Transerv from. Alberta HIGHLIGHTS. January 31, per. optimum appraisal strategy for early. for the sale. and farm-in. and Rock per cent). projects.

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1 ABN January 31, 2012 December 2011 Quarterly Report Transerv to receivee substantial cash return from initial Duvernay and Rock Creek deals HIGHLIGHTS Transerv to receive C$6.8m for its share of the sale and farm-in the Duvernay and Rock Creek fairway f as agreement executed over an 80 per cent interest in 30 sections (19,200 acres) in announced in December 2011 (Duverna ay Joint Venture DJV) Acquisition of further land (4.5 sections) with DJV Second Duvernay acreage sale announced in January 2012 Technical review of the Warro gas field in WA underway with a view to devising the optimum appraisal strategy Carnaby Operations underway- production on line and workover wells planned for early 2012 Additional lands acquired in Alberta in Genesee area Alberta In December 2011, the Company and its Albertaa Joint Venture (AJV) partners signedd a letter of intent (LOI) for the sale and farm-in agreementt on 30 of the 141 land sections held in its Duvernay Shale and Rock Creek acreage (TSV 34 per cent). The LOI and subsequent formal agreement were signed with a well-credentialed Calgary petroleum exploration and production company. Importantly this transaction provides the AJV partners with an industry-experienced partner and strong capital support to develop the Duvernay D andd Rock Creek projects. The formal Asset Purchase and Sale Agreement (Agreement) was executed by the e parties on 10 January 2012, with settlement scheduled to take place on 31 January This transactionn provides a significant immediate cash injection of C$6.8m to Transerv and confirms the real value to the Joint Venture partners of their retained acreage in the Duvernay Shale fairway. Under the Agreement, the investor will acquire an 80 per cent interest in 30 sections (19, 200 acres) inn the Duvernay and Rock Creek fairway for a total of C$20 million in cash. The AJV partners will also be free-carried through the first two wells drilled on the Duvernay. The first is a vertical well to be drilled in 2012 at an estimated cost of C$5 million. The second well, an optional horizontal well, is to be drilled during the 2013 drilling season with the AJV A carried for the first C$15 million of expenditure. The AJV s total exposure to drilling costs is capped to $ 1m above C$ $15m on the horizontal well. In addition, the investor has agreed to fund its pro-rata 80 per cent share of a Rockk Creek horizontal well within two years of execution of the LOI or returnn the Rock Creek rights in the lands to the AJV. Under the DJV Agreement, the parties have acquired a further 4.5 sections of land inn a recent Government auction. These sectionss adjoin the 30 sections involved in the transaction. Following completion of the transaction, the AJVV will retain a 20 per cent interest in the 30 sections (19,200 acres) to be acquired by the investor and 100 per cent of the remaining 1111 sections (approximately 70,300 acres). The AJV partners are continuing to evaluate additional proposalss received onn other acreage through the process undertaken with Macquarie Tristone. Ground Flo or, 1292 H ay Street, West Perthh WA 6005 Ph: Fax: ranserv.co m.au

2 Transactionn Background Macquarie Tristone Canada was engaged in September by the AJV partners to evaluate the market and undertake a potential sale/farm-out process of the Duvernay Shale and Rock Creekk petroleum rights held within the AJV acreage. Macquarie Tristone fielded significant interest in the strategic Duvernay Shale acreage and the AJV partners will continue to consider and evaluate interest received on both the Duvernay and Rock Creek projects. Prior to the first transaction, the AJV had a total land holding within thee Duvernay Shale and Rock Creek fairway of grosss sections (36,231 hectares or 90,579 acres). The T Duvernay has hosted several liquids-rich shale gas discoveries in the region in recent months, resulting in a significantly increased level of activity and interest in the region. Other Alberta Activities (Geneseee Project) Transerv has continued to build a land position in Alberta outside of the Alberta Jointt Venture area. During November the company acquired 10,624 hectares over 45 sections and part sections in the Genesee area as part of a new joint venture project. The lands are in areas with production from multiple levels and Transerv has identified a number of shallow, by-passed pay opportunities which are expected to present low risk drilling locations during This work will probably be done in conjunction with otherr operators in the area. Warro Gas Project The Company commenced a thorough technical review of the results of the Warro-4 well following completion of the testing program during the December quarter. This process is aimed at devising a plan for the next stage of the appraisal program with the results and recommendations expected early While Warro-4 succeeded in confirming the existence of a substantial gas columnn and generated a gas flow from the tight sand reservoir following fracture stimulation, further considerationc n needs to be given to the optimal well design and stimulation technique to maximise the gas flow ratess while managing any associated water flows. The technical review process involves a team of US-based tight gas specialists who have been asked to devise the next steps for the field appraisal and recommend appropriate drilling and fraccing techniques for future Warro wells. Transerv considers the presence of extraneous water a technical challenge that solution with respect to the design of future wellss and stimulation programs. will require a tailored Under the farm-in agreement with Alcoa, up to five appraisal wells can be drilled at Warro. The number of wells contemplated in the farm-in agreement reflects extensive US experience in appraising and developing tight gas and other unconventional fields. Thesee generally require r a multi-well program and a rigorous technical approach to establish the bestt techniques for producing the gas at t commercial rates. The Warro Project achieved a number of significant milestones in 2011: The Warro-4 well confirmed the reservoir structure and was drilled on time and within budget The revised well design results in a gun barrel hole that enabled the recording of high-quality A substantial gas column was confirmedd by the high-quality LWDD log data log information and resulted in the t successful placement of two largee slickwater fracs Testing confirmed the target reservoirs are gas bearing and capable of producing gas 3D seismic has been recorded over thee field and provided a high-fidelity picture of the sub-surface configuration of the reservoir section andd will be a valuable tool to t assist withh the selection of future well locations All of the above operations have beenn carried out safely and in an environmentally responsible r manner. The results from Warro-producing gas and combined with the 3D seismic data, show that parts of the field contain and Warro-4 confirmedd all the reservoir zones to be not only gas-bearing but also capable of natural fractures that are believed to be the conduits for the water present in the well bore. The technical review by US specialists will enable the Warro partners to determine what further field work is appropriate. Drilling can not resume until thee second-half of 2012 because b there is no rig presently operating in the Perth Basin, although a number of industry initiatives are underwayy to bring a rig r in to the State. w ww.transerv.com.au Page 2 of 3

3 Warro Project Background The Warro field lies 200km north of Perth in the Perth Basin and is one of o the largestt undeveloped onshore gas fields in Australia. Warro has been estimated by independent experts Gaffneyy Cline to contain a 2C recoverablee resource of 1.1Tcf (trillion cubic feet). Transerv has a 35 per cent stake in Warro andd is the project operator. Alcoa is earning the remaining 65 per cent stake under a farm-in agreement, in which Alcoa will spend up to $100 million on exploration and development at Warro. Alcoa will fund a staged evaluation and construction program, which includes drilling wells, constructing production infrastructure and the recently completed 3D seismic survey. Warro, which covers 7,,000ha and starts from about 3,750m below surface, is located just 31km east of both the Dampier-to-Bunbury Natural Gas Pipeline and the Dongara-to-Perth of which approximately 25% was comprised Parmelia Pipeline. Alcoa has substantial capacity reserved in the Dampier line. Carnaby Operations Update During the 4 th quarter, Carnaby production averaged 240boe/d of oil. In December 2011, Carnaby carried out a well workover operation which w resulted in the production of uncommercial quantities of oil. The well has been suspended pending the results of further analysis. Carnaby was successful in recent land sales in the area and acquired 9 sections (2,355 hectares) adjacent to existing holdings. Further land acquisition activity is planned during During January 2012, Carnaby commenced operations on a 3 well workover programme. This work is aimed at establishing the potential of a range of bypassed, oil-prone, pay sections identified on electric logs. All the target sections are productive nearby and if successful, will lead to a number of follow-up development locations. Corporate Cash Position as at 31 December 2011 At the end of the December 2011 quarter, the company had a closing cash balance of $938,000. For and on behalf of the Board w ww.transerv.com.au Page 3 of 3

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