Drillsearch Energy Limited (Drillsearch) and Ambassador Oil and Gas Limited (Ambassador) announced Wednesday that they have entered into a Bid Implementation Agreement under which Drillsearch will make an off-market takeover offer (Offer), via its wholly owned subsidiary Drillsearch (Central) Pty Limited, for all of the ordinary shares in Ambassador that it does not already have a relevant interest in.

The Directors of Ambassador have unanimously resolved to recommend that shareholders accept the Offer, in the absence of a superior proposal.

The Offer will be subject to certain terms and conditions which are summarized in Schedule 1. The full conditions to the Offer will be set out in the Bidder's Statement which Drillsearch expects to dispatch to Ambassador shareholders within the next 2-3 weeks. Ambassador has given its consent to the early dispatch of the Bidder's Statement. Ambassador will issue a Target’s Statement to Ambassador shareholders following dispatch of the Bidder’s Statement.

Significant Premium

Ambassador shareholders will be offered one Drillsearch share for every 5.4 Ambassador shares. The Offer implies a value of $0.271 (AUD 0.293) per Ambassador share based on the closing price of Drillsearch shares of $1.46 (AUD 1.58) Tuesday May 27, the trading day prior to this announcement.

The implied Offer price represents a substantial premium of:

• 50 percent to the closing price of Ambassador shares of $0.18 (AUD 0.195) on Friday May 23, the trading day prior to Ambassador entering into a trading halt pending announcement of the Offer
• 51 percent to the 3 month historical volume weighted average price (VWAP) of Ambassador shares of $0.178 (AUD 0.193); and
• 56 percent to the 6 month VWAP of Ambassador shares of $0.174 (AUD 0.188); and
• 60 percent to the 9 month VWAP of Ambassador shares of $0.169 (AUD 0.183)

Ambassador currently has approximately 142.1 million shares outstanding. At the Offer ratio, Drillsearch plans to issue approximately 26.3 million shares in order to acquire 100 percent of Ambassador, equivalent to 6.1 percent of Drillsearch’s issued share capital. Ambassador shareholders will own approximately 5.7 percent of Drillsearch if Drillsearch acquires 100 percent of Ambassador.

Consolidating Interests in Northern Cooper Wet Gas

The Boards of both Ambassador and Drillsearch believe that there is a compelling strategic rationale for the transaction, which consolidates Drillsearch’s dominant position in the Northern Cooper Wet Gas area by combining Ambassador’s 47.5 percent non-operated interest in PEL 570 with Drillsearch’s 80 percent owned and operated interest in the adjacent PEL 101.

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