3rd October 2011

Dear Shareholder

YOUR DIRECTORS UNANIMOUSLY RECOMMEND THE IMPROVED ARROW OFFER OF $1.52 PER SHARE, IN THE ABSENCE OF A SUPERIOR PROPOSAL

The Board of Bow Energy Limited (“Bow” or “the Company”) last wrote to you on 24th August in relation to a proposal received from Arrow Energy Holdings Pty Ltd (“Arrow”) to acquire all the issued capital in Bow for $1.48 per share. Bow now advises shareholders that, following further discussions with Arrow, the offer price has been increased to $1.52 per share (“Revised Offer”) and Bow has entered into a Scheme Implementation Agreement with Arrow. Bow’s Board unanimously recommends the Revised Offer, in the absence of a Superior Proposal arising, and subject to an Independent Expert concluding that the Revised Offer is in the best interests of Bow shareholders.

What has occurred?

The Board and its advisers, Merrill Lynch and Wilson HTM, completed a review of all Bow’s options to maximise shareholder value. This process included weighing up the risks and benefits of different future scenarios for the Company, against a difficult global economic climate and volatile stock market. The three main paths considered by the Board for the future of Bow were:

1. Remain an independent ASX listed company and further develop its assets;

2. Introduce a joint venture partner to the projects of the Company;

3. Initiate or participate in a change of control transaction.

The conclusion that the Board reached after extensive analysis and consideration was that a change of control transaction for cash consideration would immediately crystallise significant value without the execution risk and significant funding requirements associated with further developing Bow’s assets.

The Board formed the view that, as a relatively small and successful player in the coal seam gas sector, Bow had reached the point where the involvement of a major industry player with significant financial resources and operational expertise was required to take the Company’s projects to the

next level.

Bow Energy Limited ACN 111 019 857, Level 26, 10 Eagle Street, Brisbane QLD 4000

Revised Offer

As noted above, following further discussions with Arrow the offer price has been increased from

$1.48 to $1.52 per share. On 26 September the Bow Board announced that it unanimously recommends the Revised Offer, in the absence of a Superior Proposal arising, and subject to an Independent Expert concluding that the Revised Offer is in the best interests of Bow shareholders.

The Revised Offer of $1.52 represents:

• A premium of 72% to the closing price of $0.885 on 19 August 2011, the last trading day prior to the announcement that Bow had received an indicative proposal from Arrow

• A premium of 58% to the three month volume weighted average price prior to 19 August

2011

Importantly, each Bow Director intends to vote in favour of the scheme in the absence of a Superior Proposal and subject to an Independent Expert concluding that the Revised Offer is in the best interests of Bow shareholders.

Scheme of Arrangement

Bow has entered into a Scheme Implementation Agreement (“SIA”) with Arrow, which sets out the terms on which Arrow will acquire all the issued ordinary capital of Bow via a Scheme of Arrangement (the “Proposal” or “Scheme”). For shareholders who wish to see further details of the Proposal, the complete SIA has been lodged with the ASX and is available on Bow’s website at

www.bowenergy.com.au.

The Scheme is subject to certain conditions, including Bow convening a meeting of Bow’s shareholders, where all shareholders will have an opportunity to vote on the Proposal. At this meeting, a majority of shareholders voting (in person or by proxy), and who represent at least 75% of the votes cast, must approve the Scheme for it to succeed.

You will receive a Scheme booklet in the mail in late November that will include full details of the Proposal, including the basis for the Bow Directors’ recommendation and an Independent Expert’s Report. The Scheme meeting is scheduled to be held in December 2011, and subject to the shareholder vote, the transaction would be completed shortly thereafter.

Shareholder Information Line

Bow has established a Shareholder Information Line if you have any further questions in relation to the improved, recommended cash offer from Arrow. The shareholder line is Toll Free Australia –

1800 623 855 or International +61 2 8256 3375.

Yours sincerely

Howard Stack

Chairman

Bow Energy Limited ACN 111 019 857, Level 26, 10 Eagle Street, Brisbane QLD 4000