Arrow Energy recommends acquisition by Shell / PetroChina Joint Venture following planned demerger

22 March 2010

Financial Advisors Legal Advisors

Investor Briefing

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Disclaimer and Important Notice

This presentation contains forward-looking statements that are subject to risk factors associated with the gas and energy industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variablesoutside the control of Arrow Energy Limited and its Directors which could cause actual results or trends to differ materially, including but not limited to: price and currency fluctuations, geotechnical factors, drilling and production results, development progress, operating results, reserve estimates, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates. Therefore, undue reliance should not be placed on forward-looking statements.

All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated.

This presentation is not an offer or recommendation in relation to securities in Arrow Energy Limited. It includes only a summary of select information and does not, and does not purport to, contain all information relevant to those securities. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Except to the extent required by law, Arrow Energy Limited disclaims any obligation to correct, update or revise this presentation or oral communications associated with this

presentation.

The 1P, 2P and 3P reserves estimates used in this statement were compiled by Mr. John Hattner of Netherland, Sewell & Associated, Inc., Dallas, and Mr. Tim Hower of MHA Petroleum Consultants, Inc., Colorado, and are consistent with the definitions of proved, probable, and possible hydrocarbon reserves that appear in the Australian Stock Exchange (ASX) Listing Rules. Mr. Hattner and Mr Hower are qualified in accordance with the requirements of ASX listing rule 5.11 and consent to the use of the reserve figures in the form and context in which they appear in this announcement. The resource information in this ASX release has been compiled by Mr Tony Knight, a fulltime employee of the Company. Mr Knight is qualified in accordance with ASX listing rule 5.11 and has consented to the form and context in which this statement appears.

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• Dart Energy Limited to be demerged from Arrow Energy Limited (“Arrow Energy”) and listed on the ASX

• Cash offer of $4.70 per share from CS CSG (Australia) Pty Ltd (“CSCo”) for Arrow Energy shares post demerger

– CSCo jointly owned by Shell and PetroChina

• Transactions to be implemented via separate schemes of arrangement (the “Schemes”)

– Demerger Scheme: to occur regardless of outcome of acquisition proposal (subject to necessary approvals) (“the Demerger”)

– Share Scheme: CSCo to acquire post demerger Arrow Energy shares (conditional upon Demerger Scheme approval) (the “Acquisition Scheme”)

• Compelling value proposition for shareholders

– Cash component alone represents premium of 35% to pre-announcement close

– Additional value from demerged share in Dart Energy

Announcement highlights

Unanimous support of Board of Directors in absence of a superior proposal and the Independent Expert concluding that the schemes are in the best interests of Arrow Energy

shareholders

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• International CSG tenements

– China, Indonesia, India and Vietnam

– Cancellation of Shell back in rights1

• Australian listed shares

– BOW Energy, Apollo Gas, LNG Limited

• Farm-in rights into Apollo Gas NSW tenements

• Ongoing 10% shareholding by Shell in Arrow Energy International Pte Ltd (“AEI”)

• Cash of $45m to be transferred from Arrow Energy

• PetroChina to facilitate approval of Dajing PSC

• Future co-operation with PetroChina planned1

Announcement highlights

• Arrow Queensland CSG tenements

• Power stations

Domestic assetsDart Energy

Notes(1) Conditional upon Acquisition Scheme completion

1 share listed on ASX CSCo offering $4.70 cash / share

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• Intention to separate international assets previously announced in February

– inclusion of early stage Australian assets

• Opportunity to replicate Australian CSG development success

• Increased management focus on development assets

• Will enable investors to value early stage international and Australian opportunities separately

• ASX listing to enhance flexibility for future funding

Demerger rationale

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���� High quality portfolio with large reserves potential

���� Assets located close to key markets and infrastructure

���� Assets located in high value gas markets with significant growth

���� Strong partners

���� Management with proven track record in coal seam gas

���� Initial funding in excess of A$70 million

���� ASX listed platform

Investment highlights for Dart Energy

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Country Partner Overview

Indonesia• Sangatta West PSC in East Kalimantan, in partnership with Pertamina / Ephindo – drilling underway; excellent

early results; near term commercialisation plans

• High quality Tanjung Enim PSC in South Sumatra with PTBA / Pertamina – drilling 2Q 2010

• 2 PSC blocks pending; other opportunities under review

China

• PSC in Dajing (natural gas / CBM), Xinjiang Province, 4,000 sq km block with 70m thick coal seam - in partnership with PetroChina1

• Co-operation principles for CBM in China with PetroChina

• Liulin PSC, Shanxi, in partnership with CUCBM and Fortune Oil – advanced CBM prospect; State Special Pilot Project; certified reserves, near term commercialisation plans

• Corporate equity (c.12%) in Far East Energy

India• 3 license blocks – completing initial exploration program

• CBMIV blocks pending

• Other farm-in and CMM opportunities under review

Vietnam • Hanoi Trough Onshore PSC – 2nd phase drilling program underway (encouraging results)

Australia

• Apollo Gas Limited (21.0%) – emerging player in Gunnedah Basin

• Farm in to up-to 50% of two Apollo Gas exploration blocks with 2,958 sq km of acreage

• Bow Energy Limited (1.4%) – Previous Arrow spin-off – now with c.2.75 TCF of 3P reserves

• LNG Ltd (7.5%) – LNG project developers

New geographies

TBD • In discussions for broad exploration portfolios in Southern Africa and Europe

Resource Potential:>40,000 PJ

Resource Potential:>40,000 PJ

Resource Potential:>20,000 PJ

Strong diverse regional asset base…

Notes

(1) AEI currently targeting award of Dajing tenement

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…in high growth, high value markets

Country

Total Potential

CBM Resource

(TCF)

Gas Demand (bcf/a)Gas Share of

Energy Mix

Current Projected Current Projected

China(1) 1,000 3,071 7,483 4% 10%

Indonesia(2),(4) 450 1,533 2,190 19% NA

India(3) 300 1,241 5,110 9% 13%

Vietnam(4),(5) 10 388 953 12% NA

Australia(6),(7) 350 621 1,200 11% 33%

USA(8) 800 23,900 24,200 23% 22%

(1) Datafusion; UBS September 2009; all current is as at 2008; projected at 2020; based on data from BP, NDRC, UBS estimates

(2) BPMigas; demand estimate is domestic consumption only, not including substantial LNG exports; current is 2006; forecast is 2020

(3) RBC Capital; AT Kearney; current is as at 2007; projected as at 2025

(4) Vietnam Oil & Gas report, BMI, February 2010; current is at 2009; projected as at 2019

(5) US Energy Information Administration; current is as at 2004

(6) East Coast Gas Demand as per EnergyQuest Energy Quarterly Feb 2010; current is 2008/9; projected 2029 based on Energy Market Operator forecasts

(7) Australian Energy Resource Assessment, March 2010; current is 2007/8; projected as at 2025

(8) US Energy Information Administration; current is as at 2008; projected as at 2025

Arrow Operating Markets High Value Markets

(US$/mmscf)

$4.00 $4.00 $4.00

$3.00 $3.00 $3.00

$12.00

$8.00

$12.00

$6.00

$5.00

$7.00

Chin

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India

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For comparison purposes only

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Changes to existing arrangements with Shell• Shell back in rights for up to 50% into any International project through to 2013 are being

cancelled– cancellation of rights doubles Dart Energy’s interest in future projects

• Shell milestone payments to Arrow Energy International will be replaced with US$25 million loan, contingent upon obtaining second production sharing contract

Support of PetroChina• PetroChina and Dart Energy have made statements of co-operation (on a non-exclusive

basis) on CBM opportunities in China

• PetroChina will also support the award of Dajing PSC to Dart Energy

Additional enhancements conditional upon Acquisition Scheme

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Dart Energy’s business will be led by Arrow Energy’s proven management team

– Global CSG experience

– Proven track record

Existing staff of Dart Energy across the Asian region to remain in place

Arrow’s management team will remain in place to drive Dart Energy growth strategy

Key Executive Current RoleProposed Dart Energy Position

Industry Experience

Nick DaviesCEO and MD

Arrow Energy, and AEI

• Chairman • ARCO/BP/Arrow

Simon PotterCEO/MD Elect of

AEI• CEO & MD

• BP/Vico/TNK/Hardman Resources

Graham YerburyCFO of

Arrow Energy• CFO • ARCO/BP/Arrow

Shaun ScottCEO of

Arrow Energy (Australia)• Executive Director • ARCO/EDL/Arrow

Stephen BizzellExecutive Director of Arrow

Energy• Executive Director • Arrow/Bow/Apollo

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$3.48 $3.49

$3.88

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

Previous close (5 March 2010) 1 months VWAP 3 month VWAP

• The cash acquisition proposal of $4.70 for the domestic business represents in itself, a substantial premium to the trading price of Arrow Energy (which included the value of Dart Energy) before the Shell / PetroChina approach was announced

35.1% 21.1%34.7%

(to March 5 2010) (to March 5 2010)

Notes

(1) As at March 5 2010, the trading day prior to the announcement of the non binding indicative bid by Shell / PetroChina

Cash proposal of $4.70

Additional value to shareholders from share in Dart Energy retained

(1)

Acquisition Scheme provides substantial premium…

(1) (1)

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2.393.08

4.274.70

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Shell 2008 transaction

implied value for

domestic business

(excluding milestones)

Shell 2008 transaction

implied value for

domestic business

(including milestones)

Broker price targets Shell / PetroChina cash

consideration

…and a material valuation uplift on domestic assets

Notes

(1) Based on 704.1 million diluted shares outstanding as at 1 June 2008. All payments from Shell have been converted at an exchange rate of A$0.95 to US$1.00

(2) Includes only upfront payments to Arrow totalling A$435m for the Australian upstream tenements

(3) Includes upfront and contingent payments to Arrow totalling A$644m for the Australian upstream tenements. Contingent payments have been discounted at a rate of 10%

(4) In addition to the upstream value implied from Shell 2008 transaction, includes a value for the power stations based on operating MW and applying comparable transaction multiples of $0.9m / MW

(5) $4.27 broker price target as at 5 March 2010 and backs out average broker valuation for Arrow International business (prior to Shell’s relinquishment of back-in rights)

(1,2,4) (1-4)

• Transaction delivers a material uplift to valuation of domestic assets when compared to previous Shell transaction

5Additional value to shareholders from share in Dart Energy retained

(5)

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• Land accumulation

• Exploration

• Reserves certification

• Pilot production

2000 – 2006 2007 – 2010 2010 and beyond

ExplorationAppraisal / first

ProjectsLarge scale

monetisation

Domestic pricing risk

Initial funding

Large scale reserve certification

Vertical integration

Technology

• Proof of reserves maturation capability

• Margin growth strategy

• Technology decisions

• Funding

• LNG offtake agreements

• Major project execution

• Exponential growth funding

LNG market dynamics

Shareholder dilution

Cost & labour challenges due to multiple LNG projects

Achieved Achieved

Ke

y R

isk

s

Evolution of Arrow and Queensland CSG

Risks outstanding

Shell / PetroChinadelivers value today

Ch

all

en

ges

& I

ss

ues

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Conditions of the Schemes

Demerger Scheme

• Independent expert’s opinion that the Scheme is in the best interests of Arrow Energy shareholders

• Arrow Energy shareholder approval (75% voting shares; 50% by number)

• Court approval of the Demerger Schemes

Acquisition Scheme

• Approval of Demerger Scheme

• Regulatory approvals including FIRB

• Chinese regulatory approvals including NDRC and SAFE

• No Arrow Energy prescribed events and/or material adverse changes

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Indicative demerger and acquisition scheme timetables

Key Milestones Indicative Dates

Scheme booklets lodged with ASIC mid May 2010

Dispatch of Scheme booklets early June 2010

AOE shareholder meetings mid July 2010

Demerger Scheme approved and implemented late July 2010

Court hearing Acquisition Schemes late July 2010

Implementation date Acquisition Scheme early August 2010

Dates indicative and subject to change

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$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Mar 05 Dec 05 Nov 06 Sep 07 Jul 08 May 09 Mar 10

Arrow S&P/ASX200

Arrow continues to deliver significant shareholder returns

5 Year Share Price Performance Represents Significant Return

March 18 2010 =$5.29

March 18 2005 =$0.40

Significant share price growth since listing in 2000

Value now realised in domestic business

Shareholders have upside through replication of strategy via Dart Energy

Management has a proven track record of delivering shareholder returns

Arrow CAGR

1 = 66%

Notes(1) CAGR = Compound Annual Growth Rate

S&P/ASX200 CAGR1 = 3%