EMERALD RESOURCES NL — Capital/Financing Update 2007

Oct 17, 2007

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PANCONTINENTAL OIL & GAS NL

ASX Release

18 October 2007

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www.pancon.com.au

MARKET DATA

ASX: PCL

12 month high: $0.085 12 month low: $0.054 Market cap: $ 25M Cash at bank: $3.5M Issued shares: 433M

PROJECTS

� Australia Onshore Canning Basin Offshore Carnarvon Basin

� Kenya Offshore Lamu Basin

� Malta Offshore Chebba Marin Basin

� Namibia Offshore

Stokes Bay-1 Exploration Well Drilling Update

Pancontinental Oil and Gas NL (ASX: PCL) wishes to advise that Joint Venture (JV) partner and operator of the EP 104 & R1 Onshore Canning Basin project, Arc Energy (ASX: ARQ), has announced that the current operation at the Stokes Bay-1 well bore was monitoring static well fluid losses prior to pulling out of hole for wireline logging at a depth of 2,755m.

Since last report on Thursday October 11th, Stokes Bay 1 has been deepened from 1841mMD to present TD of 2755mMD after reaching a depth of 2589 metres at 1930 hours on 15 October 2007, having intersected the original primary objective; the Carboniferous-aged Anderson Formation.

Subsequently, ARC Energy Limited (Operator) proposed to the EP 104/R1 Joint Venture that the well be deepened from 2589 metres to approximately 2800 metres to evaluate the Upper Devonian aged Nullara carbonates. This recommendation was based on the favourable information gained from the recent Valentine well bore and recognition that the Nullara carbonate reef level produces oil at Blina, and had strong shows in the nearby Point Torment 1 well. Parties electing to participate in the deepening operation and their respective equity levels in this part of the Stokes Bay 1 well (below 2589mMD) are:

• ARC Energy Limited – 69.25% (Operator)

• Emerald Oil & Gas NL - 12.75%

• Pancontinental Oil & Gas NL - 10.0%

DIRECTORS & MANAGEMENT

David Kennedy

Chairman

Peter Munachen

Finance Director

Barry Rushworth New Ventures Director Ian Cornelius

Non-executive Director

Andy Svalbe Non-executive Director Matthew Battrick General Manager

CONTACT DETAILS

Pancontinental Oil & Gas Ground Flr 288 Stirling St Perth Western Australia T: +61 8 9227 3220 F: +61 8 9227 3211 E: info@pancon.com.au

• First Australian Resources Limited - 8.0%

Interval to 2589mMD, (Full EP104 / R1 JV participation) :

Elevated mud gas and minor oil shows were seen over the gross intervals 2455 to 2470mMD and 2510 to 2535mMD in the lower Anderson Formation. On the basis of interpretation of data obtained from the low resolution Logging While Drilling (LWD) tools these intervals have indications of hydrocarbon saturations. Further analysis and a possible testing decision will await higher resolution and more complete logging data to be acquired at the end of the well program.

Interval 2589m to 2755mMD (participation by less than all parties) :

In the past 24 hours, whilst drilling at a depth of 2755mMD, the well has encountered a total loss of returns indicative of penetrating a porous and highly permeable interval. Preliminary correlation indicates these losses occurred at or near the top of the Nullara Fm which is tentatively picked at 2722mMD (- 2294mTVDSS); some 86m shallower than at Pt Torment 1. Efforts to control the fluid losses were successful, and when attempting to drill ahead at the same depth, mud returns were again lost to the formation. The losses have now been contained by the spotting of LCM across the interval, and the well operation is POOH for logging and possible drill stem test to assess what fluids are present in the formation.

Enquiries:

Matthew Battrick, General Manager Tel: 08 9227 3220, Fax: 08 9227 3211, Email: info@pancon.com.au

The summary report on the oil and gas projects is based on information compiled by Mr M A Battrick, BSc, MAAPG, MPESA, MAICD, MPESGB, General Manager of Pancontinental Oil & Gas NL. Mr Battrick has the relevant degree in geology and has been practising petroleum geology for 26 years. Mr Battrick is a full-time employee of Pancontinental Oil & Gas NL and has consented in writing to the inclusion of the information stated in the form and context in which it appears.