PILOT ENERGY LIMITED — Capital/Financing Update 2007

Oct 21, 2007

Monday 22nd October 2007

General Manager The Company Announcements Office Australian Stock Exchange

Dear Sir/Madam

OIL PRODUCTION COMMENCES ON WEST FLORENCE -1 WELL WEST FLORENCE PROJECT AREA, COLORADO, USA

Adelaide Energy Limited has been advised by the operator Mountain Petroleum Corporation that the West Florence-1 well (Adelaide Energy 15%) has commenced oil production at an initial average rate of 32 barrels of oil per day and 101 barrels of water from the Codell Formation. An increased oil rate is anticipated as greater water handling capacity is installed at the production facility.

Following this early success and in looking to advance development of the West Florence project, the joint venture is now planning the drilling of a further well in order to evaluate the potential of the Pierre Shale Formation. This fractured shale historically produced about 15 million barrels up to the 1940s from the adjacent Florence oil field.

The Javernick Royal Gorge#1 well, located approximately 4 miles SE of West Florence#1, was completed in 2005 and is currently flowing oil at a rate of 100 barrels of oil per day from the Pierre Formation.

Additionally the joint venture is contemplating a 3D seismic survey in the West Florence acreage to advance development of the project.

The total gross leasehold of 25,000 acres provides the participants in the West Florence project with a significant leasehold position. The Company holds a 15% working interest in 12,000 acres and up to a 10.5% working interest in 13,000 acres.

West Florence-1 is the first well to be drilling in the West Florence Oil and Gas Project and its associated leasehold of 12,000 acres located in the Florence sub basin of the Denver basin. The leasehold is approximately 160 kilometres south of Denver, Colorado, USA.

The prospective resource for the West Florence play as estimated by the Operator ranges between 100 billion cubic feet (BCF) and 200 BCF of recoverable gas in the sands of the Muddy 'J' and Dakota Formation, and cumulatively up to 15 million barrels of oil for the three secondary targets, the Pierre, Niobrara and Codell Formations, if oil or gas are present.

Registered Office Level 5, 70 Pirie Street, Adelaide SA 5000 www.adelaideenergy.com.au t +61 8 8228 5207 f +61 8 8228 3235 ABN 43 116 256 823

Commenting on the installation of a pump and production facilities at West Florence-1 and commencement of first oil production, Adelaide Energy's Managing Director, Mr Carl Dorsch said:

"We are very pleased to have commenced production from this well. It means that the Company has now had exploration success in two of its projects.

As far as the US operation is concerned, the Company can now look forward to establishing the long term productivity of this well and to advance development of the JV project. With further drilling success, the opportunity for significant oil production from a number of wells is envisaged", he said.

The participants in the drilling of West Florence-1 and the West Florence Oil and Gas Project and their respective interests through their wholly owned subsidiaries are as follows:

Adelaide Energy Limited (ASX:ADE)	15.0%
Mountain Petroleum Corporation (Operator)	25.0%
Victorian Petroleum NL. (ASX:VPE)	25.0%
Fall River Resources Ltd (ASX:FRV)	15.0%
North American Oil Gas Energy Pty Ltd	5.0%
Private American Interests	15.0%

For further information contact: Carl Dorsch Managing Director Adelaide Energy Limited Mob: 0400 508 088 c.dorsch@adelaideenergy.com.au ASX Codes: ADE,ADEO

Registered Office Level 5, 70 Pirie Street, Adelaide SA 5000 www.adelaideenergy.com.au t +61 8 8228 5207 f +61 8 8228 3235 ABN 43 116 256 823