Eureka Energy Limited : Acceleration of Drilling Program at Sugarloaf

ASX RELEASE

11 JANUAR Y 2012

DRILLING PROGRAM TO BE ACCELERATED AT SUGARLOAF SHALE GAS PROJECT, TEXAS

Highlights

• Significantly increased number of wells to be drilled during 2012 targeting an increase in 1P reserves and production rates

• Drilling program will include pilot well spacing programs to optimize future development of the Sugarloaf AMI.

• Potential to appraise additional production horizons during the year

• Marathon to commence drilling during Q1 2012

Eureka Energy Limited (ASX: EKA, "Company" or "Eureka") is pleased to provide an update on field activities at the Company's Sugarloaf Project onshore Texas, USA.
Eureka holds a 6.25% interest in the Sugarloaf Area of Mutual Interest ("AMI"), where a total of
24 wells are currently in production within contiguous leases covering an area of approximately
24,000 acres. This area is considered to be one of the premium shale plays in North America.
The Company also holds a 9.4% working interest in a 916-acre pooled area known as Black Jack Springs and 100% of the Pan de Azucar property, located north-east of Sugarloaf, as well as a 100% interest in the Brioche property, north-east of Pan de Azucar.

SUGARLOAF AMI (EKA 6.25%)

In discussions with Marathon Oil Corporation ("Marathon"), the new operator of the Sugarloaf Project, Eureka has confirmed that an accelerated drilling program has been proposed for the Sugarloaf Project during 2012.
The accelerated program is expected to result in a significant increase in the number of wells drilled during 2012 compared with the previous operator's proposed program and the assumptions included in the upgraded reserves estimate prepared by Netherland Sewell and Associates Inc. ("NSAI") and announced in October last year.
The proposed program is expected to involve continuous drilling over the year using multiple rigs and is currently scheduled to commence during the first Quarter of 2012.

EUREKA ENERGY LIMI TED

ABN 46 116 829 139

LEVEL 1, 16 ORD STRE ET WEST P ERTH WA 6005 TELEPH ONE: FAX: [phone] [phone]

www.eurekaenergy.com.au

Page | 2

As well as targeting a significant increase in 1P reserves and production rates, Marathon's proposed program will include the evaluation of optimum well spacing which will be used to optimise the overall development plan, capital allocation and value realisation of the field. The Operator is also evaluating the potential to appraise additional production horizons within the Sugarloaf AMI in 2012.
Eureka views Marathon's approach to the Sugarloaf development very positively in terms of the capacity for accelerating production and enhancing the overall value of the asset.
In light of this anticipated increase in drilling activity, Eureka is progressing discussions with a number of institutions regarding a reserves-based debt funding facility.
Commenting on the developments, Eureka Energy's Managing Director, Mr Peter Mills, said:

"This is an exciting development for our Sugarloaf Project, with confirmation now received that drilling activities are set to be rapidly and significantly expanded under the operatorship of Marathon Oil Corporation. This greatly expanded program has the potential to significantly enhance reserves and production from this exciting asset."

Technical Information contained in this report has been reviewed by Mr Peter Mills B.Eng, Managing Director of Eureka who has had 29 years experience in petroleum engineering and

has consented to the inclusion of the information in the form and context in which it appears.

ENDS