Drillsearch Energy Limited (ASX:DLS) Release Half Yearly Report And Accounts, Revenue Up 203%

Sydney, Feb 25, 2011 AEST (ABN Newswire) - Drillsearch Energy Limited (ASX:DLS) (PINK:DRLLF) today released its half yearly report and accounts. The Company posted a 203% increase in revenue, a 44% reduction in interim loss, with drilling set to commence.

Highlights:

- Revenue from Operations were A$8.9m, up 203% on the December 2009 half-year (A$2.9m)

- Net loss of A$5.3m, compared to a net loss of A$10.5m in the December 2009 half-year, down 44%

- Net cash flow generated by operating activities of A$3.3m, compared to a net cash use of A$2.6m in the December 2009 half-year

- Strong balance sheet with A$9.1m in net cash and no debt

- Significant progress achieved in the divestment of non-core acreage (sale of interest in Circumpacific Energy Resources and ATP259P Naccowlah block)

- Drilling of five exploration wells in the Western Flank Oil Fairway (PEL 91) commencing in March

Managing Director Brad Lingo said:

"We are extremely optimistic about the prospects for Drillsearch in 2011. Our strategy remains clear - to be focused on the prolific, highly attractive Cooper-Eromanga Basin. Our exploration program in the Western Flank Oil Fairway is set to commence in March and all necessary equipment has been organised. We have five high potential exploration wells soon to be drilled which are situated in close proximity to our successful Chiton-1 discovery in PEL 91 and multiple commercial discoveries in adjoining permits. Any further drilling success in these locations will result in a short development time to first oil given existing infrastructure facilities are already in place."

"We are also putting a lot of effort in with Beach, our joint venture partner in the Wet Gas Project to move our existing discoveries in PEL 106B into development and production. The joint venture is looking at significant additional appraisal and development drilling later this year to support the overall development and moving these liquids-rich gas discoveries into commercial reserves and production. In all we expect a very active next twelve months in terms of drilling and development activities."

Financial Summary

The interim loss was derived from oil and gas production of 47,658 bbls and revenues of A$8.9m, which was 203% up on the same period last year. The increase in revenues was largely due to the sale in the period of the balance of inventory held in the decommissioned Jackson to Moonie pipeline coupled with first production from the Chiton Oil field in PEL 91 (11,636 bbls).

The widespread flooding of the Cooper Creek impacted production and resulting revenues.

Significantly the Chiton Oil field remained shut-in for much of the period due to the inundation of its access road. A new road was constructed west of flooding affected areas that allowed reinstatement of production from Chiton. With the construction of the new access road, Chiton oil production commenced in early November 2010 and has been uninterrupted from that time. Chiton is currently producing 207 bbls per day.

The balance sheet remains strong, with net cash of A$9.1m and no debt.

Forward Exploration and Development Plans

A five well drilling program is planned to commence in March 2011 in the highly prospective PEL 91 permit, in the Cooper-Eromanga Basin's prolific Western Flank Oil Fairway. The prospects have been covered by 3D seismic and Drillsearch is excited about the coming months of drilling activity.

Historical success rates when drilling on 3D seismic in the Cooper-Eromanga Basin have been over 50% in total and even higher for Drillsearch alone.

Our drilling program will be a period of intense activity and frequent newsflow. The expected drill time for each well is within 20 days, meaning the entire five well program should be completed within a relatively short time period.

In addition to this near-term drilling program, we are engaged in ongoing efforts to commercialise the liquids in our Wet Gas business. We are also looking forward to finally getting into significant activities in South West Queensland targeting the Inland-Cook Oil Fairway along the western margin of the Windorah Trough stretching from the Inland Oil Field in the North East down to the Cook and Cuisinier Oil Fields in the South West. Drillsearch holds a very significant position along this oil fairway covering four permit areas with ownership ranging from 66-100% interest in these blocks.

Contact

Brad Lingo Managing Director Ph: +61-2-9249-9600 Email: admin@drillsearch.com.au http://www.drillsearch.com.au