Ohai CSG Pilot Project Update 19/10/11

COMPANY ANNOUNCEMENT

19th October, 2011

Ohai CSG Pilot Project Update

L&M Energy Limited (ASX/NZX:LME) wishes to provide the following update for its Coal Seam Gas (CSG) Pilot Project at Ohai in the South Island of New Zealand (PEP38220).

Operations at the Pilot Project are continuing, with a well workover programme currently underway. Although LME is pleased with the thick gassy coals encountered in the OM#5 well, production rates to date are lower than modelled and the latest workover programme is aimed at determining the variances between actual and modelled production rates.

The programme will be initiated with a series of tests to reaffirm the connectivity between the lateral and vertical production wells with further tests involving individual coal seams.

Before commencement of the programme, production equipment will be removed and the well will be cleaned out to total depth.

While early stage technical challenges are not uncommon among pilot projects and CSG operations in general, LME is committed to trialing and refining the different well designs and completion techniques applicable to the Ohai project. It is expected that this test work is likely to be ongoing until the end of Q4 or until the issue has been satisfactorily resolved.

ENDS

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