DIGITALX LIMITED — Capital/Financing Update 2011

Aug 28, 2011

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August 29, 2011

Acquisition of High Impact Prospect- West Klondike & Lyons Point Farm-down

Highlights

• Kilgore has agreed to acquire a 5% of working interest in a high impact exploration prospect in Louisiana

  • West Klondike is targeting 2 MMBL and 6 BCF (unrisked 4.8 MMBL/17 BCF)

  • Multiple pay sands with significant production on trend

  • Well anticipated to spud 2[nd] week of September and take 45 days to drill

• Lyons Point Exploration Prospect due to spud early September (10% WI)

The Board of Kilgore Oil & Gas (ASX: KOG) is pleased to advise that it has entered into an agreement to acquire a 5% working interest (WI) in the West Klondike Exploration Prospect, which covers an area of 640 acres in Iberville Parish, Louisiana. This prospect will be drilled to a total depth of 10,900ft and is expected to be spudded in October 2011 taking 30 days to reach its target depth. Kilgore has now gained exposure to 2 high impact prospects at a similar cost, with both prospects expected to be drilled in the next 2-3 months.

Under a swap agreement with Grand Gulf Energy Ltd (ASX: GGE), Kilgore has acquired a 5% WI in West Klondike through a farm-down of a 5% WI in Lyons Point to Grand Gulf (KOG retains a 10% WI). Kilgore will receive approximately $424,000 from Grand Gulf under the terms of the deal, as reimbursement of its proportionate share of prepaid drilling costs for the Lyons Point well already paid to the Operator.

Acquisition of 5% working interest in West Klondike

The West Klondike Prospect is a fault block closure which has been identified on 3D seismic data and is in close proximity to analogous offset production. The targeted sand sections are the Marg Tex, Lario and Upper and Lower Nod Blan, all of which produce in the fields highlighted on the sub regional map (Map 1). The likely resource potential is 2 million barrels of oil (MMBL) and 6 billion cubic feet of gas (BCF) with unrisked potential of 4.8 MMBL and 17 BCF gas. In addition to the main target there a larger, high pressure, prospect in the leased area that will require a separate deeper well. The target sands of this deeper feature (Bridas) have recently yielded a significant discovery approximately 2.5km to the North-East.

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Map 1

L e v e l 2 1 , A l l e n d a l e S q u a r e , 7 7 S t G e o r g e s T c e P e r t h W A 6 0 0 0 P h : + 6 1 8 9 3 8 9 2 0 0 0 F a x : + 6 1 8 9 3 8 9 2 0 9 9 w w w . k i l g o r e o i l a n d g a s . c o m . a u

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The West Klondike participation terms are favourable, with the Company paying 6.67% of the initial well and entry costs (~US$220,000) to earn its 5% WI. In a success case the Company’s share of completion costs are estimated to be a further US$50,000.

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Analogue fields

These are some significant analogue fields in proximity to the West Klondike prospect that establish the potential of the field, as shown below:

Klondike

• Stratigraphic production from Lario Sand only

• 3.8 MMBO and 3.4 BCF

Happytown Field

• Analogous structure, timing, depth and deposition – Marg Tex

• 5.3 MMBO and 54 BCF

• Sayou De Glaises Field

  • Analogous structure, timing and deposition – Marg Tex

  • 8.8 MMBO and 18.8 BCF

Log of Happytown Field Analogue

Lyons Prospect- Acadia Parish, Louisiana

Non Operator (10% WI)

Following the 5% WI farm-down deal with Grand Gulf Energy as detailed above, Kilgore retains a 10% WI and will recover approximately $460,000 of drilling costs already paid as part of the transaction.

The Lyons Point Prospect has a closure of circa 400 acres with a most likely resource potential is 3 MMBC (Million Barrels Condensate) and 60 BCF with upside potential of 4 MMBC and 80 BCF. The well will be drilled to a total depth of 16,300 feet, is expected to take 45 days to drill and is planned to spud in the second week of September 2011.

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The Lyons Point Prospect is a seismically defined, up thrown fault bounded structural closure. The objective section is provided by the prolific Oligocene Marginulina Texana (MT) 1, 2, and 3 Sands, which are projected to be together 700 feet thick. The MT sands are productive in several fields in the immediate surrounding area.

The critical southerly fault (brown on the diagram above) is the same fault that is proven to seal at the nearby Leleux Field, which has cumulative production of 5 MMBC and 300 BCF from the MT interval.

Production rates are estimated to be significant given adjacent analogue wells are producing at rates of 750 BC/D (Barrels Condensate per Day) and 15,000 MMCF/D (Million Cubic Feet Gas per Day). It is likely only four wells will be required to drain the structure.

The Company’s 10% WI share of the dry hole well and entry cost is US$923,000 which has been paid in full. The well is being drilled by Precision Drilling under a turnkey arrangement, which fixes the drilling costs. In a success case, the Company’s share of completion and facilities costs is estimated to be a further US$300,000.

The participation terms are favourable with the Company paying 13.34% to earn a 10% working interest. The net revenue interest is ~7.5%.

This prospect was chosen over numerous others due to the thorough work done by the operator and the mitigation of the critical risk elements by the presence of nearby production and the availability of good quality 3D.

The Board engaged an independent expert to review the prospect and concurs with expert’s opinion that this prospect has an excellent chance of success, in the region of 50-66%.

Participants in the Lyons Prospect are as below:

Kilgore Oil & Gas Ltd (KOG)Tango Petroleum Ltd (TNP)Verus Investments Ltd (VIL)Grand Gulf Energy Ltd (GGE)Other	Before Casing Point %After Casing Point %Initial WellInitial & Subsequent Wells
	13.3310.0023.0017.2520.0015.006.675.0037.0052.75
	100.00100.00

Disclosure

Kilgore Oil and Gas Ltd entered into the agreement with Grand Gulf Energy Ltd to undertake the transaction as detailed above in this announcement, Mr Charles Morgan as a director of both companies abstained from voting on the transaction.

For and on behalf of the Board

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