Corporate Presentation June 2012 Forward Looking Statements This - - PowerPoint PPT Presentation

Corporate Presentation June 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 Ruy Riavitz: Country Manager, Madalena Austral S.A. _____________________________________________________________________ Ray Smith: Chairman, Madalena Ventures I nc. and President and CEO, Bellatrix Exploration Ltd. Barry Larson: VP and COO, Parex Resources I nc. Michael J. Lock: President, Upsilon Holdings Ltd. Keith Macdonald: President, Bamako I nvestment Management Ltd. Jay Reid: Partner, Burnet, Duckworth and Palmer LLP Ving Woo: Vice-President and COO, Bellatrix Exploration Ltd.

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Board of Directors / Management

Madalena – TSXV (MVN)

Corporate

• Strong balance sheet
• Working capital end Q1 - $70 million
• No debt
• 314 MM common shares outstanding
• 328 MM fully diluted

Valued Asset Base

• Focused exclusively on the Neuquén Basin,

Argentina

• Large acreage blocks close to key

infrastructure

• 280,000 gross acres (437 sections)
• 135,000 net acres (211 sections)
• Mix of conventional and non-conventional

targets

• Well positioned in both shale oil and shale

gas windows

• Lower risk development – high impact

exploration

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Argentina Overview

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Source: EIA World Shale Gas Resources, April 2011

Technically Recoverable Shale Gas Resources

Source: US EIA 2011 Data: Argentine Institute of Oil and Gas

2011 5.9% 2011 3.4%

Oil Oil and Gas Gas S Source Shales

Neuquén Basin Stratigraphic Diagram

S S S Oil Gas

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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
• n Madalena rock evaluation data

(every new well provides refined maturity outlook)

• Coiron Amargo is within the oil

window; Cortadera within the gas window; Curamhuele is in a transitional area

• 10 km north of Coiron Amargo, VM

well has produced ~ 750MBOE

• I mmediately west and covering

428 km2, YPF announced 927 MMBOE VM resource discovery * I n February 2012, YPF released results of Ryder Scott audit reporting a total resource of 22.8 billion BOE over 2 million acres

• Each block uniquely situated for

world class oil and gas resource development

50 km

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Neuquén Basin - Vaca Muerta Shale

World Class Source Shales

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Other large acreage holders include:

Cortadera 40% Curamhuele 90% Coiron Amargo 35%

Neuquén Basin – Acreage

YPF S.A. Apache Petrobras Total Pluspetrol

Americas Petrogas New entrants have farmed-in or acquired existing blocks in order to build meaningful acreage positions:

Madalena

Gross Acres Net Acres Coiron Amargo 99,923 34,973 Curamhuele 56,216 50,595 Cortadera 123,503 49,401 Total 279,642 134,969

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Neuquén Basin – Nearby Block Activity

Curamhuele Coiron Amargo

Neuquén – Shale Oil and Gas Activity

Majority of drilling to date has been adjacent to or on Coiron Amargo Block

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

Neuquén Basin

Established I nfrastructure

• 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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CAS.x-2 Drilled March 2012 CAS.x-4 Drilled Feb 2012 Full Core VM

CAS.x-1 CAN.x-2

10 km Faults on Sierras Blancas

Block I : Coiron Amargo

Multiple Stacked Formations

• Sierras Blancas

Six 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 / Las Molles

Gas prone deep zones

Land area: 100,077 acres or 405 km² (156 mi² )

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Sierras Blancas Structures

CAN 5 Drilled May 2012 CAN 7 Drilled June 2012

Northern 108 km2 converted to 25 year exploitation licence in March 2012

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

• Adjacent to YPF SA major

discovery

Vaca Muerta Thickness

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CAS.x-1 Frac’d Q1 2012

YPF reports 927 MMBOE resource over 428 km2 (5.6mmboe/ section) in the Vaca Muerta *

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

YPF Examples of Production Logging

% of total production from each zone by PLT

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Operators in early stages of determining how best to create “manufacturing” play:

• Varying pumping and pressure requirements

within and between basins

• Use of vertical versus horizontal

development wells

• Determination of the most effective

proppant, number of stages and size

• Identification of sweet spots within each

basin

• Accurate cost versus benefit analyses

associated with various completion techniques

Basin Bakken

• N. Dakota

Eagle Ford Neuquén Unconv Current Prod. Est. 420,000 bopd 300,000 boepd 5,000+ boepd (VM) # Wells to Date est. 3,000 producers 4,000 25 # Wells – 2012 est. 2,300 3,000 100 Type Wells Mainly Horizontal Mainly Horizontal Mainly Vertical Drilling Rigs 220 250+ 10-15 Frac Stages 20-30 15-20 3-5 Horsepower – 2012 est. 400,000 2,300,000 190,000 Frac Crews 30 50-60 8 Rigs Serviced per Frac Crew 7 4-5 2

Source: Compiled by Madalena from various contributors

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Neuquén Shale Resources – Early Development Stage

Block I I : Curamhuele

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

Tested Hydrocarbons:

• Lower 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

• Northern part of the

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

• il generation
• Marine flooding event

created a good source rock in the centre of the basin, before the remainder of the cycle fills the basin with dominantly sandstone

• The Lower Agrio Shale zone

is continuous and similar

• ver the northern part of

the block and several adjacent wells

Shale Basin

25 km C.I. = 25 m

Intrusive body replacing L Agrio

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Block I I : Curamhuele

SJ.Nq.Yp.x-1 TD=3880.0 7.4 km SJ.Nq.Ch.x-1 TD=3457.0

• 100

• 0.15

3150 3200 3250 3300 3350 3400 3450 3500 3550 3600 3650 3700

• 100

• 0.15

2800 2850 2900 2950 3000 3050 3100 3150 3200 3250

Curamhuele – L Agrio Cross Section 200+ m

The green fill between Resistivity and Sonic curves indicates high TOC, potential unconventional reservoir

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 – Lower Agrio Shale

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• Madalena operated (90% ownership)
• Preparing for 3 stage hydraulic

fracture stimulation at Curamhuele X- 1 well location

• First hydraulic fracture stimulation of

Lower Agrio in the Neuquén Basin

• Layered and brittle makes it ideal to

frac

Fracture Stimulation

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 I I : Curamhuele

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Correlation 200 API

• 100

50 MV 6 16 IN 250

• 250

0.2 2000 0.2 2000 0.2 2000 2 20000 0.2 2000 0.450

• 0.150

1908 2898 KG/MT 450 90 US/MT 20 B/E

3650 3700 3750 3800 3850

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 I I : Curamhuele

Curamhuele – Mulichinco Reservoir

• The production test of Yp.x-1

after acidizing yielded 10 mmcfd of 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

• 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 on Curamhuele

Isopach C.I. = 100m

Block I I : Curamhuele

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25 km

Vaca Muerta Field Outcrop Sampling

Block I I : Curamhuele

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• Vaca Muerta section 1300 m

thick (plan view)

• Samples taken every 5 m
• Very good mineralogy for

hydraulic fracture stimulation:

Block I I I : Cortadera

CorS.x-1

Regional seismic line

Thickest potential section in basin

• Primary targets:

–

Mulichinco: 206m thick

–

Vaca Muerta: 708m thick

• Secondary targets:

–

Quintuco: 617m thick

–

Agrio

• CorS X-1 well cased to 4,500m

targeting both tight gas and shale gas

• Two stage hydraulic fracture of Vaca

Muerta formation performed in Q1/ 2012

• Additional uphole formations

(Quintuco, Mulichinco, and Agrio zones) yet to be tested

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

Cortadera - Mulichinco

• Potential liquid rich

tight sands

• 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

• 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 I I I : Cortadera

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Vaca Muerta

• 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. Potential for condensate in the northern portion of block.

• 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
• Application approved for Gas

Plus pricing

Isopach C.I. = 100m

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Block I I I : 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 I I - 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 I I I - 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 I nformation 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 I nformation

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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