Madalena Energy Inc. announced that the CAN.xr-2(h) well was recently re-entered and drilled horizontally in the Sierras Blancas light oil reservoir to a total measured depth of 3,751 meters with a horizontal lateral section of approximately 530 meters in length. This horizontal well was subsequently cased and completed with a 3.5" slotted liner and a multi-rate production test was carried out through temporary production facilities. The high rates during that test period were achieved on a 12mm choke setting, when the well was flowed at a rate of 1,791 bbls/d of oil with 2,683 mcf/d of associated natural gas for a total of 2,238 Boe/d (80% oil) over a three hour period and at an average flowing pressure of approximately 1,304 psi.

In the 10 day period to January 7, 2014, the well flowed on a restricted 6 mm choke through temporary facilities. During this 10 day period, the well produced 6,033 bbls of oil and 10.7 mmscf of associated gas for a total of 7,815 Boe (77% oil). No significant flowing pressure declines have been observed to date and no water has been produced.

The well will continue to be produced at restricted flow rates until permanent facilities are in-place which is expected in February 2014. This well represents the first horizontal well drilled into one of the six Sierras Blancas conventional light oil pools discovered to date on the Coiron Amargo block. The Company has an inventory of horizontal development locations on the Coiron Amargo block and a second horizontal well targeting the Sierras Blancas light oil reservoir (CAN-15(h)) is now expected to spud in January 2014 once the drilling operations are completed at CAS.x-15.

The CAN-15(h) horizontal well will be drilled into one of the largest Sierras Blancas pools on the block and targets a separate pool than was drilled by the CAN.xr-2(h) horizontal well.