 2 0 1 4 THE OIL PATCH REPORT J o e l C h u r y It's been almost two years since the Argentinian government, led by Christina Fernandez de Kirchner, renationalized the world's first state enterprise, YPF., out- side of the Soviet Union. The move sent a shockwave through the market, as inves- tors holding assets in Argentina started flooding towards the exits. Now the coun- try is primed for reinvestment, as calmer heads have prevailed, and opportunities such as the supergiant Vaca Muerta oil field resume development. The seizure of YPF came after a major slide in exploration on behalf of for - mer owner Repsol. To Repsol's credit, Argentina had choked the Spanish giant down from 30 new wells in 1998 to eight wells in 2010. Government controls on exports and prospecting leases, along with NEP-like price controls on domestic oil and gas made Argentina a bit of a hos - tile jurisdiction to do business. Flash forward to today: hostilities still remain between Repsol and the Argentine government, but much has changed. Vaca Muerta's potential has drawn in the likes of Chevron and Mexican giant Pemex to the shale to get in on the action. Even though the president of the country is the same, Argentina has just got a totally different feel. At the time of seizure, Canada's Madalena Energy Inc. [MVN-TSXV] felt the sting. The Repsol debacle affected their strategy, causing them to refocus and add a significant portfolio of Canadian assets to counter market skep - ticism of Argentina's seemingly hostile business environment. Thankfully, the company didn't give up on their three key blocks in Argentina. They've managed to hold on to some impressive real estate within the Vaca Muerta next to some heavyweight neighbours. "Argentina is a different strategy for us, a two-fold one," says Kevin Shaw, President and CEO of Madalena Energy. "We want to delineate our shale resources in the country. Obviously, the Vaca Muerta shale is the primary focus down there but quickly evolving are a couple of other plays as well, by the industry, where we have positions in the Lower Agrio Shale and a tight sand play in the Mulchinco." "In a quest to boost oil volumes in Argentina, we're focused on putting horizontal technology into play. We made the decision along with our part - ners to implement our first Argentinian horizontal, which we announced back in December." That drilling program resulted in an initial production flow rate of 912 bbls/d of oil and 1,364 mcf/d of natural gas for a total of 1,139 bod/d (80% oil). The tar - get was a light oil conventional zone on the company's Sierra Blancas asset in the Coiron Amargo block. Madalena holds a 35% working interest in the property and is in the process of spudding a second horizontal re-entry to prove the concept. "The Sierra Blanca is very prolific, but we know it needs to be developed hori - zontally," says Shaw. "When we showed that technically to our partners over the last 6 months, we convinced them to re- enter a well bore horizontally, and now we have a very nice well that's exceeding our expectations. Madalena is now mov - ing quickly to drill our second well in what we believe is a much better location on a better structure." On top of a second Sierra Blanca well, the company is also in the midst of drilling a Vaca Muerta shale delineation well on the southern portion of Coiron Amargo. Completion and testing on this particular well and on a nearby previously drilled Vaca Muerta shale well are both on deck as part of a multi-well completion and frac program in 2014. The previous Vaca Muerta well was drilled and cased with approximately 105 metres of shale on logs. Herein lies the "wow" factor for the Vaca Muerta. While prolific plays in the US, like the Bakken and Marcellus, show thicknesses of 10-40 metres, Madalena's Vaca Muerta targets Coiron Amargo and Cortadera are showing 70-140 metres and 950-1350 metres, respectively. Madalena and its neighbours have a lot of shale to work with. The results of their activities both in Argentina and Canada have been astounding. "When the new team took over, we were around 130 boe/d," says Shaw. "We've now transformed that significantly, and we're moving towards a couple thousand barrels now. To continue to grow pro - duction towards that type of target, we need to find a way to delineate our shale resources and unlock them when the time is right." As the stigma from the Repsol debacle fades into the collective memory, it seems that Madalena's time to shine in Argentina is now. During the wait, they managed to keep their entire country team intact and stay well connected. Since then, oil prices have risen favourably, as have gas prices which have increased three-fold. With a new direction for YPF as a government entity, the Argentinians will want to see the industry developed and not hindered. So look for Argentina to be a much bet - ter place in which to operate compared to a few years ago, even for juniors like Madalena. n Madalena Energy keen on Argentina MINING 4 EVERYONE TECHNICAL PROGRAM TRACKS GLOBAL DIMENSIONS OF MINING • Social & Environmental Stewardship • NGOs - Partners in Development • Global Projects Update INNOVATIONS • Green Mining • Innovations in Energy Minerals • Powering Your Mine HARNESSING OUR DIVERSE WORLD • Diversity 101 • Maximizing the Workforce • Resource Nationalism & Transparency MANAGING OPERATIONS – MINE TO MILL • Safety • Mining • Processing • Integration for Optimization CONSTRUCTION TO PRODUCTION • Case Studies • Assessing the Construction Project • Developing in Non Mining Cultures (The Power of Water) ETHICS IN MINING SYMPOSIUM • Mining and Confl ict • Voluntary vs Legislated Codes and Standards • Reaching Agreements: Challenges and Opportunities Join the Mining Community Conversation! 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