EMERALD RESOURCES NL — Capital/Financing Update 2007

Sep 9, 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\

10 September 2007

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

Dear Sirs

RE: EP 104/R1 CANNING BASIN, WESTERN AUSTRALIA – UPDATE ON THE VALENTINE-1 WELL

Please find attached a release providing details of the gas shows encountered in the secondary reservoir objectives and the progress of the drilling of the Valentine-1 exploration well, Canning Basin, Western Australia as of 0600 am 10/10/07.

Further evaluation of the gas shows in both the Anderson Formation from 2100 metres to 2260 metres and the strong gas shows in the Laurel Formation from 2400 to 2470 metres from the preliminary interpretation provided will be undertaken while drilling ahead to the primary reservoir objective. The gas shows in Valentine-1 within the Anderson Formation significantly enhances the prospectivity of the Stokes Bay-1 well to be drilled updip from Valentine at its mapped crestal location.

The current operations are running in the hole with a new bit to drill ahead to the top primary reservoir objective, the Virgin Hills Formation, prognosed at 3222 metres.

I also look forward to providing further details of the additional intervals of the elevated gas readings intersected in the well from 2589 to the current depth of 2695 metres as of 0600 am 10/10/2007.

Regards

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J L CRAIG MARSHALL BSc (Hons), F. Aus. IMM, CPGeo Managing Director Empire Oil & Gas NL Suite 7, 154 Hampden Road, Nedlands WA 6009 Telephone: 61 8 6389 2687 Facsimile: 61 8 9386 6812 Email: cmarshall@empireoil.com.au

VALENTINE-1 DRILLING REPORT CANNING BASIN, WESTERN AUSTRALIA

Date:	10 September 2007	10 September 2007
Permit:	R1
Well Location:	Lat : 17o08’ 23.46”S Long: 123o42’ 32.40”E
Directional offset to target:	0 metres
Elevation:	Ground Level is 12.4mAMSL RotaryTable is 18.1mAMSL
Prognosed Depths (measured KB):	Top primary objective	Total depth
	3,222 metres	3,407 metres
Prognosed drilling time:	25	days
Spud Date:	1230 hrs,WST 12 August 2007
Present Depth:	2,695mMD
Time of Reporting:	0600 hrs,WST 10 September 2007
Operations Since Last Report:	Intermediate logging of secondary objectives over the interval 808m to 2589m MD has been completed, and the well is now being drilled ahead to the primary target, Virgin Hills Formation.
Current Operations:	Runningin the hole after tripfor bit change
Hydrocarbon indications:	Strong mud gas shows over the interval 2240m to 2470mMD have now been evaluated by wireline logging: see comments below.
Participants in the well (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%

Several strong gas peaks were recorded from monitoring gas in the drilling fluids (“mud gas”) over the interval 2240 to 2470m measured depth (MD These were considered sufficiently material to warrant an intermediate wireline logging run over the gross open-hole interval 809m to 2589m MD, and this has now been completed. Preliminary analysis of the wireline log results indicates the presence of porous (15%) and permeable sandstones of the Lower Anderson Formation over the gross interval 2100 to 2260 m MD. A preliminary interpretation of the electric logs and MDT results indicates low hydrocarbon saturations, including the zones of strong mud gas shows at 2240 m to 2260m MD. These Lower Anderson sands and their lateral equivalents, are the primary target of the Stokes Bay 1 well, which will target them in a crestal location on the structure. Please note that at Valentine-1 the secondary reservoir objective Anderson Formation sands are not mapped within closure. This 160 metre gas show interval in Valentine-1 within the Anderson Formation enhances the prospectivity of these objectives significantly in the updip location in the Stokes Bay-1 well. Comment: The Stokes Bay 1 well will be drilled following Valentine 1. The strong mud-gas shows in the deeper Laurel Fm (2400 m to 2470m MD) are interpreted as being associated with a series of organic rich tight carbonates and shales. The results to date at Valentine 1 are very encouraging for the prospectivity of the updip Stokes Bay well, and also for the regional prospectivity of the Basin as they confirm the presence of a significant hydrocarbon system in the Fitzroy Trough of the greater Canning Basin, and have confirmed the presence of reservoir quality sands and high quality shale seals. Since wireline logging at 0600 hours today, the well has been deepened by 106 metres to 2695 metresMD. In drilling this 106 metres additional elevated gas readings have been recorded and these have yet to be evaluated.