AJ Lucas European Shale Assets Update JP Morgan Shale Corporate Access Day I 10 May 2012

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• Who is AJ Lucas?

• Why look for shale gas / shale oil in Europe?

• Lucas investment in Cuadrilla and Europe

• Lancashire Bowland prospect opportunity

• How Bowland compares with major shale plays in USA

• Public / Government issues

• Gas Market in UK

• Conclusions

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Presentation Outline F

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Who is AJ Lucas Group? (AJL.ASX)

Drilling Services Pipelines Infrastructure

• Coal Exploration • Gas Production • Geotechnical • Well services • Completions • Workovers • Engineering services

• Oil & Gas Pipelines • Water & Waste Water • Gathering systems • EPC contracts • BOOT projects • HDD • Microtunnels

• Desalination plants • Waste Water Treatment • Specialist civil

engineering/M&E • Facilities management • Non-residential Building • Project management • EPCM • Asset management

– oil & gas – Water

Exploration Assets

• UK Shale • Netherlands Shale • Hungary Tight Gas • Czech Republic Shale • Poland Shale • East Texas Prospect • Canning Basin

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Recent US Trends

• Price of gas has halved in 12 months

• Over 800,000 new jobs created

• US moving to becoming a net

exporter of gas

• US awash with methane molecules

• Boon to US heavy manufacturing because dramatically lowered input costs

• Steelworks have reopened because of cheap gas availability

• US petrochemical companies now extremely competitive

• US has potential to be world’s biggest producer of Polyethylene

• Can this be replicated in Europe?

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US Henry Hub Index (Midline)

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Why Europe?

• Europe has numerous unexplored unconventional basins with analogous

burial history, structure, depositional patterns and pressure regimes to

North American resource plays

• Numerous opportunities identified by our experts

• Europe lagging behind North America in exploration of unconventionals

• Large onshore acreage positions available

• Favourable terms and conditions in politically stable democracies

• World class pipeline infrastructure with access to a wide range of markets

• New EU rules requiring liberalization of gas markets to new entrants

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Cuadrilla Resources Limited

• Lucas investment in shale exploration in Europe principally through Cuadrilla

• Cuadrilla - privately owned UK exploration & production company

• Lucas owns 42% of Cuadrilla

• Founded in 2006 by management and Lucas

• Based in Staffordshire, England

• Exploration assets in:

- Netherlands ≈ 680,000 acres

- Lancashire ≈ 293,000 acres

- Sussex ≈ 57,000 acres

- Poland ≈ 440,000 acres

- Hungary

- Czech Republic 6 *Note: Figures are in gross acreage

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Cuadrilla Acreage

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Vertically Integrated E&P Model

• Proven operations management team with global experience

• Proven gas finders in unconventional hydrocarbons

• Internal controls through company owned and operated services

- Drilling rig owned by Cuadrilla

- Purpose built / Cuadrilla owned cement & fracture stimulation equipment

- 6 x 2500 HHP frac pumpers

- Cuadrilla owned Work-over rig for completions and well maintenance

- Cuadrilla well testing equipment

- Production operations expertise

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Cuadrilla Drilling Rig

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Cuadrilla Frac Suite & Service Rig

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Cuadrilla & Lucas UK Licences

BOWLAND SHALE GAS PLAY

BALCOMBE Hz GREAT OOLITE OIL PLAY

• Lucas has 25% of these licences

• Cuadrilla has 75% of these licences

• Lucas has 42% of Cuadrilla

• Lucas has effectively 56% of these

licences

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BOLNEY / KIMMERIDGE SHALE OIL PLAY AND PORTLAND SAND GAS PLAY

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Lancashire Bowland Licence

• Lucas has 25% of licence

• Cuadrilla has 75% of licence

• Lucas has 42% of Cuadrilla

• Lucas has effective 56% of Bowland

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Bowland in Summary

• Bowland Basin is a very significant Shale Gas Resource Play

• GIIP > 200 tcf

• Many places GIIP > 1 tcf / sq.mile

• Over 1000m (>3300 ft) thickness of shales and associated lithologies

• Shale is naturally fractured (free + adsorbed gas)

• Very good quality gas – minimal CO2

• Subsurface well bore integrity guaranteed by design

• 1000’s feet below aquifers – not enough energy to frac into aquifers

• DECC approval to recommence fracking, subject to 6 week consultation

period

• Very close to major pipeline infrastructure

• Market ready for this gas

• Cuadrilla / Lucas some way from being able to assess the value of asset 13

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Gas Bubbling from New Core

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Becconsall – 1 7,025ft Grange Hill – 1 10,234ft For

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Stratigraphy

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Shale Comparison

• Asbian-Brigantian (Late Miss)

• 3000’+ black shales with

interbedded lsts

• marine-prodelta/basinal

• Fractured carbonate bands

• High silica content (outcrop)

• TOC 1-5%

• Well completions (3 partial)

• Resource GIIP 200 tcf + (?% Recoverability)

• Cost of acreage <$1 per acre – zero royalty

• Current UK gas price ≈ $9 - $10/mscfg

• Chesterian (Late Miss)

• 1000’+ black shales with interbedded lsts

• Basinal/ slope

• Fractured carbonate bands

• High silica content

• TOC 1-6%

• Well count = 15,000

• 26 tcf+ recoverable

• Cost of acreage +$10-25,000 + royalty

• Current Henry Hub ≈ $2- $3/mscfg

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Lancashire Bowland vs. Barnett

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Gas Surface Density Comparison

Play Age Depth Feet

Net Thickness Feet

Approx. Average Resource

Billion cu.ft / sq. mile (GIIP)

Barnett Mississippi 6500 - 8500 100 - 600 240

Marcellus Mid Devonian 4500 - 8500 50 - 350 13

Fayetteville Mississippi 3000 - 5000 20 -200 54

Haynesville Upper Jurassic 10500 – 13000 200 - 300 113

Woodford Mid Devonian 6000 - 11000 120 - 220 87

Eagle Ford E. Cret 8000 - 14000 150 - 300 102

Bowland (Grange Hill)

Carb. 5200 – 10700 3967 1391 = 1.4 tcf /sq.m

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Note: these are Cuadrilla estimates

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Maturity v Organic Content

Note: Ro is vitrinite reflectance. It's a measure of the maturity of Kerogens

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Current Programme

• Preese Hall-1 drilled to 9,100 ft

• Grange Hill-1 drilled to 10,700 ft

• Becconsall-1 drilled to 10,500 ft

• Elswick-1 producing from 3,500 ft

• These wells are vertical

• Anna’s Road vertical starts in July,

the horizontal later in the year

• Previous core holes by British Gas

• 150 sq. km 3D seismic programme

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Continuing Exploration of Bowland

• Concentrating on deepest parts (blue, green)

• Deepest parts likely to be gassiest

• 3D seismic over 150 sq. km (15% of Bowland)

• Preese Hall , Grange Hill, Anna’s Road wells

within 150 sq. km with Becconsall just outside

• Other wells considered at Warton & Elswick

• These will give excellent picture of the

resource and gas likely to be recovered

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Public Concerns

• Groundwater protection - We are thousands of feet below aquifers

- Fracking does not have enough energy to crack to aquifers

- Wellbore design prevents gas to water

- Surface damming, bunds, impermeable barriers

• Chemical usage - We are approved to run water & sand (99.75%), Polyacrylamide friction reducer (0.075%), Biocide

(0.05%) to prevent biological clogging, Hydrochloric acid (E507) (0.125%) as cleaning agent, Tracer

- These chemicals widely used every day in shampoo etc. Polyacrylamide used in water treatment plants in UK as flocculant.

- We are using only Polyacrylamide & tracer

• Water usage - Less water used than coal or nuclear per Btu

• Waste disposal - Recycling and through approved industrial disposal

• Land use - Long horizontal wells minimise land use, unlike vertical wells in Australian Coal Bed Methane

• Seismicity - We don’t frack with enough energy to actually cause earthquakes however, we can cause the

lubrication of highly stressed faults which release and produce tremors 21

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Managing Public Issues

• Engaged experts well known in region

• Separating real risks and hazards from “outrage issues”

“When people are outraged, they tend to think the hazard is serious. Trying

to convince them that it’s not as serious as they think is unlikely to do much

good until steps are taken to reduce the outrage” --Peter Sandman Ph.D.

• A lot of dialogue with elected leaders and officials – communicate early & often

especially with Council and community

• Emphasizing the real benefits shale gas can bring to Lancashire

• Investing in the community

• Being open and being seen to be open

• Very controlled approach so as not to interrupt the community

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UK Energy Demand

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UK Energy Demand

1000 tonnes oil equivalent = 41.68 TJ = 41,680 GJ gas

UK Energy Flow chart 2010 :

UK production (incl. UK North Sea) = 2,380 PJ / year

Imported Natural Gas = 2,110 PJ / year _____________

Total Natural Gas Usage: = 4,497 PJ / year

Gas used in Power Generation = 1,333 PJ / year

Coal used in Power Generation = 1,189 PJ / year

Recovery rate needed at Bowland to supply all UK for 10 years = 22%

Therefore more modest Bowland gas likely to be easily taken up

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Major Pipelines through Bowland

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Conclusions

• Lucas via Cuadrilla has significant interest in huge world scale shale gas acreage in

Europe

- 680,000 acres in Netherlands = 1061 sq. miles

- 350,000 acres in UK = 546 sq. miles

- 213,000 acres in Poland = 332 sq. miles

• Bowland resource in Lancashire has exceptional potential

• Parts of Bowland have in excess of 1 tcf GIIP/square mile

• Gas from Bowland has potential to be brought into the market quickly

• How long will this testing take?

• Still high risk business

• Asset very high quality in geological terms, but still too early to assess quality of asset in value terms – more field testing needed

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JP Morgan Shale Corporate Access Day I 10 May 12

This presentation has been compiled by AJ Lucas Group Limited from sources it believes to be reliable. However, it is not warranted as to its completeness or accuracy.

This presentation is not an offer to sell or a solicitation to buy any securities.

As it is prepared for general circulation, all readers must use their own judgment and seek their own advice before relying on anything in this presentation.

2012 AJ Lucas Group Limited

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