EMERALD RESOURCES NL — Capital/Financing Update 2007

Oct 24, 2007

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ASX RELEASE

Release Date: 25 October 2007 To: Australian Stock Exchange Ltd No of Pages: 4 From: Eric Streitberg Re: Stokes Bay-1 Update

Please find attached an update on the Stokes Bay-1 well.

The attached release will also be available on the Company’s website at; www.arcenergy.com.au.

For inquiries please contact:

Eric Streitberg, Managing Director Telephone +61 8 9480 1300 Freecall 1800 337 330 Email eric@arcenergy.com.au

About ARC Energy Limited ARC Energy is one of Australia’s pre-eminent energy companies, owning and operating oil and gas interests in the Perth, Canning and Bass basins, and internationally. Listed on the Australian Stock Exchange with a market capitalisation of approximately A$500 million, ARC has an aggressive onshore and offshore exploration and development drilling program. It continues to drive increased shareholder value by the early adoption of innovative technical and commercial practices.

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Level 4, 679 Murray Street, West Perth, Perth Western Australia 6005 Freecall: 1800 337 330 Tel: 61 8 9480 1300 Fax: 61 8 9480 1388 Website: www.arcenergy.com.au, Email: arc@arcenergy.com.au, ASX Code: ARQ

STOKES BAY-1 DRILLING REPORT CANNING BASIN, WESTERN AUSTRALIA

Date:	25thOctober 2007
Permit:	R1
Well Location:	Lat : 17o08’ 23.46”S Long : 123o42’ 32.40”E
Directional offset to target:	1024 metres
Elevation:	Ground Level is 12.4mAMSL Rotary Table is 18.1mAMSL
Proposed Total Depth (measured KB):	2800 metres
Prognosed drilling time:	15 days
Spud Date:	0930 hrs, WST 3rdOctober 2007
Present Depth at 0600 hrs:	2755m MD
Time of Reporting:	0600 hrs, WST 25thOctober 2007
Operations Since Last Report:	Since last report on Thursday, October 18th, drill pipe conveyed logging has been conducted. Drillpipe conveyed logs rather than wireline logs have been run to TD due to hole condition. Preliminary interpretation of these logs indicates: a) The Anderson Sands have some zones with potential oil saturations. The commercial significance of those zones will require formation testing to evaluate. Testing of the Anderson zones would follow operations to evaluate the deeper Nullara Fm. A joint venture decision on testing of the Anderson awaits availability of the test program and any relevant information to be derived from testing the Nullara Fm. b) The top of the Nullara Fm has been interpreted at 2722m MD. Below 2732m MD, the log quality is severely degraded by interpreted large scale vugular porosity such that quantitative interpretation is not possible.

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	In addition to earlier reported drilling fluid (mud) losses into the Nullara section, there have been continued losses while conditioning the well for logging and preparing to case the hole. Because of the losses and subsequent lack of mud and cuttings returns from TD, there is no indication of fluid content in the Nullara porous section. As of 0600 today the wellbore is now properly stabilised and the forward plan is to run 178mm (7”) casing prior to testing the Nullara Fm. As described in last week’s announcement, all JV partners are participating in the shallow part of Stokes Bay-1 (above 2589m MD). However, less than all parties are participating in the well below 2589m MD such that equity levels in this part of the Stokes Bay-1 well (below 2589m MD) are: • ARC Energy Limited – 69.25% (Operator) • Emerald Oil & Gas NL - 12.75% • Pancontinental Oil & Gas NL - 10.0% • First Australian Resources Limited - 8.0% Under the Joint Venture Operating Agreement, the non- participating parties in the deeper part of the well (Empire, Phoenix and Indigo) retain a future right to earn back into the well by the payment of penalties out of future production.
Current Operations:	POOH to run Casing.
Hydrocarbon indications:	Mud gas and oil shows as noted in the Anderson Fm. No returns or shows from the Nullara Fm. due to mud losses.
Comment:	While the loss of mud to the Nullara Fm has created operational difficulties that have now been overcome, we are encouraged by the presence of both porosity and significant permeability in the Nullara reef section. Development of vugular porosity in this section is a well recognised play, having previously been the target of exploration in the Basin, and we note that it is host to oil production at Blina some 100km to the SE. The planned test of the Nullara Fm will determine fluid type and flow characteristics of the reservoir. The Stokes Bay-1 intersection of the Nullara Fm is 80m up dip of the Pt Torment-1 intersection which did not have the vugular porosity developed, but nevertheless tested gas at low rates.
Participants in the Permit (post earning):	Empire Oil and Gas NL - 14.8% ARC Energy Limited - 38.95% (Operator) Emerald Oil & Gas NL - 12.75% Pancontinental Oil & Gas NL - 10.0% Phoenix Resources PLC - 10.0% First Australian Resources Limited - 8.0% Indigo Oil Pty Ltd - 5.5%

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- Canning Basin Stokes Bay 1

Spud Date: 09:30hrs 3[rd] October 2007 DATE : 25/10/2007

General Well Data

Planned TD : 2500mMD / 2130m TVSS Drill Floor Elevation : 18.1m amsl

Summary @06:00hrs WST

POOH to run 7” casing

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Canning Basin Stokes Bay-01
(Exploration Well from KO)
Predicted Progress Stokes Bay 1
Actual Progress Stokes Bay 1
Bli
0
200
Spud Stokes Bay -1 at 09:30hrs 3rd October 2007
400
600
9 5/8" @808mMD
in Valentine 1
800
1000 KO Stokes Bay-1 ftom 975mMD at 09:30hrs 03/10/07
1200 4/10/07 Drilling 8 1/2" at 1226m
1400
5/10/07 Drilling 8 1/2" at 1439m
1600
6/10/07 Drilling 8 1/2" at 1652m
1800 7/10/07 Drilling 8 1/2" at 1819m
8/10/07 Drilling 8 1/2" at 1840m
9/10/07 Work stuck pipe. 10/10/07 POOH w /Fish 11/10/07 RIH w /new BHA
2000 13/10/07 Drilling 8 1/2" at 2013m Anderson Formation Marine Member
Primary Target
2200 14/10/07 Drilling 8 1/2" at 2255m
2400
15/10/07 Drilling 8 1/2" at 2485m Nullara Limestones
2600 16/10/07 Drilling 8 1/2" at 2606m
17/10/07 Lost circulation at 2755m.
Expected TD 2500mMD
28002130mTVSS 18-23/10/07 Run Evaluation Logs
24-25/10/07 Prepare hole for 7" casing.
3000
0 5 10 15 20 25 30 35 40
Days
Depth (Measured below Rotary Table in metres)
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