ELIXIR ENERGY LIMITED — Interim / Quarterly Report 2010

Jan 27, 2011

ASX ANNOUNCEMENT

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QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 31 DECEMBER 2010

HIGHLIGHTS

• Evaluation of the large Moselle Permit in France advancing, including independent resource estimate due soon

• Several companies reviewing data room for potential farmin to Block 211/12b (Tiger Prospect)

• Successfully awarded a new licence in the Central UK North Sea

• Cash on hand at the end of the period of $3.5 million

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 December 2010 quarter is set out below.

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 billion cubic feet (“Bcf”) of gas and approximately 170,000 barrels (“Bbls”) of condensate (100% project).

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

High Island 268A		Gas Production	Gas Production	Gas Production			Oil Production	Oil Production	Oil Production
	Total Dec Qtr (MMscf)	Total Sep Qtr (MMscf)	Avg Daily Dec Qtr (MMscf/d)	Avg Daily Sep Qtr (MMscf/d)	Change (%)	Total Dec Qtr (Bbls)	Total Sep Qtr (Bbls)	Avg Daily Dec Qtr (Bbls/d)	Avg Daily Sep Qtr (Bbls/d)	Change (%)
Project (100%)	32.4	24.8	0.35	0.27	31%	6,509	8,084	71	88	-19%
Elixir (30% WI)	9.7	7.4	0.11	0.08	31%	1,953	2,425	21	26	-19%

Production from High Island has continued to be restricted during the reporting period. Although the field maintained an uptime of 91%, oil production volumes from the A1 well were again down on the previous quarter due to the continuing natural decline in reservoir pressure. The field achieved an average oil production rate of 71 bbls/d, with production derived almost exclusively from Well A1. There has been some easing on export compression capacity restrictions resulting in the observed increase in gas

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

production volumes for the quarter of approximately 31%. However, not all of the additional gas capacity on the processing platform has been filled, as the common export line from the HI-268 production platform to the process facilities continues to limit the ability to flow the higher pressure Well A2 without choking off production from Well A1.

A shallower gas bearing sand was penetrated by both High Island wells when they were first drilled. Producing from this shallower zone would negate the requirement to utilise the limited compressor capacity on the HI-442 platform, as the original reservoir pressure would be sufficient to allow the wells to flow straight to export. Additionally, the wells would have a common flowing tubing head pressure which would allow them both to flow uninhibited through the in-field pipeline to the processing platform. The intention of the joint venture is to recomplete the two wells at High Island over the shallower gas sand as soon as possible.

The Bureau of Ocean Energy Management Regulation and Enforcement (“BOEMRE”) requires that a prescribed minimum flow rate be reached before a producing horizon can be temporarily or permanently abandoned. During the reporting quarter, Well A-1 continued to produce at rates above the prescribed BOEMRE rate of 50 bopd, and therefore further depletion of the current horizon by way of production is required before the zone could be temporarily shut-in ahead of producing from the shallower gas sand in that well. It is estimated that oil production from Well A-1 will decline below the prescribed rate in Q1, 2011, after which it is expected the workover will be permitted to be undertaken. A successful workover at High Island would result in a significant increase in gas production 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 two producing wells, with production from three separate reservoirs. The field has produced approximately 6.1 Bcf of gas and 6,200 Bbls of condensate (100% project) since the commencement of production in March 2008.

The following table summarises the production achieved from Pompano for the December quarter:

Pompano Field – Brazos Block 446-L		Gas Production	Gas Production	Gas Production			Oil Production	Oil Production	Oil Production
	Total Dec Qtr (MMscf)	Total Sep Qtr (MMscf)	Avg Daily Dec Qtr (MMscf/d)	Avg Daily Sep Qtr (MMscf/d)	Change (%)	Total Dec Qtr (Bbls)	Total Sep Qtr (Bbls)	Avg Daily Dec Qtr (Bbls/d)	Avg Daily SepQtr (Bbls/d)	Change (%)
Project (100%)	349	447	3.8	4.9	-22%	188	515	2.0	5.6	-63%
Elixir (25% WI)	87	112	0.95	1.2	-22%	47	129	0.5	1.4	-63%

The field achieved an uptime of 99% with only a one day shut down in early December due to a platform trip. There were no safety incidents reported in the period.

The two primary zones that continue to contribute to production are the B Sand in Well ATO #1 and the E Sand in Well ATO #2. During the reporting period an increase in the water cut from the B Sand in well ATO#1 has been observed. This has reduced the production rates from this horizon, but the well

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maintains sufficient pressure to flow naturally to surface. This horizon will be closely monitored going forward.

Work is presently underway to abandon well ATO#3. This operation is taking advantage of work units that are located in the field undertaking abandonment activities unrelated to the Pompano joint venture.

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.

The operator is now in receipt of third party studies and other internal reports relating to a phased appraisal work programme that is anticipated to reduce the upfront capital expenditure commitment for the project. The reports will be reviewed by the joint venture during Q1, 2011 with a view to establishing a commercially viable route to take the project forward.

The current license term for Blocks 211/22b and 27d expires in September 2011. To retain the licence following that point would require the approval of the Secretary of State for Energy and Climate Change and a commitment to undertake significant activity; likely to be the drilling of a well.

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] onshore exploration block located in north-eastern France. The Permit is prospective for a number of different play types, including conventional oil and gas and unconventional gas (i.e. tight sand and shale gas). Over 4,000 kilometres of 2D seismic data exists over the block and several dozen oil and gas wells have been drilled in-and-around the Permit area over the past 60 years. The Permit was awarded in January 2009 for an initial five year term. Elixir acquired operatorship and a 100% working interest in the Permit in April 2010.

During the reporting period, Elixir continued to progress a number of technical studies designed to assess both the conventional and unconventional prospectivity of the permit area. A large database containing information and digitised logs on over 100 regional wells has been assembled, with the database also containing in excess of 800 kilometres of digitised wireline data. Regionally, 25 wells have penetrated the Carboniferous interval, the primary target in the basin, with 7 of these wells located within the Moselle Permit. The wells have been drilled over a period spanning nearly 60 years and none have had modern fracture stimulation techniques applied to the Carboniferous section. A number of wells recorded gas shows throughout the target interval, and at least two are known to have produced gas to surface.

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The database also contains 534 line kilometres of newly reprocessed 2D seismic data over the permit. The balance of the remaining digital raw seismic data over the permit has also been purchased. This provides an additional 1,602 line kilometres of digital 2D data available for processing and interpretation over the permit.

This quarter saw the completion of the interpretation of the reprocessed 2D seismic data set together with the completion of a number of key technical studies concerning petrophysics, sedimentology and geochemistry. These studies together with the results from the detailed analysis of six key wells by Core Laboratories will be integrated during Q1, 2011 with the aim of calculating the hydrocarbon volumetric potential for both conventional and unconventional systems within the permit and to identify pilot drilling locations.

Netherland Sewell & Associates Inc. has been engaged by the company to provide an independent report of the resource potential of the permit and it is anticipated that the report will be completed by late Q1, 2011.

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 Magnus field. The Magnus field was brought into production in 1983 by BP with an in-place volume of approximately 1.54 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 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.

The technical work programme has been completed and the farm-in opportunity was marketed to industry participants during the reporting period. The Tiger data room will close at the end of January, 2011, with any potential farmin offers to be submitted prior to the end of Q1, 2011.

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

On 1 November 2010, Elixir announced that it had been successful in its application for the southern part of Block 30/25 in the 26[th] Seaward Licensing Round. Block 30/25 contains a Lower Cretaceous and three Upper Cretaceous aged oil prospects that have been mapped on 2D seismic data.

The finalisation of the licence is expected to occur in the coming quarter and a further announcement of the forward programme for the licence will be made at that time.

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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 December 2010 quarter.

FINANCIAL SUMMARY AND OTHER MATTERS

At the end of the reporting period, Elixir held cash on hand of approximately $3.5 million. Receipts from production received in the December 2010 quarter were approximately $351,000. The Elixir Group is debt free.

Please find attached the Company’s Appendix 5B for the 3 month period to 31 December 2010.

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 Director, 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		Quarter ended (“current quarter”) 31 December 2010	Quarter ended (“current quarter”) 31 December 2010
			31 December 2010
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 (6.months) $A’000
			351 (474) - (74) (334) - 12 - - -	840 (661) - (828) (699) - 37 - - -
			(519)	(1,311)
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)			- - - - - - - - -	- - - - - - - - -
			-	-
			(519)	(1,311)

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(519)	(1,311)
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 of quarter	(519) 4,122 (133)	(1,311) 5,148 (367)
	3,470	3,470

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
		131
		-
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 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

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A

• See chapter 19 for defined terms.

Appendix 5B Page 2

17/12/2010

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
	240
	620
	-
	350
Total	1,210

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as	Current quarter	Previous quarter
shown in the consolidated statement of cash flows) to	$A’000	$A’000
the related items in the accounts is as follows.
5.1 Cash on hand and at bank	2,674	2,822
5.2 Deposits at call	796	1,300
5.3 Bank overdraft	-	-
5.4 Other (provide details)	-	-
Total: cash at end of quarter(item 1.22)	3,470	4,122

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.

17/12/2010 Appendix 5B Page 3

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 1 Employee Options Tranche 2 Employee Options Tranche 3 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter		1,750,000 3,250,000 2,750,000 7,750,000		Exercise price $0.25 $0.30 $0.35	Expiry date 31 March 2011 31 March 2012 31 March 2013
7.11 Debentures (totals only)
7.12 Unsecured notes(totals only)

• See chapter 19 for defined terms.

Appendix 5B Page 4

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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: 28 January 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.

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• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 5