ELIXIR ENERGY LIMITED — Interim / Quarterly Report 2011

Oct 31, 2011

ASX ANNOUNCEMENT

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QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2011

HIGHLIGHTS

• Completion of technical studies relating to unconventional prospectivity at Moselle Permit with a number of prospects mapped

• Moselle independent in-place hydrocarbon estimate published

• Conditional farmout of Tiger prospect in UK North Sea progressing

• Work continuing on new acreage acquisitions

Elixir is an internationally focused upstream oil and gas company with a diversified portfolio of petroleum interests across the exploration, appraisal, development and production lifecycle. Elixir holds interests in production leases located in the Gulf of Mexico and exploration licences onshore France and in the UK North Sea.

A summary of the Group’s activities for the September 2011 quarter is set out below.

EXPLORATION

France

Project Name: Moselle Permit Location: North-eastern France Ownership: 100% Working Interest Operator: Elixir Petroleum (Moselle) Limited

The Moselle Permit is a 5,360 km[2] (1.34 million acre) onshore exploration block located in north-eastern France. The Permit is prospective for a number of different play types, including conventionally reservoired oil and gas and unconventionally trapped hydrocarbons (i.e. tight gas sands and liquids rich gas shales).

Regionally, seventy one wells have penetrated the Triassic interval and a further twenty five wells have penetrated the Carboniferous interval, being the two primary targets in the basin. The wells have been drilled over a period spanning nearly 60 years and a number have recorded hydrocarbon shows throughout the target intervals. At least two wells are known to have produced gas to surface from the Carboniferous source rock interval. The Permit was awarded in January 2009 for an initial five year term. Elixir acquired operatorship in April 2010 and holds a 100% working interest in the Permit.

A large geological database containing information on over 100 regional wells has been assembled. The database contains over 455 kilometres of digitised wireline well log data from 25 wells, core and cuttings samples from over 2,800 metres of available core from six key wells and over 550 geochemical assays conducted on rock samples from eleven wells located in, and adjacent to, the Permit.

The database also contains 998 line kilometres of 2D seismic data over the permit which was reprocessed and reinterpreted during 2010 and early 2011. This quarter saw the selection of a further 314 line kilometres of 2D data which will be used to identify optimal drilling locations for mapped conventional prospects. Once completed, the total reprocessed and reinterpreted 2D seismic dataset will stand at 1,312 line kilometres. The balance of the remaining digital raw seismic data over the permit of approximately 1,500 line kilometres has also been purchased.

ASX CODE: EXR

Elixir Petroleum Limited

www.elixirpetroleum.com

ABN 51 108 230 995 Level 20, 77 St George’s Terrace PERTH WA 6000, AUSTRALIA T: +61 8 9440 2650 F: +61 8 9440 2699 E: info@elixirpetroleum.com

Mapping of a number of conventional hydrocarbon prospects and leads was finalised in the quarter and volumetric calculations have been produced. A total of nineteen conventional prospects and leads have been identified on the permit in the Carboniferous and Triassic sections. Netherland Sewell & Associates Inc. (“NSAI”) have independently verified the original conventional hydrocarbon-in-place volume at a mean unrisked Original Oil In-Place (“OOIP”) of 2.12 billion barrels (“Bbbls”). As there remains uncertainty to the hydrocarbon phase, an alternative mean unrisked conventional Original Gas In-Place (“OGIP”) of 2.18 trillion cubic feet of gas (“Tcf”) was determined.

In addition to the volumetric assessment of the conventional prospectivity, NSAI also completed their independent assessment of the unconventional resource potential on the permit. The undiscovered hydrocarbon-in-place for the unconventional resource has been determined by NSAI as a best estimate of 164.7 Bbbls of OOIP and 649 Tcf OGIP. As the Carboniferous section extends throughout all three hydrocarbon windows (oil, condensate, dry gas) the actual hydrocarbon phase produced will be somewhat dependant on well completion strategies.

Further studies designed to assess both the conventional and unconventional prospectivity within the permit area, including additional geochemical analyses, porosity/permeability analyses of sands, a detailed chemostratigraphy study and gravity data interpretation over approximately 28,400km[2] of land in, and adjacent to, the Moselle Permit, have all been completed and reports for these are being finalised. The studies are now at an advanced stage of integration and have significantly improved characterisation of the sub-plays within the permit and the hydrocarbon volumetric potential for both conventional and unconventional systems.

The remaining technical work is now focusing on well placement and it is anticipated that up to a 3 well drilling programme will target the majority of the identified and currently mapped conventional prospectivity within the permit. Over the next quarter activities will be focused on initiating the well permitting process. This will require engagement with the local authority regulator in Lorraine (DREAL) and the procurement of project management and well engineering services. At this stage we are targeting the commencement of drilling activities in the 2H, 2012.

The completion of the technical programme will also allow Elixir over the coming quarter to progress discussions with third parties interested in farming-in to the Moselle Permit.

Legislative and Regulatory Developments in France

In July 2011 legislation was enacted by the French Parliament prohibiting the use of hydraulic fracturing (“fracing”) as a stimulation technique within France. The new law also established a National Commission responsible for reporting to Government and Parliament on developments in unconventional resource exploration globally and on advances made in fracing technologies and practices. In addition, the new law required all exploration permit holder to submit a report to the French regulator confirming whether or not the permit holder proposed to use fraccing as part of its exploration programme. Elixir submitted its report in early September confirming that it was not its current intention to undertake fracing at Moselle. Following consideration of the report submitted, in mid-October the French Government confirmed the validity of the Moselle Permit.

The joint committee of the French Ministry of Industry and the Ministry of Ecology (“CGIET/CGEDD”). published the first part of a two part study into the possible economic, social and environmental impacts of unconventional hydrocarbon resource exploitation within France on April 2011. The report was supportive of the examination of unconventional oil and gas shale potential within France and proposed that certain regulated exploration activity be permitted so that the size, potential and commerciality of unconventional resources can be assessed. Elixir understands that the final instalment of the report of the CGIET/CGEDD is due to be published in December 2011.

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UK North Sea

Project Name: Tiger Prospect (Block 211/12b) Location: Northern UK North Sea Ownership: 100% Working Interest Operator: Elixir Petroleum (Europe) Limited

Block 211/12b is located in the northern sector of the UK North Sea, approximately 160 kilometres north east of the Shetland Islands, in a water depth of approximately 186 metres. The Block was awarded in February 2009 and has a licence term of four years.

The Block contains the Tiger prospect, which lies five kilometres to the east of the giant Magnus field. The Magnus field was brought into production in 1983 by BP with an in-place volume of approximately 1.5 billion barrels of oil. The target reservoir in the Tiger prospect is the Magnus Sandstone Member, over 500 feet of which was encountered in Well 211/12b-15. This well was drilled down-dip of the Tiger Prospect by BP in 1992. The equivalent sands in the nearby Magnus Field have excellent porosity and permeability characteristics. Evidence from the 211/12b-15 well also indicates the presence of a nearby hydrocarbon column. Reservoir presence and hydrocarbon charge for the Tiger prospect are considered to be low risks.

A conditional farmout agreement relating to Block 211/12b was entered into by Elixir on 8 July 2011. The terms of the farmout will see Elixir fully carried on partially promoted terms through the drilling of one firm exploration well and an optional appraisal well. Elixir has also secured an option to be fully carried on attractive terms through the development phase of the project in the event a commercially developable discovery is made. Upon the completion of the transaction, the farminee will pay to Elixir a substantial cash contribution towards past costs.

The completion of the Tiger farmout is conditional upon the farminee obtaining the consent of the UK Secretary of State for Energy and Climate Change (“DECC”) to act as operator of the licence and assignment of an interest in the licence. It was anticipated that the approval process would complete in early October 2011.

The proposed faminee requested in early October an extension to 14 October 2011 of its exclusivity period under the Farmout Agreement in order to meet the conditions precedent. This extension was granted, but the farminee was unable to obtain the consent of DECC by 14 October 2011. Elixir is continuing to work with the proposed farminee towards the satisfaction of the conditions precedent.

Project Name: Dumas Project (Block 30/25a (split)) Location: Central UK North Sea Ownership: 100% Working Interest Operator: Elixir Petroleum (Europe) Limited

Elixir acquired the southern part of Block 30/25 in the 26[th] Seaward Licensing Round. Block 30/25a contains a Lower Cretaceous and three Upper Cretaceous aged oil prospects that have been mapped on 2D seismic data.

Additional 3D seismic data over the Block area was purchased during the quarter and seismic interpretation and prospect mapping studies were ongoing. It is expected that a number of Cretaceous aged prospects will be worked up to drill ready status by the end of November, at which time a farmout of the opportunity will then be initiated.

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Gulf of Mexico

Project Name: Red Fish Prospect (Block 479-L N/2 and NE/4) Location: Brazos Area, Offshore Texas, USA Ownership: 25% Working Interest (18.125% Net Revenue Interest) Operator: AnaTexas Offshore Inc.

No significant additional activity was undertaken on this prospect in the September 2011 quarter.

APPRAISAL

UK North Sea Project Name: Mulle Prospect (Block 211/22b and 211/27d) Location: Northern UK North Sea Ownership: 40% Working Interest Operator: DNO (UK) Limited

The Mulle accumulation lies in Block 211/22b on the south-western extension of the Osprey ridge and is adjacent to the proposed Causeway oil field development.

During the quarter the Operator concluded discussions with stakeholders in the area in an attempt to establish an economically viable export route for a one well development of the Mulle accumulation. At the conclusion of the quarter, the discussions had not resulted in a viable solution being achieved.

Accordingly, the operator recommended to the joint venture that Blocks 211/22b and 27d be relinquished on the expiry of their licence term, which was 30 September 2011. Elixir and its joint venture partners agreed to the relinquishment of the respective licences and notification of this decision has been provided to DECC. A relinquishment report is being prepared by the operator for submission to DECC.

DEVELOPMENT AND PRODUCTION

Gulf of Mexico

Project Name: High Island Project (Block 268-A) Location: High Island Area, Offshore Texas, USA Ownership: 30% Working Interest (22.5% Net Revenue Interest) Operator: Peregrine Oil and Gas, LP

The High Island field is located approximately 60 kilometres offshore the east Texas coast in the Gulf of Mexico. The field commenced production in September 2007 from two wells and has produced to date in excess of 4.14 billion cubic feet (“Bcf”) of gas and approximately 181,500 barrels (“Bbls”) of condensate (100% project).

The following table summarises the production achieved from High Island during the September quarter:

High Island 268A		Gas Production	Gas Production	Gas Production			Oil Production	Oil Production	Oil Production
	Total Oct Qtr (MMscf)	Total Jun Qtr (MMscf)	Avg Daily Oct Qtr (MMscf/d)	Avg Daily Jun Qtr (MMscf/d)	Change (%)	Total Oct Qtr (Bbls)	Total Jun Qtr (Bbls)	Avg Daily Oct Qtr (Bbls/d)	Avg Daily Jun Qtr (Bbls/d)	Change (%)
Project (100%)	53.2	58.2	0.58	0.64	-8%	6,590	12,186	72	134	-47%
Elixir (30% WI)	16.0	17.5	0.17	0.19	-8%	1,977	3,656	21.5	40	-47%

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The field maintained an average uptime performance of 92% for the period. There were no safety incidents reported in the period.

The Bureau of Ocean Energy Management Regulation and Enforcement (“BOEMRE”) requires that a prescribed minimum flow rate of 50 BOPD be reached before a producing horizon can be temporarily or permanently abandoned. During the reporting quarter, Well A-1 produced above the BOEMRE prescribed rate at an average rate of approximately 71 BOPD. However, by the end of the reporting period, daily production was trending downwards and averaging approximately 60 bopd.

Our expectation is that production will decline to below 50 BOPD over the coming few months and at this time approval for the recompletion of the two wells at High Island over the shallower gas sands within each well will be sought from BOEMRE. A successful workover at High Island would result in a significant increase in gas production, sales revenue and cashflow from the field.

Project Name: Pompano Gas Project (Block 446-L SE/4) Location: Brazos Area, Offshore Texas, USA Ownership: 25% Working Interest (18.125% Net Revenue Interest) Operator: AnaTexas Offshore Inc.

The Pompano field lies within the Brazos Area of the Gulf of Mexico and is located approximately 6 kilometres offshore the east Texas coast and 110 kilometres south of Houston. The field has been producing from two wells, with production from three separate reservoirs. The field has produced approximately 6.35 Bcf of gas and 6,300 Bbls of condensate (100% project) since the commencement of production in March 2008.

As noted in the last quarterly report, we had observed some production difficulties emerging with the ‘B’ Sand in Well ATO#1 as it reaches the end of its productive life. In August, the zone ceased producing and a workover of the well was proposed by the operator. After careful consideration, Elixir advised the operator that it would not be participating in the workover. The other joint venture partners elected to proceed with the workover which was conducted as a non-consent operation, with Elixir’s interest in the well vesting in the participating partners. The workover was ultimately unsuccessful in re-establishing production from the well.

In September we were advised that production from the other main producing zone in the field the ‘E’ sand in Well ATO#2 had ceased production due to sand bridging. A workover operation was proposed by the operator given the presence of the workover vessel in the field. Upon consideration of the merits of the operation proposed, Elixir elected not to participate in the workover which was agreed by the other joint venture partners and conducted as a lease maintenance operation. By operation of the JOA, Elixir’s interest in the lease containing Well ATO#2 has vested in favour of the participating partners. We are advised that the workover operation was unsuccessful at re-establishing production from Well ATO#2.

At the date of this report, the Pompano field is not producing and we await the operator’s recommendations in respect of next steps.

FINANCIAL SUMMARY AND OTHER MATTERS

At the end of the reporting period, Elixir held cash on hand of approximately $901,000. Sales receipts from production received in the September 2011 quarter were approximately $124,000. In early October, the Company placed 28,300,000 new ordinary shares at a price of $0.04 per share to predominantly existing shareholders of the Company to raise $1.13 million (before costs). The Elixir Group remains debt free.

In early October, Mr Alan Watson was appointed to the Board as a non-executive director.

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Please find attached the Company’s Appendix 5B for the 3 month period to 30 September 2011.

Yours sincerely, ELIXIR PETROLEUM LIMITED

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Andrew Ross

Managing Director

For further information, please visit the Company's website at www.elixirpetroleum.com, or contact:

Information contained in this report with respect to the High Island and Pompano Projects and the Red Fish Prospect, was compiled by Elixir or from material provided by the project operators and reviewed by Elixir’s Operations Manager, Ian Lusted, BSc (Hons),SPE , who has had more than 15 years experience in the practice of petroleum engineering. Mr Lusted consents to the inclusion in this report of the information in the form and context in which it appears.

Information contained in this report with respect to the Mulle and Tiger Projects and the Moselle Permit was compiled by Elixir and reviewed by Elixir’s Exploration Manager, Iain Knott, BSc, MSc, FGS, AAPG, who has had more than 25 years experience in the practice of geology, including more than 5 years experience in petroleum geology. Mr Knott consents to the inclusion in this report of the information in the form and context in which it appears.

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Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

ELIXIR PETROLEUM LIMITED

	ABN 51 108 230 995 Consolidated statement of cash flows	ABN 51 108 230 995 Consolidated statement of cash flows	Quarter ended (“current quarter”) 30 September 2011	Quarter ended (“current quarter”) 30 September 2011
			30 September 2011
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows		Current quarter $A’000		Year to date (3.months) $A’000
		124 (224) ‐ (65) (314) ‐ ‐ ‐ ‐ ‐		124 (224) ‐ (65) (314) ‐ ‐ ‐ ‐ ‐
		(479)		(479)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐		‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
		‐		‐
		(479)		(479)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Appendix 5B Mining exploration entity quarterly report
1.13 Total operating and investing cash flows (brought forward)	(479)	(479)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows	‐ ‐ ‐ ‐ ‐ ‐	‐ ‐ ‐ ‐ ‐ ‐
	‐	‐
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(479) 1,320 60	(479) 1,320 60
	901	901

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		132
		‐
1.25	Explanation necessaryfor an understandingof the transactions
	Directors’ fees, salaries and rent. All payments are on normal commercial terms.

Non‐cash financing and investing activities

2.1 2.2	Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
	N/A
	Details of outlays made by other entities to establish or increase their share in projects in which the reportingentityhas an interest
	N/A

• See chapter 19 for defined terms.

Appendix 5B Page 2

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	‐	‐
	‐	‐

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	360
	‐
	‐
	300
Total	660

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	894	1,273
	7	47
	‐	‐
	‐	‐
Total: cash at end of quarter(item 1.22)	901	1,320

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
	‐	‐	‐	‐
	‐	‐	‐	‐

• See chapter 19 for defined terms.

Appendix 5B Page 4

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Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Total number	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy‐ backs, redemptions	‐		‐	‐	‐
	‐ ‐		‐ ‐	‐ ‐	‐ ‐
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy‐backs	188,988,472		188,988,472	Various	FullyPaid
		‐ ‐	‐ ‐	‐ ‐	‐ ‐
7.5 +Convertible debt securities(description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted		‐	‐	‐	‐
		‐ ‐	‐ ‐	‐ ‐	‐ ‐
7.7 Options (description and conversion factor) Employee Options Tranche 2 Employee Options Tranche 3 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter		3,250,000 2,750,000 6,000,000		Exercise price $0.30 $0.35	Expiry date 31 March 2012 31 March 2013
7.11 Debentures (totals only)
7.12 Unsecured notes(totals only)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

• 2 This statement does / ~~does not*~~ (delete one) give a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: 31 October 2011 ~~(Director/~~ Company secretary)

Print name: Julie Foster

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

• See chapter 19 for defined terms.

Appendix 5B Page 6

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