Centaurus Energy Inc.

Thank you very much, and good morning to everyone. This is Jose Penafiel, CEO of Madalena Energy.

I'm joined here with Alejandro Penafiel, Director of Madalena. And we're in conference room in the Calgary Airport on our way to New York to attend Canaccord LATAM Conference, which we're very excited about.

We just had a very good Board meeting yesterday and are very happy with how this year has started. We're very pleased with the Q4 results and are pleased to announce the Company's first quarterly positive net income of $3,236,000.

The Company is also reporting a positive EBITDA $524,000 for the quarter and $5,538,000 for the year. The average realized crude price was $52.69 per barrel.

This is largely due to lower Brent pricing during the last quarter of 2018. During the quarter, we successfully took over the operatorship and increased our working interest in the Palmar Largo concession.

This is already bearing fruits with the increased production. And of course, a lot of you may know, we are also excellently positioned with one of the largest positions in the Vaca Muerta play outside the majors, which totals around 80,000 net acres.

And we continue to see significant growth in general in the Vaca Muerta as the current administration has a very strong policy to promote investment in the area. A few operational highlights I would like to note are the significant production increase we have seen from the incorporation of our additional working interest in Palmar Largo.

We've also successfully completed our workover operations in the adjacent Surubi block. And one of the two planned workovers in Palmar Largo, which is part of our commitment to the province of Formosa for the agreed three-year operation agreement, which was entered into recently.

Regarding Curamhuele, our unconventional block in the dry and condensate windows of the Vaca Muerta play, we continue to pursue a farm out to potential partner. And the Company is working with the regulators in Argentina in order to execute dual listing on the MERVAL Exchange in Buenos Aires.

We look forward to providing additional guidance on timing for the double listing shortly. On the M&A side, we continue to actively pursue additional conventional production assets with drilling upside as part of our dual-pronged strategy to have both unconventional and conventional sources of growth.

And lastly, the Company has agreed to an amendment to its working capital and CapEx loan facilities with management to extend the availability period of the agreements and statistics conversion price for the CapEx loan at C$0.225. This clearly shows our long-term commitment to Madalena energy and positions the Company to be able to acquire conventional targets opportunistically through an expanded use of funds under the CapEx facility.

We will now open the call to questions.

Good morning, gentlemen, and congratulations on your first quarterly positive net income. I have a few questions, please.

I will start with CASE. Could you update us on the commencement of drilling there?

When do you expect to kick off the program? And if there is a delay, are there any costs associated with it for you?

Are you paying standby fees for example for the two rigs? And will they still be available if there is a delay?

So, thank you very much for that question and good morning, Jenny. With regards to CASE, we're still waiting for the guidance from our partners, Pan American Energy.

I think, in general, there's been a delay with regards to CapEx programs because of the elections in Neuquen. But we'll have to wait and receive feedback and confirmation from our partner before we give any guidance regarding this.

Regarding the second point of your question, Jenny, and regarding to costs, so we don't see any material additional costs associated with a delay commencement of the drilling operation. So, there isn't any standby that's being incurred by the Company or Pan American for the JV.

We also don't expect there to be an issue with rig availability as Pan American currently has several rigs under contract. So, we don't see an issue there in terms of not being able to get a rig in place.

And what is the timeline for spudding Lotena well just to the north?

So, thank you, Jenny. We're also waiting guidance from our partners Vista.

And again, in general, there was a delay across the board with regards to the elections in Neuquen province. And again we're waiting feedback and confirmation from our partners to be able to give appropriate guidance.

Understood. Can we talk about your operated blocks then in the North?

Could you maybe provide us with some color as to what's happening there with the workovers?

Yes. So, I think as stated in the news release and a little bit during Jose's remarks, we were able to get a workover rig in place and successfully workover both the well El Surubi that we were able to successfully put a new artificial lift system in.

We were also able to workover the first of two planned workovers in Palmar Largo. So, that was also successful.

So, both those wells, we're currently doing production test. So, when we have more information we'll give that guidance in terms of the results of those two workovers.

The third workover is planned and we're waiting on a part in terms of getting that workover completed. So, we have released that rig and window to Tecpatrol and will be in the next few weeks commencing that third operation, to be able to complete those three workovers, which were planned in our northern blocks.

Okay, great. Thank you.

Finally a question on netbacks, please. Your operating margin shrunk substantially in Q4.

From what I can see, your operating netbacks was about 13% of Brent, while it averaged about 24% of Brent in Q3. I can see that that’s due to lower realized pricing and also higher OpEx per BOE.

Could you comment please on the factors that are affecting your pricing and OpEx and what should we expect for the remainder of 2019?

Yes. So, we -- so you've identified correctly, we’ve seen a smaller netback in Q4.

So, that's the as you've identified one of the main drivers in terms of the lower Brent pricing that we saw in Q4 that reduced our netback. In terms of the OpEx, they were material one-off OpEx items in terms of the assumption of operatorship over Palmar Largo and there were also OpEx expenses relating to pulling operations in the -- are non-operated CAN concession with Vista.

So, we expect netback to recover slightly. I think in Q1, we still had a fairly low realized oil price due to Brent pricing.

We've seen the Brent pricing has recovered early this year. We should have better netbacks for the remainder of the year.

And I think we should also have better netbacks versus OpEx. I think, a big factor as well in terms of that OpEx per barrel figure is that we had lower production in Q3, -- sorry, in Q4.

So, we only had December where we had the benefit of the uplift from production from Palmar Largo. So, as we see that incorporated, we’ll have a lower OpEx over the unit cost per BOE, with the higher production level that we currently have.

So I think that's the, -- I think those are my main comments for that question, Jenny. Thank you.

What are you assuming for a discount to Brent, the operating costs within your internal kind of modeling for [2019] [ph]?

We're seeing -- in the south, we're seeing a $7 discount to Brent, in terms of -- in the south. I mean, that's kind of an average that we're seeing.

In the north, there's a further $8 discount to price in the south, so in total a $15 discount to Brent. So, those are kind of the average differential that we see.

You still have some variation I think with the current liberalization of the oil price and offtaking market in Argentina, we're getting a stronger and stronger link to Brent. But it's not a perfect [indiscernible] yet.

I think, as you have more liquids productions coming on in Argentina and you get to level of exports I think that we saw the first export last month, we’ll have a stronger link to Brent pricing. But, those are kind of the average differentials that we're seeing and using in terms of management’s analysis.

And what are you assuming for OpEx for 2019?

We don't have an OpEx guidance for the year at this time. So, I think we will look in terms if we can provide that guidance, but I'm afraid I can’t provide at this time.

Good morning, gentlemen. If you could go ahead and give us just a bit of an update on what the Company anticipates to the extent that matters move forward with respect to listing down in Argentina.

What does management plan for in terms of introducing the market to the Company? What type of marketing activities would the Company go ahead and deploy?

And then, in addition to that, if you could go ahead and talk more broadly about the Company’s marketing and Investor Relations efforts that are planned for the balance of the year?

Good morning, David. Thank you for those questions.

So regarding the listing on the Buenos Aires stock exchange, we're going through the process with regulators, significant waivers have been approved. And we will be able to give guidance once we have more visibility on this conclusion of that regulatory approval process to list.

And we have been engaging with parties locally with regards to explaining our plans and hopefully gathering interest in the listing. So, that's something that's ongoing.

And with regards to efforts for Investor Relations in general, that's the focus for this year. We had an Investor Day in New York in January.

We're planning several roadshows in the coming months and the summer. So, we will be very active in that sense and look forward to speaking with interested parties and letting people know how things are going and what our plans are for the Company.

Understood. If you can -- more of an operational question.

There has been a number of in and around the elections in Neuquen, there has now been I'd say a call by numerous different constituents who are in the province regarding more investment activity there have been outreach trips both on a national level and on a local level to investors certainly in the United States. Folks from the U.S.

have visited the region recently. And I know there have been calls locally regarding preferring small and medium sized enterprises, which I assume, Madalena would qualify as for purposes of I'd say somewhat better treatment or focus in terms of helping those enterprises particularly succeed as opposed to the behemoths that likely don't need much of any help in order to go ahead and succeed.

Can you talk a little bit about kind of Madalena's position as an operator in the area relative to A) its size in terms of capital that it has, its production currently, and then also going forward, in terms of the major blocks that it controls in case of CASE, hopefully exploring sometime soon in the case of Curamhuele, hopefully beginning to drill there as well towards the end of the year?

Thank you for that talking point and questions. In general, the administration, both at the provincial level and at a national level, provincial level of Neuquen and [indiscernible], specifically regarding Vaca Muerta, Neuquen is intent on attracting new investment.

I think in general, they recognize that the independents in the U.S., the small and large independents those who drove the growth of unconventional production, and I think they definitely want to attract these companies as they also want to continue to attract IOCs and NOCs and majors. And so, I think in general, there is heightened interest.

With regards to specific legislation or preferential treatment to smaller companies is there is nothing that I know of that exists, I think in general the province is very open to all those who want to invest. What's interesting is that Madalena is regarding its position at Vaca Muerta is really the largest independent acreage wise that has a position, not only has a position but is actually drilling wells and has 35 years concession to develop the Vaca Muerta, which is the case of CASE.

So, if we compare to peers, we’re really the only independents that are showing activity and that has such a significant position in a basin, which is largely already carved out between the majors, international oil companies and others. So, there is not a lot of open acreage left, which talk to the value of our current position.

And of course, this is all coupled with the reality of presidential election year. So, I think, there’s both, intention of attracting capital, at the same time this is an election year and people are very focused on what could happen after October.

And that’s also a factor that in general companies are taking into consideration this year.

Could you just tell -- last question, could you just tell us the exit rate of production for Q4?

Sorry, could you repeat that? We couldn’t hear the question.

Sure. Could you give us the exit rate of production for Q4 and for Q1?

Yes. So, I think, we -- hi, David, I think we gave guidance regarding the average, though in terms of Q1.

The average was 1,960 barrels as a BOE per day, which was an increase of 30% from the Q3 average of 1,730. In terms of the exit rate, in terms of Q4, I think it’s around approximately 2,200, but we are not giving additional guidance beyond that at this time.

Something that is worth mentioning, we had carried out a workover on the Proa-3. And because of the time it took us to workover the well, so that contributed to the average that you see -- and that we've announced in Q1.

Yes. So, just following on to that theme, so, we did two workovers in the north.

So, when you are doing the workovers on those wells, you don’t have the production during that time period. So that affected the Q1 average.

So, we expect Q2 production to be benefited from the results of those workovers. And as we get those production tests done, we are looking forward to announcing that and sharing it with the market.

Good morning, gentlemen. Thank you for the call and information.

Congratulations on the quarter. I would like to ask if there are deadlines that Vista and Pan American regarding the drilling that would give us some confidence that those programs are going to happen perhaps in this next quarter.

I think you’ve indicated that the reasons they haven’t happened yet, have just been delays due to the elections and things. But, are they under specific timelines themselves that we are of that we have confidence that drilling will indeed happen as opposed to continually being pushed out and having to wait for guidance?

Thanks.

Right. Thank you for the question.

So, there is no formal requirement. They have announced the drilling and work has been done with regards to separation of surface facilities.

However, nor Vista nor Pan American are obliged under the contract to drill in any specific times. In the one case, during the negotiations to obtain 35-year contract, the company and its partner has the obligation to drill nine wells in the next two years in the case of CASE.

In the case of Pan and Vista, we have an exploitation concession and all commitments with regards to investments have been fulfilled with the province. So, there's no formal requirement to them to drill in a specific time period.

Okay. So, is it a case of us just waiting to hear an announcement from them formally that they're kicking off the program and that's when we understand the situation?

So, we have agreements with both Vista and Pan American. So, we're -- the management is in a dialogue on a continual basis with our partners in terms of working with them, and also making sure that our views are also known.

And I think, when we have concrete guidance to update in terms of timing, we're going to be sharing with that. But there's, again, there's no mechanism for set timeframe beyond what's committed to the provinces in terms of investment commitment on the blocks.

Okay. And my final question, thanks for your answers so far.

Regarding the MERVAL listing, what would we expect when that gets completed? It's been in the works for a long time, we know.

What does it look like when that actually reaches conclusion? Is that a formal announcement from Madalena saying that there is now a listing and if it -- does it happen, a week in advance of its lifting or just what does that look like once it actually reaches the conclusion?

Right. So, we're still in the regulatory process and our listing application is pending approval.

Once we receive formal approvals from the regulatory authority, we’ll be able to give guidance as to the specific timing of the listing.

So, again, thank you very much for calling in. We look forward to good news in the future and next quarterly call.

And we wish everyone a very good day. Thank you very much.