Drillsearch Energy Limited (ASX:DLS) Substantial Western Cooper Basin Gas And Liquids Project Resource Upgrade

Sydney, Oct 27, 2009 AEST (ABN Newswire) - Drillsearch Energy Limited (ASX:DLS)(PINK:DRLLF) is pleased to announce substantial increases in the resource estimates for the Western Cooper Gas & Liquids Project ("WCGL Project"). The project is based on the company's gas and liquids discoveries in PEL 106. Drillsearch owns and operates 100% of the eastern portion (503 km2) of PEL 106 and the south west portion of PEL 106 is the Beach Farmin Block held by Beach (50%) and the company (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, Mr 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"), a leading independent international energy advisory group, and are in addition to the resource estimates reported on 30 June 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 completed a further assessment of the exploration potential within PEL 106 ("Prospective Resources"). With the completion of this work, Drillsearch 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," Mr Lingo said. The project plan is discussed in more detail below.

"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." Mr. 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.

Table 1 summarises the estimated Contingent Resources for the WCGL Project (PEL 106) as estimated by Drillsearch. These resource estimates have been confirmed in the audit review conducted by GCA and are set below as shown in the GCA report.

TABLE 1CONTINGENT RESOURCES FOR WESTERN COOPERGAS & LIQUIDS PROJECT (PEL 106)AS AT 1ST OCTOBER-------------------------------------------Gross (100%)              1C     2C     3C-------------------------------------------Sales Gas (Bcf)          20.2   41.3   78.3Condensate (MMBbl)        0.9    1.9    3.7LPG (Mtonnes)            53.1  106.8  199.6Total (MMBOE)             5.2   10.7   20.3-------------------------------------------DLS Net Working Interest-------------------------------------------Sales Gas (Bcf)          11.8   24.4   47.1Condensate (MMBbl)        0.6    1.2    2.4LPG (Mtonnes)            30.0   61.0  115.6Total (MMBOE)             3.1    6.4   12.3-------------------------------------------

Table 2 summarises Drillsearch's estimated Prospective Resources for the best three prospects in PEL 106 as reviewed in the GCA report. A complete table of all the prospects in PEL 106 is contained in the GCA report.

TABLE 2ESTIMATES OF PROSPECTIVE RESOURCES(BEST CASE) FOR WESTERN COOPERGAS & LIQUIDS PROJECT (PEL 106)AS AT 1ST OCTOBER---------------------------------------------------Prospect -    Sales Gas  Condensate    LPG    GCoS*Gross 100%     (Bcf)      (MMBbl)   (Mtonnes)  (%)---------------------------------------------------106P-28         24.3       0.89       81.8     34106P-27         23.8       0.87       80.1     34106P-22         20.5       0.75       69.0     31---------------------------------------------------Prospect -DLS Net WI%---------------------------------------------------106P-28          9.9       0.36       33.6     34106P-27         11.9       0.43       40.1     34106P-22         15.1       0.55       50.8     31---------------------------------------------------* Defined at the end of this ASX Release

Project Financial Potential

The Contingent Resources represent a significant revenue opportunity for the company.

Table 3 sets out the revenue potential for the WCGL Project:

TABLE 3WESTERN COOPER GAS & LIQUIDSPOTENTIAL REVENUES---------------------------------------------------Contingent Resources & Revenues   1C    2C     3C---------------------------------------------------Gross BOE (MMBBLS)               5.2   10.7   20.3Revenues - Gross ($MM)           166    342    650DLS Net BOE (MMBBLS)             2.8    5.8   11.2Revenues - DLS Net ($MM)          90    186    358---------------------------------------------------

These revenue projections are based on an economic barrel of oil equivalent price of A$32/bbl ("EBOE reference price") assuming a current oil price of USD 75/bbl and an AUD/USD exchange rate of AUD 0.85. Approximately 75% of these revenues come from liquids sales rather than gas. This price is based on interconnection with the regional gas gathering system in the Western Cooper Basin and is consistent with previous arrangements Drillsearch was able to secure for Smegsy Gas Field connection to the system and associated sales.

It is significant to note that these revenue estimates are based on actual resources that have been discovered and several of the discoveries (Middleton and Udacha) are held under petroleum retention licenses pending commitment to an overall field and project development plan.

If the WCGL Project proceeds with a standalone gas development the potential revenues for the project are expected to be significantly higher. This benefit of potentially higher revenues would be offset by higher field development costs for standalone gas processing and pipeline facilities. With the potential of developing a much larger resource base the development of a standalone development becomes an increasingly attractive alternative.

The endorsement of the Prospective Resources potential of the WCGL Project in the GCA report highlights the significant economic potential of the project. Based on the Best Estimate Prospective Resources for the best three prospects set out in Table 2, the project has additional unrisked revenue potential of A$512 million based on 16.0 MMBOE at the EBOE reference price.

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 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 have already approved this work. In parallel, Drillsearch is planning to complete and test the Paprika and Cadenza discoveries in the PEL 106 area held 100% by Drillsearch. 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 holds the gas marketing rights for the WCGL Project for both the 100% Drillsearch owned PEL 106 area and for the Beach Farmin Block. Drillsearch has previously successfully negotiated gas sales to the SACBJV from the Smegsy Gas Field and connection to the joint venture pipeline system. Drillsearch 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 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 2 additional exploration wells should be drilled in PEL 106 over the next 6 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.

For the complete Drillsearch Energy ASX Announcement, please click the link below:

http://www.abnnewswire.net/media/en/docs/61643-ASX-DLS-570222.pdf

Contact

Brad Lingo Managing Director Tel: +61-2-9241-4440