Adelaide Energy Limited is pleased to announce that it has been advised by the Operator of the PEL 218 shale gas drilling program, Beach Energy Limited, that the drilling of the first well in that program (Encounter-1) commenced on Sunday 3 October 2010. ADE has a 10% interest in this program and is carried through the first A$25M of gross expenditure thereon.

Encounter-1 is a vertical test well to approximately 3700 metres, whose major objective is to undertake extensive technical evaluation of the Permian shale/sand/shale sequence in the Nappamerri Trough (the "REM" sequence from 3250 - 3550m). The well is expected to take around 50 days to drill and will be immediately followed by the Holdfast-1 well, located some 20 kilometres distant.

Ensign Rig 16 is drilling this well.

Commenting on the spudding of the well, Carl Dorsch, ADE's Managing Director, said:

"The spudding of Encounter-1 is a major step forward in the search for significant volumes of shale gas in countries outside of North America. ADE's participation in this exploration program provides our shareholders with leveraged exposure to a very large potential gas resource and we look forward to the drilling and evaluation of the Encounter-1 and Holdfast-1 wells over the course of the rest of this year."

About Adelaide Energy Limited

Adelaide Energy Limited (ASX:ADE) is an oil and gas exploration and production company with a focus on the Cooper and Otway Basins of South Australia.

ADE is the dominant player in the onshore Otway Basin in South Australia, with existing gas production assets, a development program and substantial exploration acreage.

ADE hold exploration acreage in the Cooper and Maryborough Basins of South Australia and Queensland respectively which are prospective for large gas resources.