METGASCO LTD — AGM Information 2013

Oct 3, 2013

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ASX / MEDIA RELEASE

ASX Code: MEL

4 October 2013

Letter to shareholders on resolutions proposed by Members

Metgasco (ASX:MEL) today advises the following:

Dear Shareholder,

Metgasco Limited (“Metgasco” or “Company”) recently received paperwork from a small group of minority shareholders (“Minority Shareholder Group”) seeking the removal of two of your three current Non-executive Directors and replacing them with three of their own nominees.

The Minority Shareholder Group has indicated their intention to vote against the following resolutions at the Company’s upcoming Annual General Meeting to be held on Tuesday 29 October 2013:

• re-election of Mr Nicholas Heath

• election of Mr Greg Short

• Remuneration Report

• award of shares to Mr Peter Henderson in his role as Managing Director

Your Directors unanimously recommend that you VOTE FOR all of the existing 2013 AGM resolutions as outlined in the Notice of Meeting.

In addition, the Minority Shareholder Group has requisitioned three additional resolutions be put to shareholders seeking the election to the Board of their own nominees:

• Ms Glenda McLoughlin

• Mr Michael O’Brien

• Mr Stuart Glenn

Your Directors unanimously recommend that you VOTE AGAINST the three Director appointment resolutions proposed by the Minority Shareholder Group when they are put to shareholders.

The reasons for your Directors’ recommendations are:

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• 1. The Minority Shareholder Group is intending to take control of your Company without making a formal takeover offer
• 1. Two of the three Directors proposed by the Minority Shareholder Group have no prior board roles with ASX-listed energy companies
• 1. A change of directors will be highly disruptive for your Company
• 1. Over the past two years your Board has managed costs
• 1. The Directors proposed by the Minority Shareholder Group have not provided any evidence that they have a strategic vision for your Company
• 1. Your Board has a focused strategy in place designed to grow shareholder value

The Minority Shareholder Group is intending to take control of your Company without making a formal takeover offer

It is clear to your Directors that the Minority Shareholder Group is intending to opportunistically take control of your Company without making a fair bid that provides value to all shareholders.

The Minority Shareholder Group is seeking the removal of two out of three of your Non-executive Directors, to be replaced with three of their own nominees. If this was to succeed, the Minority Shareholder Group would account for three of five Board seats, and as a result control the Company, without having made a formal takeover offer that provides value to all shareholders.

Two of the three Directors proposed by the Minority Shareholder Group have no prior board roles with ASX-listed energy companies

Your Board does not believe that two of the proposed Directors nominated by the Minority Shareholder Group have the requisite experience to act as Directors of your Company given their lack of prior Board roles with ASX-listed energy companies.

One of the three proposed Directors, Mr Michael O’Brien, has no prior experience in a Board capacity with an ASX-listed company, instead coming from an engineering background. As a result, he is unlikely to possess the necessary understanding to adequately perform the duties required of a Director of a publicly listed company.

Another of the three proposed Directors, Mr Stuart Glenn, has no prior experience in a Board capacity with an ASX-listed company. His previous directorships, all short in tenure, have been with private companies and therefore he too does not have sufficient experience and is unlikely to possess the necessary understanding to adequately perform the duties required of a Director of a publicly listed company.

A change of directors will be highly disruptive for your Company

Should the Minority Shareholder Group be successful in removing two of your three Nonexecutive Directors and replacing them with three of their own nominees, neither of your remaining two Directors are prepared to remain with Metgasco.

In addition, with only a small corporate team, you should be concerned about the flow-on effect to Metgasco staff as well.

Your Board also questions whether any member of the Minority Shareholder Group or the proposed Directors nominated by this group, fully understand the current regulatory environment

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and the challenges that this presents given they have not recently been dealing with State or Federal governments in relation to the gas sector. This particularly relates to the developing regulation of associated water production and disposal which is critical to the Company’s future.

In addition, your Board does not recall any strategies identified by the key members of the Minority Shareholder Group and two of its proposed Directors when they were employees of your Company that would have better managed community acceptance and government policies in New South Wales (“NSW”).

Over the past two years your Board has managed costs

The regulatory environment in NSW over the past two years has been unprecedented. The State Coalition Government put in place an effective 18 month moratorium on all exploration activity, and then announced new policies that severely damaged the gas industry and severely reduced confidence in its ability to function.

However, over the past two years, your Company was able to drill two wells, complete a seismic acquisition programme, and most importantly prepare the work necessary for a new production licence. Your Board also took the opportunity to decommission a large number of wells commissioned under the stewardship of the previous management team that had no future value, required ongoing maintenance costs and represented a financial and operational liability to the Company.

Shareholders should review how many other CSG wells or seismic operations occurred in NSW during the period that your Company was conducting the above works (seismic program and two core wells). Metgasco was the most active company in NSW. By doing so, the Company was also bearing the brunt of the anti-CSG lobby, with consequent security issues for key stakeholders including staff, contractors and landholders. In addition, 2 offices and 27 staff were placing a substantial burden on the Company’s finances given there was no incoming production or revenue.

As a result, your Board determined that the Company needed to systematically reduce costs, implementing a strategy to fully use staff capacity when the Company moved into the development and production phase. Following the NSW Government’s February 2013 announcement it became clear that the Company could no longer bear this cost overhead, and your Board had little choice but to terminate most of the Company’s employees.

Metgasco is now in a much stronger and more financially sound position from which to restart operations than from where it was before. On 2 October 2013 your Company announced plans to restart gas exploration with the drilling of its Rosella-1 well.

The Directors proposed by the Minority Shareholder Group have not provided any evidence that they have a strategic vision for your Company

None of the Directors proposed by the Minority Shareholder Group have declared any specific intentions or outlined any strategy for the future growth of your Company. Their only stated intention should they become Directors of Metgasco is that “a refreshed Board will ensure enhanced financial discipline and re-focus the efforts of the Company on its core strengths.” This is not a strategic vision for your Company.

The proposed Directors have also stated their intention to ensure the strategy of Metgasco is redirected towards improving the performance of its share price and that the alignment of interests is towards ensuring that Metgasco achieves its full potential. This again is not a strategy and your current Board is focused on building a sustainable business that generates long term shareholder value for all shareholders.

The proposed Directors were invited to meet with your Board to understand, and where possible accommodate, their views. In particular your Board wanted to understand their strategic vision and Metgasco Limited Page 3

how it would add value to your Company. The meeting took place on 27 September with only one of the three proposed Directors attending. During the brief discussion, your Board heard criticism of its performance and a view that investment in assets outside the current Clarence-Moreton Basin was not supported. However, no alternative vision and strategy for your Company was tabled by the proposed Director.

Two of the proposed Directors nominated by the Minority Shareholder Group (Ms Glenda McLoughlin and Mr Michael O’Brien), as well as one of the proposing shareholders (Mr David Johnson) were the previous Metgasco senior management team involved in the exploration phase of the Company. Under their stewardship, the Company raised and spent over $71 million of shareholder funds to conduct exploration activities. Following this phase, the Company’s Board determined that senior management change was required to transform Metgasco from an explorer to a producer, requiring a different strategic approach and operational experience that necessitated a change in management.

Your Board believes that given the lack of any strategic vision the proposed Directors have for Metgasco, in addition to their lack of appropriate experience or positive track records, it would be imprudent for you to elect any of the proposed Directors.

Further, your Board believes that should the Minority Shareholder Group be successful in removing two of your Directors and replacing them with three of their own nominees, there would be a major disruption in the strategic foundations of Metgasco that your Board has established to provide long term shareholder growth.

Your Board has a focused strategy in place that will grow shareholder value

Your Board has a focused strategy in place. This strategy is a well-considered plan that takes into account the substantial regulatory challenges the Company has faced and still currently faces, and seeks to grow long term shareholder value.

In early 2011 – a time when two of the three proposed Directors and a key member of the Minority Shareholder Group had senior executive roles in Metgasco – your Company had little strategic focus and no concrete plans to move into production .

Since mid-2012, significant advances were made towards new production licences and plans to sell gas to Richmond Dairies and to a local compressed natural gas business. This work was performed professionally and on schedule and was close to being ready for regulatory submission, when your Board had no choice but to suspend the Company’s exploration and development programme on 13 March 2013 in light of the uncertain operating environment created by the NSW Government’s intentions to change the regulations for coal seam gas operations in the State. This suspension was a necessary and prudent measure to conserve cash given the investment community ceased to invest in the NSW gas industry, and the likelihood that the uncertainty relating to new regulation and roles within government, particularly in the volatile period leading to the Federal election, would delay implementation of the Company’s plans significantly.

Had your Directors chosen not to suspend operations and cut costs, the Company would have faced higher costs and operational stagnation due to regulatory delays and heightened protest action in the very tense political atmosphere prior to the Federal election. This would have placed undue strain on the Company’s financial position.

With a weak equity market and little confidence in the NSW business climate, raising additional funds on acceptable terms to support ongoing field operations would have been a significant challenge. Any equity raising, even if possible, would have had to have been completed at a significant discount to the Metgasco share price at that time and therefore would have been highly dilutive to existing shareholders.

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Potential farm-in partners unfortunately withdrew from discussions within weeks after the NSW Government’s February 2013 announcement. Potential partners industry-wide are reluctant to engage in discussions until there is greater clarity around the regulatory environment.

To continue field expenditure during this period of destabilisation would have destroyed the value of your Company and its assets. This would simply have been irresponsible.

During this period of suspended activities, your Board has actively managed the Company, ensuring the continued development of Metgasco and positioning the Company for future growth. Substantially lower expenditure and work commitment requirements for the Company’s exploration licences have been sought and obtained. This strategy has already started to pay off. With minimised overhead costs and greatly reduced expenditure commitments, the Company now has the financial flexibility to recommence new field activity when the CSG industry experiences a more stable political and regulatory environment.

Recently the new Federal Minister for Industry has expressed strong support for gas exploration in NSW. At the recent NSW Energy Security Summit attended by a broad range of gas industry stakeholders, there was clear recognition that constructive consultation between stakeholders was the key to re-energising the CSG industry in NSW and your Company is well positioned to participate in such consultation.

There is a growing acceptance that looming gas shortages will lead to higher gas prices, particularly when gas exports begin in 2014. The actions of your Directors have positioned the Company to benefit from increased gas prices. Given industry fundamentals and your Company’s very large and uncontracted gas Reserves, Metgasco’s value is likely to increase over time if prudently managed.

It is worth noting that all other CSG companies in NSW, including AGL, Santos, Dart Energy, Planet Gas and Apex followed Metgasco’s lead by suspending operations, substantially delaying exploration programmes or withdrawing completely from NSW. AGL had to write down $343 million and withdraw from its well advanced Camden project, while Santos’ Pilliga programme has been delayed and scaled down significantly. Metgasco’s business interests and operating environment are no different from these other companies operating in NSW.

The Minority Shareholder Group has given no indication of how their proposed Directors would have responded to these circumstances or how they will manage your Company in the future.

At the same time as suspending operations in NSW, your Board has been considering opportunities outside the State to diversify the Company’s asset base and continue your Company’s transition from explorer to producer. This strategy would also provide Metgasco with time to better realise the inherent value of its acreage in the Clarence-Moreton Basin.

Your company is in a strong financial position with no debt on its balance sheet, greatly reduced liabilities, and $21 million cash as at 30 June 2013. This places Metgasco in a strong position to fund its current activities, and generate attractive long term shareholder returns.

Given the changing political and regulatory landscape following the recent Federal election, and with a more supportive Federal Government in place, your Directors believed the time was now appropriate to restart drilling activity with the Company’s Rosella-1 conventional gas well. Your Board is methodically progressing steps to unlock the substantial value inherent in the Company and remains committed to establishing Metgasco as an operating gas company in Australia.

The Company remains firmly committed to maximising the value of its Clarence-Moreton Basin assets. The next steps towards commercialisation will require demonstration of the Company’s ability to drill and sustainably produce gas from its planned CSG pilot production wells, together Metgasco Limited Page 5

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with a further test of the conventional gas potential of the Greater Mackellar structure in the basin with an exploration well at Rosella-1. Execution of this strategy will require, in particular, the careful management of environmental and community relations and an improving investment climate for CSG in NSW.

VOTE AGAINST ALL OF THE MINORITY SHAREHOLDER GROUP’S RESOLUTIONS

Your vote counts.

Your Board unanimously recommends that you:

• VOTE FOR all of the existing AGM resolutions, and

• VOTE AGAINST all the resolutions proposed by the Minority Shareholder Group.

We encourage you to take an active interest in this important meeting and to provide your proxy votes in favour of the existing AGM resolutions and against the resolutions proposed by the Minority Shareholder Group (when they are put to shareholders) if you are unable to attend the meeting in person.

You should not allow a minority of vested interests to take control of your Company.

If you have any queries please call Peter Henderson, Managing Director, on +61-2 9923 9100, or call Ronn Bechler (Investor Relations) on +61-400 009 774 or email

ronn.bechler@marketeye.com.au.

Yours sincerely,

Nicholas Heath Chairman

Peter Henderson Managing Director

Peter J Henderson Managing Director & CEO Sean Hooper Chief Financial Officer

Tel: +61 2 9923 9100 Fax: +61 2 9923 9199 Web: www.metgasco.com.au

Investors / Media Market Eye - Ronn Bechler Tel: +61 400 009 774 Email: ronn.bechler@marketeye.com.au

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