9th February, 2011

L&M Energy Limited (LME) is pleased to provide the following update on drilling progress at the Ohai pilot project. The rig is continuing operations at OM#5 and is at a current depth of 550m, which is within the upper section of the Morley coal measures.

OM#5 will be drilled to a total depth of approximately 750 metres targeting the thick Morley 2 coal seam. Two horizontal lateral wells will then be drilled to intersect OM#5 using proven directional drilling methods. Each of the lateral wells will pass through approximately 700m of coal with the gas they produce to be extracted from OM#5.

The pilot project follows on from the company’s 3P reserves upgrade to 274 PJ and forms a key part of the Company’s 2P gas reserves campaign which is aimed at independently certifying New Zealand’s first tranche of 2P CSG reserves.

ENDS

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