BLUE ENERGY LIMITED. — AGM Information 2012

Nov 14, 2012

15 November 2012

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ASX ANNOUNCEMENT

Chairman’s Address to the 2012 Annual General Meeting

Good morning ladies and gentlemen, shareholders and other interested stakeholders. My name is John Ellice-Flint. It is with great pleasure that I welcome you to the 2012 Annual General Meeting of Blue Energy Limited.

Today, I am pleased to provide you with a high-level overview of the energy sector in which your Company is involved. Following the meeting I will introduce our CEO, John Phillips, to give an overview and update of Blue Energy’s performance.

Energy Outlook

Blue Energy has a geographically diverse but exciting exploration portfolio, conveniently divided into coal seam gas (CSG) and Shale Basin objectives. Some of the Company’s CSG assets are already positioned to convert resources to reserves while other areas give the company a significant exposure in the evolving shale basin plays with both oil and gas potential. The majority of these assets are strategically located to take advantage of the expanding Queensland liquefied natural gas (LNG) export industry.

This new demand centre for gas in conjunction with domestic gas supplies creates the need for a paradigm shift from the historical eastern Australian energy market. The upshot is that the demand outlook for gas in Queensland, and indeed in all of Eastern Australia, is very strong in the short, medium and long term.

In addition to this current and expanding demand, I am convinced that Australia will need to transform its energy usage and fuel switch from coal to gas for baseload power generation, thus creating even greater demand for gas.

Brisbane Level 3, 410 Queen St Brisbane QLD 4000 t (+61 7) 3270 8800 f (+61 7) 3270 8899

e info@blueenergy.com.au ABN 14 054 800 378 w www.blueenergy.com.au

Gas is a more flexible, cleaner and energy-efficient fuel source and uses only 10% of the water that coal fired power generation requires. For the driest continent in the world, this is a significant issue. Also, using gas for the same amount of electricity generation as using coal, gas produces 50% less greenhouse gases than does coal. So there are a lot of benefits to using gas as our major baseload energy source and if we are serious about CO[2] emission levels and sustainable water use in Australia, increasing the usage of gas in the energy mix should be a priority.

Just look at our neighbours in Asia. They are well aware of these benefits and are taking advantage to tie up long term gas contracts via LNG. In Singapore and Thailand they have already fuel switched from coal to gas as their primary energy source.

The 2012 Queensland gas market review forecasts domestic gas prices ranging from $6.50/GJ to $10.00/GJ by 2012. In any event, most gas producers would be seeking LNG net back parity pricing. At these projected prices, there is clear economic incentive to explore for gas.

Industry Challenges

Since my return to the energy sector after a three year hiatus, I am struck by the level of regulation now facing simple and straightforward exploration drilling activities that had until recent times been successfully undertaken without issue in this country, in fact since 1866 – some 146 years ago. Lately, however, the industry in eastern Australia is being treated as if it is a new and uncontrolled industry - so what has changed to bring about such a regulatory regime?

When we look at the history of the industry, the increased regulation is even more puzzling. The earliest record of hydrocarbons in Australia was by recognition of oil and/or gas associated with water bores. Indeed water bore drilling was the genesis of the oil and gas industry in this country and gas from water bores drilled in the 1950 and 60’s on the Darling Downs of Queensland led to the recognition, decades later, of CSG in these areas.

Most of the early search for hydrocarbons included drilling in relatively sparsely inhabited and lightly cultivated or grazing areas – like the Amadeus Basin or Cooper Basin. The recent changes that occurred to prompt the sensitisation of the community and hence additional regulation are threefold:

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1. the new era of CSG (identified by those early water bores) encroached into more densely populated or intensely farmed areas;

2. the development of this new, world-first CSG to LNG industry, together with its tight contractual timeframe for LNG delivery to buyers, has occurred in new geographical areas and in a much more rapid manner than anywhere else in the world; and

3. the interaction between environmental activism and land holder uncertainty fostered much misinformation and distrust of the sector, prompting at times unnecessary responsive action from Governments.

The Challenge for both industry and stakeholders is to prosper in harmony. We believe that regional development plans are a key to solving the issues that arise from multiple land use in high value agricultural areas, and will lead to prosperous coexistence and environmental value preservation, just as has been seen in the conventional oil and gas industry.

Strategy and Externalities

Your Company’s strategy is to find commercial quantities of gas and oil as safely as possible and at the highest possible margin. The decision to use Blue Energy’s capital to achieve this or to enlist the capital of others via a farm out arrangement is dependent on the characteristics of each asset. This approach has the dual benefit of more rapidly monetising our assets and reducing corporate risk. Blue Energy’s size and nimbleness, allow for efficient and flexible operating, in turn providing the Company with a distinct advantage over some of the larger companies in the Exploration and Production space. To this end, we believe that Blue Energy should, where appropriate, retain Operatorship through the exploration/exploitation phases.

As you are aware, all of your Company’s acreage is located onshore Queensland and hence we are affected by the regulatory conditions imposed by the State Government. As I noted earlier the Exploration and Production industry has in recent times been treated as something “new” and “uncontrolled” and has resulted in a myriad of new adhoc regulations put in place by Government Departments. This has seemingly occurred in an attempt to bolster public confidence in the Regulator and counter the campaign by some elements against exploration drilling of any sorts. The unintended consequence of this non fact based regulation has been to severely curtail exploration activities in this state and add costs.

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We need to speed these processes up. A one day delay in industry activity is worth $2.3 million in royalty payments to the state, and makes Australia less competitive for capital investment.

On behalf of our shareholders and the industry generally, we welcome some recent positive steps taken to address some of the more restrictive elements of the environmental and operational regulations that have constrained previously standard exploration activities.

Health and Safety

I am proud to report that during the year, the Company celebrated five years without a Lost Time Injury. This is a significant achievement especially when you consider that Blue Energy operates all of the Company’s permits and licences right across the state.

On behalf of shareholders, my congratulations go to our employees and contractors for such a stellar performance. Such a milestone is extremely difficult to achieve for such a small company as ours when you consider we don’t have a continuous operation program. Each operation starts from scratch.

Community Relationships

During my first visit to the Company’s operations around Nebo in the Central Coalfields area, I had the pleasure of meeting some of our land owners and received a first-hand account of how Blue Energy conducts itself as a guest on these properties. To my delight, all landholders we spoke with were very complimentary of the way in which your Company’s representatives conduct themselves in the course of our exploration activities. What was evident however was that the landowners are under significant pressure from the volume of additional legal paperwork that is now required to be filled in before resource companies are able to conduct activities on the land. This all adds time and cost and is amplified where there are multiple resource companies plying the same land – CSG and Coal and Minerals tenements overlap. The Blue Energy team ensures we provide as much assistance to ease this burden, and our field staff involves people off the land who understand the business of agriculture.

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Corporate

I would like to acknowledge the role of our employees and your Board and their efforts in ensuring that Blue Energy successfully improves shareholder value.

Of great value to the Company has been the role that our former chairman, Mr Peter Cockcroft played in the embryonic stages of the Company guiding us through the Global Financial Crisis and the resultant substantive changes to our share register.

As a result of the GFC and significant expenditure on initial drilling activity, Peter conducted several successful capital raising exercises and introduced new investors to the company, including KOGAS. Negotiating a restructuring of the Board composition as the Company evolved, he added fresh ideas and brought new skill sets to the Board. Peter’s significant knowledge of the sector in which we operate – along with his extensive contacts has ensured that Blue Energy has not been short of opportunities to pursue. Peter will also be retiring from the Board at the end of December and on behalf of the Board, shareholders and all of our employees, I wish Peter well in his future pursuits.

As indicated in the meeting notes, Dr Paul Massarotto has elected to retire from the Board at the conclusion of today’s meeting. Paul also joined the Board shortly after the GFC and with his technical skills provided a significant contribution to the operational team and the methods used to attack the issues of CSG production in the Bowen Basin. Again, we all thank you Paul for your contribution and wish you well in you post Blue journey.

Thank you for your continued support.

John Ellice-Flint

Acting Chairman

Blue Energy Limited

For further information contact:

John Phillips Managing Director Blue Energy Limited Tel. +61 7 3270 8800

Stuart Owen Chief Financial Officer / Company Secretary Blue Energy Limited Tel. +61 7 3270 8800

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