CHALLENGER GOLD LIMITED — Capital/Financing Update 2012

Feb 26, 2012

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27 February 2012

ASX release

Operations Update – Mercury Stetson

• Drilling successfully kicked off cement plug

• Drilling progressing as planned

27 Feb 2012: Challenger Energy Ltd (“Challenger”) is pleased to announce that well has successfully kicked off the cement plug and is currently drilling ahead with all operations progressing as planned.

After a successful “Kick off” from the cement plug, and following a trip to change motor and bit, drilling recommenced at a measured depth (MD) of 4 999 ft at midnight on Saturday night 25 February 2012. Directional steering tools and a “button” bit are currently being utilised to steer the new well bore away from the existing well bore before turning back to fully vertical at ~ 6 600 ft MD.

As at 6.00 am 27 February 2012, the hole was at 5 490ft depth, with a total of 491 ft drilled in the past 36 hrs, with drilling rates in the past 8 hours averaging ~ 20 ft/hr. Based on current drilling rates, Challenger expect to trip out of the hole and change to a high performance PDC bit later this week.

The well plan is to drill the hole through the Barnett and Woodford shales and then log and case the new sections of well.

Following demobilisation of the drilling rig, fracture stimulation and production testing equipment will be mobilized to site to conduct these operations.

Prospect Overview.

The Mercury Stetson Prospect contains two of the premier shale formations in the US – the Woodford and Barnett shales – in geological extensions of the core producing areas in the Arkoma and Fort Worth Basins.

The key well on the Mercury Stetson Prospect was drilled in 1978 before the development of any of the shale gas plays in the US. It identified that both shales present in the well had the same log signatures, geochemical characteristics and thicknesses as those found in the core producing areas of both the Barnett and Woodford shales.

Based on the technical information available from this well, the two shales are estimated to contain in excess of 360 BCF/sq mile of gas in place. Interpretation of the current seismic data suggests that the prospect area is ~ 55,000 acres (85 sq miles).

Address Level 17, 500 Collins Street, Melbourne, VIC, 3000 Tel + 61 3 9614 0600 Fax +61 3 9614 0550 Email admin@challengerenergy.com.au Web www.challengerenergy.com.au ACN 123 591 382

The core objective of the testing program is to demonstrate that gas can be delivered to surface from both the Barnett and Woodford shales in the prospect area. This is the critical piece of information that will underpin the validity of the massive gas in place and commercial potential of the prospect area.

Challenger Energy has agreed to farm in to earn 50% of the Mercury Stetson Prospect which includes the Barnett and Woodford shales - both proven shale formations. The prospect which is potentially up to 55,000 acres (86 sq miles) has a massive potential gas in place with OGIP estimated at 360 BCF/sq mile. The JV area initially includes 26,000 acres contiguous land position with three pipelines across prospect with an initial target of 35,000 acres across the prospect.

Further updates will be provided in due course.

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Mr Paul Bilston Managing Director P: 0402 060 405

About Challenger

Challenger Energy Limited is a public company listed on the Australian Stock Exchange (ASX:CEL) with a growing portfolio of exciting Oil and Gas exploration opportunities in South Africa and the USA.

Challenger’s strategy is to utilise its network of global contacts to identify and acquire material upstream oil and gas exploration opportunities at a low entry cost which enables it to focus its exploration expenditure on drilling wells and other direct expenditure.

Challenger is targeting opportunities where it can act as operator, and which have significant scale and materiality (more than 1 TCF of gas or 10 Million bbl of Oil). The scale of these opportunities provides potentially significant upside for the company.

Forward Looking Statements

This announcement contains “forward-looking statements”. Such forward-looking statements include, without limitation: estimates of future earnings, the sensitivity of earnings to oil & gas prices and foreign exchange rate movements; estimates of future oil & gas production and sales; estimates of future cash flows, the sensitivity of cash flows to oil & gas prices and foreign exchange rate movements; statements regarding future debt repayments; estimates of future capital expenditures; estimates of reserves and statements regarding future exploration results and the replacement of reserves; and where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to oil and gas price volatility, currency fluctuations, increased production costs and variances in reserves or recovery rates from those assumed in the company’s plans, as well as political and operational risks in the countries and states in which we operate or sell product to, and governmental regulation and judicial outcomes. For a more detailed discussion of such risks and other factors, see the Company’s Annual Reports, as well as the Company’s other filings. The Company does not undertake any obligation to release publicly any revisions to any “forward looking statement” to reflect events or circumstances after the date of this release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.