1. NZEC and L&M Energy Limited have entered into an agreement whereby NZEC can increase its interest in the Alton Permit from 50% to 65% by completing a 50 km² 3D seismic survey over the Alton property.
2. Net undiscovered petroleum initially in place (OOIP) as identified by AJM Petroleum Consultants.
3. Net prospective resource as identified by AJM Petroleum Consultants (best estimate), assuming 9% recovery.

The Taranaki Basin offers an excellent opportunity to add substantial reserves and production in an environment of relatively low technical risks with established oil and natural gas infrastructure. NZEC holds and is operator on two large permits, Eltham (100%) and Alton (65%, subject to NZEC completing agreed upon milestones), totalling 169,949 net acres directly offsetting known production and reserves.

NZEC’s two permits have already yielded 33 prospects or leads and substantial resource estimates of 843 million barrels OOIP and 77.1 million barrels of prospective (recoverable) resources (NZEC's net share) using a conservative 9% recovery factor. NZEC made its Copper Moki-1 discovery in August 2011 and achieved production in December 2011, bringing cash flow to the company and transitioning NZEC from an exploration-stage company to an oil and gas producer. NZEC replicated its exploration success with Copper Moki-2 in February 2012, is preparing to test Copper Moki-3 and Copper Moki-4 and plans to drill six exploration wells in H2-2012, with the objective of growing the Company's production, cash flow and reserves.

The Taranaki is New Zealand’s sole oil and natural gas producing basin, accounting for 100% of the country’s current volumes of approximately 130,000 boe/day (55,000 barrels/day of crude oil and 460 mmcf/day of natural gas). The Taranaki Basin has been producing since 1934 when the first well came on-stream near New Plymouth. Average per-well productivity of approximately 325 boe/d in the Taranaki Basin is many times the North American average. NZEC’s two permits are surrounded by pools currently producing approximately 18,000 boe/d. Prior to NZEC’s involvement, however, only two historical exploration wells had been drilled in what is now the Eltham Permit area.

This region offers immense opportunities for further exploration and development. There have been only 400 wells drilled since 1950, virtually all of which relied on older technology (vertical wells completed without hydraulic fracturing) and conventional exploration ideas (sandstone reservoirs with structural traps). Until recently, substantial prospective lands remained unallocated and unexplored.

Geologically, the Taranaki Basin’s sediments extend from shallow burial at approximately 200 metres all the way to the deep basement at more than 6,000 metres. Hydrocarbon source rocks are believed to be deeply buried Paleocene and Cretaceous coaly rocks and shales. Drilling targets are primarily sandstones with some carbonates, with four horizons dominating to date: the Kapuni Group, which can be as deep as 4,000 metres and accounts for the majority of current basin production, and the generally shallower Moki, Mount Messenger and Urenui at depths of 1,000 to 3,000 metres.

NZEC sees the Taranaki Basin as an excellent opportunity both to drill unexploited prospects in known reservoir types and to maximize per-well results through the application of modern technology. This includes using modern seismic reprocessing and interpretation to identify the stratigraphic-structural traps that were overlooked in the past. In addition, the recent advent of horizontal drilling by other companies in the area has yielded excellent results, with initial productivity approximately 2.5 times the average rate for comparable vertical wells.