Corporate Presentation January 2012 Forward Looking Statements - - PowerPoint PPT Presentation

Corporate Presentation January 2012

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This presentation includes forward-looking statements, which are statements other than of historical fact, such as information regarding drilling potential and production forecasts. Factors that could cause actual results to differ materially from our expectations include exploration and development risks, commodity prices and operating hazards. A barrel of oil equivalent (boe), derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This slide is limited as to space in order to be readable if projected. Please review detailed risks and limitations statements at the end of this document.

Forward Looking Statements

Dwayne Warkentin: President and Chief Executive Officer, Director Anthony J. Potter: Vice President Finance and Chief Financial Officer, Director _____________________________________________________________________ Ray Smith: Chairman, Madalena Ventures Inc. and President and CEO, Bellatrix Exploration Ltd. Barry Larson: VP and COO, Parex Resources Inc. (formerly Petro Andina) Michael J. Lock: President, Upsilon Holdings Ltd. Keith Macdonald: President, Bamako Investment Management Ltd. Jay Reid: Partner, Burnet, Duckworth and Palmer LLP Ving Woo: Vice-President, Engineering and COO, Bellatrix Exploration Ltd.

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Board of Directors

Madalena – TSXV (MVN)

Corporate

• No debt
• Strong balance sheet
• 260 MM common shares outstanding
• 274 MM fully diluted

Valued Asset Base

• Acquired initial acreage in Argentina in 2007
• Focused exclusively on the Neuquén Basin, Argentina
• Large acreage blocks close to key infrastructure
• Mix of conventional and non-conventional targets
• Lower risk development – high impact exploration
• Well positioned in both shale oil and shale gas windows
• Competitive fiscal terms
• Strong strategic alliances

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Argentina Overview

Source: US EIA Source: US EIA

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$0 $5 $10 $15 $20 NQN Old Gas New Gas (Gas Plus) Imports (LNG, Bolivia)

Recent Argentina Gas Price Dynamics ($/mmbtu)

Neuquén Basin

Established Infrastructure

• Established oil and gas pipeline

network

• Capacity available within existing

network including export capacity

• Experienced work force
• Major center for services
• Strong candidate to be one of the

first major non-conventional resource areas to be developed

• utside North America
• Madalena’s acreage located in both
• il and gas window close to major

pipelines and facilities

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Neuquén – Acreage and Shale Oil and Gas Activity

• EOG et al
• Exxon et al
• Shell et al
• VM Drilling

Curamhuele 90% Cortadera 40% Coiron Amargo 35%

50 km

Madalena’s Acreage:

• 280,000 gross acres (437 sections)
• 135,000 net acres (211 sections)

Basin has attracted several major new entrants including:

New entrants are farming-in or acquiring existing blocks in

• rder to build meaningful

acreage position

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Conventional Oil and Gas

Tight Sands, Shale Oil and Gas

• Vaca Muerta O&G
• L. Agrio O&G
• Los Molles Gas
• S. Blancas O&G
• L. Troncoso O&G
• Avile O&G
• Lotena Gas
• Mulichinco Gas
• Lotena Gas
• Quintuco O&G
• L. Agrio O&G
• Lajas Gas

Source & Reservoir

Madalena Opportunities Neuquén Basin

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Oil Oil and Gas Gas S Source Shales

Neuquén Basin Stratigraphic Diagram

S S S Oil Gas

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Source Shales

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World class source shale in Neuquén Basin Major source of new oil and gas production in United States

Source: EIA World Shale Gas Resources, April 2011 Source: EIA Annual Energy Outlook 2011

The geological features of the Neuquén Basin are similar to the shale gas fields in North America. In particular, the Vaca Muerta (Neuquén) is most similar to the Eagleford and Haynesville formations.

Chert 3 to 6% 125 to 450 1.6 to 2.7 10.6 to 13.5 4 to 10% 100 to 1000 5 to 8 175 to 250 4 to 10

Horn River

Lithology Average Mature TOC (%) Net Thickness (Ft) Maturity (Ro) Pressure Gradient (ppg) Porosity (%) Permeability (nD) Well IP (mcfd peak month) GIP*/Sq Mi (GCF) EUR**/Well (GCF) Siliceous Marl 3 to 4% 225 to 300 1.7 to 2.8 13.5 to 17.3 7 to 9% 100 to 500 8 to 25 150 to 250 8 to 12

Haynesville

Siliceous Shale 4 to 5% 150 to 250 1.3 to 2.1 9.6 to 10.6 4 to 8% 50 to 200 3 to 7 100 to 150 3 to 4.5

Barnett Marcellus

Siliceous Shale 4 to 7% 75 to 150 1.3 to 2.4 11.6 to 13.5 7 to 9% 100 to 200 4 to 10 75 to 125 3 to 6 Chert 4 to 8% 75 to 150 1.2 to 2.8 9.6 to 10.6 5 to 6% 40 to 70 2 to 6 75 to 150 2.5 to 5

Woodford

Siliceous Marl 3 to 5% 300 to 1300 1.4 to 1.8 9.4 to 17.3 7 to 12% 50 to 200 2 to 12 300 to 800 (BBN) 8 to 20

Vaca Muerta

Shale gas world class targets

* Gas in place ** Estimated Ultimate Recovery Calcareus Shale 4 to 8% 120 to 280 0.7 to 1.8 9.6 to 14.5 4 to 10% 100 to 1500 2 to 17 80 to 250 2 to 6

Eagleford

Unconventional fields: Neuquén's potential

Source: Gas y Petroleo del Neuquen

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Thickness

• The Vaca Muerta is comprised
• f a series of wedges that

prograde toward the north and west

• The lower portion of each

wedge typically contains the best source rock characteristics

• Excellent shale resource play

exists over most of the mature part of the area where Vaca Muerta is present

• A large part of the Vaca Muerta

is oil prone, with gas dominating in the deeper, thicker (700 m+) western area around the Cortadera block

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50 km

C.I. = 100m

Bakken 30 m Eagle Ford 60m Barnett 90m

Neuquén Basin - Vaca Muerta Shale

Maturity

• Maturity is based on vitrinite

reflectance values

• Modified YPF presentation

based on Madalena rock evaluation data

• Coiron Amargo is within the
• il window; Cortadera within

the gas window; Curamhuele is in a transitional area

• 10 km north of Coiron

Amargo, VM well has produced ~750MBOE

• Immediately west and

covering 428 km2, YPF announced 927 MMBOE VM resource discovery *

• Each block uniquely situated

for world class oil and gas resource development

50 km

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Neuquén Basin - Vaca Muerta Shale

CAS.x-2 Drill after CAS.x-4 CAS.x-4 Spud 2011-12-14 Full Core VM

CAS.x-1 CAN.x-2

10 km Recent successful drilling on trend Faults on Sierras Blancas

Block I: Coiron Amargo

Multiple Stacked Formations

• Sierras Blancas

Five light oil discoveries to date, multi-well development. North area facilities development.

• Lotena Gas

Gas pools on east and west sides

• f block
• Quintuco

Oil shows on block, producing pools nearby

• Vaca Muerta

110 – 150 m thick oil saturated section over entire block

• Lajas

Gas prone deep zone

Adjacent to announced YPF major VM shale oil discovery Land area: 100,077 acres or 405 km² (156 mi²)

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Sierras Blancas Structures

Block I: Coiron Amargo

Vaca Muerta

• The total Vaca Muerta

section has been shown to be productive several km’s to the west by YPF

• All wells drilled on the

block have exhibited oil shows while drilling the Vaca Muerta

• A highly prospective

section of the Vaca Muerta on the block is the lower Vaca Muerta which ranges from 40- 65m thick - produced 750 MBOE in a well 10 km north of block

50 km

C.I. = 5m

Vaca Muerta Thickness

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YPF reports 927 MMBOE resource over 428 km2 (5.6mmboe/section) in the Vaca Muerta, and November 2011 production of about 5,000 B/D

Source: YPF: Nov 2011

Coiron Amargo 404 km2 vs. 428 km2 for YPF lands proven to date

AnN.x-1

. . . .

YPF Success in Vaca Muerta

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YPF Examples of Production Logging

% of total production from each zone by PLT

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Vaca Muerta Log

Block I: Coiron Amargo

• High GR
• High resistivity
• Good SP Response
• Over-Pressured
• Excellent oil shows

while drilling

• TOC 7%, Type II

Shale Oil: Vaca Muerta in Coiron Amargo

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• 3 Stage / 1 mm lbs /

22,000 bbls

• 11 wells logged
• 300 km 3D seismic
• 1 vertical fracture
• Geochem work from

northeast to southwest

• 1 well full core

VM Fracture Modelling

Block II: Curamhuele

Land area: 56,000 acres or 227 km² (88 mi²)

Tested Hydrocarbons:

• L. Agrio

Existing light oil well on block, more section to test, oil tested in 2 other wells on block

• Mulichinco:

Existing gas well on block, lower sandier section yet to be tested

Untested - Shale:

• Vaca Muerta:

200 – 600 m over block. To be drilled or deepened with an existing well. Majors have secured surrounding blocks.

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Lower Agrio Shale Thickness

• The Lower Agrio cycle

begins with a marine flooding event that creates a good source rock in the centre of the basin, before the remainder of the cycle fills the basin with dominantly sandstone

• Preparing for fracture

stimulation to test

• The northern part of the

Curamhuele block is ideally located in a thick area with >180m of section, where depth is sufficient to cause oil generation

Shale Basin

25 km C.I. = 25 m

Intrusive body replacing L Agrio

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Block II: Curamhuele

Curamhuele – L Agrio Cross Section

The green fill between Resistivity and Sonic curves indicates high TOC, potential unconventional reservoir; The Lower Agrio Shale zone is continuous and similar over the northern part of the block and several adjacent wells.

Mulichinco Lower Agrio Lower Agrio Shale Upper Agrio Quintuco Yp.x-1 swabbed a small amount of 40º

• il after acid

treatment Ch.x-1 flowed 26 m3/d of 36º-41 oil without stimulation: Over-Pressured 0.74 psi/ft Ch.x-1 will be fractured and tested in 2012

21 Appears similar to the Vaca Muerta Formation

Curamhuele – Mulichinco Play

• Rapid thickening of the

Mulichinco near the Cortadera and Curamhuele blocks

• These blocks have

potential to contain the lowermost and coarser clastic part of the formation that was deposited during the initial lowstand period

• The Yp.x-1 penetrated

very little of this clastic section

• The clastic section in Cur

X-1 also remains to be tested

Potential area of coarse lowstand sandstone west of this line Mulichinco ~ 1TCF in Sierra Chata field

25 km

Mulichinco tested 10mmcfd in Yp.x-1

Block II: Curamhuele

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Lower Agrio Mulichinco Quintuco Mulichinco Lowstand

Mud gas readings rose by 2 orders of magnitude at the top of Mulichinco

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Block II: Curamhuele

Curamhuele – Mulichinco Reservoir

• The production test of Yp.x-1

after acidizing yielded 10 mmcfd

• f gas and 500 bpd of 51º

condensate

• The upper portion of the

Mulichinco tested in Yp.x-1 has a high carbonate content

• This well was not drilled deep

enough to encounter much of the sandier lowstand cycle

• Any future well drilled to test

the Vaca Muerta on the block will also penetrate the sandy lowstand Mulichinco objective

Vaca Muerta Thickness and Maturity

• Maturity is based on vitrinite

reflectance values:

Pink = Dry gas window Yellow = Wet gas window Green = Oil window

• The Vaca Muerta has not yet

been penetrated in Curamhuele

• Field outcrop sampling

including joint Vaca Muerta and Agrio study in progress

• Based on studies, either a re-

entry or new drill will be chosen to test the Vaca Muerta

• n Curamhuele

Isopach C.I. = 100m

Block II: Curamhuele

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25 km

Block III: Cortadera

CorS.x-1

Regional seismic line

CorS X-1 well cased to 4,500m targeting both tight gas and shale gas

• Primary targets:

– Mulichinco: 206m thick – Vaca Muerta: 708m thick

• Secondary targets:

– Quintuco: 617m thick – Agrio

• Multi-horizon completion,

fracturing, testing planned in Q1/2012

• Additional 3D seismic 2012

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Land area: 124,000 acres or 500 km² (193 mi²)

Cortadera - Mulichinco

• Rapid thickening of the

Mulichinco near the Cortadera and Curamhuele blocks

• Both blocks have

potential to contain the lowermost and coarser clastic part of the Mulichinco that was deposited during the initial lowstand period

• That lowstand cycle

does not exist in the majority of the central part of the basin

Potential area of coarse lowstand sandstone west of this line High mud gas readings in CorS.x-1 Mulichinco gas in these wells Mulichinco ~ 1TCF in Sierra Chata field Chihuidos Anticline

25 km

Block III: Cortadera

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Vaca Muerta Thickness and Maturity

• Maturity is based on vitrinite

reflectance values:

Pink = Dry gas window Yellow = Wet as window Green = Oil window

• Maturity map is modified

from a YPF presentation

• Both blocks are highly

prospective for Vaca Muerta unconventional shale plays

• Cortadera block has

tremendous thickness in the Vaca Muerta

• Apache Nq.CorS.x-1 well

Isopach C.I. = 100m

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Block III: Cortadera

25 km

• Large, well situated blocks all with proven hydrocarbons and all with

identified drill targets

• All blocks are in Neuquén Basin with superior access, services and

infrastructure

• Significant exposure to one of the leading unconventional resource plays
• utside North America attracting majors
• Stacked zones, multiple play types: Stratigraphic/structure traps, broad

resource plays

• Multi products: Oil, Gas, Condensate
• Steady increase in product prices
• All discoveries qualify for Gas Plus, Oil Plus
• Energy shortages mean increasingly expensive imports: bodes well for

incentives and growth in domestic E&P

• Service companies preparing for growth in unconventional plays

Madalena 3 Block Summary

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Block I - Coiron Amargo:

• Test Vaca Muerta oil resource play
• Transition from exploration to development thru additional drilling
• Determine most effective drilling and hydraulic fracture program / technique
• Move acreage from exploration license to 25 year production lease

Block II - Curamhuele:

• Frac lower Agrio shale resource play
• Drill or deepen existing well to test thick Vaca Muerta shale resource potential
• Further evaluate sandy lowstand Mulichinco objective

Block III - Cortadera:

• Test multiple formations (tight gas and shale gas) in CorS X-1 well
• Prove up resource potential within tight sand and shale play

Madalena 2012 Activity

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The information in this presentation contains certain forward-looking statements. These statements relate to future events or

• ur future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-

looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Corporation’s control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry ; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Corporation’s actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Corporation will derive from

• them. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause

actual results to differ materially from those anticipated or implied in the forward-looking statements. The Corporation’s forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements contained in this presentation speak only as of the date hereof, and the Corporation assumes no

• bligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to

applicable laws. Except as required by law, the Corporation undertakes no obligation to publicly update or revise any forward-looking statements. Investors are encouraged to review and consider the additional risk factors set forth in the Corporation's Annual Information Form which is available on SEDAR at www.sedar.com.

Forward Looking Information and Statements

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All amounts in this presentation are stated in Canadian dollars unless otherwise specified. In accordance with Canadian practice, reserve and similar volumes and production volumes and revenues are reported on a gross basis, before deduction of royalties, unless otherwise stated. Where applicable, natural gas has been converted to barrels of oil equivalent ("BOE") based on 6 Mcf:1

• BOE. The BOE rate is based on an energy equivalent conversion method primarily applicable at the burner tip and does not

represent a value equivalent at the wellhead. Use of BOE in isolation may be misleading. This presentation may also contain references to Original Oil-In-Place (‘OOIP”) and Original Gas-In Place (‘OGIP”) (collectively "PIIP“) and the term "recoverable", which are not and should not be confused with references to oil and gas reserves. PIIP is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. PIIP is comprised of Discovered PIIP and Undiscovered PIIP Discovered PIIP is that quantity

• f petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production; therefore, the

estimates may differ materially from estimates prepared in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). *Analogous Information Certain information in this document may constitute "analogous information" as defined in National Instrument 51-101 – Standards

• f Disclosure for Oil and Gas Activities ("NI 51-101"), including, but not limited to, the reservoir data, resource estimates,

production and decline rates and economics information relating to the areas in geographical proximity to exploratory lands held by Madalena or other shale plays in development in North America. Such information has been obtained from government sources, regulatory agencies or other industry participants. Management of Madalena believes the information is relevant as it helps to define the reservoir characteristics and the reserves and production potential in which Madalena holds an interest. Such information includes resource estimates using categories such as Original Oil-In-Place and Original Gas-In Place which are not derived from the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and have therefore not been prepared in accordance with NI 51-

• 101. Madalena is also unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor.

Such information is not an estimate of the resources attributable to lands held or to be held by Madalena and there is no certainty that the reservoir data, resource estimates, production and decline rates and economics information for the lands held by Madalena will be similar to the information presented herein. The reader is cautioned that the data relied upon by Madalena may be in error and/or may prove not be analogous to the lands be held by Madalena.

Oil and Gas Disclosures

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