METGASCO LTD — Capital/Financing Update 2011

Jun 16, 2011

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Investor Update & Capital Raising

17 June 2011

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.

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Executive Summary

• Metgasco is seeking to raise approximately $21 million through:

• a non-underwritten Placement; and

• a Share Purchase Plan (“SPP”).

• Institutional placement at $0.26 per share which represents a discount of 17.5% to Metgasco’s closing price on 14 June 2011.

• Further details on the SPP will be sent to shareholders shortly.

• Existing funds and proceeds from this capital raising will be used to fund:

  • Gas sales to local industry

    • Gas sales to Richmond Dairies

    • Richmond Valley Power Station (Stage 1 - 6 MW)

  • Drilling Potential High Impact Conventional Gas Lead – Mackellar North P50 1,312 Bcf

  • Reserve development and licence commitment drilling in PEL 13 and PEL 426; and

  • Ongoing working capital requirements

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Overview

• Metgasco is an ASX Listed, onshore conventional and unconventional gas company, with significant 100% owned acreage in Clarence Moreton Basin (NSW)

• Onshore conventional and unconventional gas

• Large uncommitted coal seam gas reserves – established in less than 10% of the Company’s acreage

• 1P Gas reserves of 2.7 PJ

• 2P Gas reserves of 397 PJ

• 3P Gas reserves of 2,240 PJ

• Significant potential to grow current reserves

• Located close to end markets and infrastructure on east coast of Australia

• Defined path to cashflow generation and value creation

• Increasing demand for gas – domestic and international

• Strong board and management team strengthened by the addition of new Managing Director - Mr Peter Henderson

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Corporate Overview

Capital Structure

Capital Structure
ASX code	MEL
Shareprice (at 14 June 2011)	$0.315
Market Capitalisation (million)	$79.6
Shares on Issue (million)	252.7
Options on Issue(million)	9
Cash(at 31 March 2011)	$7.7
Debt	Nil

Board and Management Team

	Nicholas Heath Chairman, Non-Executive Director Peter Henderson ManagingDirector Glenda McLoughlin Chief Financial Officer & Company Secretary Steven Koroknay Non-Executive Director Leonard Gill Non-Executive Director

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Purpose
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Major Shareholders

Major Shareholders
CSG Nominees	5.09%
Mr David Johnson	5.00%
HSBC CustodyNominees	4.84%
Ms Glenda McLoughlin	4.20%
Enmore Centre	2.18%
Top20	31.61%

(2010 Annual Report)

New Managing Director – Peter Henderson

• Metgasco about to transition from exploration to production  Skills now added at the top of the organisation to ensure delivery of our projects

• Peter Henderson

• Senior roles with Santos, WMC, Clough & ExxonMobil

• Mechanical engineer with 30 years experience in O&G industry

• Most recently managed Chim Sao field development for Premier Oil in Vietnam: drilling, platform and associated facilities and an FPSO

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Acreage

 World scale acreage position in Clarence Moreton Basin (CMB)

• 3 tenements (PEL 16, 13 & 426)

• 1,126,059 acres

• 100% owned

• Active 2 year drill program demonstrated CMB is gas charged over distance of 100km

• Large gas resources with significant volume growth potential

• Located close to markets and infrastructure

• Development of Lions Way pipeline will connect Metgasco projects to wholesale gas markets

• Potential to supply gas to Gladstone LNG markets and to SE Qld gas markets

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Large and growing coal seam gas reserves

 100% ownership of gas reserves

• Large uncontracted reserve position in the CSG sector

• Reserves:

 PEL 16 only  Over <10% of area

• Excludes conventional gas

 First reserves in PEL 13 about to be achieved.

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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	Australian	Coal Seam Gas Reserves (Petajoules)	Coal Seam Gas Reserves (Petajoules)
	Company	3P	2P
	QGC (BG) Origin Conoco Phillips	14,261 6,206 6,206		7,245 4,786 4,786
	Shell		4,129	2,636
	PetroChina		4,129	2,636
	AGL		3,506	2,029
	Santos		3,283	2,035
	Bow Energy Metgasco Sinopec		2,739 2,239 2,190	149 397 1,689
	Petronas		2,112	1,377
	TOTAL		2,112	1,377
	Eastern Star		1,818	988
	Kogas Molopo Westside		1,152 828 432	751 345 114
	Senex		249	79
	Mitsui		212	110
	CS Energy		189	70
	Dart		18	-
	Icon Energy		-	-
	Blue Energy		-	-
	Total	57,845		33,565

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Significant progress over the last 12 Months

• CSG exploration – Bowerbird drilling program likely to deliver reserve upgrade  First drilling in PEL 13

• CSG fairway interpreted to extend to the west

 Currently preparing data for reserve certification process

• CSG: drilling program completed. Harrier production testing in progress

• Conventional exploration – 2010 Seismic survey in progress  Updated conventional leads and prospects

• Conventional discovery – Kingfisher gas field  Large gas resource identified

• Lions Way Pipeline – Environmental Assessment lodged with NSW Govt

• LNG Feasibility Studies completed

• MOUs with LNG Ltd and FLEX LNG

• Currently in commercial discussions

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CSG Trial Production - Richmond seam

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• Corella P11 – single lateral on production test for over two years

• Corella P18 – sidetrack single lateral (improved drilling and completion techniques) - currently dewatering

• Harrier P01 – dual lateral recently finished drilling – production testing underway

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CSG Trial Production – Thornbill E01

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• Thornbill E01 – Vertical well, no stimulation

• Produced gas immediately at 100Mcf/d

• No water production

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Kingfisher gas field

 Kingfisher E01

 First major conventional gas discovery in NSW (November 2009)

 138 meters of gas charged sands identified

 Additional gas charged sands likely below the TD of Kingfisher E01  Depth of system unknown

• Up to 500 meters of additional section below TD of Kingfisher E01

 Extended production tests

• 2,050-2,043.7m (conventional zone) – 2.97mmcfd

• 1450-1453m (tight gas zone) – fracture stimulation conducted in 3 meter zone

• Extensive testing and appraisal program conducted  Good quality +95% CH4 gas

• Clearly merits follow up drilling!

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Exploration program – 2010 2D seismic

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Kingfisher Field

• Contingent resource  P50 : 77 Bcf  P10 : 284 Bcf

• Likely to be related to Mackellar North structure

• Mackellar Lead  P50 OGIP 77 Bcf

• Mackellar North Lead  P50 OGIP 1,312 Bcf

The growing importance of gas worldwide

 Recent Exxon Mobil forecasts predict…

• Natural gas will surpass coal use in the next two decades

• China’s natural gas demand will rise 6-fold

• Natural gas consumption will come close to oil consumption

 The UK Government says…

• The rapid growth of gas-fired power in the UK in the 90’s kept Britain’s CO2 levels to the level agreed at Kyoto – the only nation to meet its target

• The NSW Government says…

• Gas is forecast to supply 30% of the States power needs over the next 25 years

• Australian gas markets are changing

• Development of LNG projects in Gladstone means the domestic market will need to adjust to global energy prices

• The dominant buyer of Australian gas will soon be the world market

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Unconventional gas is here to stay

 Unconventional gas

• Coal seam gas

• Tight gas

• Shale Gas

• Hydrates and other

• Energy majors are hungry for positions in large scale unconventional gas resource plays

• Shell/ Petrochina – Acquisition of Arrow Energy A$3.5 Billion

• BG – Acquisition of QGC A$5.2 Billion

• ConocoPhillips – Acquisition of Origin assets A$7.1 Billion

• BHP – Acquisition of Chesapeake’s Fayettville Shale Assets US$4.75 Billion

• ExxonMobil – Acquisition of XTO US$40.9 Billion

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Multiple development pathways – gas, power, LNG
700
1x 3.5 Mtpa NSW Electricity
LNG Plant Market with
600
Carbon price or
direct action
500 policy
Power
400
Brisbane
Gas Load
300
Mini LNG 200
Nth NSW
100 Electricity ad
NRPS
RVPS
0
Export LNG 0 100 200 300 400 500
Market Sector Demand (PJ/A)
Distance to Market (Km)
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Commercialisation Agenda - Local sales and power generation

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• Gas sales to Richmond Valley customers

• 30 MW Richmond Valley Power Station

• Field development studies complete

• Site acquisition complete

• Development approval granted

• EPC contracts in discussion  Offtake agreements now being negotiated

• Application for registration and licences

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Commercialisation Agenda - Lions Way Pipeline

• New high pressure gas pipeline to connect Metgasco gas fields in Northern NSW to customers in SE Qld

• 145km pipeline starting in Casino (NSW) and finishing in Ipswich (Qld)

• Environmental Assessment Studies lodged with DOP. Regulatory review process underway

• will allow for supply of gas into SE Qld via an alternative delivery route and alternative supply basin

• Access to gas grid offers opportunity to participate in LNG market via swaps

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Commercialisation Agenda - LNG Sector

Eastern Australia Gas Demand Growth

2500

2000 10% pa demand growth PROJECTED LNG DEMAND for the next decade 1500 1000 PROJECTED DOMESTIC DEMAND 500 Source : McLennan and Magasanik Associates - 23 June 2010 Annual Gas Market Review 0 2010 2015 2020 2025

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2030

Commercialisation Agenda - LNG Studies

• Metgasco gas resources should be sufficient for LNG scale participation or development

• Worley Parsons LNG Feasibility Study completed

• Demonstrated that standalone LNG developments at Gladstone, Brisbane and offshore NSW (FLNG) are economically attractive

• MOU with LNG Ltd , developer of approved & environmentally permitted LNG site at Fisherman’s landing at Gladstone

• MOU with leading FLNG technology provider FLEX LNG for Floating LNG located offshore NSW

• Also have potential to supply currently planned LNG projects

• Farmin discussions based on an LNG development are underway

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Looking forward

 Heightened demand for gas

• Domestic customers currently seeking to lock in large gas volumes

• Gladstone LNG projects require additional gas to meet export commitments

• Potential for stand-alone LNG project

• Metgasco is one of three companies on the east coast with large, uncommitted 2P gas reserves

• ….and the only company on the east coast with conventional gas supply potential

• Metgasco plans:

• First gas sales and production

  • Gas sales to local customers (Richmond Dairies)

  • Richmond Valley Power Station – Stage 1 (6 MW)

• Drill high impact conventional gas lead – Mackellar North P50 1,312 Bcf

• Continue to refine CSG production technology and improve reserve position

• LNG Project - refine options and pursue partnership / farmin opportunities

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Equity Raising - Details

 Metgasco to raise gross proceeds of approximately $21 million of new equity

• Placement of approximately $6 million to s708 investors

• Share Purchase Plan of approximately $15 million

• The offer price of A$0.26 represents:

• a 17.5% discount to last close; and

• a 18% discount to the 3 week VWAP

• Share Purchase Plan - details will be provided at a later date

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Capital Raising - Source and Use of Funds

Source of Funds	A$Million
Opening Cash (31 Mar)	7.7
Placement	6.0
SPP	15.0
TOTAL	28.7

Use of Funds	A$Million
Conventional Gas Exploration	5.0
Local electricity and gas supply • Local Gas Sales • Richmond Valley PS (6MW) • Production wells • Surface infrastructure	12.0
Reserve Development Drilling and License Commitments (CSG)	2.3
Working Capital	9.4
TOTAL	28.7

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