First Quarter Production and Development Update

April 6, 2010

Castello (near Milan, northern Italy)

• Castello produced 5.4 million cubic metres (190 million cubic feet) in the March quarter 2010
  
• Average quarterly production was 59,884 metres per day (2.12 million cubic feet per day) - and is currently running at 60,000 cubic metres per day
  
• Revenue from gas sales was €1.32 million (AUD1.94 million)

Sillaro (near Bologna, northern Italy)

• Sillaro surface plant reaches mechanical completion
  
• Plant expected to be ready for start up by 12 April 2010
  
• First commercial gas flows expected in late April 2010

Market and Prices

• ENI Gas Release prices increased from €0.21 per cubic metre in the December quarter 2009 to €0.26 per cubic metre in the March quarter 2010
  
• Forward prices indicate that the ENI Gas Release prices will further rise to €0.29 per cubic metre for the balance of 2010 and €0.32 per cubic metre in 2011

Finance

• Cash at bank at end of quarter €5.1 million (AUD7.6 million)
  
• Bank of Scotland (BOS) facility borrowing base limit was €13.8 million at the end of the March quarter with €10.3 million drawn at quarter end

Castello

Castello First Quarter 2010 Production and Revenue:

Daily average production		59,884 cubic metres per day
March quarter production		5,382,676 cubic metres
March quarter revenue		€1.318 million

During the quarter Castello produced 5.38 million cubic metres of gas at an average daily production rate of 59,884 cubic metres per day. The plant was successfully ramped up to stable operating rates with few issues.

Current production is running at approximately 60,000 cubic metres a day.

Daily Production Since Castello Start-Up:


Gas was delivered to our two customers, Italtrading and Elettrogas via the SNAM pipeline meeting all gas specification requirements. Revenue from first quarter gas sales was €1.32 million.

During the first quarter 2010 the 90 day BOS completion test was finished and following formal certification and documentation, we expect BOS completion test sign-off in April 2010. When the completion tests are confirmed for both Sillaro and Castello the BOS margin over EUROLIBOR will drop from 3% to 1.8%.

Sillaro

As previously reported, heavy snow as late as 10 March 2010 hampered progress on the final stages of surface plant installation.

Installation of the Sillaro surface plant is now on schedule to reach mechanical completion on 6 April 2010 and ready for pre-commissioning start-up by 12 April 2010. Final safety and environmental checks will then be completed with the final regulatory go ahead for commissioning start-up expected late in April 2010.



Prices

Prices rose through the March quarter with rising crude oil, diesel and fuel oil prices, and the falling Euro, contributing to increases in prices we receive under our ENI Gas Release referenced gas sale contracts.

Based on forward curves for the balance of 2010 the ENI Gas Release price projections are now close to €0.30 per cubic metre.

Italian Eni Gas Release Price: March Update


Finance

Po Valley concluded the March quarter with positive operating cash flow, cash at bank of €5.1 million (AUD7.6 million) and conservative debt levels of €10.3 million.

Under the BOS reservoir based facility, BOS sets a borrowing limit on a semi annual basis. The borrowing base limit is determined according to the facility agreement and has a maximum limit of €20 million.

The BOS calculations are based on a combination of factors including gas and oil prices, production projections based on proven reserves and operating costs. During the quarter BOS increased the borrowing base limit from €10.3 million to EUR13.8 million.


MEDIA CONTACTS:

Michael Masterman
Po Valley Energy
0417 851 303

Kevin Skinner
Field Public Relations
(08) 8234 9555 / 0414 822 631

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