Elixir Outlines 2007 Drilling Program

Elixir Petroleum said it is looking at opportunities to diversify its asset base with production or near term development projects, both in the North Sea and elsewhere. Production would complement the company's high impact exploration activity and provide balance and cashflow.

The company continues to pursue its focused strategy of high impact exploration by participating in an active North Sea drilling campaign.

In a letter to shareholders, the company said that even though the first three exploration wells it drilled over the past nine months have been unsuccessful, the company was disappointed but not discouraged. Elixir says it will push on with more exploration across its existing North Sea portfolio as well as looking for new opportunities.

Elixir participated in the Muness farm-in well in Block 21/4b drilled by Oilexco in December. Whilst Muness was unsuccessful, the farm-in route is a valid one to extend our interests by providing additional drilling exposure. Of course any farm-in must stack up after detailed pre-drilling technical evaluation.

Farm-out campaigns are underway for our Granby alliance licenses in the Central North Sea as well as our Leopard prospect in the Northern North Sea.

The much-watched Jaguar well was drilled in Block 211/22b by our farminee partner, DNO. The well failed to find oil or gas in the primary target zone but did encounter oil shows in a deeper formation.

Forward Drilling Plans

Post-Jaguar the company is keen to continue our active North Sea exploration program by drilling on a number of the prospects in our license portfolio. Although we do not presently have a firm well commitment, we are pursuing more exploration activity on three separate fronts.

First we are making good progress with our alliance partner, Granby Oil & Gas, towards farming out some of the 22nd Round licenses that we jointly hold in the Central North Sea. Second we are actively marketing our Northern North Sea block which hosts the Leopard prospect for farm-out and also preparing the Panther prospect for farm-out. Third we shall continue to assess numerous farm-in opportunities where we could gain an interest in another company's license area.

By this triple front approach we are hopeful of drilling 1 or 2 more wells in the second half of 2006 with a further 2-3 wells next year.

24th UKCS Licensing Round

The latest annual offshore UK licensing round has just been announced with applications for 24th Round licenses due for submission by mid-June. More than 1,400 blocks are up for grabs in this latest round in the North Sea, Atlantic Margin and East Irish Sea. We have already commenced work purchasing data and identifying prospective blocks for application together with our partners. The actual license offers are expected to be announced around mid-September.

New Opportunities

We are also seeking producing or near-production projects to add to Elixir's asset base. Such projects would not only add diversity and balance to our portfolio but also provide the company with cashflow. Many options are available to grow our company in addition to through the drill bit and farmins. These include asset and corporate acquisitions.

However we are conducting this search in a sensible manner being careful to seek assets with upside and ones that will add significant shareholder value. Most of the North Sea assets that have been put up for sale recently have been marketed by public auction. We would prefer to avoid this route to buy producing assets as the auction process often induces successful buyers to pay some heady prices.

Be assured that we do not intend to shift from our strategy of drilling high impact exploration wells. But the addition of production would complement this higher risk exploration activity and make your company into a fully-fledged E&P (exploration and production) oil and gas company.

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