Madalena Ventures Inc. Strategically Enters the North American Oil & Gas Sector with the Acquisition of Online Energy Inc.

    




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 MADALENA VENTURES INC. 200, 441 - 5(th) Avenue S.W.  Calgary, Alberta T2P 2V1 Telephone:  [phone]  Facsimile [phone] TSXV Trading Symbol: MVN  ONLINE ENERGY INC. 200, 707 - 7(th) Avenue S.W.  Calgary, Alberta T2P 3H6 Telephone:  [phone]  Facsimile [phone] TSXV Trading Symbol: ONL 

 CALGARY, Sept. 4, 2012 /CNW/ - Madalena Ventures Inc. ("Madalena") , an international upstream oil and gas company and  Online Energy Inc. ("Online") , a domestic oil and gas company with operations in  Alberta, are pleased to jointly announce that they have entered into a  pre-acquisition agreement (the "Pre-Acquisition Agreement") pursuant to which Madalena will, subject to certain conditions, make  an offer to acquire all of the issued and outstanding common shares of  Online ("Online Shares") by way of a take-over bid (the "Offer").  Under the terms of the Pre-Acquisition Agreement, Madalena will pay  $0.35 cash per Online Share for a total purchase price of $20.3  million, which includes the assumption of Online's debt in the amount  of approximately $4.0 million excluding transaction costs and  severance.  Based on the 20 day volume weighted average trading price  of the Online Shares on the TSXV ending August 31, 2012, Online's  shareholders will receive a 52% premium for each Online Share held.   Madalena intends to fund the purchase price from its current working  capital. 

 Online is a junior exploration and production company which currently  operates exclusively in Alberta, Canada.  Its assets include 145 net  sections of land (net 76.4% average working interest) in the Paddle  River area of central Alberta across multiple light oil and  liquids-rich gas resource plays.  Online's resource plays are  highlighted by the Ostracod light oil (43 of the 145 net sections) and  Nordegg light oil and liquids-rich gas (131 of the 145 net sections)  plays, and are complemented by the Rock Creek, Notikewan, Wilrich and  Duvernay oil and liquids-rich gas plays.  Online has current production  of approximately 400 boe/d (37% oil and liquids, 63% natural gas) and  anticipates the recently completed Paddle River 1-5-56-7W5M Ostracod  horizontal oil well will commence production on or around September 15,  2012 at an initial rate of approximately 400 boe/d (80% oil and  liquids). 

 This strategic acquisition positions Madalena to enter the North  American oil and gas sector and obtain a source of cash flow from  production along with access to a large inventory of horizontal  drilling locations.  The acquisition also allows Madalena the ability  to re-deploy capital, where required, as international and domestic  economic conditions evolve in its core operating areas. 

 Transaction Overview 

 The transaction is expected to be highly accretive to Madalena on a per  share basis to cash flow, reserves and production and has the following  characteristics and metrics: 





    Total Purchase Price(1)                 $20.3 million

                                             

    Estimated Online Daily Production      
    (Q4 2012 Average(2))                    675 boe/d (53% oil and liquids)

    Estimated Online Daily Production      
    (Current(3))                            800 boe/d (58% oil and liquids)

                                             

    Reserves(4)                              

      Total Proved                          1,082 MBOE

      Total Proved Plus Probable            1,436 MBOE

                                             

    Land                                    145 net sections (92,800 net
                                            acres)

    Ascribed Land Value(5)                  $7.6 million

                                             

    Acquisition Metrics                      

      Q4/12E $/average daily boe(2)(6)      $18,815

      Current $/average daily boe(3)(6)     $15,875

      $/boe Total Proved(4)(7)              $18.76

      $/boe Proved Plus Probable(4)(7)      $14.14






  

 Notes: 




      1. Assuming a cash price per Online Share of $0.35, the assumption of
         Online's debt in the amount of $4.0 million (and excluding
         transaction costs and severance) and that 46,558,859 Online Shares
         are acquired under the Offer after the exercise of the
         in-the-money stock options of Online.
      2. Average daily production of Online estimated as of Q4/12 and based
         on 400 boe/d initial production from the Paddle River 1-5 Ostracod
         horizontal well.
      3. Current estimated average daily production of Online including 400
         boe/d initial production from the Paddle River 1-5 Ostracod
         horizontal well.
      4. Reserves evaluated by McDaniel & Associates Consultants Ltd.
         ("McDaniel") in the report of McDaniel dated February 2, 2012 and
         effective as at December 31, 2011 (the "McDaniel Report"). 
         Reserves are "gross reserves", being Online's working interest
         share of reserves before the deduction of royalties owned by
         others and without including royalty interests of Online.
      5. Assumes $100/acre of undeveloped land and 75,855 net acres
         undeveloped.
      6. Metrics per flowing barrel equivalent exclude the ascribed land
         value of $7.6 million from the total transaction value of $20.3
         million
      7. Excluding the future development capital estimated by McDaniel of
         $0.31 million for the proved reserves and $0.59 million for the
         proved plus probable reserves.




 The Paddle River 1-5 well was Online's second Ostracod horizontal well.   In July 2012 the well tested at an average rate of 438 boe/d (73% oil)  over a three-day period following a fourteen stage frac completion and  further supports the potential of its emerging oil resource play at  Paddle River.  This well is currently awaiting tie-in and is expected  to be on production by September 15, 2012. While there currently is not  an established decline curve for the Ostracod horizontal oil project  due to the lack of data, Online has budgeted that the 1-5 well is  expected to decline approximately 50% from its initial rate by December  31, 2012.  No reserves have been attributed to this second Ostracod  well in the McDaniel Report, however, management of Madalena expects  reserve additions for this well to be reflected in Madalena's year-end  reserve report assuming the well performs as anticipated following  tie-in.  Further, the McDaniel Report attributed little value to  Online's developing horizontal resource plays which management of  Online and Madalena believe could potentially support up to 50 Ostracod  drilling locations. 

 Madalena Strategic Rationale 

 The acquisition of Online is expected to have the following benefits for  Madalena: 




        --  Provides entry into the domestic E&P space with the opportunity
            to ramp production and cash flow while continuing to develop
            and grow its international assets & business plan

        --  High working interest ownership and operatorship of a sizeable
            domestic land base with a large inventory of potential oil and
            liquids-rich natural gas locations

        --  Increases critical mass for continuing operations and the
            opportunity to transfer North America technology and
            engineering techniques to other international resource plays

        --  Continues to build on the recent Ostracod oil success of Online
            and allows Madalena to further direct capital into two
            significant and emerging oil resource plays in both the
            Ostracod & Nordegg Oil

        --  Increases total proved reserves of Madalena by 124% from 874
            MBOE to 1,955 MBOE(1)

        --  Increases total proved plus probable reserves of Madalena by
            92% from 1,565 MBOE to 3,001 MBOE(1)




 Notes: 




      1. Based on the addition of Online's proved and proved plus probable
         reserves effective as of December 31, 2011 as set forth in the
         McDaniel Report to Madalena's proved and proved plus probable
         reserves evaluated by InSite Petroleum Consultants effective as of
         December 31, 2011.  Reserves are "gross reserves", being each
         company's working interest share of reserves before the deduction
         of royalties owned by others and without including royalty
         interests of each company.




  

 Pre-Acquisition Agreement 

 Under the terms of the Pre-Acquisition Agreement, the Offer is subject  to a number of conditions including the tendering of at least 66(2/3)% of the outstanding Online Shares to the Offer, the receipt of all  necessary regulatory and stock exchange approvals and other customary  closing conditions.  Online has agreed that it will not solicit or  initiate any discussion with any third party  concerning the sale of a  material portion of the assets of Online or any business combination  involving Online and has granted Madalena the right to match any  subsequent proposal.  Additionally, a non-completion fee in the amount  of $1 million is payable by Madalena or Online in certain cases  involving the termination of the Pre-Acquisition Agreement. 

 Madalena anticipates mailing the Offer to all registered Online  shareholders on or before September 26, 2012 and the Offer will expire  35 days thereafter unless otherwise extended by Madalena in accordance  with the terms of the Pre-Acquisition Agreement. 

 Addition to Madalena Management Team 

 Mr. Dwayne Warkentin, alongside Madalena's current management team &  board of directors, will continue to lead the overall entity focused on  continued growth both internationally and domestically.  Online's  current President and CEO, Steve Dabner - P. Geol, has agreed to  employment with Madalena in the position of Vice-President, Exploration  following the completion of the Offer.  Mr. Dabner has over 27 years  experience in the oil and gas industry and in that capacity will play a  significant role in heading up Madalena's domestic operations and will  provide Madalena with the necessary leadership and expertise needed to  grow the emerging resource plays at Paddle River. 

 Fairness Opinions, Recommendations and Lock-up Agreements 

 The board of directors of Madalena has approved the Pre-Acquisition  Agreement and the Offer.  Casimir Capital Ltd. is acting as the sole  financial advisor to Madalena, and has provided the board of directors  of Madalena with its opinion, pending review of the finalized form of  documents effecting the Transaction, that the consideration to be paid  by Madalena pursuant to the Offer is fair, from a financial point of  view, to Madalena shareholders. 

 Online's board of directors has also approved the Pre-Acquisition  Agreement and the Offer and has retained Emerging Equities Inc. to be  its sole financial advisor with respect to the Offer.  Emerging  Equities Inc. has provided the board of directors of Online with its  opinion that the consideration to be received by the Online  shareholders pursuant to the Offer is fair, from a financial point of  view, to the Online shareholders. 

 Holders of Online Shares (including all directors and officers of  Online), holding an aggregate of approximately 10.2% of the outstanding  Online Shares have entered into lock-up agreements with Madalena  pursuant to which they have agreed to tender their Online Shares to the  Offer. 

 Madalena International Update 

 Madalena, which holds three large blocks / concessions within the  prolific Neuquen basin in Argentina, continues to move forward on both  its conventional opportunities, alongside its continued prove-up of its  large-in-place oil & gas resources within both the unconventional Vaca  Muerta shale and emerging Agrio shale plays.  Madalena holds 135,000  net acres held across the Coiron Amargo (35,027 net acres), Curamhuele  (50,400 net acres) and Cortadera (49,600 net acres) blocks.  A drilling  rig is expected to return to the Coiron Amargo Block later this month  to drill one additional development well on Coiron Amargo Norte and one  exploration well on Coiron Amargo Sur.  The exploration well is located  approximately 10km west of the CAS X-2 well near a previous well  drilled on the block that during drilling indicated extensive natural  fracturing in the Vaca Muerta formation. 

 Reader Advisories 

 The information in this news release 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 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.  In particular, this news release contains forward-looking  statements pertaining to: (i) estimated Q4 2012 production for Online;  (ii) the anticipated tie-in date of the Paddle River 1-5 well and the  anticipated performance therefrom (including anticipated initial  production and decline rate) and the potential reserve additions  therefrom; (iii) the mailing of a takeover bid circular by Madalena;  and (iv) operational activities to be conducted in Argentina by  Madalena.  These statements involve substantial known and unknown risks  and uncertainties, certain of which are beyond the control of Madalena  and Online, 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 Company'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 Madalena and Online 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 forward-looking statements in this news release are  expressly qualified in their entirety by this cautionary statement.  Except as required by law, Madalena and Online undertake 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 annual information form of each of Madalena and Online,  which are available on SEDAR at www.sedar.com. 

 Any references in this news release to test rates, flow rates, initial  and/or final raw test or production rates, early production and/or  "flush" production rates are useful in confirming the presence of  hydrocarbons, however, such rates are not necessarily indicative of  long-term performance or of ultimate recovery.  Such rates may also  include recovered "load" fluids used in well completion stimulation.  Readers are cautioned not to place reliance on such rates in  calculating the aggregate production for Madalena.  In addition, the  Vaca Muerta shale is an unconventional resource play which may be  subject to high initial decline rates. 

 All calculations converting natural gas to barrels of oil equivalent  ("boe") have been made using a conversion ratio of six thousand cubic  feet (six "Mcf") of natural gas to one barrel of oil, unless otherwise  stated. The use of boe may be misleading, particularly if used in  isolation, as the conversion ratio of six Mcf of natural gas to one  barrel of oil is based on an energy equivalency conversion method  primarily applicable at the burner tip and does not represent a value  equivalency at the wellhead.  Given that the value ratio based on the  current price of crude oil as compared to natural gas is significantly  different from the energy equivalency of 6:1, utilizing a conversion on  a 6:1 basis may be misleading as an indication of value. 

 Neither the TSX Venture Exchange nor its Regulation Service Provider (as  that term is defined in the policies of the TSX Venture Exchange)  accepts responsibility for the adequacy or accuracy of this release. 

Madalena Ventures Inc.


CONTACT:  Dwayne H. Warkentin  President and Chief Executive Officer Madalena Ventures Inc. Phone: [phone] ext 229 Anthony J. PotterVice President, Finance and Chief Financial OfficerMadalena Ventures Inc.Phone: [phone] ext 233Steve Dabner  President and Chief Executive Officer Online Energy Inc. Phone: [phone] ext 228 Thomas LoveChief Financial OfficerOnline Energy Inc.Phone: [phone] ext 227 


    

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