Elixir's Pompano Wells Back On-Stream & Ramping Up Production

Elixir Petroleum Ltd.

Elixir Petroleum Limited has provided an update on its U.S. production assets.

Pompano Field

Elixir has reported that following the shut-in of the two wells at Pompano as a result of the passage of Hurricane Ike in mid-September, production has been re-established at rates similar to that being achieved prior to the shut-in.

A further update regarding progress on Well #3 which is currently being drilled at Pompano will be made next week.

High Island Field

As previously reported, the unmanned production platform at High Island A-268 and the 5 kilometer pipeline to the Maritech regional processing facility did not suffer any material damage as a result of the passage of Hurricane Ike, although the two production wells at High Island were shut-in as a safety precaution, and to date remain shut-in.

The operator at High Island has received advice from the owner of the 480 kilometre High Island Offshore System pipeline ("HIOS") into which production from High Island is ultimately exported to shore, that following an inspection by a remotely operated vehicle of the offshore portion of the pipeline, further damage to the HIOS has been discovered. The pipeline owner has reported that during the passage of Hurricane Ike, a tanker ship appears to have dragged its anchor across the HIOS sales line at a point located approximately 18 kilometers NE of the High Island field.

Initial survey results indicate that approximately a 60 metre section of 42" pipeline has been damaged. The owner of the pipeline is undertaking further surveys on the HIOS, but at this stage has found no further damage. Repairs to the damaged line are the responsibility of the owner and Elixir has no obligations in this respect.

The pipeline owner holds replacement pipe and repair clamps in storage, but there is currently limited availability for barges in the Gulf of Mexico capable of picking up the pipeline to effect the repairs. The pipeline owner has provided an estimated time frame for repair to the HIOS of six weeks, depending upon barge availability. The two production wells at the High Island field will therefore remain shut-in in the meantime pending completion of the repairs to the HIOS.

Commenting on the announcement, Elixir's Managing Director, Andrew Ross, said, "The damage occasioned to the HIOS pipeline appears to be relatively minor, but will mean the High Island wells will remain shut-in until the pipeline is repaired. We expect to be in a position to immediately recommence production once the HIOS is operable.

"It is important to note that production from High Island is not lost as a result of the shut-in, but merely deferred. Monthly cash receipts from the Pompano Project are in the order of US $500,000, and at current prices, High Island is likely to add a further US $400,000 to US $500,000 per month when it comes back on stream.

"Elixir has a strong cash position of approximately A$9 million after allowing for our share of costs in relation to the current drilling activities at Well #3 at Pompano."