Ohai CSG Pilot Operations Update

COMPANY ANNOUNCEMENT
21st June, 2011

Ohai CSG Pilot Operations Update

• LME achieves first incoalseam lateral drilling operations in New Zealand

• Initial pressure connection between lateral and production well achieved

• Workover scheduled to cleanout production well and recomplete nearby wells

• Power connection agreement signed with network company

• 1MW generator being prepared for deployment to project site

L&M Energy Limited (ASX: LME) wishes to provide the following update for its Coal Seam Gas (CSG) Pilot Project at Ohai in the South Island of New Zealand (PEP 38220).

In Q2 2011, as part of the Ohai CSG Pilot Project, LME drilled New Zealand’s first incoal seam lateral well culminating in the successful intersection of the 1035m long OM#7 lateral well with the OM#5 production well. A major goal of the Pilot Project was to gain an understanding of the most effective way to complete production wells; therefore OM#5 was immediately placed on production test.

Pressure measurements during drilling of OM#5 indicated that OM#5 and OM#7 were in communication; however subsequent analyses have triggered contingent plans for a cleanout operation. The cleanout (scheduled for next month) is aimed at optimising water flow rates and improving setup of downhole equipment, both very common operations in CSG projects.

To take advantage of the availability of a workover rig the nearby OM#1 and OM#3 wells will be recompleted and converted into production wells. By including these additional wells as part of the Pilot it is expected that this will assist in expediting the dewatering process and promote early gas production.

Preparations are continuing for the installation of a 1MW power station at the project site. The 1MW generator has arrived in country and is undergoing predelivery work before being relocated to the project site for commissioning.

In parallel, connection to the existing nearby electricity network is proceeding as planned, with the signing of a connection agreement with the local electricity network company and finalisation of site preparation plans.

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

Full release with maps: June_21_2011_Ohai_CSG_Pilot_Operations_Update.pdf

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