September 2010
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.
Management
Dwayne H. Warkentin: President and Chief Executive Officer, Director
Mr. Warkentin is an experienced petroleum industry executive with 31 years of diversified
experience in the oil and gas industry. He previously held the position of Senior Vice President and
Chief Operating Officer of Madalena for the past 4 years. Mr. Warkentin has worked in the oil and
gas industry in Canada, the United States, Europe, the Middle East, the Far East, South East Asia
and South America. These include Vice President and Chief Operating Officer of Antrim Energy
Inc., Vice President and Chief Operating Officer of Camberly Energy Ltd., Manager, Development of
Lasmo Indonesia Limited, and Petroleum Engineering Manager of Ultramar Oil & Gas Limited.
During his tenure with these companies Mr. Warkentin was actively involved in all aspects of
international oil and gas operations including acquisitions and divestitures, corporate
development, and the management of exploration and development operations in both offshore
and onshore international jurisdictions.
Anthony J. Potter: Vice President Finance and Chief Financial Officer, Director
Mr. Potter is a Chartered Accountant with over 24 years of experience with public international oil
and gas exploration and development companies. Mr. Potter has provided strategic planning, tax
and risk management advice in senior management capacities in the private and public oil and gas
sectors, including extensive involvement in Canadian and international operations in Argentina,
United Kingdom and Eastern Europe. He has been involved with numerous equity and debt
financings, new listings on the London Alternative Investment Market (AIM) and Oslo Stock
Exchange and other corporate transactions, including foreign acquisitions and divestitures. Mr.
Potter’s previous positions include Chief Financial Officer with Antrim Energy Inc., Vice-President
Finance with a US exploration company and a Principal with Coopers & Lybrand Chartered
Accountants. Mr. Potter is a member of the Institute of Chartered Accountants of Alberta.
Argentina and Canada Management, Consultants and Advisors
Jesica Juri, Juan Lucino, Martin Gene, Ruy Riavitz, Raul Munoz, Allan Carswell, Ken Broadhurst,
Michael Leith
Board of Directors
Raymond G. Smith: Chairman of the Board
Dwayne H. Warkentin: Director
Anthony J. Potter: Director
Ving Woo: Director
Michael J. Lock: Director
Jay Reid: Director
Keith Macdonald: Director
Barry Larson: Director
Madalena- TSXV (MVN)
•
Financial
– No debt
– Working Capital End Q1/10 $12 million
– International financial structure in place
– 178.4 MM common shares outstanding – basic
– 230 MM fully diluted including outstanding warrants
– 10% (fully diluted) held by Officers, Directors and Management
•
Valued Asset Base
– Light Oil Opportunities in Argentina
– Substantial Exploration and Development Drilling defined
– Strategic alliances
– Acquired large seismic data base to explore for and develop oil and gas
opportunities
Madalena’s Growth History
2006
 $27MM raised in 3 equity offerings
 Farm-in at Remada Sud, Tunisia
2007
 Acquire 3 exploration blocks in Neuquén Basin, Argentina
2008
 Successfully drill Discovery in Tunisia testing 200 bopd
 Successfully repair and production test two existing wells in Curamhuele, Argentina
 3D seismic surveys shot at Cortadera and Curamhuele, Argentina
 Acquire and reprocess 3D seismic over Coiron Amargo, Argentina
2009
 Successfully drill CAN X-2 light oil discovery at Coiron Amargo, Argentina
 $10 MM financing
2010
 Multi-well farm-out on Coiron Amargo block, Argentina
 Sold Tunisia - US $4.0MM
 Preparing drill sites and acquiring environmental approvals for new exploration wells
at Coiron Amargo and Curamhuele, Argentina
ARGENTINA
• Low Operating Costs
• Low Royalties
• Low F&D Costs
• Excellent Prospectivity
• Large Land Blocks
• Attractive Netbacks
ARGENTINA
NEUQUÉN BASIN
•
Highly prolific oil and gas producing
basin in Central Western Argentina
•
Extensive pipeline and facility
infrastructure
•
Highly developed service industry
•
Industry receptive Provincial
Government
•
3 prospective blocks acquired by
Madalena in September and October
2007 (278,000 acres gross)
CURAMHUELE
CORTADERA
COIRON AMARGO
•
Priority access to over 100,000 km of 2D
seismic, 15,000 sq km of 3D seismic and
over 2000 well files and logs
Madalena Prospect Inventory
•
Coiron Amargo:
–
–
–
–
•
Curamhuele:
–
–
•
Vertical and Horizontal well locations in the Sierras Blancas in Numerous Structures on Trend
Vaca Muerta Oil Shale Prospect (potential to use N. America Shale Resource Technology)
Lotena fractured Gas Prospectivity
Quintuco Oil Potential using under-balanced drilling Technology
Faulted Thrust Play, Oil and Gas Continuation of Filo Morado/ El Porton Trend from North
•
L. Troncoso, Avile, Mulichinco
•
L. Troncoso, Avile
Truncation Oil Play Up-Structure from existing Cur X-1 oil shows and tests against Igneous
Intrusion Trap
Cortadera:
–
–
–
Faulted Thrust Play, L. Troncoso, Avile and Mulichinco zones identified through Field Work
Mulichinco Tight Gas Play trending on to block
Potential Structure plays outside 3D area
Coiron Amargo
• Located on east side of
Neuquén Basin
• Multi-zone potential
• Close proximity to prolific oil
and natural gas pools
following fault structure
• High working interest: 70%
• Attractive royalty structure –
12% Provincial royalty
• Provincial oil company 10%
partner responsible for
funding its share of costs
after exploration phase
• 3 year Exploration Extension
• 25 year lease term upon
commerciality
• High productivity wells
offsetting Coiron Amargo
(405 km²)
7 well Horiz. Development
Coiron Amargo
• Major Farm-out to Apco
• 2 stage multi-well commitment to
drill up to 4 earning wells
• Up to $US 18 million commitment
• After earning Madalena retains
significant 35%-52.5% interest in
block
• Horizontal drilling application
• Potential for up to 38 locations
identified on 7 separate prospect
features identified on 3D with
multi 4 zone potential
• Can X-3 well drilled and cased
August 2010
Coiron Amargo – Horizontal-Type Wells
CURAMHUELE (227.5 km²) and CORTADERA (500 km²)
•
Located on north - south
trending fault structure
•
Close proximity to prolific oil
and natural gas pools
following fault structure and
in plains area
•
High working interests: 7090%
•
Attractive royalty structure –
12% Provincial royalty
•
Provincial oil company 10%
responsible for funding its
share of costs after
exploration phase
•
Both Blocks have 3 year
Extension to Exploration
•
25 year lease terms upon
production
•
Oil and natural gas tested on
blocks
CURAMHUELE – Prospect Identified on 3D
TRUNCATION PLAY
• World class drilling opportunity
• Madalena majority 70% ownership in
block
• New 3D seismic program on the block
indicates the existence of a igneous
dome in the south portion of the
block
• Offsetting analogous blocks have
government estimated individual
recoverable proven reserves estimate
of between 150-400 million
• Both the Avile and Troncoso are
structurally trapped at the proposed
Curamhuele X-1001 location
• Ch X-1 produced oil from the Avile
formation far downdip on the same
structure
• Preparing 2 Truncation drilling
locations
Curamhuele X-1001 Truncation
Disturbed
Zone (Seal)
L. Troncoso
Troncoso - Pampa Tril
Tronosco
Anhydrite
Tronosco
Fluvial Channel
Tronosco
Dune
Upper
Agrio
Curamhuele Truncation Play
CURAMHUELE – Truncation Type Wells
Curamhuele Truncation Play Average Well Production Profiles
El Trapial, (1990) Wells to S. of Disturbed Zone
600 Producers, 400 Inj. Wells
Oil 36 API, Average GOR 100 scf/bbl
700
Curamhuele Well Cost $3-$3.5 Million
600
Top Quartile Production Well Avg: IP 1,000 bopd, 1,600 mbbls
500
Average Production Well: IP 550 bopd, 475 mbbls
BOPD
400
300
200
100
1
2
3
4
5
6
7
8
9
10
11
12
13
YEARS
El Trapial Avg
El Trapial Top Qtl
14
15
16
17
18
19
20
CURAMHUELE – Truncation Type Wells
Curamhuele Truncation Play Average Well Production Profiles
Lomita Sur, (1978) and Sierra Negra, (1968) Wells to N. of Disturbed Zone
700 Production Wells, 500 Inj. Wells
Oil 41 API, Average GOR 500 scf/bbl
400
Curamhuele Well Cost $3-$3.5 Million
350
Top Quartile Production Well Avg: IP 550 bopd, 1,200 mbbls
300
Average Production Well: IP 370 bopd, 640 mbbls
BOPD
250
200
150
100
50
1
2
3
4
5
6
7
8
9
10
11
12
13
YEARS
LS/SN Avg
LS/SN Top Qtl
14
15
16
17
18
19
20
CURAMHUELE – Drilling Prospects Identified on New 3D
THRUST FAULT PLAY
• World class drilling opportunity
• Madalena majority 70% ownership
in block
• New 3D seismic program on the
block indicates the extension of the
Avile, Troncoso, and Mulichinco
formations from the offsetting Filo
Morado Block
• Offsetting Filo Morado field has
recovered 64 million barrels of oil
equivalent to date
• Anticipate drilling after the
Truncation well
Yapai X-1 Test – (existing well on Curamhuele Block)
Volcano
Filo Morado Facilities
Curamhuele – Yapai X-2
• Faulted thrust block
• Potential to access formations with
deviated wellbore
• Potential for horizontal equivalent
productivity from shallower
interval
• Developed road access and existing
well pad will result in significant cost
reduction
CURAMHUELE – Thrust Play Type Wells
Curamhuele Thrust Play Average well Production Profile Estimate
Filo Morado, (1987)
Cumulative Prod 32 mmbbls oil, 170 bcf, 4 mmbbls NGL's= 64 mmboe
38 API Gravity excl NGL
1,800
1,600
Top Qtl Well Avg: IP 2,080 BOPD, 2,150 mbbls Oil, Gas 10 bcf. 1.4MMBOE first 3 years
1,400
Average Well: IP 1,130 BOPD, 950 mbbls Oil, 5 bcf, 0.8 MMBOE first 3 years
BOEPD
1,200
1,000
800
600
400
200
1
2
3
4
5
6
7
8
9
10
11
12
Years
Top Qtl boepd
Avg boepd
13
14
15
16
17
18
19
20
Estimated P+P Reserves (mmboe)
Thrust Plays
(40-50% oil) mmboe
• Filo Morado
• El Porton
• 4 Chihuido Fields
Curamhuele
Thrust Play
69
92
257
Truncation Plays
(90% oil) mmboe
• El Trapial
• Lomita Sur
• Sierra Negra
500
200
180
69?
Curamhuele
Truncation Play
77?
Curamhuele Summary
•
Madalena majority 70% ownership in block
•
Two high quality drilling prospects located on block:
- Truncation Play - new 3D seismic indicates the existence of an igneous dome
creating trapping mechanism on block analagous to offsetting blocks
- Offsetting analogous blocks have government estimated individual recoverable
proven reserves estimate of between 150-400 million barrels of oil equivalent
(National Secretary of Energy of Argentina)
- Fault Thrust Play - new 3D seismic program on the block indicates the extension of
the primary plays on the block, the Avile and Troncoso formations from the
offsetting Filo Morado field
- 0ffsetting Filo Morado field has recovered 64 million barrels of oil equivalent to date
(National Secretary of Energy of Argentina)
•
Hydrocarbon accumulations and value in existing wellbores owned by Madalena on
the Curamhuele block
•
Drill locations selected and surveyed on Truncation and Fault Thrust and
environmental permitting and drilling approvals underway
Cortadera
• Excellent drilling candidate with multiple zone exploration targets
• Extensive field mapping completed to date
• Field mapping and 3D seismic indicates presence of source rock and
reservoir quality rock
• New 3D seismic program
• Structures potentially similar in size to Filo Morado
• Strong Industry interest to participate on block
Cortadera
• New 3D seismic shot over
block
• Extensive field work
conducted over block
• Presence of Avile and
Troncoso reservoir rock
identified on block at surface
• Thick high porosity Eolian
dunes identified on the block
• Tight Gas play in Mulichinco
formation on eastern side of
block
ARGENTINA - OVERVIEW
• Three significant exploration blocks in the Neuquén basin with
extensive 2D and 3D seismic coverage and drilling potential
• Majority working interests – 70% to 90%
• Attractive royalty structure – 12%
• Farmout Agreement in place for significant third party farmout
investment at Coiron Amargo - up to $US 18 million. Madalena
remains with a significant 35% to 52.5% WI after farmout
• Extensive remaining low risk development drilling potential after
farmout
• 25 year lease term granted upon commerciality
• Extensive low risk vertical and horizontal development drilling
potential with low projected F&D costs
ARGENTINA – OVERVIEW
(Continued)
• Attractive netbacks during periods of high and low world oil prices
resulting from low operating costs and low royalties
• In 2008 the Argentina Government announced the “Gas Plus” and
“Oil Plus” Plans to encourage oil and gas exploration and
production, significantly improving future netbacks from new
discoveries and tight gas discoveries
• November 20, 2009, media press release that Argentina
Government will announce a revised Gas Plus program enabling
producers to sell natural gas at US$4-5 per MBTU
• 100% of Madalena’s oil and gas production will qualify for Gas and
Oil Plus programs
• Well established Madalena corporate structure in Argentina with
experienced international team
Forward Looking Information and Statements
The information in this presentation contains certain forward-looking statements. These statements relate to
future events or our future performance. All statements other than statements of historical fact may be forwardlooking 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 obligation 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.
Information Regarding Disclosure in this Presentation of
Oil and Gas Reserves and Other Volumes
All amounts in 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 also contains references to "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 of petroleum that is estimated, as of a given date, to be contained in known
accumulations prior to production
All references throughout this presentation referring to oil and natural gas reserves and production rates have
been obtained from the National Secretary of Energy of Argentina and are stated as proven plus probable
reserves. The estimates of proven plus probable reserves have not been prepared in accordance with the
Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") or National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities ("NI 51-101") and the Corporation cannot confirm whether such estimates
have been prepared by a person who meets the definition of a "qualified reserves evaluator" in NI 51-101;
therefore, the estimates may differ materially from estimates prepared in accordance with the COGE Handbook
and NI 51-101.