Elixir Expects Mid-February Guinea Spudding

UKCS Block 15/13b - Guinea Prospect (EXR 13.125%)

Elixir Petroleum Limited said that its next North Sea exploration well to be drilled on the Guinea prospect in Block 15/13b by the principal farminee, Nexen Petroleum UK, is now expected to spud around mid February. Guinea is the second well of a multi-well program being undertaken by Nexen using the Borgsten Dolphin semi-submersible drilling rig.

Nexen commenced drilling its first well in Block 20/1 in mid-October. The rig is still on location and estimated to complete the current well in early-mid February. Sustained periods of bad weather have adversely affected activities across the whole of the North Sea this winter, including causing significant delays to Nexen's operations.

Although these slippages in spudding the Guinea well are frustrating, the circumstances are beyond Elixir's control and incur no cost penalty to the Company. Under the terms of the farmin agreement between the license holders, Elixir and Granby Oil & Gas plc, and the two farminees, Nexen and Gas Plus Italiana SpA, Elixir and Granby will be free-carried through the drilling of the Guinea well.

Guinea is a four way dip-closed Palaeocene prospect which lies on-trend with producing oil fields to the southeast including Balmoral and Dumbarton. Nexen holds interests in a cluster of blocks adjacent to Block 15/13b, including Block 15/18b to the south that hosts the Yeoman oil discovery. Should Guinea prove successful, its location close to existing production infrastructure should enhance an early field development.

On an unrisked basis, the Guinea structure is estimated to contain prospective resources of between 65 million (low case) and 120 million (high case) barrels of oil on Block 15/13b if hydrocarbons are present, with a mid case estimate of 91 million barrels. Projected drilling time for the well is approximately 21 days on a dry hole basis.

Block 211/18b (EXR 80%)

Good progress was made during the quarter towards farming-out the drilling of the Leopard prospect on Block 211/18b. The Company anticipates that an agreement with a major farminee will be finalized shortly.

The Company commissioned the acquisition of two long offset 2D seismic lines from TGS-NOPEC as part of the latter's North Sea Renaissance (NSR) regional survey conducted during the second half of 2006. Two key lines linking Leopard to its Norwegian analog, the Borg oil field, and also to the Jaguar well in Block 211/22b were acquired and processed with the primary objective of de-risking the Leopard prospect.

The results from this investigation are considered very encouraging for the prospectivity of Leopard and were presented to potential farminees at the DTI's Prospect Fair held in London in mid December.

Block 211/8b (EXR 80%)

Located to the northeast of the Leopard block, Block 211/8b contains the Panther prospect which has the potential to host hydrocarbons at both the Upper Jurassic and Lower Cretaceous horizons. Detailed technical work in preparation for a concerted farmout campaign was completed by year-end allowing active marketing to commence.

Block 211/22b (EXR 40%)

Results of post-Jaguar technical studies were presented by the block operator, DNO, at a partner's meeting held in Oslo in late November. The fact that the Jaguar well, 211/22b-5, drilled in February 2006 intersected residual oil in Middle Jurassic (Brent) sands has enhanced the Brent prospectivity of the block.

Ongoing technical work is aimed at fully evaluating this Brent potential as well as the remaining Upper Jurassic plays within Block 211/22b.

24th Seaward Licensing Round

The award of successful applications in the 24th UKCS Licensing Round remains pending with no recent news from the DTI on a likely announcement date. The award process in this annual round has been delayed for about three months so far by several issues. It is understood that environmental groups are challenging the award of several newly-offered offshore licenses in Cardigan Bay in the Welsh Assembly and potentially through the European Union.

The vast majority of 24th Round applications including those made by Elixir and its partners are outside of such sensitive areas. It is hoped that the awards will be made soon, even if this means withholding those licenses in dispute.

22nd Round License Relinquishments

Five 22nd Round Promote licenses that Elixir held with two partners in the Central North Sea reached their second anniversary in December 2006. Under the Promote license terms, a firm drilling commitment or substantial work program was required by the DTI to retain each license for a further two years.

License P1212 covering Block 15/13b has been converted to a Traditional license with a firm commitment to drill the Guinea well.

Elixir has relinquished its interest in three of the other licenses due to the inability to secure farmin partners before the DTI's two-year deadline. The status of the fifth license, P1211 over Block 14/14b, remains unresolved. Although Elixir has relinquished its interest, it has the option to re-enter the license if a proposal to the DTI is accepted.

Although a number of the more marginal licenses have now been given back to the DTI, the Company still retains an attractive exploration portfolio with interests in eight UKCS licenses. Prospects spread across these licenses are estimated to contain total unrisked prospective resources of 262 million barrels of oil at the mid case level, if hydrocarbons are present. This volume translates to 54 million barrels on a risked basis.

The remaining prospects in the Company's portfolio represent a good diverse mix of geological play types located in all three main basins of the UK North Sea.


Annual General Meeting

The Company held the second annual general meeting since its 2004 ASX listing at the Sheraton Hotel in Perth, Western Australia, on Friday November 17. All five resolutions put to the meeting were passed without amendment.

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