Drillsearch Energy (DLS)

Shares / Stock Code

DLS

Stock Exchange / Sharemarket

ax

Drillsearch Energy (DLS) has over 20 years of petroleum production and exploration experience, with a balanced development pipeline of permit interests containing a portfolio of production interests and exploration interests right through the development charts in Australia, Canada, and Papua New Guinea. This mix offers shareholders asset growth with real upside potential.

Drillsearch is seeking to merge with Great Artesian. If this happens the combined entity would have exposure to tenements in NSW, QLD, WA and Papua New Guinea. The focus is to create a sustainable mid-tier oil and gas producer with the goal of maintaining core production and development assets. The combined market capitalisation would be around $100M; a net interest in more than 165,000 bbls oil production in CY08; and exploration acreage in seven prospective basins covering over 55,000 sqkm.

During the fiscal year ended June 30, 2009 (fiscal 2009), the Company continued producing oil from its Naccowlah and Tintaburra joint venture interests in south west Queensland. During fiscal 2009, 97,472 barrels of oil were sold by the Company from these properties. During fiscal 2009, 13 wells were drilled in Naccowlah as part of the Cooper Oil Project. Of these 11 wells are in production or were cased and suspended as future oil producers. The Marino-1 well, located in PEL91 in the Cooper Basin, spudded on August 22, 2009. The Company’s subsidiaries include Drillsearch Energy (WA) Limited, Great Artesian Oil and Gas Limited, Transoceanic Securities Pty Limited, Frontier Bonaparte Pty Limited and Kun Yick International Limited. On August 12, 2008, the Company announced the completion of merger with Great Artesian Oil and Gas Limited.

DLS is one of the few ASX-listed oil and gas companies active in the Canadian exploration business which was listed on 2 July, 1987. The company is seeking new discoveries in a range of geological and geographical settings in order to diversify company risk.

Customers for DLS's oil production in SW Queensland are the two main oil refineries in Brisbane, while Canadian gas is sold into the grid, with growing demand from the US. There are many competitors at the junior end of the exploration and production industry including CUE Energy (CUE) and Carnarvon Petroleum (CVN).

Drillsearch Energy History

DLS reported an operating cash flow of $8.3M for FY07, which was 66% higher than that of FY06. Total investment activities cost $25.9M, which included payments relating to acquiring petroleum properties of $17.5M. The Cooper Oil Project and offshore drilling projects like Marina-1 are being funded from debt and equity. A key challenge for DLS is to generate surplus cash after investing activities. Relatively low-risk cash flows are helping fund high-impact plays.