METGASCO LTD — AGM Information 2014

Nov 27, 2014

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Managing Director’s Address

Metgasco AGM 28 November 2014

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Page 1

Rehabilitation and PPLA 9

 Rehabilitation

• All wells other than two CSG producers decommissioned and sites rehabilitated

• Three water ponds decommissioned and sites rehabilitated

• Three CSG water ponds handed back to landholders, CSG water to be used for stock watering

• Some bonds returned from NSW Government, more refunds expected in next few months

 PPLA 9

• Development Approval (DA) for Casino Gas Project and Richmond Valley Power Station Project received June 2010

• Still waiting on formalisation of production licence award for PPLA 9

• Offer of production licence made to Metgasco in 2012

• Metgasco accepted offer and associated conditions

• Metgasco paid $100k fee

• Minister Hartcher announced award in September 2012

• Planning to commence limited activity in 1H 2015 to satisfy DA requirements

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Page 2

Rosella exploration drilling frustrated by NSW Government

• Plans to drill announced in September 2013

• Conventional and tight gas – not CSG

• Test structure identified by the Kingfisher well (2009)

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Casino
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Rosella
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• 2Q 2014 drilling, subject to rig availability

• Simple, vertical exploration well – 40 days duration

• No fracking

• Site: an unused gravel quarry

• Review of Environmental Factors (REF) – included community consultation program:

• Submitted in March 2013

• Approved in February 2014

• Landholder agreement with a very enthusiastic local farmer

• All drilling and service contracts in place and preparations made for drilling

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Rosella E01 Kingfisher E01

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Page 3
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Rosella site carefully considered Insignificant noise impacts

Closest home 1.4 km from drill site No noise affected residents

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KYOGLE
30KM
LISMORE
15KM
CASINO
14KM
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Careful planning and consultation with local council to ensure minimal impact on the community

Page 4

General Community Consultation Program

Three year general program:

• Presentations at public meetings

• Regular dinner meetings with community leaders

• Open days

• Letters to landholders and general community

• Videos – Switch and Fracknation – available at libraries

• Website

• Regular weekly advertisements

• Community Consultation Group

• Availability – local media

Large community meetings unattractive due to anti-gas hecklers and intimidation.

Government informed of our annual activities

• No feedback or criticism received.

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Page 5

Community Consultation Program- Rosella

Dual focus:

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• People living within 2 km of well:

• Information provided directly

• Opportunity to meet as a group or one-on-one with Metgasco

• General community

• Information handout

• Briefings for local governments

• Media interviews

• Advertising –local newspapers

• Website

• Direct briefings on request

• Consultation program expanded from programs for earlier wells

Program specified in approved REF. Advised to Minister in January 2014 No feedback/comment pre suspension

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Page 6

Exploration licences and local communities

• Metgasco - the only active explorer in the region over the last three years – most of our activity has been between Casino and Kyogle

• 270,000 people live in broader Northern Rivers Region, 23,000 in Richmond Valley Council LGA

• Characteristics of the various local government areas are quite different

• Metgasco has enjoyed solid community support where we operate, around Casino

• Strongest opposition comes from Nimbin area and coastal towns (which are outside the Clarence Moreton Basin and have very limited or no gas potential).

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Walloon Outcrop
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Little or no gas
prospectivity
Most prospective
gas exploration
area
Page 7
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Rosella well – protest action

• Protests experienced with early 2013 drilling

• Police supported operation

• Protestors started assembling outside Rosella well site from January 2014

• Repeated acts of intimidation, property damage and trespass through May:

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• Gates padlocked and welded shut on 5 occasions, preventing landowner access

• Structures and barricades built on entrances

• Roads vandalised

• Protest camp approved – numbers increased to 300 level, with peak daily protest numbers in the order of a 1000, with claims of potential for larger numbers

• Protestors drawn from areas well beyond Bentley and Northern Rivers – a national program, not just a local Bentley program

• Reports of the need for 700 police

Repeated assurances from senior government officials and police that they would support drilling

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Page 8
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Suspension of Rosella drilling approval

• 14 May; Rosella drilling approval suspended, only days before drilling rig due to arrive

• Justification: failure to comply with community consultation guideline – ”genuine and effective”.

• No warning whatsoever – a complete surprise

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Impact on Metgasco:
Suspension announcement
 Losses associated with the need to
terminate drilling and related contracts
 Share price fell 40% on the day the
suspension was announced
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• Metgasco challenged position (15 May and 6 June):

• Government did not have lawful right under Petroleum Onshore Act to suspend our activity.

• Government did not follow correct suspension process, even if it had the right to do so;

• Suspension decision fundamentally flawed.

• 26 June: OCSG rejected Metgasco’s submission and maintained suspension.

• Metgasco had no choice other than to commence court action to have the suspension removed and is considering a damages claim. Supreme Court hearing held on 20 and 21 October.

• Metgasco would prefer to settle out of court.

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Page 9

Comparison with consultation guidelines - summary

Guideline element
Opening line: “Keeping the community informed is an important part of any exploration program.”	
“The level and type of community consultation to be undertaken will depend on the specific exploration program, the resources available and the scale of the project.”	
“the purpose of the consultation being made clear – this includes what is being consulted on and what is non- negotiable”.	
“Interaction with stakeholders will vary depending on the level of interest and/or impact associated with the activity”.	
Communication – factsheets, newsletters, direct contact, consultation committees, websites, email, etc	
OCSG selective criteria (sentences embedded in guidelines, not presented as bullet points): • is about involving people in making decisions that affect them; • aims to understand and address issues in the early stages of a project to ensure that the interests of the community are considered during the planning process; • Is important to identify potential issues, minimise the risk of conflict and provide additional information in relation to proposed exploration activities	

• Rosella is a single simple conventional gas exploration well.

• The 40 day well will have essentially no impact on any of the “stakeholders”

• If successful and more exploration or development activity follows, the consultation program will need to increase accordingly

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Page 10

Major messages from Rosella suspension

 Consultation

• Consultation should not mean persuasion

• Scope of consultation must match activity

• Stakeholders must be only those directly affected

• Protests and need for law enforcement should not be considered an indication of failed consultation

• Government’s must play a lead role and show support for an industry

• Law enforcement – act immediately on small acts of lawlessness – don’t wait

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Page 11

There are some positive signs in NSW, but - -

• NSW Government / Santos –Pilliga development MOU

• AGL fracking plans (Gloucester) finally approved and program carried out

• Strong statements by Resources Minister, Anthony Roberts:

• He [Minister Anthony Roberts] urged a more open-minded, fact-based approach to coal seam gas business and the technology that supports it.

• “Is the industry safe? Yes”

• “The science is there and the protection is there. The highest levels of well integrity are required. I would have no issue with having a well on my property,”.

• Government water monitoring program

• CSIRO – GISERA

• Growing awareness of imminent supply challenge and higher prices

• Recent comments from Premier Baird that resource project approval time are unacceptably long and that PAC decision making processes are flawed – but action must wait until his next term

  • NSW gas industry has been subject to a series of delays and changes to regulations – we still do not have certainty or a stable investment climate

  • The NSW Government needs to demonstrate that it supports the industry

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Page 12

Disclaimer

This presentation is being provided for the sole purpose of providing the recipients with background information about Metgasco Ltd (Metgasco). No representation, express or implied, is made as to the fairness, accuracy, completeness or correctness of information contained in this presentation, including the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relation to future matters contained in the presentation (“forward-looking statements”). Such forward-looking statements are by their nature subject to significant uncertainties and contingencies and are based on a number of estimates and assumptions that are subject to change (and in many cases are outside the control of Metgasco, its Directors and Officers) which may cause the actual results or performance of Metgasco to be materially different from any future results or performance expressed or implied by such forward-looking statements.

This presentation provides information in summary form only and is not intended to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor.

Due care and consideration should be undertaken when considering and analysing Metgasco’s financial performance. All references to dollars are to Australian Dollars unless otherwise stated.

To the maximum extent permitted by law, neither Metgasco nor its related corporations, Directors, employees or agents, nor any other person, accepts any liability, including, without limitation, any liability arising from fault or negligence, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

This presentation should be read in conjunction with other publicly available material. Further information including historical results and a description of the activities of Metgasco is available on our website, www.metgasco.com.au.

ASX Listing Rule 5.11 Disclosure

Reserves have been certified by Mr Tim Hower of MHA Petroleum Consultants (Denver) who is a qualified person as defined under the ASX Listing Rule 5.11. Reserves have been developed within the guidelines of the SPE. Mr Hower has consented to the use of the reserve figures in this presentation. Conversion of reserves from PJ to Bcf at 1.04 PJ/1.00 Bcf.

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