1 Quarterly Activities Report - povalley.com

1

Monday 30 April 2012

MARCH QUARTER 2012

Capital Details (as at 31 March 12, AUD)

Share Price $0.14

Shares on Issue 111.1m

Market Capitalisation $15.5m

Cash at Bank $1.4m

Drawn Debt $7.4m

Enterprise Value $21.5m

Po Valley Energy Limited (PVE) is an emerging gas and oil

exploration and development company with an expanding

portfolio of hydrocarbon assets in northern Italy.

The Company owns and operates two gas treatment plants, with more gas and oil developments to come.

Quarterly Activities Report For the March quarter and to the date of this report

HIGHLIGHTS — KEY DEVELOPMENTS

COMPANY OVERVIEW

ASX: PVE

Castello field restarted production in February 2012

Castello and Sillaro gas fields currently producing at a combined daily rate of 77,000 cubic metres per day (2.7 million cubic feet per day)

Gas production for the quarter, with the contribution of both producing gas fields was 5.5 million cubic metres (0.2 bcf)

Revenue for the quarter was € 2.1m (AUD 2.6m)

Reserves and Resources audited by the independent experts Fugro Robertson Limited (FRL) and released in the 2011 Annual Report

Bezzecca - Production concession application is continuing to progress

San Vincenzo/S. Alberto – Updated production licence application lodged with the Ministry

Bagnolo in Piano and Ravizza oil discoveries - Data review finalised with potential Best estimate Contin-gent Resources (2C) of 10 million barrels (mmbbls)

Canolo -1, -2 and Zini-1 wells - Drilling applications have been lodged with the Ministry

AR168PY– Final permit award imminent. ENI data review finalised with Best estimate Contingent Resources (2C) of 702.3 million cubic metres (24.8 bcf) of gas

Tozzona exploration block preliminary award received: EIA clearance under way

Average ENI gas release price for the quarter increased to €/cent 43.33 per cubic metre (14.87 AUD/Mcf) while the average realised price was €/cent 38.44 per cubic metre (13.36 AUD/Mcf)

Cash at bank and cash equivalents at the end of the quarter was €1.1 m (AUD 1.4m). Positive EBITDA margin and operating cash flow

The current use of the Lloyds Senior Facility is €6.0m (AUD 7.4m) The borrowing base limit for 1H 2012 has been set at € 7.6m (AUD 9.4m)

The farmout effort continues for a portfolio of development, appraisal and pure exploration projects

1st Q 2012 4th Q 2011 Full 2011

Production mmcm

- Castello 0.76 0.00 0.72

- SIllaro 4.76 6.67 28.27

Total Production mmcm 5.52 6.67 28.99

Total Production bcf 0.20 0.23 1.02

Total Revenue €m 2.1 2.6 9.1

2011 - 2012 1st Quarter Gas Production and Revenue

2

In January 2012, the impact of colder weather

conditions caused an increase in condensate

production and the Sillaro gas site was halted for

four days while excess condensate was removed

from the processing facility.

As a precautionary measure, the Company suspen-

ded production from the Sillaro1dir well, where the

condensate was suspected to have originated from

level PL2 C1+C2, while the Sillaro2dir well

continued to operate.

SILLARO GAS FIELD (Sillaro Concession)

March 2012 Quarterly Activities Report

CASTELLO GAS FIELD (Cascina Castello concession)

In February 2012, the Company announced the production start from its sidetracked well Vitalba1dirA at its

Cascina Castello concession, north of Milan.

After the successful drilling and testing, completed at the end of 2011, production from the Pliocene SAN A2

sand level started at a rate of about 0.5 million standard cubic feet per day and was gradually increased to

reach the target rate of 0.7 million standard cubic feet per day.

Po Valley Energy is also pleased to report that no safety incidents occurred during the workover drilling and

reconnection to the gas treatment plant.

The updated assessment of SAN A2 gas remaining reserves estimates Proved (1P) Reserves of 28.3 MScm

(1.0 bcf), Proved+Probable (2P) Reserves of 51.0 MScm (1.8 bcf) and Proved+Probable+Possible Reserves

(3P) of 70.8 MScm (2.5 bcf).

The gas condensate situation was thoroughly evaluated and it was confirmed that condensate production

was originating from the PL2 C1+C2 producing level. While condensate production is minor, the Company

has decided to install condensate extraction equipment in the Sillaro production facility and, as a precaution

in the interim, production from the PL2 C1+C2 producing level has been temporarily suspended and the new

level PL2 B1 opened.

As a result, the cumulative production from Sillaro1dir and Sillaro2dir, is 60,000 standard cubic meters per

day (2.1 million cubic feet per day), compared to around 2.8 million cubic feet/day. The Company will install

condensate processing equipment before reopening level PL2 C1+C2. The design plans and equipment

sourcing for the relatively minor plant modification is underway.

To date, Sillaro gas production amounts to 51.7 MScm (1.8 bcf), with a contribution in 1Q 2012 of 4.8 MScm

(0.2 bcf).

Updated remaining Reserves stand at 1P Reserves of 178.4 MScm (6.3 bcf) and 2P Rserves of 201.1

MScm (7.1 bcf).

The Company expects final authorisation from the Ministry to drill Fantuzza-1 well to be granted shortly.

FANTUZZA-1 (Crocetta permit)

3

During the quarter the review of the available technical data, including cores, well tests, seismic analysis

and STOOIP of the Bagnolo in Piano and Ravizza oil accumulations was finalised following review by FRL.

Cumulative 1C oil Resources of 5.9 mmbbls, 2C oil Resources of 10 mmbbls and 3C oil Resources of 15.8

mmbbls were evaluated for the two structures drilled and tested by ENI in the 1980’s. Improved recovery

factors should be achieved once modern stimulation techniques, together with horizontal drilling, could be

tested on the first appraisal well.

During the Quarter, the Company finalised the evaluation work on the two Quaternary gas prospects, Zini-1

(2C; 2.7 bcf) and Canolo-1 (2C; 1.1 bcf) and on the Pliocene prospect named Canolo-2 (2C; 3.6 bcf). During

the quarter the drilling plans and Environmental Impact Studies of Zini-1, Canolo-1dir and Canolo-2dir were

submitted to both the Ministry and to the Emilia Region for final approval.

BEZZECCA (Cascina Castello permit)

The production Concession application for the Bezzecca gas field is continuing to progress through the

regulatory process. In January 2011 the Company submitted an application to the Ministry to enlarge the

size of the existing Cascina Castello production licence to include the nearby Bezzecca area.

The Company received positive feedback from the Ministry, after submitting all the additional requested

technical and financial information. During the quarter the Company lodged the Environmental Impact

Study, another important step towards the production licence grant.

The gas field Contingent resources have been recently reviewed by FRL and are:

Low estimate Contingent Resources (1C) of 19.8 MScm (0.7 bcf)

Best estimate Contingent Resources (2C) of 116.1 MScm (4.1 bcf)

High estimate Contingent Resources (3C) of 189.7 MScm (6.7 bcf).

In January the Company lodged the documentation for a reviewed application for the development of Santa

Maddalena1 well, together with an evaluation of the potential of the field.

Subsequent to a seismic structural re-interpretation (including the seismic data acquired in 2011) the

updated static and dynamic reservoir model confirms the reduced 1C gas Resources of 51.0 MScm

(1.8 bcf) and 2C Resources of 59.5 MScm (2.1 bcf) which would be produced from the existing SM1dir well.

3C Resources of 79.3 MScm (2.8 bcf) are estimated if a second well within the field structure is drilled.

SAN VINCENZO permit

CADELBOSCO DI SOPRA & GRATTASASSO permits


AR168PY application

The Ministry has confirmed informally that the modification to the licence boundary, which was required to

comply with the new coastal protection law has been accepted. The final award of the AR168PY explora-

tion licence is therefore believed to be imminent.

While waiting for the final award of the licence, during the quarter the Company completed a review of the

Carola/Irma discoveries with the support of existing technical documentation supplied by ENI.

The review of the Irma-Carola gas discovery data (reviewed by FRL) resulted in estimated 1C Resources

of 620.1 MScm (22.0 bcf), 2C Resources of 702.3 MScm (24.8 bcf) and 3C Resources of 761.7 MScm

(26.9 bcf). Ultimate gas recovery will depend on the final development plan.

4

Within the La Prospera exploration licence regulatory approval to drill the Gradizza-1 well is expected

shortly. The results of the seismic interpretation in the Gradizza prospect (reviewed by FRL) identified Best

estimate gas Resources of 254.9 MScm (9.0 bcf).

Two additional prospects have been identified within this permit:

The Pioppette prospect with Prospective Best estimate gas Resources of 356.8 MScm (12.6 bcf);

The Capitello prospect with Prospective Best estimate gas Resources of 263.4 MScm (9.3 bcf);

In addition the Fondo Perino prospect (former Selva gas field) has been identified with Best estimate gas Resources of 413 MScm (14.6 bcf).

Within the Podere Gallina exploration licence the assessment of the Cembalina shallow gas prospect was

finalised. The prospect carries prospective Best estimate gas Resources of 87.8 MScm (3.1 bcf).

Within La Risorta exploration permit (which has been preliminarily granted), located in the north east of the

Ferrara province and in the Veneto region, the Company is progressing studies for promising gas prospects

with target depths ranging from 1,200 and 2,100 metres:

Dosso delle Anime, Prospective Best estimate gas Resources of 518.2 MScm (18.3 bcf);

Ariano, Prospective Best estimate gas Resources of 470.1 MScm (16.6 bcf);

Corcrevà, Prospective Best estimate gas Resources of 249.2 MScm (8.8 bcf).

The Opera exploration licence contains two Leads that were evaluated:

Barona structure with prospective Best estimate gas resources of 141.6 MScm (5.0 bcf) and;

Opera structure with prospective Best estimate gas resources of 1.3 BScm (47.0 bcf).

The Tozzona application (which has been preliminarily granted) and the Torre del Moro application

(a preliminary grant expected soon) are under preliminary review by the Company.


EXPLORATION

Overall 2,000 km2

2 Production Concessions

2 Production Concession applications

7 Exploration permits

3 Exploration permits in application

PO VALLEY ENERGY - PORTFOLIO OF LICENCES IN ITALY

5

In 1Q12, the Castello gas field was successfully integrated to the Company’s producing fields.

Revenues for the first quarter of 2012 amounted to €2.1m (AUD 2.6m) compared to €2.6m (AUD 3.2m)

in 4Q11. The slight decrease resulted from the reduction in Sillaro production in the months of January

and February due to extreme weather conditions in Northern Italy. Realised gas prices remained strong

throughout the period at €38.44 cents per cubic metre during the quarter.

The Company continued to achieve solid operating netback for each cubic metre sold. Both operating

profit and operating cash flow remained in the positive for the three months ended 31 March 2012, in

line with the 2011 annual results.

Po Valley ended the March quarter with cash and cash equivalents of €1.1m (AUD 1.4m). The current

drawdown under the Lloyds reservoir facility is €6.0m (AUD 8.0m) while the borrowing base limit has

been set at €7.6m (AUD 10.1m). The next borrowing base review will be in May 2012 to determine the

limit for 2H 2012.

As previously communicated, beginning 1 April 2012, Po Valley Energy is selling 100% of the gas

produced at Sillaro and Castello to the Italian distributor Italtrading Spa (one of its two former custo-

mers) and will continue to do so until the end of the current Gas Year (30 September 2012). In April,

the Company initiated the gas sale tender process for a new contract(s) commencing 1 October 2012,

which it plans to finalise within 1H12.

CORPORATE

Market Capitalisation (at A$0.14) A$ 15.5m (€12.1m)

Cash at Bank (March 12) A$ 1.4m (€1.1m)

Drawn Debt A$ 7.4m (€6.2m)

Enterprise Value A$ 21.5m (€17.2m)

Substantial

Shareholders

Shares (‘m) as

at 31 Mar 2012 %

Michael Masterman 27.8 25.0%

Hunter Hall 20.4 18.4%

Beronia Investments 7.1 6.4%

Other 55.8 50.2%

TOTAL SHARES 111.1


Share price chart: March 2011 to March 2012

1€=1.284 Aud as at 31 Mar 2012 and Aud 1.242 for the period average (01/01/12– 31/03/12)

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12

6 March 2012 Quarterly Activities Report

Competent Person’s Statement

Information in this report that relates to Hydrocarbon Reserves and or Resources is based on information compiled by Mr Giovanni Catalano, CEO of Po Valley Energy who has consented to the inclusion of this information in the form and context in which it appears.

Mr Catalano has over 32 years experience in Exploration and Development in the Oil and Gas Industry. He is member of SEAPEX and AAPG and holds a masters degree in Geology from the University of Ferrara.

ROME OFFICE

CONTACTS

For further information please contact:

Or visit: www.povalley.com

Giovanni Catalano Chief Executive Officer +39 06 4201 62 75

Michael Mullane Cannings Corporate Communications (02) 8284 9990 [email protected]

REGISTERED OFFICE

Level 28, 140 St George's Terrace

Perth WA 6000

TEL +61 8 9278 2533

FAX +61 8 9278 2525

Via Boncompagni, 47

Rome Italy 00187

TEL +39 06 4201 4968

FAX +39 06 4239 1900

The benchmark ENI gas release price

was €43.14 cents per cubic metre for

the month of March 2012 (€43.25

cents per cubic metre for the month of

December 2011). The gas price is

being up held by the continued

strength in gasoil prices and the

strengthening of fuel oil in recent

months.

Using market based forwards for ga-

soil, fuel oil and crude, ENI gas relea-

se prices are expected to increase

slightly to €44.00 cents for April 2012

and €44.47 cents for May 2012.

The Company’s average realised

price for the quarter was €38.44 cents

per cubic metre.

ITALIAN ENI GAS RELEASE PRICE: MARCH UPDATE

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PO VALLEY ENERGY RESERVES & RESOURCES STATEMENT


1P 2P 3P

Sillaro Sillaro 6.3 7.1 -

Castello Castello 1.0 1.8 2.5

1C 2C 3C

San Vincenzo Sant'Alberto 1.8 2.1 2.8

C. San Pietro Bezzecca 0.7 4.1 6.7

Crocetta Fantuzza (*) 1.8 (*) 5.7 (*) 8.3

Zini (Qu-B) 1.1 2.7 4.6

Canolo (Qu-A) 0.7 1.1 1.7

Canolo Pliocene 0.4 3.6 10.5

AR168PY Carola / Irma 22.0 24.8 26.9

(*) under review

1C 2C 3C

Grattasasso Ravizza 2.2 5.7 10.7

Cadelbosco Bagnolo in Piano 3.7 4.3 5.1

Low Best High

Cadelbosco Zini (Qu-A) - 1.4 -

Gradizza 4.5 9.0 16.0

Pioppette 7.1 12.6 20.8

Capitello 5.5 9.3 14.4

Cembalina 2.5 3.1 3.9

Fondo Perino 10.2 14.6 20.5

Ariano 10.6 16.6 24.7

Corcrevà 7.0 8.8 11.3

Dosso delle Anime 13.8 18.3 24.4

Barona Lead 3.3 5.0 7.3

Opera Lead 29.0 47.0 73.0

PROSPECTIVE RESOURCES, GAS (bcf)

RESERVES, GAS (bcf)

Podere Gallina

La Prospera

ProjectLicence

Licence Project

La Risorta

Opera

CONTINGENT RESOURCES, GAS (bcf)

ProjectLicence

ProjectLicence

Cadelbosco

CONTINGENT RESOURCES, OIL (mmbbls)

The following table summarises the status of the Reserves & Resources as of 31st December 2011 for certain assets with Po Valley Energy 100% Interest. The assesment work was undertaken by the Company and audited by Fugro Robertson Limited.

Fantuzza Contingent Resources are subject to Company and FRL review - still ongoing.

These figures are based upon independent evaluations in accordance with 2007 SPE/WPC/AAPG/SPEE Petroleum Resource Management System.

Prospective Resources are unrisked.

RESERVES are those quantities of hydrocarbon anticipated to be commercially recoverable by application of development

projects to known accumulations from a given date forward under defined conditions.

Proved Reserves are those quantities of hydrocarbon, which, by analysis of geoscience and engineering data, can be estimated with reasonable

certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating me-

thods, and government regulations (1P).

Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than

Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be

greater than or less than the sum of the estimated Proved plus Probable Reserves (2P).

Possible Reserves are those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than

Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus

Possible (3P) Reserves, which is equivalent to the high estimate scenario.

CONTINGENT RESOURCES are those quantities of hydrocarbon estimated, as of a given date, to be potentially recoverable from known

accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies.

PROSPECTIVE RESOURCES are those quantities of hydrocarbon estimated, as of a given date, to be potentially recoverable

from undiscovered accumulations by application of future development projects.

For Contingent Resources, the general cumulative terms low/best/high estimates are denoted as 1C/2C/3C respectively.

For Prospective Resources, the general cumulative terms low/best/high estimates still apply. No specific terms are defined for incremental quantities

within Contingent and Prospective Resources.

APPENDIX

Documents

1 Quarterly Activities Report - povalley.com