1. a placement by Sydney Gas to Lucas of 15% of its issued share capital, amounting to 52,505,665 shares at a price of 38 cents per share;

2. a technical services agreement (TSA) under which Lucas agrees to provide geological, petrophysical and other services to Sydney Gas for three years; and

3. a drilling services agreement (DSA) under which Lucas agrees to supply not less than two fully operated drilling rigs to Sydney Gas for not less than two years at commercial market rates.

In addition, subject to SGL shareholder approval, Lucas will be granted two tranches of options, each equal to 5% of the enlarged issued share capital of Sydney Gas, after the placement.

The first tranche will be exercisable at 60 cents per share after 24 months provided 2P reserves in the resource increase by at least 150 PJ.

The second tranche will be exercisable at 75 cents per share after 36 months provided 2P reserves have increased by 300 PJ.

In recognition of the close operating relationship between Lucas and Sydney Gas, Andy Lukas will resign from his current role as Lucas executive director, remaining on the board as a non-executive director, and join Sydney Gas as chief executive officer. Allan Campbell will join the Sydney Gas board as a non-executive director.

Allan Campbell said "As a foundation investor in Sydney Gas, we have long believed in its potential and further believed that Lucas' directional drilling technology and coal seam gas expertise would provid the solution to unlock the undoubtedly huge potential of the coal seam gas in the Sydney Basin."

"We are delighted to strengthen our ties with Sydney Gas and assist further in the commercialisation of its coal seam gas. We are already drilling at Camden where we have increased gas production by some 300% since commencing our involvement. We believe that our participation in the Hunter Project can add further significant value."

Dr John Saunders, executive chairman of Sydney Gas, said "Today's agreements are key steps in the development of Sydney Gas. We have potentially great resources in Camden and the Hunter. The involvement of Lucas, which has an outstanding record in coal seam gas, will provide the expertise and support that we need to make our joint venture with AGL the success that it deserves to be."