Corporate Presentation January 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 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. 3
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 4
Argentina Overview Source: US EIA Source: US EIA Recent Argentina Gas Price Dynamics ($/mmbtu) Imports (LNG, Bolivia) New Gas (Gas Plus) NQN Old Gas $0 $5 $10 $15 $20 5
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 outside North America • Madalena’s acreage located in both oil and gas window close to major pipelines and facilities 6
Neuquén – Acreage and Shale Oil and Gas Activity Madalena’s Acreage: • 280,000 gross acres (437 sections) • 135,000 net acres (211 sections) Basin has attracted several major new Curamhuele entrants including: 90% • EOG et al • Exxon et al Cortadera 40% Coiron • Shell et al Amargo 35% • VM Drilling New entrants are farming-in or acquiring existing blocks in order to build meaningful acreage position 50 km 7
Madalena Opportunities Neuquén Basin Source & Reservoir • Mulichinco Gas • Vaca Muerta O&G • Lotena Gas • L. Agrio O&G • Quintuco O&G • Los Molles Gas • S. Blancas O&G • L. Agrio O&G • L. Troncoso O&G • Lajas Gas • Avile O&G • Lotena Gas Tight Sands, Shale Oil and Gas Conventional Oil and Gas 8
Neuquén Basin Stratigraphic Diagram S Oil S Gas S S Source Shales Oil Gas Oil and Gas 9
Source Shales Major source of new oil and gas production in United States Source: EIA Annual Energy Outlook 2011 World class source shale in Neuquén Basin Source: EIA World Shale Gas Resources, April 2011 10
Unconventional fields: Neuquén's potential Shale gas world class targets Eagleford Haynesville Barnett Marcellus Woodford Vaca Muerta Horn River Siliceous Shale Calcareus Shale Lithology Siliceous Marl Siliceous Shale Chert Siliceous Marl Chert 4 to 5% Average Mature TOC (%) 3 to 4% 4 to 7% 4 to 8% 3 to 5% 3 to 6% 4 to 8% 150 to 250 Net Thickness (Ft) 225 to 300 75 to 150 75 to 150 300 to 1300 125 to 450 120 to 280 1.3 to 2.1 0.7 to 1.8 Maturity (Ro) 1.7 to 2.8 1.3 to 2.4 1.2 to 2.8 1.4 to 1.8 1.6 to 2.7 9.6 to 10.6 9.6 to 14.5 Pressure Gradient (ppg) 13.5 to 17.3 11.6 to 13.5 9.6 to 10.6 9.4 to 17.3 10.6 to 13.5 4 to 8% 4 to 10% Porosity (%) 7 to 9% 7 to 9% 5 to 6% 7 to 12% 4 to 10% 50 to 200 Permeability (nD) 100 to 500 100 to 200 40 to 70 50 to 200 100 to 1000 100 to 1500 3 to 7 Well IP (mcfd peak month) 8 to 25 4 to 10 2 to 6 2 to 12 5 to 8 2 to 17 100 to 150 80 to 250 GIP*/Sq Mi (GCF) 150 to 250 75 to 125 75 to 150 300 to 800 (BBN) 175 to 250 3 to 4.5 2 to 6 EUR**/Well (GCF) 8 to 12 3 to 6 2.5 to 5 8 to 20 4 to 10 * Gas in place ** Estimated Ultimate Recovery 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. Source: Gas y Petroleo del Neuquen 11
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 wedge typically contains the Eagle Ford 60m 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 12
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 oil 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 km 2 , YPF announced 927 MMBOE VM resource discovery * • Each block uniquely situated 50 km for world class oil and gas resource development 13
Block I: Coiron Amargo Sierras Blancas Structures Land area: 100,077 acres or 405 km² (156 mi²) Recent successful drilling on trend Multiple Stacked Formations • Sierras Blancas Five light oil discoveries to date, multi-well development. North area facilities development. CAN.x-2 • Lotena Gas Gas pools on east and west sides of block • Quintuco Oil shows on block, producing pools nearby CAS.x-2 Drill after CAS.x-4 • Vaca Muerta 110 – 150 m thick oil saturated section over entire block CAS.x-1 Faults on Sierras • Lajas Blancas Gas prone deep zone Adjacent to announced YPF major VM shale oil discovery 10 km CAS.x-4 Spud 2011-12-14 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 50 km C.I. = 5m 15
YPF Success in Vaca Muerta . . . . AnN.x-1 Coiron Amargo 404 km 2 vs. 428 km 2 for YPF lands proven to date Source: YPF: Nov 2011 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 16
YPF Examples of Production Logging % of total production from each zone by PLT 17
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 • 18
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. 19
Block II: Curamhuele Lower Agrio Intrusive body replacing L Agrio Shale Thickness Shale Basin • 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 25 km C.I. = 25 m 20
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