EMERALD RESOURCES NL — Capital/Financing Update 2007

Oct 17, 2007

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EMPIRE OIL & GAS NL

ACN 55 063 613 730 SUITES 7 & 8 154 HAMPDEN ROAD NEDLANDS 6009 WESTERN AUSTRALIA TELEPHONE 61 8 6389 2687 FACSIMILE 61 8 9386 6812 EMAIL info@empireoil.com.au WEBSITE www.empireoil.com.au\

18 October 2007

ASX Limited Company Announcements Office Level 4 20 Bridge Street SYDNEY NSW 2000

Dear Sirs

RE: EP 104/R1 CANNING BASIN, WESTERN AUSTRALIA – AN UPDATE OF THE STOKES BAY-1 WELL

Please find the following update on the drilling of the Stokes Bay-1 exploration well.

The Stokes Bay-1 well encountered two sands with oil and gas shows in the lower Anderson Formation. Empire interprets these to be from 2104-2113 metres and 2147-2158 metres (true vertical depth) and can be correlated with sands from 2242-2250 metres (good gas shows) and 2310-2320 metres in Valentine-1. Empire is keen to test these sands, being of the order of 140 metres updip from Valentine-1, subject to the approval of the R1 Joint Venture.

The Stokes Bay-1 well was drilled to a depth of 2,589 metres at 1930 hours on 15 October 2007 with Empire approving this depth to be the total depth of the Stokes Bay-1 well to evaluate the carboniferous aged Anderson Formation.

The Operator proposed to the EP 104/R1 Joint Venture that the well be deepened from 2589 metres to 2800 metres to evaluate the Upper Devonian aged Nullara carbonates.

Empire notified the EP 104/R1 Joint Venture of its decision to go non-consent on the deepening of the Stokes Bay-1 well from its approved total depth of 2589 metres to the new total depth of 2800 metres as our technical analysis of the Nullara limestone play was that it was very high risk.

Upon these deeper drilling operations being completed, electric wireline logs will be run to evaluate the potential hydrocarbons intersected in the well.

Regards

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J L CRAIG MARSHALL Managing Director EMPIRE OIL & GAS N.L.

STOKES BAY-1 DRILLING REPORT CANNING BASIN, WESTERN AUSTRALIA

Date:	18thOctober 2007
Permit:	R1
Well Location:	Lat : 17o08’ 23.46”SLong: 123o42’ 32.40”E
Directional offset to target:	1024 metres
Elevation:	Ground Level is 12.4mAMSLRotaryTable is 18.1mAMSL
Proposed Total Depth(measured KB):	2800 metres
Prognosed drilling time:	15 days
Spud Date:	0930 hrs,WST 3 October 2007
Present Depth at 0600 hrs:	2755mMD
Time of Reporting:	0600 hrs,WST 18thOctober 2007
Operations Since LastReport:	Since last report on Thursday October 11th, Stokes Bay 1 hasbeen deepened from 1841mMD to present TD of 2755mMD.Stokes Bay-1 was drilled to a depth of 2589 metres at 1930hours on 15 October 2007, having intersected the originalprimary objective; the carboniferous aged Anderson Formation.Subsequently, ARC Energy Limited (Operator) proposed to theEP 104/R1 Joint Venture that the well be deepened from 2589metres to approximately 2800 metres to evaluate the UpperDevonian aged Nullara carbonates. This recommendation wasbased on the favourable information gained from the recentValentine wellbore and recognition that the Nullara carbonatereef level produces oil at Blina, and had strong shows in thenearby Point Torment 1 well. Parties electing to participate in thedeepening operation and their respective equity levels in this partof 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%•First Australian Resources Limited - 8.0%

	Interval to 2589mMD, (Full EP104 / R1 JV participation) :The well has encountered elevated mud gas and minor oil showsover the gross intervals 2455 to 2470mMD and 2510 to2535mMD in the lower Anderson Formation. On the basis ofinterpretation of data obtained from the low resolution LoggingWhile Drilling (LWD) tools these intervals have indications ofsome hydrocarbon saturations. Further analysis and a possibletesting decision will await higher resolution and more completelogging 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, thewell has encountered a total loss of returns indicative ofpenetrating a porous and highly permeable interval. Preliminarycorrelation indicates these losses occurred at or near the top ofthe 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 whenattempting to drill ahead at the same depth, mud returns wereagain lost to the formation. The losses have now been containedby the spotting of LCM across the interval, and the well operationis POOH for logging and possible drill stem test to assess whatfluids are present in the formation.
Current Operations:	Monitoring static well fluid losses prior to pulling out of hole forwireline logging.
Hydrocarbon indications:	Mudgas and oil shows as noted in the Anderson Formation.
Comment:	N/A
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 PtyLtd - 5.5%

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