Drillsearch Energy Limited (Drillsearch Energy) announced substantial increases in the resource estimates for the Western Cooper gas and liquids project (WCGL project). The project is based on the company's gas and liquids discoveries in PEL 106. Drillsearch Energy owns and operates 100% of the eastern portion (503 squarekilometers) of PEL 106 and the south west portion of PEL 106 is the Beach Farmin block held by Beach Petroleum Limited (Beach Petroleum) (50%) and Drillsearch Energy (50%).

“Our next steps will be to pursue a programme of extended production testing on a number of the existing discoveries in conjunction with working to secure commercial sales arrangements for the project,” Managing Director, Brad Lingo said.

“Completion of this work has allowed the company to formulate a forward exploration plan to build upon the Contingent Resource base we have already established in PEL 106,” he said.

These increases have been independently audit reviewed by Gaffney, Cline & Associates Pty. Limited (GCA), an international energy advisory group, and are in addition to the resource estimates reported on June 30, 2009. These prospective resources measure the potential increase in resources possible through further exploration drilling and represent a material potential scale for the WCGL project.

The review completed by GCA follows on from the initial review by GCA which,for the WCGL project, considered only contingent resources. Following the positive results from the initial review, Drillsearch Energy completed a further assessment of the exploration potential within PEL 106 (Prospective Resources). With the completion of this work, Drillsearch Energy commissioned GCA to conduct an audit review of the company’s assessment of the Prospective Resources and risking in the project. The GCA report has been prepared in accordance with the society of petroleum engineers (SPE) petroleum resources management system.

“These are significant Prospective Resources and further support the plan to develop processing and transportation facilities for the WCGL project. These are exciting results and imply that we are close to sanctioning the project,” Lingo said.

“The seismic interpretation indicates that there is a good probability that the contingent resources in PEL 106 will increase significantly through additional exploration drilling. The company’s Prospective Resource assessment and the GCA audit review fully support this view.” Lingo added.

“Given our success in PEL 106 to date, we consider this play fairway low risk and GCA agrees with this assessment,” he said.

Project Plan

The GCA report has provided the company with independent confirmation of the discovered gas and liquids resources and the additional low risk exploration potential within PEL 106. The review has assisted Drillsearch Energy in formulating an exploration and development plan for the project. This plan can be broken down into three main components:

– Extended Production Testing of Existing Discoveries – The next stage of the development of the project will involve the extended production testing (EPT) of the Brownlow and Canunda gas discoveries in the Beach Farmout block. Beach Petroleum as operator and Drillsearch Energy have already approved this work. In parallel, Drillsearch Eenrgy is planning to complete and test the Paprika and Cadenza discoveries in the PEL 106 area held 100% by Drillsearch Energy. It is anticipated that the EPT projects will be undertaken over the next quarter. Successful completion of the EPT projects will provide increased confidence in the full development of these fields and entering into gas and liquids sales arrangements.

– Gas and Liquids Marketing – Drillsearch Eenrgy holds the gas marketing rights for the WCGL project for both the 100% Drillsearch Eenrgy owned PEL 106 area and for the Beach Farmin block. Drillsearch Energy has previously successfully negotiated gas sales to the SACBJV from the Smegsy gas field and connection to the joint venture pipeline system. Drillsearch Eenrgy has initiated preliminary discussions with the SACBJV seeking to secure similar arrangements. The company is endeavouring to secure these arrangements over the next several months but the timing of securing these arrangements is subject to reaching agreement with the joint venture. In the alternative Drillsearch Energy continues to evaluate stand-alone options independent of the existing joint venture facilities.

– Additional Exploration and Appraisal Drilling – In parallel with the EPT testing programme and the gas marketing activities, the company is currently determining the exploration programme for PEL 106 through the end of the current financial year. Ideally, the company believes that at least two additional exploration wells should be drilled in PEL 106 over the next six months to establish additional Contingent Resources to underpin the WCGL project. The completion of the PEL 106 prospectivity review and endorsement of the Prospective Resources by GCA identified in the review has provided the company with the confidence to move forward with this programme and which prospects to focus on.