ELIXIR ENERGY LIMITED — Capital/Financing Update 2009

May 5, 2009

ASX ANNOUNCEMENT

ABN 51 108 230 995

6 May 2009

Company Announcements Platform Australian Securities Exchange Level 4 20 Bridge Street SYDNEY NSW 2000 By E-Lodgement

SALE OF SUBSIDIARY AND INTEREST IN BLOCK SL-4

Elixir Petroleum Limited (“Elixir”), the international oil and gas exploration and production company, announces it has sold its shareholding interest in its wholly owned subsidiary, Elixir Petroleum (UK) Limited (“EP(UK)”) to Prontinal Limited (“Prontinal”).

The only asset held by EP(UK) on its sale to Prontinal was its interest in Block SL-4, located offshore the Republic of Sierra Leone. The sale of EP(UK) does not involve or affect any of Elixir’s UK licence interests. The consideration paid in respect of the sale comprised a cash payment of approximately US$250,000 and the grant of a US$5 million overriding royalty interest on Block SL-4.

Background

EP(UK) acquired a 15% interest (with an option to acquire a further 20%) in Block SL-4 in February 2008 and also assumed operatorship of the Block. The basis for the investment in Block SL-4 was that it represented entry into a prospective frontier exploration opportunity on ground floor terms, it required a modest capital commitment on the part of EP(UK), and was therefore in keeping with Elixir’s overall exploration strategy.

The project objectives agreed prior to entry into Block SL-4 were as follows:

• The immediate commencement of the acquisition of a 3D seismic survey, which was to be fully funded by Prontinal;

• The processing and interpretation of the 3D dataset by the end of 2009;

and if suitable prospects were mapped,

• To thereafter seek to farmout the licence to an industry participant on the basis of a well commitment.

Non-performance by Prontinal of its contracted obligations has meant the original project objectives and licence conditions have to date not been met. Management considers that

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under current arrangements these conditions are unlikely to be met prior to the expiry of the licence term in August 2009. For some months now the project has been burdened by a number of legal actions relating to performance issues. These actions include an arbitration procedure commenced by a seismic contractor in relation to the acquisition of the 3D seismic data on Block SL-4 (the “Dispute”), to which EP(UK) was recently named as a co-respondent with Prontinal. EP(UK) also has a legal action in progress against Prontinal.

Whilst Block SL-4 is considered to be an interesting frontier exploration opportunity, in light of the above matters, the possible increased financial exposure to EP(UK) during a more difficult international market for exploration and the various legal actions preventing the project from moving forward, it was considered prudent to accept the offer received.

Sale Terms

The consideration received by Elixir comprised a cash payment of US$254,663 (which substantially represents the funds advanced by Elixir to EP(UK) in respect of project costs incurred on Block SL-4 to date) and the grant by Prontinal to Elixir of an overriding production royalty interest on Block SL-4, capped at US$5 million. The royalty will be payable by Prontinal (or its assigns) from the proceeds of sale of any hydrocarbons produced from Block SL-4 in the event of a discovery on the Block and the subsequent commercialisation of that discovery.

Prontinal has also provided the Elixir Group with an indemnity in respect of any losses which may arise with respect to Block SL-4 or the Dispute. As a result of the completion of the sale of EP(UK), Elixir considers the group’s involvement in the Dispute to now be at an end.

Commenting on the announcement, Elixir’s Managing Director, Andrew Ross said:

“Elixir (UK)’s involvement in SL-4 has been a frustrating one and increasingly we have felt that necessary project objectives would be difficult for us to achieve ahead of licence expiry in August this year.

“In selling Elixir (UK), and therefore our interest in Block SL-4, we have substantially recovered project costs incurred to date, have some exposure to future upside to the extent of the royalty arrangement and have removed ourselves from the various disputes.”

He added: “Elixir remains well funded with over $8.7 million in cash, no debt and continuing cash receipts from production from our Gulf of Mexico projects.

“We have refocused our efforts on our existing portfolio of lower risk producing, appraisal and exploration assets located in the US and the UK. We are also considering other opportunities for expansion that have emerged as a result of the current market conditions.”

Yours faithfully,

Andrew Ross Managing Director Elixir Petroleum Ltd

Further information on Elixir can be found on the Company’s website at www.elixirpetroleum.com

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