CONDENSED INTERIM CONSO LIDATED FINA NCIAL … Energy Inc Condensed... · months ende June 30 ......

COONDENSED IN

FOR THE SIX

TERIM CONSO

X MONTHS EN

(UNA

OLIDATED FINA

NDED JUNE 30,

AUDITED)

ANCIAL STATEM

, 2018 AND 20

MENTS

017

M

C(

CS

Madalena Ener

Condensed InteUnaudited)

USD 000s Assets Current assetsCash and caTrade and oInventory Other curre

Property, planExploration anOther long‐te Liabilities Current liabiliCurrent porTrade and oTaxes payabDecommiss

Convertible dDeferred incoDecommissioOther long‐te Shareholders’Share capitaContributedEquity compAccumulateDeficit

Commitments See the accomp

rgy Inc.

erim Consolida

s ash equivalentsother receivabl

nt assets

nt and equipmnd evaluation arm assets

ties rtion of long teother payables ble ioning obligati

ebentures ome tax liabilityning obligationrm liabilities

’ Equity al d surplus ponent of conved other compr

and Other Lonpanying Notes

ated Statement

s es

ent assets

rm debt

ons

y ns

vertible debenrehensive loss

g‐term Liabilitto the Consolid

Condens

ts of Financial

ture

ies (note 15) dated Financia

sed Interim Co

Position

Note

347

9

8

9

10

8

al Statements

nsolidated Fin

AsJune20

2

((1

ancial Stateme

s ate 30 018

1,268 8,216 824 603

10,911 18,193 42,287

168 71,559

1,416 7,782

‐ 3,850 13,048 1,208 3,037 18,794 1,497 37,584

239,029 17,443

76 (26,941) 195,632) 33,975 71,559

ents Q2 2018|

As atDecember 31

2017

1,202 9,534 1,585

46112,78220,39339,869

20473,248

‐9,522453

3,85013,8251,2741,352

17,8211,977

36,249

238,98916,371

76(26,941)(191,496)

36,99973,248

2

1

M

Co(U

U

S

Madalena Ener

ondensed InterUnaudited)

USD 000s, exce

Revenues

Oil and natura

Royalties

Other Income

Expenses

Operating General and aRestructuring

Finance (incomShare‐based acompensatio

Warrants expe

Depletion and

Gain on dispo

Loss before in

Income tax re

Current

Deferred

Loss

Foreign curren

Comprehensiv

Net Loss per s

Basic and dilut

Basic and dilut

See the accomp

rgy Inc.

rim Consolidat

ept per share a

al gas revenues

dministrative

me) expenses nd long‐term ion

enses

depreciation

sal of assets

ncome taxes

covery (expen

ncy translation

ve Loss

share

ted – continuin

ted – total

panying Notes

ted Statements

mounts

s

incentive

nse)

adjustment

ng

to the Conden

Condens

s of Income (Lo

Note

18

17 17

13

11,12

8

3

10

10

nsed Interim Co

sed Interim Co

oss) and Comp

Three moJun

2018

9,802

(1,602)

108

8,308

4,2191,468

‐

1,233

538

90

1,925

(33)

9,440

(1,132)

‐

(2,382)

(2,382)

(3,514)

‐

(3,514)

(0.01)

(0.01)

onsolidated Fin

nsolidated Fin

prehensive Inco

onths endedne 30

2017

9,35

(1,675

7,68

6,192,952,20

38

(666

2

3,65

(841

13,90

(6,225

2,83

(2,056

77

(5,449

12

(5,325

(0.0

(0.0

nancial Statem

ancial Stateme

ome (Loss)

Six

2018

57 19,

5) (3,0

‐

82 16,

90 9,5102

2,

86 1,

6)

26

59 3,

1)

07 18,

5) (2,3

32

6) (1,7

76 (1,7

9) (4,1

24

5) (4,1

01) (0

01) (0

ents.

ents Q2 2018|

x months endeJune 30

20

,413

087) (

197

,523

,691 ,990

‐

,537

613

513

,590

(33)

,901

378) (

‐ (

758)

758)

136) (

‐

136) (

0.01)

0.01)

3

ed

017

19,693

(3,307)

‐

16,386

11,704 4,9232,202

1,032

(438)

26

7,419

(560)

26,308

(9,922)

(1,200)

2,406

1,206

(8,716)

288

(8,428)

(0.02)

(0.02)

M

Cond(Una

USDBal201NetSha(noComConWa

Bal

BalNetForadjSha(noWa

Bal

See t

Madalena Ener

densed Interimaudited)

D 000s lance at Decem17 t Loss are‐based comote 11) mmon shares invert debentuarrants (note 8

lance at June 3

lance at Decemt loss reign currency ustment are‐based comote 11) arrants (note 1

lance at June 3

the accompany

rgy Inc.

m Consolidated

mber 31,

mpensation

issue – res )

30, 2018

mber 31, 2016

translation

mpensation

1)

30, 2017

ying Notes to t

d Statements o

Share Capital (note 10)

238,989 ‐ ‐

40

‐

239,029

238,97

238,97

the Condensed

Condens

f Changes in Sh

Contributed

Surplus

16,371‐

559

‐

513

17,443

3 16,0

‐

‐

‐ (49‐

3 15,5

d Interim Conso

sed Interim Co

hareholders’ E

EquityComponent oConvertibleDebentures(note 8)

76‐‐

‐

‐

76

066

‐

‐

97) 26

595

olidated Financ

nsolidated Fin

Equity

of AccumulatOther

ComprehenLoss

(26,9

(26,94

76‐

‐

‐ ‐

76

cial Statements

ancial Stateme

ted

nsive Def

941) (19‐ (4‐

‐

‐

41) (195

(27,157) ‐

288

‐ ‐

(26,869)

s.

ents Q2 2018|

ficit

91,496) 4,136)

‐

‐

‐

5,632)

(157,700)

(8,716)

‐

‐ ‐

(166,416)

4

Total Equity

36,999 (4,136)

559

40

513

33,975

70,258

(8,716)

288

(497) 26

61,359

M

Co(U

UCONI

CCCIPEPoPtCN

FBCNCCI

C S

Madalena Ener

ondensed InterUnaudited)

USD 000s Cash provided Operating Net Loss tems not affec

Depletion Accretion Fair value cGain on disShare‐basecompensatWarrants eDeferred inUnrealizedLease comNon‐cash i

Change in otheChange in non‐Cash flow fromnvesting Property, plantEvaluation andProceeds on diof transaction fProceeds on ditransaction feeChange in non‐Net cash from

Financing Bank loan repaChange in non‐Net cash used Change in cashCash and cash mpact of forei

Cash and cash

See the accomp

rgy Inc.

rim Consolidat

by (used in):

cting cash: and depreciati

change on assesposal of asseted and long‐tetion expenses ncome tax expd (gain) loss on mitment liabilncrease of coner long‐term as‐cash working m (used in) ope

t and equipmed exploration assposal of PP&Efees sposal of assetes ‐cash working (used in) inves

ayment ‐cash working in financing ach and cash equequivalents, bign exchange o

equivalents, e

panying Notes

ted Statements

ion

ets held for salts rm incentive

pense (recoveryforeign exchaity ntingent liabilitssets capital rating activitie

nt additions ssets additionsE and E&E asse

ts held for sale

capital sting activities

capital ctivities ivalents eginning of peon cash balance

end of period

to the Conden

Condens

s of Cash Flows

Not

le 3,

11,1

y) nge

ty

es

s ets, net

e, net of

riod es

nsed Interim Co

sed Interim Co

s

Thre

Jte 2018

(3,514

3 1,92513 175

,4,5 (33

12 5388 90

2,38213 1,065

(3635

14 (1,225 1,244 3 (1584 (1,825

4

514 8

(1,975

614 1,200

1,200469798

1,268

onsolidated Fin

nsolidated Fin

ee months ended une 30

2017

4) (5,449 5 3,657 6‐ 1

3) (841

8 (6660 22 2,055 216) (265 174‐ 16

5) (4,0424 (4,656

8) (1725) (1

‐ 82

‐ 818 185) 1,66

‐ 0 0 9 (2,9968 5,94‐

8 2,94

nancial Statem

ancial Stateme

Six moJ

2018

9) (4,136 9 3,596 50 1) (33

6) 616 516 1,751 1,166) (704 86 2) (2,0706) 1,47

2) (3021) (2,297

9

9 5 (60 (2,605

‐ ‐ 1,20‐ 1,206) 62 1,20‐

6 1,26

ents.

ents Q2 2018|

onths ended une 30

2017

6) (8,71 0 7,4193 149‐ 150

3) (560)

3 (438)3 268 (2,406)9 4370) (53)4 212‐ 58

0) (2,421)1 (6,143)

2) (683)7) (155)

‐ 7,373

‐ 1,2806) (1,152)5) 6,663

‐ (1,646)0 ‐0 (1,646)6 (1,126)2 4,071‐ 1

8 2,946

5

16) 9 9 0 )

) 6 ) 7 ) 2 8 ) ) ) )

3

0 ) 3

) ‐ ) ) 1 1

6

NA(T

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1

2

Notes to the CoAs of and for thTabular amounts a

___________

Madalena Ener

1. Reporting

Madalena of oil and nS.W., Calga

The condesubsidiarie

• M

• M

• M

• M

• M

• M

• Pe

2. Basis of PrThese condto a going course of bamend capprovincial capital comdependentchallenging

Statement

These condAccountingotherwise policies an31, 2017. Tstatementfinancial stcondensedfinancial sInternation(“IASB”).Thfor all perapproved a

ondensed Interhe Six Months are stated in thous

__________

rgy Inc.

Entity

Energy Inc. (thnatural gas in ary, Alberta, T2

ensed interim es: Madalena Petro

Madalena Energ

Madalena Petro

Madalena Petro

Madalena Ventu

Madalena Ventu

et‐Ja S.A. (Arge

reparation densed interimconcern, whicbusiness as thepital commitmeauthorities. Fammitments. Tht on obtaining g.

t of Complianc

densed interimg Standard 34,indicated. Thd method of cThe disclosuress. Certain infotatements havd interim consotatements fornal Financial hese consolidariods presenteand authorized

rim ConsolidatEnded June 30sands of United St

___________

he “Company” Argentina and2P 2Z1.

consolidated

oleum Ltd. (Can

gy Argentina S.

oleum America

oleum Holdings

ures Internatio

ures Internatio

entina)

m consolidatedh contemplateey become dueents outlined iilure to amendhe Company’s aalternative eq

ce

m consolidated, “Interim Finahese condensecomputation ass provided belormation and ve been condeolidated financr the year endReporting Stted financial sd as outlined d for issue by t

ted Financial St0, 2018 and 20tates dollars (“USD

__________

Condens

or “Madalena its principal p

financial stat

nada)

.R.L. (Argentina

s Limited (Barb

s Limited (Barb

onal Holding Co

onal Inc. (Barba

financial statee the realizatioe. Continuing an Note 15, whd the commitmability to contiuity, debt fina

d financial statancial Reportined interim cons the annual coow are incremdisclosures n

ensed or havecial statementded Decembeandards, as tatements follin note 3.Thehe Company’s

tatements 17 (UnauditedD”), except per sha

___________

sed Interim Co

a”) is involved place of busine

tements includ

a) (“MEA”)

bados)

bados)

ompany Inc. (B

ados)

ements have bn of assets andas a going concich is expectedments could resnue as a goingncing, and/or p

tements have bng” and are prensolidated finaonsolidated finmental to thosenormally inclue been discloses should be reer 31, 2017, wissued by thow the same ae condensed i Board of Direc

) are amounts and a

__________

nsolidated Fin

in the exploratess is Suite 160

de the results

Barbados)

een prepared d the settlemecern is depended to be achievesult in insufficig concern and dproceeds from

been preparedesented in Unancial statemenancial statemee included withded in the ned on an annead in conjuncwhich have behe Internationaccounting polinterim consolctors on Augus

as otherwise state

___________

ancial Stateme

tion, developm00 Dome Towe

s of the follo

in accordance nt of liabilitiesent upon the Ced through negient sources todischarge its om asset sales w

d in accordancited States Doents follow thents for the yeh the annual cootes to the aual basis onlyction with the een prepared nal Accountinglicies and methlidated financist 21, 2018.

ed)

__________

ents Q2 2018|

ment and proder, 333 – 7th A

owing wholly‐o

with IFRS apps in the normalCompany’s abilgotiations witho fund anticipatbligations wouhich could be

ce with Internaollars (“USD”), he same accoear ended Deceonsolidated finannual consoly. Accordingly, annual consolin accordanceg Standards hods of compuial statements

_____

6

uction Avenue

owned

licable lity to h the ted uld be

ational unless unting ember nancial idated these idated e with Board

utation s were

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_

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___________

Madalena Ener

Significant

IFRS 15 The IASB ispecifies reannual permodified rstatementcontracts ftiming of tadjustmen IFRS 9 IFRS 9 proinstrument1, 2018, thvalue of th IFRS 16 IFRS 16 wacontains a the Legal disclosure the accounleases of ’months or(i.e., the lethe right‐oand the deLessees wiin the leasthose paymadjustmenLessor acccontinue toof leases: oIFRS 16 alsIFRS 16 is ebefore an modified r


__________

rgy Inc.

t accounting po

issued IFRS 15evenue recognriods beginningetrospective ms have not befollowing the ghe Company’snt to retained e

ovides guidants. The new stahe Company ahe Company’s f

as issued in JaLease, SIC‐15 Form of a Leaof leases and nting for finanlow‐value’ assr less). At the cease liability) aof‐use asset). Lepreciation expll be also reque term, a chanments). The lesnt to the right‐ocounting undero classify all leoperating and so requires lesseffective for anentity applies etrospective a


___________

olicies

5 “Revenue fronition criteria g on or after Jamethod that weeen restated. Tguidance outlins previous reveearnings was re

ce on the recandard was efadopted IFRS 9financial instru

anuary 2016 anOperating Leaase. IFRS 16 serequires lesseence leases undets (e.g., perscommencemenand an asset reLessees will bepense on the riuired to remeange in future lessee will generof‐use asset. r IFRS 16 is suases using thefinance leasessees and lessornnual periods IFRS 15. A lespproach. The s


__________

Condens

om Contracts and expandedanuary 1, 2018ere not compleThe Company ned in IFRS 15. enue recognitioequired.

cognition andfective for ann9 which resultuments.

nd it replaces ses‐Incentivesets out the pres to account er IAS 17. Theonal computent date of a leepresenting the required to sght‐of‐use asssure the leaseease payments rally recognise

ubstantially une same classific. rs to make mobeginning on ossee can choosstandard’s tran


___________

sed Interim Co

with Customed disclosures fo8. The Companeted at the datcompleted an Based on th

on. As a result

measuremennual periods beted in no mate

IAS 17 Leasesand SIC‐27 Ev

rinciples for thfor all leases ue standard incrs) and short‐tase, a lessee we right to use eparately recoet. liability upon resulting from

e the amount o

nchanged fromcation principle

re extensive dior after 1 Januse to apply thensition provisio

) are amounts and a

__________

nsolidated Fin

ers” which repor revenue. Thny adopted IFRte of initial appn assessment ois review, therof the adoptio

nt, impairmeneginning on orerial changes

s, IFRIC 4 Detevaluating the Suhe recognition,under a single ludes two recoterm leases (i.will recognise athe underlyingognise the inte

the occurrencm a change in aof the remeasu

m today’s accoe as in IAS 17 a

isclosures thanuary 2019. Earle standard usions permit cert

as otherwise state

___________

ancial Stateme

places IAS 18 he new standaRS 15 on Januaplication, thus of its revenuere were no maton of IFRS 15, n

t and derecor after January in the measur

ermining whethubstance of Tr, measuremenon‐balance shognition exem.e., leases witha liability to mg asset during erest expense

ce of certain evan index or raturement of the

ounting under and distinguish

n under IAS 17y application iing either a futain reliefs.

ed)

__________

ents Q2 2018|

“Revenue”. IFard was effectiary 1, 2018 usiprior years' fin streams and terial changes no cumulative

gnition on fin1, 2018. On Jarement and ca

her an Arrangeransactions Invnt, presentatioeet model sim

mptions for lesh a lease termmake lease paythe lease termon the lease li

vents (e.g., a ce used to detee lease liability

IAS 17. Lessoh between two

. s permitted, bull retrospectiv

_____

7

FRS 15 ive for ng the nancial major to the effect

nancial anuary arrying

ement volving on and milar to sees –

m of 12 yments m (i.e., iability

change ermine y as an

ors will o types

but not ve or a

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3.


___________

Madalena Ener

Property, P

USD 000s

Cost At DecemAdditions Disposals Effect of cAt DecemAdditions Effect of cAt June 30

USD 000s AccumulaAt DecemDepreciatiImpairmenDisposals Effect of cAt DecemDepreciati

At June 30

USD 000s Net book At DecemAt June 30

At June 30,

The depletidepletable producing rand probab

During the producing rThe change


__________

rgy Inc.

Plant and Equi

ber 31, 2016

hange in foreigber 31, 2017

hange in foreig0, 2018

ted depreciatiber 31, 2016 ion and depletnt

hange in foreigber 31, 2017 ion and deplet

0, 2018

value ber 31, 2017 0, 2018

2018 and 2017

on expense cabase, $3.2 mreserves (June ble reserves).

first quarter oreserves would is considered


___________

ipment (“PP&E

gn exchange ra

gn exchange ra

ion and deplet

tion

gn exchange ra

tion

7, Madalena d

alculation for tillion for estim30, 2017 ‐ $8

of 2018 the cod be more appa change of th


__________

Condens

E”)

ates

ates

tion

ates

etermined the

he three and smated future 83.5 million for

ompany determropriate than phe estimation t


___________

sed Interim Co

Oil and NaGas A

1393

143

144

Oil and NaGas A

(86(14

(22

(123

(3

(126

19

1

ere were no im

six months perdevelopment r estimated fu

mined that theproved and protechnique, and

) are amounts and a

__________

nsolidated Fin

atural Assets

9,535 3,866

‐‐

3,401

1,096 ‐

4,497

aturalAssets

6,934) 4,582)

‐2,206)

‐3,722)

3,240)

6,962)

9,679

7,535

mpairment indic

riod ended Juncosts associature developm

e use of proveobable reserved the effect is r

as otherwise state

___________

ancial Stateme

Corporate

2,059

54 (34) 42

2,121

36 1

2,158

Corporate

(1,116) (326) 34

‐ 1

(1,407)

(93)

(1,500)

714

658

cators for any

ne 30, 2018 incted with provment costs ass

ed producing aes for the deplrecognized pro

ed)

__________

ents Q2 2018|

To

1413

145,

1,

146,

To

(88,0(14,9

(22,2

(125,1

(3,3

(128,4

20,

18,

of its CGUs.

cluded as part ved developedociated with p

and developedetion reservesspectively.

_____

8

otal

,594 ,920(34)42

,522

,132 1

,655

otal

050) 908)34

206)1

129)

333)

462)

,393

,193

of the d non‐proved

d non‐s basis.

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4.

5


___________

Madalena Ener

During the million and and equipm

During the tgain on disp

Exploration

USD 000s Cost At DecembAdditions Disposals At DecembAdditions

At June 30

E&E assets or probableE&E assets a

In January 2Este (“CASEwere $10 magreed upo

At June 30,

5. Assets Held

As a result proceeds, 6that date. Aall of the cequity inve

In January approximatgain on disp

In addition,the Companwith no resu


__________

rgy Inc.

three and six $0.4 million) o

ment.

three month pposal of assests

n and Evaluatio

ber 31, 2016

ber 31, 2017

0, 2018

consist of the e reserves. Addare not deprec

2017, the ComE”) to Pan Ammillion and PAEn work progra

2018 and 2017

d for Sale and I

of the disposa6.2 million comAt December 3common sharestment, but as

2017, the Coely $0.5 millioposal of assets

and pursuantny sold the remulting gain or l


___________months perio

of directly attri

period ended Jus of $0.8 millio

on Assets (“E&

Company’s inditions represeciated or deple

mpany sold 55%merican EnergyE agreed to cam (“Work Prog

7, Madalena d

nvestments

al of the non‐cmmon shares o31, 2016, and ge investment is assets held fo

ompany sold 1on, and realizefor the twelve

t to a purchasemaining 4.7 moss on sale.


__________

Condens

od ended Junebutable gener

une 30, 2017 ton.

&E”)

tangible exploent the Compaeted.

% of its previoy LLC, Sucursalrry Madalena gram”) (note 1

etermined the

core Canadian of Point Lomagiven the liquidin Point Loma,or sale (“AHFS”

1.5 million of d a gain on sae months perio

e and sale agreillion common


___________

sed Interim Co

e 30, 2018, apral and adminis

the Company s

oration projectany’s share of

ously held 90%l Argentina (“Pshare of capit5).

ere were no im

assets on June, which were dity challenges, these comm”) and recorded

the Point Loale of approximod ended Decem

eement datedn shares in Poi

) are amounts and a

__________

nsolidated Fin

proximately $stration costs w

sold casing from

s in Argentina costs incurred

% working intePAE”). Gross ptal cost up to $

mpairment indic

e 28, 2016 therecorded as as faced by the on shares wed at fair value

ma common mately $0.1 mmber 31, 2017

April 21, 2017nt Loma for g

as otherwise state

___________

ancial Stateme

$0.1 million anwere capitalize

m Valle Morad

pending deted on E&E asset

rest (“WI”) in proceeds befo$5.6 million ov

cators relating

e Company recn equity accouCompany and re no longer aamounting to

shares for neillion which is 7.

7 with an armross cash proc

ed)

__________

ents Q2 2018|

nd $0.3 (2017ed to property

do field resultin

49,

(10,0

39,82,4

42,2

rmination of pts during the p

Coirón Amargre transactionver the course

to E&E assets

ceived as part unted investm the intention accounted for $1.3 million.

et cash proceerecorded as p

s‐length third ceeds of $0.8 m

_____

9

‐ $0.1 , plant

ng in a

340 529 000)

869 418

287

proven period.

go Sur‐n costs e of an

.

of the ment at to sell as an

eds of part of

party, million

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6

7


___________

Madalena Ener

6. Long‐term D

Argentina

The credit fFebruary 3,borrowing r

Canada

On May 8, (“Hispania”Peñafiel is dexpected toprovide the$16.5 millio

The Workinpurposes. Imonths afte

The Capex each drawdinto units oa Common Common Shvolume wedrawdown Warrants isafter the daand interesis limited in

Both loans a

On SeptemInternationCorporate F8, 2017 for the terms th

As a June 32017.

7. Other Long‐

Other long‐value. The 31, 2017 – $


__________

rgy Inc.

Debt and facili

facility with Ind 2017. The loarate of 32.6% a

2017, Madalen), a private, fadirector, whicho alleviate Mae Company accon.

ng Capital Loannterest accrueer an advance

Loan is a multdown and accrf the CompanyShare purchashare. The Capeighted averag(“Conversion ssued upon conate of issuancet owing hereu some circums

are secured, lim

mber 13, 2017,al Capital LimFinance Manuaan amount uphereof.

30, 2018, neith

‐term Assets

‐term assets along‐term rece$0.2 million).


___________

ity availability

dustrial and Coan incurred intat the time it w

na entered intamily‐owned Sh provides for adalena’s liquidcess to growth

n is a multi‐dres at 7% per anof funds.

ti‐drawdown crued interest ry (“Units”) withse warrant (“Wex Loan is cone price (“VWAPrice”) in respnversion is alsoe. Both Hispaninder into Unitstances.

mited to the C

the shareholited as a newal) of the Comp to $16.5 mill

her loan has be

re comprised oeivables prima


__________

Condens

ommercial Banterest at the vwas paid out.

o a series of aSpanish energya package of dity challengeh capital for dr

rawdown facilnnum. Principa

convertible loarepayable thirth each Unit coWarrant”), withvertible basedAP”) of the Copect of the Como at a 5% premia and Madalets on or before

ompany’s inte

ders of the Cow "Control Perpany. In connlion is now ava

een drawn. Th

of long‐term rarily relate to A


___________

sed Interim Co

nk of China (Arvariable rate o

greements (thy Company andebt and mezs through a Willing and inve

ity, which is aal and interest

an. The loan sity‐six months omprised of onh each Warrand on a conversommon Sharesmmon Shares mium to that 2na have the rige repayment, a

rests in the Pu

ompany passerson" (as suchnection therewailable to be d

e Company ha

receivables forARS denomina

) are amounts and a

__________

nsolidated Fin

rgentina) S.A. of BADLAR plus

he “Transactionnd a related pzzanine financiWorking Capitastment activit

available to bet on each draw

imilarly accrueafter drawdowe common shant entitling thesion price equas on the last comprising th

20‐day VWAP. ght to convertalthough Mada

uesto Morales

ed an ordinary term is definwith, the convedrawn upon by

as no bank deb

r which the faiated taxes rece

as otherwise state

___________

ancial Stateme

of $1.6 millions approximate

ns”) with Hisparty of the Coing of up to $2al Loan of up ies through a

e used for genwdown will be

es interest at 7wn. The Capexare (“Commone holder to pual to a 5% pretrading date phe Units. The eThese Warrant the whole or alena’s right to

concession.

y resolution aned in the TSXertible loan agy the Company

bt in Canada a

ir value approxeivable of $0.2

ed)

__________

ents Q2 2018|

n was fully repely 8.8%, result

ania Petroleumompany, wher23 million whito $6.5 millioCapex Loan of

eral working ce repayable thi

7% per annumx Loan is conven Share”) and 0rchase an addmium to the 2prior to a parexercise price nts expire 18 mpart of the pro compel conv

pproving KD EX Venture Excgreement datey in accordanc

at June 30, 201

ximates the ca2 million (Dece

_____

10

aid on ting in

m S.A., e José ch are on and f up to

capital irty‐six

m, with ertible 0.22 of itional 20‐day rticular of the

months incipal version

Energy change d May e with

18 and

arrying ember

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___________

Madalena Ener

8. Convertibl

The Hispancommon shentitling thconversion Shares on tShares comthat 20‐daywill have thbefore repa

In conjunctwhich requJune 2017 months froentitles the4,758,333 wrespectively

The Compawarrants (2

On July 13,convertible date. The dcommon shDecember 3end. The Coindebtedneinsiders parparties.

These debedebt compothe contracequivalent substantiallissuance, thcharge reco


__________

rgy Inc.

le Debentures

ia Capex Loan hare ("Commoe holder to pprice equal tothe last tradin

mprising the Uny VWAP. Thesehe right to coayment, althou

ion with the Tires the Comp(see notes 7 am the date ofe holder to puwarrants issuedy.

any expensed 017 – $26 tho

, 2016, the Codebentures, n

debentures arehare, any time 31 and June 30ompany may, ess. Such reparticipated in th

entures are a leonents must bctually determto that whichy the same che liability comorded in financ


___________and Warrants

will be conven Share") and purchase an ado a 5% premiung date prior tnits. The exercie Warrants wilnvert the whough Madalena's

Transactions enpany to issue and 13). Each f issuance. Eaurchase one cd was $0.145/s

$90 thousandusand). On a Y

ompany compnet of fees, pre convertible inafter January 0. Interest accrat its option aayments involvhe private plac

evel III financiae bifurcated. T

mined stream h the market wcash flows, onmponent accree (income) exp


__________

Condens

s

rtible into unit0.22 of a Comdditional Comm to the 20‐dto a particularse price of thel expire 18 moole or part of s right to comp

ntered into wisix monthly trmonthly trancach tranche wiommon shareshare, $0.165/

d for the threeYTD basis, the C

leted a privaterimarily to insinto common s13, 2017. Interrued to Decemand upon provve premiums cement, the te

al liability withThe value assigof future cashwould apply tn the same teetes up to its penses in the c


___________

sed Interim Co

ts of the Commmon Share pumon Share. Tay volume wer drawdown (e Warrants issuonths after thethe principal pel conversion

ith Hispania, tranches of shache includes 4ill expire 18 me of the Comp/share, $0.18/s

e months perCompany expe

e placement oiders or existinhares of the Crest on the debmber 31, 2017 viding notice tothat reduce arms and cond

h an embeddedgned to the liah flows discouto an instrumeerms, but withprincipal valueconsolidated st

) are amounts and a

__________

nsolidated Fin

pany ("Units")urchase warranThe Capex Loaeighted averag"Conversion Pued upon conve date of issuaand interest o is limited in so

he Company eare purchase w4,758,333 warmonths from thpany. The exershare, $0.17/sh

riods ended Juensed $0.5 mill

of $1.2 millionng shareholdeCompany at a cbentures is payamounting to o the debentuas the date toitions were th

d conversion feability on July unted at 15%,ent with comphout the conve using the eftatements of lo

as otherwise state

___________

ancial Stateme

) with each Unnt ("Warrant")n will be conge price ("VWAPrice") in respversion will be ance. Both Hispowing hereundome circumsta

entered into a warrants to Hirrants that arehe date of issurcise price for hare, $0.17/sh

une 30, 2018 ion (2017 – $2

n (CAD $1.6 mrs, with a Junconversion priyable semi‐ann$0.1 million w

ure holders, reo maturity ape same as tho

eature. As a re13, 2016 was t, being the raparable credit version optionffective interesoss.

ed)

__________

ents Q2 2018|

nit comprised o), with each Wvertible basedAP") of the Coect of the Coat a 5% premipania and Madder into Units ances.

services agreeispania commee exercisable auance. Each wthe six trancare and $0.18/

in relation to 26 thousand).

million) 12% see 30, 2019 mace of CAD $0.2nually, in arreawas fully paid apay the outstapproaches. Altose available to

esult, the equitthe present vaate estimated status and pn. From the dst method, wi

_____

11

of one Warrant d on a mmon mmon ium to dalena on or

ement encing after 6 warrant hes of /share

these

ecured aturity 25 per ars, on at year anding hough o third

ty and alue of to be rovide ate of th the

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___________

Madalena Ener

The followin

USD 000s At DecemAccretion ConvertedImpact of At June 30

9. Decommiss

The total Argentina majority ofobligationsthe currentbeen estimmarket ass

At June 30,the liabilitdecommiss

. Share Capit

The Compacommon shshare. No pdeclared by

Balance aCommonBalance aCommonBalance a

On Januaryconvertible

On Octobeconvertible


__________

rgy Inc.

ng table recon

ber 31, 2017 (note 13) d debentures (nforeign exchan0, 2018

sioning Obligat

undiscounted only at June 3f the costs to b are recorded t obligations a

mated using exiessments of th

2018 an inflaty at June 30sioning obligat

tal

ny is authorizehares are entitpreferred shary the Company

at December 3 shares issued at December 3 shares issued at June 30, 201

y 17, 2018, 20e debenture op

er 30, 2017, 8e debenture op


___________ciles the princi

note 10) nge

tions

amount of c30, 2018 is apbe incurred betas a current lire expected tosting technolohe time value o

tion rate of 2.90, 2018 was ions are expec

ed to issue an tled to receiveres were outst.

1, 2016

1, 2017

18

00,000 commoption of $40 th

0,000 commoption of $16 th


__________

Condens

ipal amount, li

ash flows reqpproximately $tween 2026 anability and theo be incurred bogy at current pof money and t

9% was used (D2.91% (Decem

cted to be invo

unlimited nume dividends astanding at Jun

on shares werhousand.

n shares werehousand.


___________

sed Interim Co

ability and equ

LiaCompo

quired to sett$22.7 million nd 2027. At June remainder ofby December 3prices and discthe risks specif

December 31, mber 31, 201iced in USD an

mber of comm declared by tne 30, 2018 or

e issued at a

e issued at a p

) are amounts and a

__________

nsolidated Fin

uity componen

abilityonent C1,274

33 (40) (59)

1,208

le Madalena’s(December 31ne 30, 2018, $3f $18.8 million 31, 2018. The dcounted using fic to each liab

2017 – 2.1%). 17 – 2.65%). nd settled throu

mon shares andthe Company r December 3

price of CAD $

price of CAD $

as otherwise state

___________

ancial Stateme

nts of the conv

Equity Component

76 ‐ ‐ ‐

76

s decommissio1, 2017 – $223.9 million of tas a long‐termdecommissiondiscount ratesility.

The risk free rThe majority

ugh payments

d preferred shand are entit1, 2017. No d

NumbeShar000

543,

543,

544,

$0.25 pursuan

$0.25 pursuan

ed)

__________

ents Q2 2018|

vertible debent

To1,

1,

oning obligatio2.7 million) withe decommissm liability, givening obligations that reflect c

ate used to disy of the Argin ARS.

ares. The holdled to one vodividends have

er of es 0s

ShaCapi000

780 238, 80

860 238,200 060 239,

nt to the exerc

nt to the exerc

_____

12

tures:

otal ,350 33

(40) (59) ,284

ons in th the sioning en that s have urrent

scount entine

ders of te per e been

re tal 0s ,973 16

,989 40

,029

cise of

cise of

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12

13


___________

Madalena Ener

Net Income

As at June following ta

Weighted shares ‐ baNet Loss fr000s Per share –operations

. Share‐basedDuring the employees

During the t

. Long‐term I

The LTIP econsolidatethousand, rreporting pe

At June 30,

. Finance (Inc

Finance (Inc

USD 000s Bank chargForeign exDecommis(note 9) Accretion debentureInterest (inFair value held


__________

rgy Inc.

e (Loss) Per Sha

30, 2018, theable provides t

average numbasic – 000s rom continuing

– basic & dilutes ($/share)

d Compensatiothree and six of the Compan

three month p

Incentive Plan

expense record statements respectively (2eriod.

2018 the LTIP

come) Expense

come) and Exp

ges xchange loss (gssioning obliga

of debt portione issued (note 8ncome) and otchange on con


___________are ere is no resuhe weighted av

ber of common

g operations ‐

ed ‐ continuing

on months endedny.

eriod ended Ju

rded as part of loss for th

2017 – expens

liability was $1

es

enses are mad

ain) tions accretion

n of convertibl8) her expenses nvertible deben


__________

Condens

lting dilutive iverage numbe

T

n

USD

g

d June 30, 201

une 30, 2018, n

of share‐basehe three and se of $20 thou

130 thousand (

de up of the fo

T

n

le

ntures


___________

sed Interim Co

impact of the er of common s

Three months June 30

2018

544,042

(3,514)

(0.01)

18, 11,400,000

no share based

ed and long‐tsix months enusand and $33

(December 31,

llowing:


2018 122

1,065

‐

17 28

‐ 1,233

) are amounts and a

__________

nsolidated Fin

convertible dshares used in

ended0

2017

543,780

(5,449)

(0.01)

0 options were

d compensatio

term incentivended June 30, 3 thousand) an

, 2017 ‐ $49 th

ended0

2017 242211

50

16(143)

10386

as otherwise state

___________

ancial Stateme

debentures or the per share

Six moJ

2018

544,04

(4,13

(0.0

e issued to dir

on was capitaliz

e compensati 2018 was $8nd is revalued

housand).

Six moJ

2018 29

1,16

2

32

1,53

ed)

__________

ents Q2 2018|

share optioncalculations:

onths endedune 30

20

42 54

36) (8

01) (

rectors, officer

zed (2017 ‐ nil)

on expense i8 thousand an at the end o

onths endedune 30

2094 68

20

33 21

‐ 37

_____

13

s. The

17

43,780

8,716)

(0.02)

rs, and

).

in the nd $55 f each

17 546 435

114

34 (247)

150 1,032

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___________

Madalena Ener

USD 000s Realized foUnrealizedTotal Currency e$1 USD = C$1 USD = A

4. Suplementa

Changes in

USD 000s Trade andOther curinventory Assets heTrade, taxImpact ofcapital Change inAttributab

OperatingInvesting Financing

(1) Change in no

Other cash f

USD 000s Interest paInterest reTaxes paid


__________

rgy Inc.

oreign exchangd foreign excha

exchange rate aCAD ARS

al Cash Flow In

non‐cash work

d other receivarent assets, inc

ld for sale x and other payf foreign excha

n non‐cash worble to:

g activities activities activities

on‐cash working capita

flow informati

aid (income) eceived (incomd


___________

ge loss (gain) ange loss (gain)

at period end:

nformation

king capital

ables cluding

yables ange on workin

rking capital¹

al excludes the curren

on

e)


__________

Condens

T

2

)

Thre

20183,

(3,7ng

(1,2

1,

t portion of long‐term

T

2


___________

sed Interim Co


2018 ‐

1,065 1,065

e months endeJune 30

8 20,017 (

703 ‐

737) (

‐ (17) (

225) (48

,200(17) (

m debt, as this is consid


2018 16 ‐

36

) are amounts and a

__________

nsolidated Fin

ended 0

2017 ‐

211 211

ed

0171,276)

(731) 809

2,550)

(109) 3,857)

4,042) 185

‐3,857)dered part of financing

ended

2017(45)

‐648

as otherwise state

___________

ancial Stateme

Six mo J

2018

1,161,16

$1.3$28.8

Six months June 3

2018 1,146

877 ‐

(2,899)

‐ (876)

(2,070) (6)

1,200 (876)

g activities.

Six moJu

2018 774

1,257

ed)

__________

ents Q2 2018|

onths ended June 30

2017‐

68 68

32 85

ended 0

20171,926

(840) 1,116

(5,490)

(285) (3,573)

(2,421) (1,152)

‐(3,573)

onths endedune 30

27 4 7 1

_____

14

7 (2) 437 435

$1.30 16.63

201757 ‐

,008

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___________

Madalena Ener

. Commitme

Developmen

Coirón Ama

Madalena acosts duringgovernmenttheir proporsouthern po

In an explothrough an The amountand develoongoing com

Coirón Ama

PAE agreedrecourse bawould bear expendituredraw down

Pursuant to

USD

Conc(1) CommittOn November 1(2) Subject t

The new exwill be eligi

Curamhuele

U

Conce


__________

rgy Inc.

nts and Other

nt and Explora

argo Norte (“CA

nd its partnersg the exploratt entity, receivrtionate share ortion of CA.

oitation or devassignment ofts due to Madpment phasesmmitments.

argo Sur Este (C

d, subject to casis, to be drawinterest at 7%e program. Traof $2.4 million

o the new arran

000s

cession committed values are reflect13, 2017 the companto the results in 2017

xploration andble to enter int

e Block (90% W

USD 000s

ession commitm


___________

Long‐term Lia

tion Commitm

A‐Norte”‐ 35%

s at the CA contion and evaluing a 10% carryof GyP’s WI. C

velopment phf GyP’s 10% inalena from Gys are containe

CASE ‐ 35% WI)

certain conditiwn‐down as re% per annum anansaction fees n and a repaym

ngements, Mad

tments at CASted at Madalena’s 35ny received the prov7 to be completed, be

evaluation peto a developm

WI‐operated)

ments


__________

Condens

abilities

ments

WI)

ncession in theuation phase, y whereby all oCurrently, expl

ase, GyP is renterest in futuryP are recordeded in CA‐Norte

)

ons, to providequired to fundnd is repayableof $0.5 million

ment of $1.1 m

dalena work co

E 5% WI at December 3incial approval due tefore November 8, 2

ermit for CASEent concession


___________

sed Interim Co

e province of Nwith Gas y Peother partnersoration and ev

esponsible for re production d on Madalenae, the norther

de Madalena wd certain CASE e in five years fn were incurreillion as of Jun

ommitments a

20

31, 2017 plus Madaleo the re‐entry of we2019.

E expires on Nn.

20

‐

) are amounts and a

__________

nsolidated Fin

Neuquén are retróleo del Nes, including Mavaluation phas

r its 10% interrevenue streaa’s books as a rn part of CA

with a loan o capital expenfrom the net red to completee 30 2018.

t CASE were a

018

‐ ena’s proportionate ll Cas.x‐15 for $2.1 m

November 8, 20

018

as otherwise state

___________

ancial Stateme

responsible foreuquén S.A. (adalena, are reses are contain

rest of the inams to Madalereceivable. Cu, for which th

f up to $40 mditures. This lievenue generae this agreeme

mended as fol

2019(1)

1,787(2) share of GyP’s carrymillion.

019, following

2019

8,225

ed)

__________

ents Q2 2018|

r paying 100% “GyP”), a proesponsible for pned in CA‐Sur,

curred capitalena and its parurrently, exploihere are no c

million, on a limited recoursated from the cnt. There was

lows:

.

g which the pa

_____

15

of the vincial paying in the

l costs rtners. itation urrent

imited se loan capital a loan

artners

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___________

Madalena Ener

At Curamhuthe costs du

The Compa2019 undernotified thethe option t

Puesto Mo

USDConcessio

The Compacommitmen

Santa Victo

The contracThe secondbeen madeevaluation currently oexploration

El Chivil Blo

The concessprovince of which expir

El Vinalar B

Salta provinJanuary, 20facilities an

. Financial InThe Compaholds. The managemenhow they ar


__________

rgy Inc.

uele, an exploruring the explo

any has proposr the Evaluatioe approval to eto extend this

orales Block (10

D 000s n commitment

ny is in discussnts in a new ex

ria Block (100%

ct can contain phase requiree. A performanpermit. On Nngoing with t permit.

ck (100% WI –

sion’s one yeaFormosa granred on May 1, 2

lock (100% WI

nce granted a018 the Compad wells have b

struments andny is exposed Board of Direcnt framework, re managed.


___________ration permit ioration phase t

sed a horizonton Lot Periodenter into the Eperiod for ano

00% WI‐operat

ts

sions with the xploration plan

% WI ‐ operate

up to three exed additional wnce bond of $ovember, 201he province o

– operated)

r extension expted a further s2017. The Com

I – operated)

block extensiny notified theeen mothballe

d Risk Manageto various riskctors has overapolicies and p


__________

Condens

in the provinceto maintain its

tal multi‐frac r. On May 5th,Evaluation Lot other 2 years o

ted)

provincial authn.

ed)

xploration and work commitm$3.6 million is 17 an applicatof Salta for re

piry occurred osix month extempany is in disc

ion to file an e province of Sed.

ement ks that arise frall responsibiliprocedures. Th


___________

sed Interim Co

e of Neuquén, 90% WI.

re‐entry in CH. 2017, by mePeriod. Once tr to enter into

20124,700

hority for a re‐

evaluation phments of $4.0 m

in place overtion has been conversion of

on September nsion to negotcussions with t

investment plSalta that it is n

rom its busineity for the estae following ou

) are amounts and a

__________

nsolidated Fin

the Company

.x‐1 for $8.2 means of Resoluthis commitmethe Exploitatio

180

schedule and c

hases, of whichmillion for whicr the commitmsubmitted an

f the Explorati

7, 2016 and dutiate a 10‐yearhe province of

lan, which expnot interested

ess environmenablishment anutlines the upd

as otherwise state

___________

ancial Stateme

y is responsible

million to be inution 119/17, ent is completeon Period.

2019 7,000

conversion of t

h the second ech no qualifyinments under tnd negotiationion Area into

uring the last qr development f Formosa.

pired on Nove in a contract

nt and the finad oversight ofdate to risk exp

ed)

__________

ents Q2 2018|

e for paying 10

ncurred by Mathe Province ed, the compa

Beyon600

the present

xpired in Aprilg expenditurethis explorations continue ana non‐conven

quarter of 2016period extens

ember 11, 201extension. El V

ancial instrumf the Companyposures and ex

_____

16

00% of

arch 9, finally ny has

nd0

2015. s have on and nd are ntional

6, the sion,

16. On Vinalar

ents it y’s risk xplains

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___________

Madalena Ener

Foreign Exc

The table bethe USD, thARS and CAand six moexchange ga

USD

Average CAAverage APeriod endPeriod end(1) Differences

Liquidity risThe Compa

At June 30,2017 ‐ $1.2Canada and

Market riskChanges in fluctuations Commodity

The Governthe Compan30, 2018 (230, 2018 (2Argentina, "Agreementstated that consecutive10 consecutwas reachebetween re

17. Supplemen

Madalena’prepared pin both the


__________

rgy Inc.

change Fluctua

elow provides he Argentine PeAD changes relanths ended Juains and losses

AD to USD RS to USD d CAD to USD d ARS to USD s calculated from t

sk ny’s liquidity r

2018, cash a2 million), andd Barbados, and

k commodity p

s in its net earn

y price risk

nment of Argenny have paid a017 ‐ $55.90),2017 ‐ $48.58)at the request") allowing foin case internae days, the Agrtive days, the d and the agrfiners and pro

ntal disclosure

’s condensed primarily by nae operating an


___________ations

various exchaneso (“ARS”), aative to the USune 30, 2017. s recorded in t

20

0.70.00.70.0

the numbers withi

isk is highlighte

nd cash equiv is held in ARd $227 thousa

prices, interestnings and in th

ntina sets the ban average uno official Meda). In January 2st of the goveor convergenceational Brent peement wouldAgreement wreement finalizducers conside

e

interim consoature of expennd general and


__________

Condens

nge rates that nd the CanadiSD in the threeForeign exchahe condensed

Three monthsended June 30

018 201

775 0.7043 0.0759 0.7035 0.0in the table are du

ed in note 2.

alents of $1 mRS. Cash and cnd is held in U

t rates and foe fair value of

benchmark (Mofficial crude onito crude oil 2017, Madalenernment, havee with internatpricing reachedd be suspendedould be reviewzed in Octobeering the intern

lidated statemses, with the ed administrativ


___________

sed Interim Co

illustrate the qan dollar (“CAe and six montange changes interim conso

s

%17 Change(1

744 (4.2%064 33.1771 1.5%060 42.4ue to rounding.

million was depcash equivalenSD and $10 tho

oreign currencits financial as

Medanito) priceoil price of $66averaged $72na was advisee signed a 201tional Brent prd and remainedd. And, in casewed. On Septeer, 2017. As fnational Brent

ments of incomexception of emve expense lin

) are amounts and a

__________

nsolidated Fin

quarterly foreiAD”). The tableths ended Junin CAD and Alidated statem

Six m% 1) 2018

%) 0.781% 0.04% 0.754% 0.03

posited with bnts of $0.2 milousand is held

cy exchange rassets and liabili

e for oil. Althou6.30 per barrel.69 per barrel ed that a majo17 Medanito ricing over thed above the me international ember 13, 201rom October, price as a refe

me (loss) and mployee compe items on the

as otherwise state

___________

ancial Stateme

gn exchange fe illustrates thee 30, 2018 comARS impact thements of incom

months endedJune 30

8 2017

83 0.74946 0.06459 0.77135 0.060

banks in Argenllion was depod in CAD.

ates can expoities.

ugh the Argent for the three for the three ority of producrude oil price coming montmonthly MedanBrent pricing f7 the above smarket prices

erence.

comprehensivpensation costse condensed i

ed)

__________

ents Q2 2018|

luctuations bee impact of bompared to thee unrealized fe (loss).

d %

Change(1)

9 (4.4%)4 27.3%1 1.5%0 42.4%

ntina (Decembosited with ba

ose the Compa

tine refiners usmonths endedmonths endedcers and refincing agreemenths. Such agreenito floor price fell below $45.uspension cons were agreed

ve income (loss which are incnterim consol

_____

17

tween oth the e three foreign

ber 31, anks in

any to

sed by d June d June ners in nt (the ement for 10 .00 for ndition d upon

ss) are cluded idated

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___________

Madalena Ener

statementemployee condensed

USD 000

OperatinCompensTransportMaintena General &CompensOther

18. Revenue

Madalena in the casoutlined incrude oil aincluding p All of the C

USD 000Crudo OilNatural gOil and na


__________

rgy Inc.

s of income (compensationd interim conso

s

g expenses sation costs tation and proance, workove

& administratisation costs

generally recoe of services, n contractual and natural gasproduct quality

Company’s sign

s l gas atural gas sale


___________loss) and comn costs includeolidated statem

cessing rs and other

ive expenses

ognizes oil andas contractedgreements ans is based on thy and location.

nificant revenu

s


__________

Condens

mprehensive ind in the operaments of incom

d natural gas red services are d are based onhe commodityCommodity p

ue streams are


___________

sed Interim Co

come (loss). Tating and geneme (loss) and co

Three montJune 3

2018

1,2101,0141,995

4,219

361 1,107 1,468

evenue when tperformed. Pn fixed or varia price in the mrices are based

located in Arg

Three montJune 3

2018 9,063 739

9,802

) are amounts and a

__________

nsolidated Fin

The following eral and adminomprehensive

hs ended30

2017

1,0401,9573,1936,190

7722,1792,951

title passes froProduction revable price commonth of produd on monthly o

gentina and inc

hs ended30

2017 8,2691,0889,357

as otherwise state

___________

ancial Stateme

table details tnistrative expenincome (loss).

Six moJ

2018

0 2,07 2,73 4,90 9,6 2 89 2,11 2,9

om Madalena venues are purmponents. The uction, adjusteor daily market

clude the follow

Six moJ

2018 9 17,98 1,47 19,4

ed)

__________

ents Q2 2018|

the amount onse line items .

onths endedune 30

2017

065 2722 3904 5691 11

829 2161 2990 4

to the purchasrsuant to the transaction pred for various ft indices.

wing:

onths endedune 30

2017935 17478 2413 19

_____

18

f total in the

7

2,045 3,944 5,715 1,704

2,028 2,895 4,923

ser or, terms

rice for factors

7 7,679 2,014 9,693

CONDENSED INTERIM CONSO LIDATED FINA NCIAL … Energy Inc Condensed... · months ende June 30 ......

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