Corporate Presentation June 2012
Forward Looking Statements 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. 2
Board of Directors / Management 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. 3
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 4
Argentina Overview 2011 2011 5.9% 3.4% Source: US EIA 2011 Data: Argentine Institute of Oil and Gas Technically Recoverable Shale Gas Resources Source: EIA World Shale Gas Resources, April 2011 5
Neuquén Basin Stratigraphic Diagram S Oil S Gas S S Source Shales Oil Gas Oil and Gas 6
Neuquén Basin - Vaca Muerta Shale Thickness The Vaca Muerta is comprised • of a series of wedges that prograde toward the north and west Barnett 90m The lower portion of each • Eagle Ford 60m wedge typically contains the best source rock characteristics Bakken 30 m • 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 50 km C.I. = 100m 7
Neuquén Basin - Vaca Muerta Shale Maturity • Maturity is based on vitrinite reflectance values Modified YPF presentation based • on 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 km 2 , 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 50 km • Each block uniquely situated for world class oil and gas resource development 8
World Class Source Shales 9
Neuquén Basin – Acreage Gross Acres Net Acres Madalena Coiron Amargo 99,923 34,973 Curamhuele Curamhuele 56,216 50,595 90% Cortadera 123,503 49,401 Total 279,642 134,969 Other large acreage holders include: Cortadera 40% YPF S.A. Total Coiron Apache Pluspetrol Amargo 35% Petrobras Americas Petrogas New entrants have farmed-in or acquired existing blocks in order to build meaningful acreage positions: 10
Neuquén Basin – Nearby Block Activity Curamhuele Coiron Amargo 11
Neuquén – Shale Oil and Gas Activity Majority of drilling to date has been adjacent to or on Coiron Amargo Block Coiron Amargo 404 km 2 vs. 428 km 2 for YPF lands proven to date 12
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 outside North America Madalena’s acreage located in both • oil and gas window close to major pipelines and facilities 13
Block I : Coiron Amargo Sierras Blancas Structures Land area: 100,077 acres or 405 km² (156 mi² ) CAN 5 CAN 7 Drilled May 2012 Drilled June 2012 Northern 108 km 2 converted to 25 year exploitation licence in March 2012 Multiple Stacked Formations CAN.x-2 Sierras Blancas • Six light oil discoveries to date, multi-well development. North area facilities development. • Lotena Gas Gas pools on east and west sides CAS.x-2 of block Drilled March 2012 • Quintuco Oil shows on block, producing CAS.x-1 Faults on Sierras pools nearby Blancas • Vaca Muerta 110 – 150 m thick oil saturated section over entire block Lajas / Las Molles • 10 km Gas prone deep zones CAS.x-4 Drilled Feb 2012 Full Core VM 14
Block I : Coiron Amargo Vaca Muerta Thickness 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 YPF reports 927 MMBOE resource over 428 km2 CAS.x-1 (5.6mmboe/ section) in the Vaca Frac’d Q1 2012 Muerta * 15
Block I : Coiron Amargo Shale Oil: Vaca Muerta in Coiron Amargo Vaca Muerta Log VM Fracture Modelling • 3 Stage / 1 mm lbs / • Geochem work from • • High GR Excellent oil shows 22,000 bbls northeast to • High resistivity while drilling • 11 wells logged southwest • • Good SP Response TOC 7% , Type II • • 300 km 3D seismic 1 well full core • Over-Pressured • 1 vertical fracture 16
YPF Examples of Production Logging % of total production from each zone by PLT 17
Neuquén Shale Resources – Early Development Stage Operators in early stages of determining Bakken Eagle Neuquén how best to create “manufacturing” Basin N. Dakota Ford Unconv play: Current Prod. Est. 420,000 300,000 5,000+ bopd boepd boepd (VM) • Varying pumping and pressure requirements # Wells to Date est. 3,000 4,000 25 within and between basins producers • Use of vertical versus horizontal # Wells – 2012 est. 2,300 3,000 100 development wells • Determination of the most effective Type Wells Mainly Mainly Mainly Horizontal Horizontal Vertical proppant, number of stages and size Drilling Rigs 220 250+ 10-15 • Identification of sweet spots within each basin Frac Stages 20-30 15-20 3-5 • Accurate cost versus benefit analyses Horsepower – 2012 400,000 2,300,000 190,000 associated with various completion est. techniques Frac Crews 30 50-60 8 Rigs Serviced per 7 4-5 2 Frac Crew Source: Compiled by Madalena from various contributors 18
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. 19
Block I I : Curamhuele Lower Agrio Shale Intrusive body replacing L Agrio Northern part of the • Shale Basin Curamhuele Block is ideally located in a thick area with > 180m of section, where depth is sufficient to cause oil 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 over the northern part of the block and several adjacent wells 25 km C.I. = 25 m 20
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