Drillsearch Energy Ltd (ASX:DLS) Takes Legal Action To Protect Shareholder Interests And Seeks Injunction On Sale Or Farmout Of Assets

Sydney, Oct 19, 2009 AEST (ABN Newswire) - Drillsearch Energy Ltd (ASX:DLS)(PINK:DRLLF) has moved to protect the interests of all shareholders in its 79.5% owned Canadian subsidiary Circumpacific Energy Corporation (CVE:CER) following the resignation of the former chief executive of CER Peter Simpson.

Drillsearch has commenced legal action against Mr Simpson and two other CER directors, Roger Tidmarsh and Paul Johns, following their refusal to step aside from their director duties and their attempt to dispose of material assets of CER.

Drillsearch will allege in the Supreme Court of British Columbia that following Mr Simpson's resignation, the three directors have sought to enter into material transactions that involve the attempted disposal or farmout of interests in CER's SW Queensland Cooper & Eromanga Basins interests (the "SWQ Blocks").

Drillsearch is seeking an injunction preventing the three directors from entering negotiations on those assets or acting as directors prior to an Annual and Special General Meeting of CER on 26 November 2009. Copies of the Drillsearch Statement of Claim and the resignation letter are available on the company's website.

At the Drillsearch Extraordinary General Meeting of 10 June 2009, then Executive Chairman Peter Simpson tendered his resignations from the Boards of both Drillsearch and CER This resignation was provided to the Board of CER.

However, the Board of CER has not yet acted on Mr. Simpson's resignation and such failure has required Drillsearch to requisition a shareholders' meeting to remove Messrs Simpson, Tidmarsh and Johns.

Mr Simpson has continued to act as an Executive Director and CEO of CER despite his resignation.

Cooper and Eromanga acreage

Drillsearch believes the attempt of the directors to dispose or farmout the interests of the SWQ Blocks is not in the best interests of shareholders of either company. The SWQ Blocks were awarded to CER as the preferred tender by the Queensland Government in November 2007 as part of a competitive bid process. Under the award process both Drillsearch and CER (the "JV") were declared the preferred tenderer for their respective blocks and the JV will need to complete native title arrangements as a precondition to the grant of an Authority to Prospect over each block.

As announced in June 2008, Drillsearch and CER entered into a Joint Evaluation Agreement ("JEA") that combined their SWQ Blocks. This agreement provides for Drillsearch to manage the native title clearance process for the SWQ Blocks and to conduct a geotechnical evaluation to delineate the most prospective areas within each block. Since the JEA was implemented, Drillsearch has conducted these activities and in connection with the native title clearance process, all of the SWQ Blocks were converted to the Right-to-Negotiate process as of August 2008.

Drillsearch has also completed an initial preliminary technical evaluation of the SWQ Blocks through 3D Geo, jointly funded by Drillsearch and CER. Under the JEA neither party is entitled to farmout or disclose any confidential information related to the SWQ Blocks without the prior written consent of the other party.

Drillsearch has formally advised CER that under no condition does it consent to the farmout or disposal on any interest in the SWQ Blocks at this time until the native title clearance process and technical evaluation of the SWQ Blocks are complete.

CER Shareholders Meeting

An Annual and Special General Meeting of CER has been called for Thursday, 26 November 2009 (Vancouver time) to consider a number of items, including:

- the removal from the CER Board of Mr Simpson and Messrs Tidmarsh and Johns, who were originally nominated to the Board of CER by Mr Simpson in his previous capacity as Executive Chairman of Drillsearch; and

- the election of Brad Lingo, Chris Carty and Jim McKerlie to the Board of CER.

Pending the CER meeting, Drillsearch has advised the current Board of Directors of CER that it should act in a caretaker capacity and should not undertake any material transactions including, but not limited to, issuance of equity, incurrence of debt or the acquisition or disposal of material assets.

Drillsearch has also advised the TSX Venture Exchange, the British Columbia Securities Commission and the Alberta Securities Commission of its concerns, including CERs refusals to grant any requests to ensure that the Annual and Special General Meeting is conducted fairly and in compliance with all applicable laws.

Contact

Brad Lingo Managing Director Tel: +61-2-9241-4440