OPERATIONS
Projects
Canada
Madalena signed participation agreements in 2006 to drill wells in the Edson and Brazeau areas of Alberta to cover overhead costs while exploring offshore. Four wells were drilled in the Edson area and six in the Brazeau area during 2006. Two additional wells were drilled in Edson during 2007. In Edson, the Company paid 25% of the drilling and abandonment, or completion costs to earnvarying interests from 12.5% to 17% in 12 sections, and in Brazeau, the Company paid 33.35% of the drilling and abandonment, or completion costs to earn interests varying from 20% to 30% in 8.25 sections with options to earn 2 additional sections. Of the twelve wells drilled, one has been abandoned, five are shut in, and six are producing. One well is producing oil, gas and natural gas liquids, and the other five are producing gas and natural gas liquids. Average production for 2006 was 40.2 boe/day, and average production for the first quarter of 2007 was 33.2 boe/day from gas and natural gas liquids production. Oil production was brought on stream in April of 2007.
Tunisia
On May 23, 2006, the Company entered into a seismic option agreement with Storm Exploration Inc. (“Storm”) on the Hammamet offshore exploration block containing over 1.1 million acres in the Pelagian basin offshore Tunisia. The block contains the previously developed Tazerka oil field which produced 21 million barrels prior to its deactivation and is offset by eight proven oil discoveries, two of which are scheduled for development by other operators within the next 12 to 18 months. In addition, Lundin Petroleum announced in December 2006 that their Oudna block located offshore Tunisia has exceeded production rates of 20,000 boe/day. The Oudna block is located within the geographical boundary of the Hammamet block and is surrounded on three sides by the Hammamet acreage. The Tunisian authorities granted the Hammamet block to Storm in June 2005, for a period of five years, starting September 13, 2005, under favourable fiscal terms. Madalena is participating for a 30% working interest in an extensive seismic program consisting of approximately 400 square kilometers of 3D seismic and 200 kilometers of 2D seismic to commence during the third or fourth quarter of 2007. Upon review of the seismic Madalena will have the option to participate for 30% in the drilling of a test well on the block to earn a 15% working interest and the right to participate in all further development of the block. The 3D seismic program has been designed to evaluate the potential reactivation of the Tazerka field, delineate seven significant hydrocarbon shows in wells drilled on the block, evaluate three large untested structures previously recognized on the block and high-grade the most prospective test well location on the block.
On June 8, 2006, the Company entered into a second seismic option agreement with Storm on the Remada Sud onshore exploration block containing over 1.2 million acres in the prospective Ghadames basin of southern Tunisia. Madalena will be participating for a 30% working interest in 200 km 2-D seismic program which will provide further delineation of structures identified by 2-D seismic data shot during 2005. The delineation and final approvals for the shooting of the seismic program for the Remada Sud onshore exploration block were finalized during Q1 2007 and the seismic program is currently underway. Upon review of the 2-D seismic Madalena will have the option to participate for 30% in the drilling of a test well on the block to earn a 15% working interest in approximately 600,000 acres of land. Madalena will retain the option to drill a second test well on the block to earn an additional 600,000 acres and will have the right to participate in all further development of the block. The Remada Sud block has exploratory potential in the Ordovician, Silurian Acacus and Triassic formations. All three zones are proven commercially productive from adjoining blocks in Libya and Tunisia. In addition to the proven play concepts defined by offsetting production, there are at least two additional trap configurations prospective on the block that could prove to be significantly larger. The Ghadames basin is widely recognized as a world-class basin.
South America
The Company is concentrating on assessing and developing oil and gas investment opportunities in South America with the objective of having significant working interest in selected properties. The Company is committed to alignment with high quality joint ventures partners whose skill sets add value to our own. Several opportunities for exploration and acquisition in South America are currently under evaluation by the Company. In the first quarter of 2007 Madalena received final government approval for the establishment of a Madalena branch office in the Province of Rio Negro in Argentina. The establishment of the registered branch office will be a significant benefit to Madalena as we pursue deal opportunities in Argentina. Madalena has also made an application for a branch office in Colombia.
