METGASCO LTD — Investor Presentation 2014

Nov 27, 2014

Ladies and Gentlemen,

Slide 1

The past 12 months for Metgasco have been particularly difficult. We have, however,

• retained our NSW exploration licences;

• we have cash in the bank; and

• we have significant gas resources in a market which is increasingly in need of more gas supplies.

Slide 2

I would like to focus my discussion today on the Rosella well and the actions we have taken following the NSW Government’s decision to suspend our drilling approval. But, before I do, I will cover two items that might be of interest to shareholders.

Firstly, we have completed the decommissioning of all exploration wells other than two which we have suspended for future production, and have rehabilitated the sites. All paperwork has been submitted to government, some of the associated bonds have been repaid by Government and the balance is expected shortly.

We have also decommissioned all but three of our water holding ponds and rehabilitated the sites. The three remaining ponds have been handed over to the farmers. We were able to demonstrate to government that the untreated CSG water in the ponds was suitable for stock watering. As such, the transfer of the ponds to the farmers was a win‐win for everyone.

The second item is the Casino Gas and Richmond Valley Power Station projects. After making extensive submissions in 2008, the Development Approval for these projects was received in June 2010. Since then we have been waiting on government approval for a production licence. More than two years ago we were offered the production licence by government, accepted all terms and paid the required $100k fee. Minister Hartcher announced the award of the production licence in September 2012. We are still waiting on the final production licence to be issued and have asked the NSW Government to expedite the formal approval. We will be seeking to commence field activity before June 2015 to satisfy the DA and secure development rights.

Slide 3

And now to talk about the Rosella well and the suspension decision.

The suspension decision dominated the Company’s activities this year and has a big bearing not only on the future of the Company’s activity in the Northern Rivers, but also on the State of NSW as a whole.

Metgasco planned the Rosella conventional gas well thoroughly and conducted a considered and professional community consultation program. We believe we complied with the Government’s guidelines. This is important.

The Rosella well was intended to appraise an exploration prospect which we call the Greater Mackellar structure.

The potential for the Greater Mackellar structure was identified following the drilling of the Kingfisher discovery well in late 2009 and the subsequent production testing program that continued for several years following the discovery.

The Greater Mackellar structure could have a very large volume of gas in place and, if confirmed by the Rosella exploration well, could be very important for Metgasco and the entire NSW economy.

We announced the drilling of the well in September 2013 after the change in our federal government and comments from the new Industry Minister, Ian Macfarlane, that he supported the gas industry and was going to solve the NSW gas crisis by the end of the year, 2013.

The scope of the Rosella was very clear. We planned to explore for conventional and tight gas, not CSG. The well is planned as a simple vertical well and is expected to take about 40 days to drill and test, from start to finish. We had approval for approximately 3 days of production testing if we were successful in finding gas. We did not plan to frack the well in the current program. We had made it clear that if fracking proved to be necessary, it would require more engineering, more approvals, more consultation and time before a fracking operation could proceed.

We had an excellent site for the well – an old, unused gravel quarry and a landholder who was and remains very enthusiastic for drilling to proceed.

We had submitted the document required for Government drilling approval, the Review of Environmental Factors or REF in March 2013. The REF was approved in February 2014.

On approval of the REF we immediately made the final commitment to a drilling rig and associated services to allow the well to be drilled in the March to June period, depending on rig availability.

For months prior to this we had been working with the landholder, the local council and police to ensure a smooth operation.

By early March we were ready to go, subject to weather and the release of the drilling rig from its Queensland operations!

Slide 4

This slide shows the location of the Rosella well. It is about 15 km from both Lismore and Casino and about 30 km from Kyogle, on the Kyogle to Lismore road. The immediate area is known as Bentley.

The nearest resident lives 1.4km from the well. There were only 11 families living within 2km of the well. Our studies indicated clearly that there would be no noise impact or any other impact on their lives as a result of the well.

Slide 5

We have been operating in the Northern Rivers now for over 10 years. During the period we have drilled more than 50 wells and acquired 400km of seismic. We have been a

responsible corporate citizen and have enjoyed the support from landholders and the general community we worked with.

An anti‐gas movement developed in Australia and the Northern Rivers region following the release of the Gasland movie in late 2010. The Green movement went from being strong backers of clean gas to strong opponents, driven by concern that cheap gas could stop investment in renewables. An anti‐gas program became a focal point for their fund raising and election campaigns.

In response to the attacks on the industry, Metgasco has been actively involved in community consultation for more than three years. Our program has included presentations to public meetings, regulars dinner meetings with community leaders, meetings with local councils, open days, letters sent to landholders and the general community, videos made available to interested parties and local libraries, our website, advertisements in local newspapers, the establishment of a community consultation group, and a frank and responsive approach to all forms of local media.

One limitation for our programs has been that we have not been able to take advantage of large community meetings because of the disruptive and intimidating behaviour of anti‐gas activists. In fact, for safety reasons we generally try to avoid them. An extreme example of this disruptive behaviour occurred in December 2012 when Minister Hazzard and a team of government experts visited Lismore to explain the Government’s new gas policy. People in the crowd yelled and screamed and prevented the Minister and his team from speaking or answering questions, completely disrupting the event and preventing anyone who wanted to understand the industry from hearing about the Government’s initiatives.

An observation from more than three years of consultation – we get very little interest or response from “average” members of the public. Very few people have taken up the opportunity to attend open days, ask questions or provide any feedback to our letters, advertisements or other forms of engagement. As with most “feedback” programs, the responses we have received tend to be negative. They are from a relatively hardcore group of anti‐gas activists, the bulk of whom live well outside our exploration licence areas.

To put this in perspective, as part of our Supreme Court action, the OCSG indicated that it had received about 160 letters or emails on the subject of the broader gas industry. This really does not indicate a strong anti‐gas position when you consider that of these letters:

• 30 were either government letters, Metgasco or from people supporting the industry;

• All but 22 were from people living outside our exploration licence areas;

• Some people wrote multiple letters

• Many of the letters were critical of government and opposed to the gas industry, not specifically opposed to Metgasco.

There are more than 250,000 people living in the Northern Rivers region. Are the people who wrote really representative of the entire Northern Rivers, let alone of the people who live in our exploration licence areas?

I think many “ordinary” people have heavy demands on their lives with work and family obligations. As a result, they choose not to spend their limited free time reading about the gas industry. Instead they look to government to provide strong and decisive leadership and to ensure that the gas industry, like other key industries, is safe and regulated effectively.

At no stage during the 3 year period prior to the Rosella suspension decision did the NSW Government make any comment on our community consultation efforts, nor did it criticise. As per our licence requirements, we provided a report to government on our consultation efforts in December 2013. The Government made no response.

Slide 6

I would now like to talk about the community consultation program we developed and implemented for the Rosella well.

We had experienced protests during the drilling of two CSG wells in early 2013, which was contrary to our experience in the preceding 9 years or our operation. We therefore took a careful look at what we should do for the Rosella well.

In the past we had always consulted with those landholders who held land or occupied land with a common boundary to the property on which we were drilling.

This time we decided that it was appropriate to consult with a broader group of people and adopted a dual focus:

• those people who lived within 2 km of the well, irrespective of whether their land had a common boundary with the proposed well site property; and

• the broader, general community.

Our Rosella program was a quantum increase in our efforts compared to past practices for individual activities, none of which had been deemed to be unsatisfactory or deficient by the NSW Government.

For those living within 2km, we provided a series of letters explaining well progress, written information on the well and the opportunity to meet with us individually or in a group. We demonstrated that we had considered the factors that might affect them, such as noise, light and traffic and that the impact of the well on their lives would be minimal.

Apart from some short term traffic along the Kyogle to Lismore road, it is hard to argue that anyone living more than 2 km from the well site could be affected by the Rosella well.

For the broader community, we provided a general well handout which explained the drilling objectives for the well, review and approval processes, environment impacts and possible outcomes from the drilling. We met with all three local councils. We gave a series of radio interviews, advertised in local papers, included material specific to Rosella on our website. We also met with people who expressed an interest in the well, even if they lived more than 2km from the well.

As stated earlier, our program was significantly larger than earlier activity related programs.

I would also like to point out that the consultation program was referred to in the REF we submitted in March 2013 and which was approved by the NSW Government in February 2014 ‐ without comment.

Furthermore, in January 2014 I met with the Chief of Staff of the new Minister, Anthony Roberts, and discussed our program. I wrote to the Minister’s Chief of Staff in response to a request at the meeting, providing details of our consultation program. No comment was ever made on the planned consultation program.

Slide 7

Before I talk about the events that led up to the drilling suspension and our subsequent actions, it is worthwhile making some comments about the area we work in.

These maps show the licence areas we work in relative to the broader Northern Rivers region.

For the past 4 years we have been the only active explorer in the area.

There are 270,000 people living in the broader Northern Rivers region, most of which lies outside our exploration licences. There are 23,000 people living in the Richmond Valley Council area, the area that most of our exploration activity has been conducted in.

The characteristics of the different LGAs are quite different, with the RVC having a strong farming and industrial representation, in comparison to the “life style” and “alternative” areas represented by Nimbin and Byron Bay.

The bulk of our opposition comes from areas outside our licence areas, strangely enough from areas that have limited, if any gas exploration or development potential whatsoever.

Slide 8

When planning the Rosella well we took into account the likelihood of protests. We had experienced them when drilling two CSG wells in early 2013. During these wells, we enjoyed the support of local police in getting access to the sites and had no reason to believe that this would not continue.

There were no secrets about our drilling plans. We had been very open and transparent.

Protestors started camping outside the well site in January and numbers gradually built.

The landholder we were working with was subject to repeated intimidation, property damage and trespass. His gate was padlocked 5 times and welded closed on two occasions. Structures and barricades were erected in his driveway. He was told that his family was not safe and that he no longer had any rights to his property.

A protest camp was set up on a neighbour’s property. Our information suggests that as many as 300 people camped at the site and peak daily attendance at the protest site reached 1000 people. Media reported a peak attendance of 2000 people.

This was clearly not a local Bentley community program. There are, after all, only 30 families in the entire Bentley area, and why would people need to camp if they could drive from 20 minutes away? Videos from the website people show people who are proud to have travelled from interstate for the protest. This was a national protest against the gas industry, not Metgasco specifically.

I should point out that protest group did include local people and that the acts of intimidation, property damage and law breaking were not supported by all who protested. I think it is fair to say, however, that the protestors in general were not prepared to respect the lawful rights of the landholder or Metgasco.

Local police had given us regular assurances that they could and would provide safe access to site.

In April, a senior NSW policeman visited the drilling site and protest campsite. He was concerned that there was a clear intention of some elements of the protest group to break the law and that to ensure the safety of the police and general public and to ensure our access to the drilling site, that 700 police would be required. Despite this, we were given repeated assurances from senior police, including a deputy police commissioner, only days before the drilling suspension, that the police would support law and order and our right to drill. Minister Roberts made similar comments.

Slide 9

On 14 May, after hours, I received a letter by email from the Director of OCSG to say that our drilling approval has been suspended. This was only days before the drilling rig was due to mobilise to site.

The basis for the suspension was that we had failed to comply with the Government’s community consultation requirements.

We had been given no warning whatsoever. Neither the Minister nor the Director bothered to show any respect to Metgasco and notify us in person via a telephone call.

The suspension had a huge impact on Metgasco and its shareholders. We had to cancel contracts with the drilling rig and other service suppliers, paying associated penalties that ran into the millions of dollars. Our share price also took a savage beating.

We immediately asked the Minister and the Director to reconsider the situation. We provided them with clear and complete evidence to show that we had complied with the government’s guidelines and that the decision was unjust and flawed. We also wrote to the Premier to have an independent party consider the decision, to no affect.

Despite our efforts, perhaps not surprisingly, the Director refused to change her decision.

Given the Government’s refusal to correct the injustice we had no choice but to take the matter to court. This was not a knee‐jerk reaction. Taking government to court is not something that companies like doing. Again, we had no other alternative.

Our court challenge is based on three major grounds:

1. the government does not have the lawful right under the Petroleum Onshore Act to suspend an activity approval on the basis of community consultation;

2. The government failed to follow both the procedures specified in the Petroleum Act and which, in the absence of the Act, would normally be expected as part of procedural fairness; and

3. The decision was, in itself, irrational ‐ fundamentally flawed.

We have now made our legal submissions and the Supreme Court heard the case on 20 and 21 October. We are now waiting on the judge to hand down his decision.

We have indicated to Government on a number of occasions that the court action was one of last resort, and that spending Metgasco and NSW funds in court is not the best solution. We have been and remain willing to settle the matter out of court.

Slide 10

Apart from the cost and corporate damage done to us by the NSW Government’s suspension decision, our reputation is also important. We did consult with the community. We did comply with the Government’s guideline. We have provided the Government with an analysis of our compliance relative to the guideline.

The opening line of the guideline talks about keeping the community informed. There is absolutely no doubt that we did this.

Importantly, the guideline says specifically that the level and type of community consultation undertaken will depend on the specific exploration program, the resources available and scale of the project. The Director herself acknowledged this in effect when speaking at a Lismore meeting the day before the suspension decision.

I won’t go through the rest of the points on this slide other than to point out that:

• Rosella was a single, simple conventional gas exploration well;

• The 40 day program could not have had any impact on the real “stakeholders”

Slide 11

The Rosella suspension decision clearly had nothing to do with Metgasco’s consultation program and compliance with government guidelines. It was due to an anti‐gas program which might have mobilised 1000 or more people at the well site and required a large police force to uphold law and order and ensure that our rights to proceed with our exploration program were respected.

The protest was an action by a nationwide group of people who are opposed to the gas industry, some of whom consider themselves above the law.

Putting aside the purely legal matters, there are some major flaws in the suspension decision:

• It conflates persuasion with consultation. To consider that any company must persuade everyone after getting government approval is simply not realistic or workable;

• The scope of consultation must match the activity, as per the government’s own guideline.

• The concept of stakeholders must be considered carefully. A stakeholder can only reasonably be someone who is affected directly by an activity.

As Judge Button asked the Government’s barrister at the Supreme Court hearing:

is it necessary to consult with someone in Chicago, Illinois, because they declare an interest in the activity?

• Protests and the need for law enforcement cannot be considered the basis for failed consultation.

Another lesson learnt was that police action should be taken as soon as violations occur, not allow repeated offences to go without response, allowing issues to build up.

Slide 12

There are some positive signs in NSW as far as the industry is concerned, as highlighted by the items on this slide.

We do, however, still face strong head‐winds. The NSW Government has repeatedly changed the rules for the industry and penalised it. It talks about science based decisions while taking actions that have no scientific basis whatsoever.

We have just had yet another gas policy announced, with many of the details not defined and likely to remain this way until well after the March 2015 election.

Two years ago I stood before our AGM with confidence that we had been given the green light by government and that we could safely invest in NSW. Today I cannot say this. In this environment it is difficult for any company to justify significant expenditure in NSW.

We must therefore do our best to secure our exploration acreage at minimal expense while the NSW Government comes to terms with gas supply shortfalls, higher prices and job losses, and demonstrates support for the gas industry.

The NSW Government should be worried that it has created concerns over sovereign risk that have never existed in the past. It needs to take action to correct this situation.