Mackie Research keeps Madalena Ventures' buy rating on shale resource upside in Argentina

Mackie Research Capital analyst Bill Newman has kept his buy rating and $2.15 target price on Madalena Ventures (CVE:MVN), after the oil and gas explorer's CAS X-5 well in Argentina intersected 100 metres of Vaca Muerta shale, providing resource upside. 

The international upstream oil and gas company has production and exploration operations in Argentina and is focused on international oil and gas opportunities in South America.

The CAS X-5 exploration well was drilled in the southern portion of the Coiron Amargo block, and cased to a total depth of 3,400 metres. It found 100 metres of Vaca Muerta (VM) shale with hydrocarbon shows, the analyst noted. Logs indicate an average total organic content (TOC) of roughly 4% over the 100 metre VM shale zone.

"The results of the CAS X-5 well further delineate the VM shale in the southern portion of the Coiron Amargo block in Argentina," said Newman. "Also, in Argentina, we expect Madalena and Apache to test the thick Quintuco zone in the CorS X-1 well." 

"Following the recent increases in the pricing for both natural gas and oil in Argentina, the political environment appears to be improving and capital has begun to return to Argentina."

The Coiron Amargo block is located within the heart of the VM oil play and is within kilometres of the recently announcedChevron and Bridas proposed billion dollar farm-in deals on YPF’s lands. YPF is an Argentina-based integrated oil and gas company. 

The analyst adds that in Canada, a successful production test of the Nordegg could be a major catalyst for the stock, with the well to frac in February. 

Last month, Madalena drilled a Nordegg well to a total depth of around 3,000 metres, with 1,100 metre horizontal section. Within the next few weeks, Madalena plans to complete a multi-stage frac and production test. 

"This is a critical well, as success could set up a new liquid rich (100+ bbl/mmcf) natural gas

resource play with hundreds of potential drilling locations. Weather permitting; a follow-up well (100% W.I.) is planned prior to spring break-up," the analyst noted. 

In Canada, the oil and gas company also has the Ostracod light oil play, where a horizontal oil well is drilling ahead in the Paddle River area, and the Notikewin facilities under construction. 

As announced last month, Madalena tested the 6-27 Notikewin well at a final rate of 5.5 mmcf/d plus 28 bbl/mmcf of liquids (154 bbl/d). The well is expected to be on production by mid-February, Newman highlighted in the note.