Q3DRILLSEARCH ENERGY LIMITED March 2012

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Highlights

33% increase in 2P Reserves An independent review of the Company’s 2P Reserves saw an uplift of 33 per cent to 11.3 MMboe from new oil discoveries in the Western Flank Oil Fairway.

962% increase in production over the last quarter with the start-up of the Wet Gas Pilot Project at an initial rate at 25 mmscf/d raw gas, and sales to the South Australian Cooper Basin Joint Venture under the Gas Sales Agreement.

376% increase in sales revenue Sales revenue increased by 376% due to the escalation in production seen at PEL 91 and the commencement of production at pel 106B during the quarter.

Inclusion to the S&P/ASX 300 S&P Indices announced the addition of Drillsearch into the S&P/ASX 300 Index following their quarterly review, acknowledging the significant growth of the Company.

Further success with the Western Wet Gas Fairway drilling program 3 out of the 4 wells drilled being cased and suspended. Baird-1 for future evaluating of potential deep coal seam gas (CSG) and tight oil bearing sands. Coolawang-1 and Haslam-1 for multiple Patchawarra Formation wet gas bearing sands.

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Q3 DRILLSEARCH ENERGY LIMITED March 2011

Growing Reserves, Growing Production, Growing Cash Flow

Development of new oil discoveries The Bauer and Hanson oil discoveries in the Western Flank Oil Fairway were completed for future production, with initial production testing showing significant initial flow rates in line with expectations.

$42.6 million cash position The Company has strengthened its cash position to $42.6 million with no debt, as at 31 March 2012.

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Q3 DRILLSEARCH ENERGY LIMITED March 2012

The Managing Director’s comments

Brad Lingo Managing Director

I am pleased to report on another quarter in which we delivered solid growth for our shareholders from the strengthening of our Oil and Wet Gas businesses through development of our new discoveries.

Our activities during the quarter clearly demonstrate we are continuing to deliver on our strategy of increasing resources, increasing production and increasing cashflow across the short, medium and long-term. By any measure this quarter and the remainder of the financial year look to be a standout period of strong growth for the Company.

This growth was recognised by S&P Indices which announced the Company’s inclusion to the S&P/ASX 300 Index in their latest review. Our addition to this Index places us amongst strong industry peers and strengthens our ‘investment grade’ status.

During the quarter, we continued to see the results of our successful drilling program in the Western Flank Oil Fairway with an increase in our 2P Reserves of 33%. The new oil discoveries that contributed to this significant uplift have increased the Company’s weighting in oil and hydrocarbon liquids to provide further balance to our portfolio.

The March quarter witnessed strong growth in Drillsearch’s total production up 962% to 164,787 boe over last quarter’s 15,512 boe. The increase can be attributed to the start-up of the Wet Gas Pilot Project and increased production from the Western Flank Oil Fairway. Production is expected to continue to increase with the Bauer and Hanson fields expected to come online soon.

We were proud to see the development of the new oil discoveries, as well as production from the Wet Gas Pilot Project, combine to provide an increase in sales revenue of 376% for the quarter as production escalated from PEL 91 and began in PEL 106B. Production from both the Western Flank Oil Fairway and Western Wet Gas Fairway will continue to grow as we further develop these two permits.

In the Western Flank Oil Fairway, our program is focused on the continued development of the area to capitalise on our success at the Bauer and Hanson oil discoveries during the quarter. At these new oil discoveries we have completed initial production testing and are targeting first production at the Bauer field before the end of the June quarter.

The exploration program in the Western Wet Gas Fairway resulted in three of the four wells being cased and suspended, Coolawang-1 and Haslam-1 for future pilot project wet gas production as part of a program of extended production testing and Baird-1 which was cased and suspended for future evaluating of potential deep coal seam gas (CSG) and tight oil bearing sands. A coring program focused on unconventional gas opportunities in the Western Wet Gas Fairway has seen results indicating significant gas content in the intersected coals.

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962% increase in production over the last quarter with the start-up of the Wet Gas Pilot Project at an initial rate at 25 mmscf/d raw gas, and sales to the South Australian Cooper Basin Joint Venture under the Gas Sales Agreement

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Production and Revenue

Revenue and Production History

The March quarter witnessed strong growth in Drillsearch’s total production up 962% to 164,787 boe over last quarter’s 15,512 boe. Oil production from the Chiton Oil Field in PEL 91 resumed intermittently during February 2012 with full production continuing through March. Oil production from the Tintaburra Block fields remained consistent adding to the total oil production for the quarter of 20,361 bbls, up 31% over oil production from the previous quarter (15,512 bbls). Oil production is anticipated to increase with the Bauer Oil Field expected to come on line in the June quarter 2012 and the Hanson Oil Field in the September quarter.

The Wet Gas Pilot Project delivered the strongest growth in production. Production from the PEL 106B Middleton Brownlow Wet Gas Pilot Project commenced in early January 2012 after commissioning of the new pipeline and connection with the South Australian Cooper Basin Joint Venture (SACB) Producers’ facilities at Moonanga. Raw gas production for the quarter was 814 mmscf which consisted of Sales Gas, 2.68 Ktonne of LPG and 15,771 bbls of condensate.

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DRILLSEARCH ENERGY LIMITED March 2012

Production facilities at Middleton SACB Producers’ facilities at Moonanga

Sales revenue for the March quarter was $8.2 million, which is a 376% increase over the previous quarter ($1.7 million) due largely to the escalation in production at PEL 91 and the commencement of production at PEL 106B. Drillsearch sold 36,132 bbls of oil and condensate in the quarter and realised an average oil price of $118.60 (prior quarter $112.70).

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Development and Exploration

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DRILLSEARCH PERMIT AREA, COOPER-EROMANGA BASIN

Oil BusinessThe March quarter saw a 33% increase in Drillsearch’s total 2P Reserves to 11.3 mmboe over the previous estimate of 8.5 mmboe as at 30 June 2011. The uplift in Reserves follows the completion of an independent audit review by Gaffney, Cline & Associates Ltd (GCA) and includes Drillsearch’s new oil discoveries in the Western Flank Oil Fairway. The table below sets out the Company’s Reserves and Resources position as at 31 December 2011.

Drillsearch Net Reserves & Contingent Resources

Business Segment Reserves 1P 2P 3P

Western Flank Oil 1.1 3.1 8.0

Western Cooper Wet Gas 2.4 7.6 21.1

Eastern Cooper Oil* 0.2 0.6 1.3

Total Reserves 3.7 11.3 30.4

Business Segment Contingent Resources 1C 2C 3C

Western Flank Oil 0.1 0.5 1.2

Western Cooper Wet Gas 1.5 3.4 6.9

Eastern Cooper Oil 0.0 0.7 1.9

Total Contingent Resources 1.6 4.7 10.0* Reserves reviewed by GCA as at 30 June 2011 adjusted for production to 31December 2011 by

Drillsearch. Columns may not add exactly due to rounding

Source: Drillsearch Energy Ltd

DRILLSEARCH ENERGY LIMITED March 2012Q3

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Development and Exploration

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WESTERN FLANK OIL FAIRWAY PEL 91, COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

The ATP 299P Joint Venture (Drillsearch 11%, Santos 89% and Operator) is maturing a number of near field exploration prospects for drilling this year based upon the newly acquired Tintaburra 3D seismic survey. An exploration well is scheduled for the September quarter 2012.

Drillsearch has entered into an agreement with WesternGeco for 3D and 2D seismic acquisition at ATP 539P in the Inland-Cook Oil Fairway, a set of five contiguous South West Queensland Blocks in the Cooper Basin. The seismic crew is expected to mobilise during May 2012 and acquisition is expected to take approximately a month to complete.

The Inland-Cook Fairway remains in the early stages of the exploration cycle. The Company is hopeful of demonstrating a similar play concept to that which has proved successful in the Western Flank Oil Fairway.

INLAND-COOK OIL FAIRWAY, COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

DRILLSEARCH ENERGY LIMITED March 2012Q3

The independent Reserves audit review confirmed the extent of the Bauer Oil Discovery as being larger than Drillsearch’s original estimate made after the Drilling of the Bauer-1 well. The Joint Venture is currently planning further appraisal/development and exploration drilling to be conducted progressively commencing in the second half of 2012.

Production from the Bauer field is expected to commence via a trucking operation shortly. Planning continues on construction of a pipeline from the Bauer field to allow increased volumes to be exported without weather constraints. This pipeline is targeted to be in operation before the end of 2012.

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Development and Exploration

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DRILLSEARCH ENERGY LIMITED March 2011

Wet Gas BusinessThis quarter has seen three of the exploration wells spud as part of the PEL 106B Western Wet Gas exploration drilling campaign and of those three, Coolawang-1 and Haslam-1 have been cased and suspended as future gas producers and Admella-1 was plugged and abandoned (PEL 106B: Drillsearch 50%, Beach Energy 50% and Operator). Baird-1 (spudded December 2011) was cased and suspended in January for future evaluation of potential deep coal seam gas and tight oil bearing sands.

The fifth and final well in the campaign, Southend-1 in PEL 107 spudded post 31 March 2012 on 17 April 2012 and is expected to take 14 - 18 days to drill (PEL 107 - Drillsearch 60%, Beach Energy 40% and Operator). Extended Production Tests (EPT) will be conducted on Coolawang-1, Haslam-1 and potentially Southend-1 if the well is cased and suspended. Once the data is reviewed the Joint Venture will consider development plans for the wells.

WESTERN WET GAS FAIRWAY, COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

This quarter also saw the beginning of test reprocessing of 100km2 of the Spinel 3D seismic survey. The preliminary results of this reprocessing are currently being evaluated.

Unconventional BusinessGeological and geophysical work has been ongoing during the March quarter. Post 31 March 2012, QGC was officially transferred to the ATP 940P title and Drillsearch as operator of the permit has signed a letter of intent with WesternGeco for the acquisition of 1,052km2 of 3D seismic in ATP 940P.

CENTRAL UNCONVENTIONAL FAIRWAY, ATP 940P COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

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Corporate

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Divestment of Tintaburra and ATP 783PDrillsearch is inviting offers for its divestment of the Tintaburra Block located in the Cooper Basin in south-western Queensland with production from the prolific Birkhead Formation and Wyandra Sandstone. The ATP 299P block comprises 13 producing fields with 85% of the Reserves and 83% of current production being from four fields (Mulberry, Endeavour, Talgeberry and Tarbat/Ipundu fields).

ATP 783P is located 100km south-east of Windorah in South-west Queensland and covers 1,797km2. Historically 716 line km of 2D seismic have been acquired and five wells drilled including Chandos-1 and Earlstoun-1 which both recovered light oil during production tests. Drillsearch has undertaken and completed the Native Title ‘right to negotiate’ process and can now proceed to grant.

The data room for both permits will be open from 7 May to 22 June 2012. Any expressions of interest should be made to Chris MacKinnon of Miro Advisors on +61 433 084 625.

Issue of Options to QGCQGC Pty Limited, a BG Group business, has exercised options it holds to subscribe for 31,622,454 Drillsearch shares at 62 cents per share, raising $19.6 million of additional funding for Drillsearch. QGC now holds approximately 9.4% of the issued ordinary shares of Drillsearch.

Small Shareholder Sale FacilityDrillsearch implemented a Small Shareholder Sale Facility in February 2012 to provide an opportunity for certain eligible small shareholders to sell their shareholding without incurring any brokerage or handling costs. The Small Shareholder Sale Facility closed on 19 March 2012 with 82,231 ordinary shares (0.02% of issued share capital) to be sold by Drillsearch in the market on behalf of eligible small shareholders. The disposal of all Sale Shares has now been completed at an average realised price of $1.49 per share.

DRILLSEARCH ENERGY LIMITED March 2012Q3

TINTABURRA AND ATP 299P COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

ATP 783 COOPER-EROMANGA BASIN

Source: Drillsearch Energy Ltd

Source: Drillsearch Energy Ltd Source: Drillsearch Energy Ltd

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Financial PositionDrillsearch remains in a sound financial position. The cash balance at the end of March 2012 was $42.6 million with no debt. The financial information presented in this report is unaudited.

Production Summary and Financial Highlights

9 months ended March 2012

3 months ended March 20121

3 months ended December 2011

Quarter Change %

Description Units

Production

Oil bbl 53,577 20,361 15,512 31%

Gas "Raw" MMscf 814.00 814.00 – N/A

LPGs Ktonne 2.68 2.68 – N/A

Condensate bbl 15,771 15,771 – N/A

Total Production boe 198,003 164,787 15,512 962%

Sales revenue

Oil A$ 6,877,243 2,236,038 1,721,973 30%

Gas "Sales volume" A$ 3,005,432 3,005,432 – N/A

LPGs A$ 1,440,724 1,440,724 – N/A

Condensate A$ 1,517,275 1,517,275 – N/A

Total Revenue A$ 12,840,674 8,199,469 1,721,973 376%

Avg Realised Oil Price A$/bbl 115.2 118.6 112.7 5%

Avg Realised Condensate Price A$/bbl 96.2 96.2 – N/A

Avg Realised Gas A$/boe 28.1 28.1 – N/A

Avg Realised LPG Price A$/boe 63.7 63.7 – N/A

Direct operating expense (by business unit)

Oil A$ 2,364,349 617,581 945,135 -35%

Wet gas A$ 1,302,297 1,296,840 5,457 23665%

Total direct operating expense A$ 3,666,646 1,914,421 950,592 101%

Oil & gas asset expenditure (by business unit)

Oil A$ 10,375,688 2,832,545 4,352,164 -35%

Wet gas A$ 5,514,029 673,357 1,821,285 -63%

Total oil & gas asset expenditure A$ 15,889,718 3,505,903 6,173,449 -43%

Exploration & evaluation expenditure

Oil A$ 10,411,017 2,825,879 4,262,597 -34%

Wet gas A$ 6,552,557 4,038,477 1,829,101 121%

Unconventional A$ 483,557 125,000 97,495 28%

Corporate activity A$ 552,110 75,385 239,356 -69%

Total exploration & evaluation expenditure A$ 17,999,242 7,064,741 6,428,549 10%

Financials

Cash & Cash Equivalents A$ mil 42.6 42.6 33.7 27%Debt A$ mil None None None N/AHedging A$ mil None None None N/A

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DRILLSEARCH ENERGY LIMITED March 2012Q3

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Further informationFor further information please contact: Brad Lingo Managing Director Ph: +61 2 9249 9600 Email: admin@drillsearch.com.au

Or visit the website www.drillsearch.com.au Media enquiries to: David Greer at Mercury Consulting 02 8256 3333/3307.

If you would like to register for email alerts please subscribe on the Drillsearch website.

About Drillsearch Energy Limited (ASX: DLS), which listed on ASX in 1987, explores and develops conventional and unconventional oil and gas projects. Drillsearch has a strategic spread of petroleum exploration and production acreage in Australia’s most prolific onshore oil and gas province, the Cooper-Eromanga Basins in South Australia and Queensland. The Company’s focus is on ‘brownfields’ exploration where geological risk is reduced and there is access to existing infrastructure, ensuring that any discoveries can be brought into production.

Competent Person StatementInformation on the Reserves and Resources in this release is based on an independent evaluation conducted by Gaffney, Cline & Associates and has been compiled under the supervision of Mr Steven Lane. Mr Lane is a Principal Advisor of Gaffney, Cline & Associates Singapore & Sydney Offices with over 30 years of industry experience. He holds a B.Sc. (Hons) Geology and is a member of the Petroleum Exploration Society of Great Britain. The technical analysis was performed primarily by Mr Zis Katelis, Dr Azlan Majid, Mr Miguel Muruais and Mr Murray Freeman. Mr Katelis holds a B.Sc. (Hons) in Geophysics, is a member of the Society of Petroleum Engineers and the South East Asia Petroleum Exploration Society and has over 20 years industry experience. Dr. Majid holds a PhD and a M. Eng. in Chemical Engineering, has over 9 year industry experience and is a member of the Society of Petroleum Engineers and the Society of Professional Well Log Analysts. Mr. Muruais has over 13 years of E&P industry experience and holds Masters Degrees in both Petroleum Engineering & Energy Engineering and is a member of the Society of Petroleum Engineers. Mr. Freeman holds a BE in Chemical Engineering, an M.Sc (Chemical Engineering), is a member of the Society of Petroleum Engineers and the Petroleum Exploration Society of Australia, and has over 40 years industry experience. These individuals have given their consent as of the date of this release to the inclusion of this statement and the information in the form and the context in which they appear in this release.

Level 16 , 55 Clarence Street Sydney NSW 2000 Australia

P: +61 (02) 9249 9600 F: +61 (02) 9249 9630 E:  admin@drillsearch.com.au

www.drillsearch.com.au

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DRILLSEARCH ENERGY LIMITED March 2012Q3

PEL 91 Bauer Facility - February 2012 Source: Drillsearch Energy Ltd

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