Progress Report on Kaitangata MultiWell Coal Seam Gas

COMPANY ANNOUNCEMENT
18th November, 2011

Progress Report on Kaitangata MultiWell Coal Seam Gas Program

• A multi well program of up to 6 production testing and stratigraphic wells are to be drilled during Q4 2011 and Q1 2012 at the Kaitangata coal field 60 kilometres of Dunedin.

• The first well, Wangaloa1, was suspended at 507m at the limit of existing rig prior to deciding whether to deepen.

• Second well, Lockington2 spudded on 17 November and is targeted for 350m. The well will be drilled open hole until approximately 30m above the coal seam and then cored. Currently the well is at a depth of 35m.

• The first stratigraphic well, Kai21, intersected 12m of coal at 72m and was completed to basement at 160m.

• The second stratigraphic well, Kai22, was spudded Thursday 17th November and is at 140m.

L&M Energy is pleased to provide the following update regarding its initial Kaitangata CSG appraisal programme within PEP 38219, located 60km south of Dunedin.

The first well, Wangaloa1, has been suspended at 507m and is awaiting logging and core analysis to accurately determine the current position within the stratigraphic column. The well has reached the drilling rigs depth capacity and once the results are received LME may elect to mobilise a larger rig to continue drilling to basement. If prospective coals are intersected LME plans to case and suspend the well as a future production well in order to carry out further testing at a later date.

The second well in the appraisal programme, Lockington2, located approximately six km to the south of Wangaloa1, spudded on 17th November with a target depth of 350m. This well is located near Lockington1 which was drilled in 2007. Lockington1 intersected 8.30m of Kai Main coal, with a measured permeability of in excess of 300mD. A third well, Wangaloa 2 is to be drilled after Lockington2 and is located in the north east of the coalfield.

In addition to these appraisal wells, further stratigraphic drilling is underway to the north of L&M’s pilot testing location to determine the aerial extent of the Kai Main and Carson seams in that sector of the coalfield. The first of these, well Kai 21, intersected 12m of coal at a relatively shallow depth of 72m. The base of the sequence was faulted out and a further well (Kai 22) is in progress to complete the sequence.

Managing Director, Kent Anson commented “The Kaitangata coal field represents an opportunity to discover commercial CSG close to existing markets at the 150 year old Kaitangata coal field, which has many shallow and open pit mines noted for gassy coals. The drilling program of six wells offers an exciting opportunity to test this large coal field for CSG."

Corporate
New Zealand Energy Corporation: As previously announced, LME entered into an arrangement with New Zealand Energy Corporation (NZEC) to be free carried for the full cost of drilling Talon1, within PEP51151. LME is pleased to announce regulatory consent has been issued and full back costs of NZD$1.63 million has been received.

ESOP Options: The Company wishes to announce that it has approved an issue of 11.25 million share options to the Directors pursuant to the Company’s Employee Share Option Plan (“ESOP”) and subject to shareholder approval at the 2012 Annual Shareholder Meeting.

The options are priced at A$0.12, a premium of 35% to the November 7 closing price. All other terms are as per the existing ESOP. Full details will be provided to shareholders in the Notice of Meeting preceding the 2012 Annual Shareholder Meeting.

A total of 22,875,000 share options are due to expire on 31 December 2011.

Christchurch Office: The Company is in the process of reestablishing its Christchurch office since the damaging earthquakes earlier in the year. The new premises are located at 122 Victoria Street, Christchurch and should be functional by year end.

ENDS

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