Oil

The Company is exploring and developing new low-risk, shallow oil projects in the prolific Western Flank Oil Fairway, targeting numerous, high-return oil exploration projects to drive short-term growth. Drillsearch has existing oil production which provides ongoing cashflow. This cashflow helps fund the Company's growth projects.

Current Activities

A five-well exploration program in PEL 91 commenced in May 2011 in the Western Flank Oil Fairway. Four out of the five wells drilled were successfully and have been cased and suspended as future oil producers. A sixth well, Basham-1 was added to the exploration program and this well was also cased and suspended as a furture oil producer.

In 2011 the PEL 91 Joint Venture completed the 434km² Aquillus 3D seismic survey which addressed further exploration prospectivity in the block. The new survey covered over 20 Namur Sandstone oil prospects previously identified on 2D seismic as well as potential prospective Birkhead Formation plays immediately south of the Wirraway, Growler and Snatcher oil discoveries.

Wet Gas 

Wet Gas is natural gas that contains significant amounts of liquid hydrocarbons - condensate (a very light oil) and LPG's. Drillsearch has 10 existing wet gas discoveries and is focused on developing and commercialising them. The Company also holds significant wet gas exploration upside with the potential development of these discoveries significantly contributing to revenue generation over the long-term.

Current Activities

During the December quarter 2011 the PEL 106B Joint Venture (Drillsearch 50%, Beach Energy 50% and Operator) signed a Gas Sales Agreement (GSA) with the South Australian Cooper Basin Joint Venture (SACB) (Santos 66.60%, Delhi Petroleum 20.21% and Orgin Energy 13.19%). The GSA is on on interruptible basis for a term to 30 April 2013 subject to a minimum quantity to be taken by the SACB Joint Venture,

Production of wet gas from the Middleton and Brownlow Pilot Project and sales to the SACB Joint Venture commenced in early January 2012. The initial production rate post commissioning is expected to be sustained at 25 mmscf/d raw gas comprising about 15 TJ/d sales gas and 1,250 bbls/d of LPG and condensate, higher than previous expectations.

As a result of the GSA, Beach and Drillsearch agreed to a four well drilling campaign in PEL 106B. This campaign commenced with Baird-1 which was cased and suspended for future evaluation of potential deep coal seem gas and tight oil bearing sands. 

Unconventional

Drillsearch has identified significant unconventional resources while undertaking the Wet Gas exploration program. The unconventional resource lays in the deeper coal seams, shales and tight gas sands throughout the Cooper-Eromanga Basin. The Company is focusing its unconventional exploration activities on two key project areas; the Central Cooper Basin - Nappamerri Trough Shale Gas Fairway, and in the Western Cooper Basin Unconventional Gas Fairway. The prospective unconventional resource zones in each of these project areas have the potential to contribute significantly to Drillsearch's long-term growth potential.

Current Activities

In July 2011 Drillsearch announced that it has formed a strategic Joint Venture with QGC a BG Group company, to explore and develop unconventional shale and tight gas resources in the Nappamerri Trough Shale Gas Fairway and are eagerly awaiting the award of ATP 940P which is located in the south western area of the Queensland Eromanga Basin. The permit covers an area of 2,545km² and is located in the heart of the Nappamerri Trough Shale Gas Fairway. 

The Joint Venture involves QGC farming into, and acquiring, a 60% interest in DLS's strategically located ATP 940P covering over 2,545km²of the Central Cooper Basin Nappamerri Trough Shale Gas Fairway. Beach Energy has recently booked 2TCF of Sales Gas Contingent Resource in permit PEL 218 which is immediately adjacent to Drillsearch's ATP 940P. The Joint Venture is encouraged and the Company is looking to mirror if not better this result.

In November 2011, ATP 940P was formally awarded to Drillsearch by the Queensland Government. The commencement of the ATP 940P Joint Venture with QGC is subject to approval by the Governement of the transfer of the interest in the permit to QGC. 

Geological and geophysical work has been ongoing. In addition, Drillsearch is continuing with its plan to acquire a large 3D seismic survey in ATP 940P. 

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