Opportunities have been identified by Elixir to to re-enter wells drilled on the Permit in the mid-1990’s.  Providing an early opportunity  for Elixir to test intervals of conventionally trapped hydrocarbons that may have been overlooked in past exploration activities.

Tellingly, a number of oil majors are moving back into the region.

Elixir will look to farmout the Moselle Permit and has retained an investment bank to assist in the process.

Elixir managing director Andrew Ross said today, "the work completed to date leads us to believe that Moselle has the potential to host a significant hydrocarbon resource, and could over time deliver substantial value to the company and its shareholders."

The Moselle permit is prospective for tight gas, gas shale and conventional oil and gas and represents a huge acreage position for with a working hydrocarbon system, with multiple play potential.

Preliminary work done to date indicates Elixir believes Moselle to be highly prospective for commercial hydrocarbon production from unconventional sources, particularly Carboniferous aged tight gas and shale formations. 

Elixir has decided to undertake further technical appraisal ahead of the release of more detailed initial findings and the commencement early in the second half of this year of marketing to industry of a farmout for a significant carried work programme.

There are at least six sub-plays existing within the Moselle Permit. These are a combination of conventionally and unconventionally sourced hydrocarbon plays which Elixir will indiviudally drill and test.

The work programme has been aimed at acquiring, processing and interpreting available well, geological and seismic data located in, and adjacent to, the Permit.

Elixir has assembled a geological database which comprises:

- Detailed reports on over 100 wells located in, and adjacent to, the Permit;
- In excess of 455 kilometres of electric log data from 25 representative wells;
- Over 2,500 line kilometres of unprocessed, digital 2D seismic data;
- Over 530 line kilometres of fully reprocessed and reinterpreted 2D seismic;
- Ground based gravity data over an area of some 28,400 km2;
- Core and cuttings samples from over 2,800 metres of available core sourced from 6 key wells

A forward work program will be determined from the studies.

The studies have however already identified opportunities. When finalised, the integration of the conclusions from these studies will shape the forward work programme on the Permit.

Netherland Sewell & Associates, Inc consulting reserve auditing firm have been retained to provide an independent assessment of the in-place hydrocarbon resources within Moselle.

Managing director Andrew Ross said today the indicative results from the preliminary NSAI work "have been very encouraging."

This has recently led to the identification of an additional conventional play type located within the Carboniferous interval.  To better characterise leads in this area associated with conventionally trapped hydrocarbons, Ross said "we have commenced reprocessing a further 464 line kilometres of 2D seismic data. The reprocessing of this dataset is scheduled for completion in late April 2011," he said.

NSAI will then develop their resource estimate for the Moselle Permit. The independent resource report is expected to be finalised prior to the commencement of the farmout process.

Elixir has finalised a process for the selection of a leading global investment bank to provide assistance with a proposed farm out of the Moselle Permit.

Given the further technical work being undertaken by Elixir and the ongoing studies being conducted by the French Government, Elixir’s advice has been to delay the commencement of the marketing campaign for the farm out until early in the second half of 2011.

In early February 2011, the French Government announced its intention to undertake a study into the possible economic, social and environmental impacts of unconventional hydrocarbon resource exploitation within France. The study is similar in nature to a number of studies which are currently being undertaken in other parts of the world in response to the rapid growth of horizontal drilling and fracture stimulation activities associated with unconventional oil and gas exploitation.

Elixir has been travelling under the radar but offers a highly favourable risk and reward equation over the next 6-12 months

Elixir responded to the ASX stating it is not aware of any material information that has not been released to the market which may have sparked the sudden investor interest in the stock.

In November 2010 Elixir was offered a new North Sea licence, provisionally being awarded the Southern part of Block 30/25.

Block 30/25 is located in the Eastern margin of the central UK North Sea, and is adjacent to the now abandoned Ardmore field, which was the first offshore oil production in the UK producing almost 80 million barrels of oil.

Block 30/25 was offered by way of a promote licence to Elixir as operator and 100% interest holder.

Elixir shares have subsequently eased slightly in afternoon trade, last changing hands at $0.125.

Ross now holds a total of 390,000 shares in Elixir, along with 1,250,000 unlisted employee options exercisable at $0.30 with an expiry of 31 March 2012, and another 1,250,000 unlisted employee options exercisable at $0.35 with an expiry of 31 March 2013.

Earlier in the month Elixir was provisionally awarded the southern part of block 30/25, located in the eastern margin of the Central UK North Sea, adjacent to the now abandoned Ardmore field (formerly named Argyll), which was the first offshore oil production in the UK producing almost 80 million barrels of oil.

Block 30/25 has been offered by way of a promote licence to Elixir as operator and 100% interest holder.

The licence complements and builds Elixir's position in the UK North Sea, as it contains several prospects which have already been mapped on existing 2D seismic data, and if successful, provide the potential to create significant shareholder value.

The Permit is prospective for a number of different play types including conventional gas, unconventional gas and coal bed methane.

Elixir Managing Director Andrew Ross said after a lengthy period of evaluation of opportunities in this area, the company was delighted to have been able to enter into an agreement for the acquisition of the Moselle Permit in North-eastern France.

"The acquisition represents a significant expansion of our European exploration strategy and sees our first entry onshore into Western Continental Europe," Mr Ross said.

“This opportunity is particularly attractive given the stable political environment, established and growing gas market, excellent fiscal regime and the fact that the Moselle permit is prospective for a number of different play types, including shale gas.”

Elixir last traded on the Australian Stock Exchange for 4c.

In the United States, advances in drilling and hydraulic fracturing techniques have opened huge reserves of unconventional gas that now mean the country is virtually self-reliant in terms of its gas-supply needs. A 2007 study from the National Petroleum Council, an advisory body to the US Department of Energy, estimated that the European continent could hold up to 549 trillion cubic feet of shale gas, 431 Tcf of tight gas and 275 Tcf of CBM.

For a continent whose hydrocarbon production peak is thought to have passed, these resources present an enticing prospect in the continuing effort on the part of European nations to secure energy independence.

Shale gas, which is considered the most promising hydrocarbon resource in Europe, is drawing significant investment into the continent. The last 18 months have seen ExxonMobil, ConocoPhillips, Shell, OMV and other large producers acquire significant land positions across the EU. A number of independent oil and gas companies, including Elixir, have joined the pursuit.

The Moselle Permit is 5,360 km2 in area or approximately 1.32 million acres, making it the largest single exploration block onshore France. The Permit was awarded in January 2009 to East Paris Petroleum Development for an initial five year term. EPPDL is required to spend €3 million on exploration activities within the Permit during the initial term, of which a proportion has already been expended by EPPDL during 2009.

Elixir has agreed to acquire the entire issued share capital of EPPDL, the 100% interest holder and operator of the Moselle Permit. The consideration payable to the vendor on the completion of the acquisition includes a cash payment and an advisory services arrangement totalling US$1 million, and will be met from Elixir’s existing funds.

The vendor is also to be granted an overriding royalty interest on any future production. Additionally, if a well is spudded on the Permit within the initial term, or part of the Permit is sold to a third party during the initial term, a further similar cash payment will be made to the vendor of EPPDL.

It is Elixir’s intention to apply its experience in the identification, evaluation and presentation of new exploration opportunities for farmout, particularly for exploration and appraisal drilling, to the exciting potential of the Moselle Block.

Mr Ross said that shale gas plays were now firmly established as one of the most exciting sectors globally for the oil and gas industry, largely as a result of the continuing success of these types of plays onshore in the USA where members of Elixir’s team and its largest shareholder have relevant experience.

“In the past year a large number of oil and gas companies, including the majors, have entered the search for unconventional hydrocarbons in Western Europe," he said.

"The ability to find, produce and deliver gas within one of the largest energy markets in the world holds great appeal and represents a significant opportunity for Elixir, and one that has the potential to deliver considerable value to shareholders over the medium to longer term.”

Elixir also holds interests in producing gas and condensate fields located in the Gulf of Mexico and has extensive interests in exploration and appraisal licences in the UK North Sea.

In a statement, the Perth-based company said the re-establishment of higher condensate production rates at High Island was another important milestone of the quarter.

Elixir is an internationally focused upstream oil and gas company with a diversified portfolio of offshore petroleum interests across the exploration, appraisal, development and production lifecycle.

The company stated it was also preparing to kick off marketing activities on Block 211/12b (Tiger Prospect) UK North Sea.

Cash on hand at the end of the period of $6.95 million

Complementing the company's exploration strategy is the addition of lower risk oil and gas development projects with appraisal upside located in the shallow waters of the Gulf of Mexico. These projects typically demonstrate a short cycle time to production and provide cashflow for the Elixir Group.

The High Island field is located approximately 60 km offshore the Texas coast in the Gulf of Mexico. The field has been in production since September 2007 and has produced to date in excess of 3.8 billion cubic feet (“Bcf”) of gas and over 107,000 barrels of condensate.

Production uptime was 87% for the quarter with no safety incidents reported. The major contributor to platform downtime was a fire at a downstream installation on the HIOS gas pipeline system.

The A-1 well was produced at reduced rates until the end of April, when the well was shut-in due to surface constraints limiting the drawdown that could be applied to the well.

The Pompano field lies within the Brazos Area and is approximately 12 km offshore the Texas coast and 150 km southwest of Houston. The field has two production wells, with each producing from two separate reservoirs.

A third well drilled during Q3, 2008 has been temporarily suspended as a future sidetrack candidate. The field has produced approximately 3.7 Bcf of gas and 4,700 Bbls of condensate since the commencement of production in May 2008.

The field achieved 98% uptime during the reporting period with no safety incidents reported. The uptime was affected at the end of the reporting period when the Well #1 workover commenced on 19 September 2009 and the well was shut-in.

The company, which has a diversified portfolio of interests across the exploration, appraisal, development and production spectrum, is examining a number of options for growth in 2010, as well as meaningful extensions to the company's core business.

However, it is mindful of recent volatility in markets and forecasts for commodity prices

Elixir's cash on hand at 30 June 2009 $8.1m (mid-Nov 2009 - $7.1m), with the company having cut costs in the first half of 2009, which will flow through in FY 2010. It repaid $3m in Jan 2009 and is now debt free.

The market cap of the company stands at $10.8 million.

The company's current geographic areas of activity include the development and production from the shallow shelf Gulf of Mexico and exploration and appraisal activities in the UK North Sea.

This year, Elixir announced the successful completion of the workover of Well #1 at the Pompano Field and the recommencement of gas sales from the well.

Elixir owns a 25% working interest in the Pompano gas field development and exploration project, located in Brazos Block 446-L SE/4, which is 7 miles offshore the Texas Gulf Coast.

The Pompano Project is located in 60 feet of water and has existing production infrastructure, including a platform and two satellite caissons tied back to the platform. The field has pipeline access to intrastate gas markets.

It has a current production rate of ~6.4MMscf/d.

Meanwhile, the High Island Project (30%WI), which has had two wells on production since Sept 2007, experienced a shut-in for 5 months in FY 2009.

Gas production rate is currently facilities constrained and the field is currently producing at ~0.5 mmscf/d.
of gas and 200 Bbls/d condensate (100% project)

The operator has confirmed potential to increase gas rate to 10-13 mmscf/d, while it will continue with oil recovery from existing horizon in current low gas price environment.

The company was awarded block 211/12b awarded in February 2009 at the Tiger Prospect, which is an Upper Jurassic Magnus Sandstone prospect located adjacent to 1.5 Bn bbl Magnus field.

Elixir is anticipating a significant uplift in the resource estimate of the prospect.

During the AGM, the Mulle Appraisal Project and the Leopard Prospect were also mentioned as part of the company's focus for the year ahead.

Elixir owns a 25% working interest in the Pompano gas field development and exploration project, located in Brazos Block 446-L SE/4, which is 7 miles offshore the Texas Gulf Coast.

Since the last update, the B sand has been re-perforated and an electric log has shown a significant improvement in annular seal following the cement squeeze operations undertaken last week. Both strings have been unloaded using nitrogen to lift out completion fluids and the well clean-up continues to be monitored.

At the time of the operator’s report on Monday, 5 October 2009 (CST), Well #1 was flowing at an aggregate gas rate of approximately 3.3 million standard cubic feet per day with declining water production of approximately 325 barrels per day.

Water and any sand content of the production will continue to be closely monitored. The operator intends to limit the production rate from Well #1 whilst the well cleans-up. Once production rates have stabilised, the choke settings on the well may be adjusted to increase the gas production rate from Well #1.

The lift barge and support vessel have now been demobilised and equipment back loaded at the dockyard.

The Pompano Project is located in 60 feet of water and has existing production infrastructure, including a platform and two satellite caissons tied back to the platform. The field has pipeline access to intrastate gas markets.

Elixir owns a 25% working interest in the Pompano gas field development and exploration project, located in Brazos Block 446-L SE/4, which is 7 miles offshore the Texas Gulf Coast.

The work will commence in mid September, depending on the availability of an appropriate work boat, and will take approximately 14 days to complete.

The well will then be opened to production gradually and may take some time to achieve full rates. The company said if successful, the workover should result in a significant increase in the gas production rate from the Pompano well.

Investors maybe aware the well has suffered production impairment from both the 6700 ft and B sand horizons as a result of water and associated sand production which has formed bridges within the completions.

Sand will be removed by coiled tubing, then attempt to isolate the water and sand production for the B sand followed by the injection of a stabilising treatment on the 6700 ft sand.

All of this work will take place through the existing completions and thereby minimise the time and cost of the operation.

The Pompano Project is located in 60 feet of water and has existing production infrastructure, including a platform and two satellite caissons tied back to the platform. The field has pipeline access to intrastate gas markets.

The operator at High Island reports that production has been re-established at rates equivalent to those being achieved prior to the shut-in, with the field currently producing approximately 2.2 mmscf of gas and 370 bbls of condensate per day.

The High Island field is a gas and oil field located in 169 feet of water offshore Texas in the Gulf of Mexico. The field is surrounded by a number of producing fields and associated oil and gas infrastructure. Elixir holds a 30% working interest in the High Island Project. Federal and other royalties on production equate to 25% giving a net revenue interest to Elixir of 22.5%.

Recent activities

In the UK North Sea, a comprehensive programme of technical studies continued with respect to the 100% owned Tiger prospect located in Block 211/12b. The Tiger prospect is estimated to hold 90 million barrels of oil (“MMBbls”) on a most likely in-place resource basis. It is anticipated the technical studies will conclude in the next few weeks, after which marketing activities for the farmout of the block will commence.

Farmout activities continued in the quarter with respect to the 56% owned Leopard prospect located in Block 211/18b, with a number of new companies entering the dataroom and examining the opportunity. Elixir is in discussions with several companies and is hopeful that a farmout of the Leopard prospect will be completed in the next few months to allow the drilling of the Leopard exploration well before year end.

The fire occurred at at a third party compression facility associated with the High Island Offshore System (HIOS) regional export pipeline.

Elixir is debt free and remains well funded with cash on hand of approximately $7.9 million. Elixir’s cash on hand equates to cash backing per share of $0.042.

The HIOS compression facility is located approximately 17 kilometres East-North-East of the High Island field and is the gathering point for three main trunk lines.

Elixir holds interests in producing gas and condensate fields located in the Gulf of Mexico and has extensive interests in exploration and appraisal licences in the UK North Sea.

An assessment of the damage to the compression facility is currently being undertaken by the owner of the HIOS and that steps are being undertaken to bypass the compression facility and thereby allow for the re-commencement of gas deliveries into the HIOS.

The High Island field, located in High Island Block A-268, produces gas and condensate from two wells via a 5km subsea pipeline to a regional processing facility owned by Maritech Resources Inc., which is located in High Island Block A-442. Processed hydrocarbons are then transported to shore via the 470 kilometre long HIOS pipeline gathering system, which is owned and operated by Enterprise Products Partners L.P.

It made a pretax loss of A$21.49 million, hit by a A$12.9 million impairment charge and higher depreciation, compared with a loss of A$6.06 million in the previous first half. Revenue from oil and gas sales rose to A$4.2 million from A$2.99 million.

The company last week announced that EP UK received a notice of arbitration issued by TGS-NOPEC Invest AS, which relates to an alleged dispute concerning payment of approximately US$9.3 million for the seismic data acquired by TGS over Block SL-4 offshore Sierra Leone.

Elixir said today it remains the unit’s view that its joint venture partner in Block SL-4, Prontinal Ltd, remains responsible for payment of any amounts found to be due to TGS-Nopec, and EPUK intends to vigorously defend its position.

At the end of the December 2008, Elixir held cash on hand of A$12,531,000. As of today, March 13, Elixir holds cash on hand of approximately A$9.8 million, following the repayment in January 2009 of A$3.0 million of convertible loan notes. With the repayment of these notes, Elixir is now debt free.

EP (UK) has been named as a co-respondent in the arbitration together with Prontinal Ltd, EP (UK)'s former joint venture partner in the Block SL-4 joint venture.

EP(UK) understands that an existing arbitration in relation to the dispute is currently in progress between Prontinal and TGS.

Elixir said it remains the view of EP (UK) that Prontinal is responsible for the payment of any sums that are found to be due to TGS in respect of the 3D seismic acquisition and processing.

Elixir Petroleum announced earlier this week it is to cancel its secondary listing on AIM with effect from the end of March 2009 as the compliance burden coupled with the costs of the listing outweigh its benefits. It also cited its Australian focused shareholder base and the relatively low volume of trading in shares on AIM as reasons for the decision.

It also cited its Australian focused shareholder base and the relatively low volume of trading in shares on AIM as reasons for the decision.

Elixir will continue to maintain its primary listing on the Australian Securities Exchange. It has also established a facility with UK based broker, WH Ireland Group PLC and its related Australian subsidiary, D.J. Carmichael & Co, which will allow shareholders on the UK register who do not have an account with a broker, to trade their shares on the ASX with relative ease. As a result, shareholders currently on the UK register should not be materially prejudiced as a result of the delisting, Elixir added.

In an update for the quarter to December 31 2008, the group said it made further progress in the period despite difficult market conditions.

Following the passage of Hurricane Ike in Mid-September, the High Island field was shut-in for most of the quarter pending the repair of third party operated export pipelines. By early January 2009 the two High Island wells were back in production at rates equivalent to those being achieved prior to the shut-in.

A workover of the well is still planned to address the underlying cause of the sand bridging in this reservoir which has inhibited production from the B Sand reservoir in the well. Elixir expects to receive a final recommendation from field operator AnaTexas Offshore Inc for the workover in the coming weeks, with operations to commence shortly thereafter.  

Elixir has also been advised by the operator of the High Island Field, Peregrine Oil & Gas LLC, that repairs to the High Island pipeline system, which was damaged during the passage of Hurricane Ike in mid-September 2008, are now complete.

Peregrine has reported that, with the completion of repairs and the re-commissioning of the pipeline system, the two wells at High Island are now being brought back online and production has restarted, Elixir added.

Elixir said the additional time would allow it complete the farm-out of the unfunded portion of the proposed Leopard well, which has a mean prospective resource estimate of around 350 million barrels, making it one of the largest untested prospects in the UK North Sea.

 Elixir's Managing Director, Andrew Ross said the extension was good news for the company:

'The granting of an extension is good news and will assist in our efforts to secure a further partner in the short term to assist us with the drilling of the Leopard Prospect in 2009.'

'We noted with interest the result of the recent Cladhan well drilled in the northern North Sea which also targeted Upper Jurassic sandstones in a stratigraphically controlled play type, similar to the Leopard Prospect. It has been reported the Cladhan well discovered a 34m oil column and that the reservoir has excellent interpreted porosity and permeability. We are confident the Cladhan discovery proves the viability of Upper Jurassic plays in the northern North Sea and significantly de-risks the Leopard Prospect. We believe that the Cladhan discovery, together with the updated geobody studies undertaken by Elixir in the second half of 2008, has further upgraded the Leopard Prospect.'

'Furthermore, the current financial market crisis and commodity price falls is somewhat of a mixed blessing in this case. We recognise deals are harder to close, but with companies currently reducing their drilling activities in the North Sea, rig slots have become available in 2009 and rig rates have fallen significantly. '

Elixir said the notice of forfeiture it issued to Prontinal after the deadline passed included a demand for the immediate payment of all monies Prontinal owes to the joint venture, but Prontinal has not paid this amount to date.

Prontinal has indicated it will be contesting the demand, default and forfeiture notices. Elixir believes any challenge to the default and forfeiture process will be without merit.

As previously advised, a notice of default was issued in late September by Elixir's subsidiary Elixir Petroleum (UK), the operator of Block SL-4.

Prontinal’s obligations primarily relate to outstanding payments to the seismic contractor who acquired 3D seismic over the block.

Elixir’s update was twofold. First, it reported that Well 3 on the Pompano Project, which is targeting multiple gas sands, had encountered productive gas with a total net pay of 12 feet from the ‘6700 feet Sand”.  However, the B, C and E Sand were ‘water wet’.  The operator, AnaTexas Offshore has shut in the well, while drilling and logging data is collected, before a decision is made on whether to complete the 6700 feet Sand, or to continue drilling a sidetrack to additional targets.

Meanwhile at Well 1, Elixir announced that the well has “recently experienced declining production rates”. The lower productivity is due to a poor cement job between the B Sand and B-2 Sand which is allowing water “to dominate flow”.  Elixir said the well was now shut in, awaiting a work over rig that will attempt to restore production back to ‘pre-decline’ levels of 6-7 million cubic feet per day.

 The combination of weakening oil prices and the Pompano Gas Project update hit Elixir Petroleum hard today; however the company finds itself in a better position than most of its peers thanks to a healthy cash balance. At the end of June, 2008, Elixir reported cash balances of approximately £4.1 million (A$10.6 million) versus a market capitalisation today of just £5.2 million.

The well was spudded on the 22 September 2008, and is now preparing to commence drilling from a depth of 3,005 feet to approximately 8,000 feet.  The well is expected to intersect a number of primary and secondary gas targets.

Elixir Petroleum has a 25% interest in the well, with Buccaneer Energy (65%), Baron Petroleum (7.5%) and Streamline Exploration Inc. (2.5%).

Elixir Petroleum has an interest in two offshore producing fields in the Gulf of Mexico, which together net the company revenue of around US$1m a month. High Island lies some 65km from the coast of Texas in 50m of water while Pompano is in shallower waters of 18m and lies just 7km off the coast.

At High Island, Elixir has a 30% working interest in two wells that are producing around 4.5 million cubic feet of gas per day and 200 barrels of condensate. One of the wells has proved problematic and an intervention is planned to raise production levels. Efforts are continuing to resolve this issue, but both wells are expected to shift to produce from shallower reservoirs in a year or so anyway.

At Pompano, current gross production from two wells is currently around 10 million cubic feet of gas per day and 50 barrels of condensate. An independent reserves review of the first two wells at Pompano showed 2P reserves of 17.1 billion cubic feet of gas and about 50,000 barrels of condensate.

Production was not shut-in at the Pompano Field, though as a precaution, the High Island fields was for around 4 days. High Island is now producing again at a combined rate of 4MMscf of gas and 200 barrels of condensate per day.

Drilling of a third well at the Pompano Project has also been delayed, as the crew with the Hercules 152 jack-up drilling rig were moved onshore as a precaution. No damage was sustained to the rig.  Elixir added that Hurricane Ike which is entering the Gulf of Mexico, had also forced the Hercules 152 Rig to be down manned again until the storm passes.

 Meanwhile, in back in the UK, Elixir said it had finalised with its partners an appraisal programme for the Mulle Project in the North Sea.   A data room has now been opened to prospective farm-in partners.  Elixir currently holds a 40% interest in Block 211/22b which includes the Mulle accumulation.