OilVoice - L&M Petroleum to Acquire L&M Coal Seam Gas

L&M Petroleum to Acquire L&M Coal Seam Gas

Saturday, December 26, 2009

Highlights
• L&M Petroleum to acquire privately held company, L&M Coal Seam Gas Limited
• Company to be re-branded as 'L&M Energy' (LME)
• Adds six coal seam gas permits to LME's current portfolio including 173 PJ of independently certified 3P gas reserves (see attached map)
• Substantial upside potential across the combined permit position
• Aggressive 2010 work program to increase current 3P Reserves and certify maiden 2P Reserves

L&M Petroleum Limited (LMP) announces that it has entered into a conditional Sale and Purchase Agreement (SPA) to acquire all of the issued share capital in L&M Coal Seam Gas Limited (LMCSG), marking an important milestone for the Company.

About LMCSG
LMCSG is a privately held New Zealand company that holds six petroleum exploration permits, representing acreage of approximately 7,778 km2, across both the North Island and South Island of New Zealand.

LMCSG's Ohai project, which adjoins LMP's Waiau project, currently contains 173 PJ of independently certified 3P gas reserves. The reserves were certified by MHA Petroleum Consultants in October 2009 and represent the first certified CSG reserves in New Zealand.

Benefits of the Transaction
A merger of LMP and LMCSG brings a number of benefits to LMP shareholders, including:
• Creating a larger dual-focused CSG development and conventional petroleum exploration company with a leading position in New Zealand's emerging CSG sector;
• The addition of 173 PJ of independently certified 3P gas reserves to LMP's asset portfolio;
• The potential for further increasing 3P reserves and certifying an initial tranche of 2P gas reserves;
• The potential to commercialise the first domestic supply of gas in the South Island within the short to medium term;
• Substantial additional upside potential across the combined permit position;
• Creating operational efficiencies and achieving critical mass through the consolidation of adjoining permits and associated work programs; and
• The addition of staff with substantial coal seam gas development experience, in particular, Mr Kent Anson, who will be appointed co-CEO and, subject to shareholder approval, an executive director of the Company.

Prior to joining LMCSG in August 2008, Mr Anson held senior positions with Arrow Energy developing coal seam gas resources in Australia and India.

2010 Work Program
The parties have developed an aggressive 2010 work program, with the aim of increasing the current 3P reserves position to 300 PJ and certifying an initial tranche of 2P reserves.

Key Terms and Conditions of the SPA
Under the terms of the SPA, LMP has agreed to acquire 100% of the issued share capital in LMCSG in consideration for issuing 444 million LMP shares to LMCSG's shareholders and 56 million LMP options to members of LMCSG's executive team (exercisable within five years of settlement at a strike price of NZ$0.0001). These shares and options will be subject to restriction agreements for a period of 12 months following their issue.

Two LMP directors, Mr Geoff Loudon and Mr Greg Hogan, have declared that they have a material personal interest in LMCSG. As such, they have precluded themselves from LMP board discussions of the proposed transaction. They are also ineligible to vote at a special general meeting of LMP shareholders to approve the transaction and will not be making a recommendation to LMP shareholders about how to vote.

The transaction will be subject to and conditional upon a number of conditions precedent, including:
• LMP convening a special general meeting of shareholders and the shareholders approving the transaction for the purposes of various statutory and regulatory purposes; and
• Ministerial approval of the transaction under Section 41 of the New Zealand Crown

Minerals Act 1991
Upon approval of the transaction Mr Kent Anson will be appointed joint Managing Director and CEO of LME, with specific responsibility for overseeing all coal seam gas activities. John Bay will remain Managing Director and CEO with responsibility for all conventional petroleum activity as well as LME corporate governance, reporting and investor/media relations.

Next Steps
LMP anticipates convening the special general meeting in mid February 2010 in Wellington, New Zealand.

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