EMERALD RESOURCES NL — Capital/Financing Update 2007

Jul 18, 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\

19 July 2007

Australian Stock Exchange Limited Company Announcements Office Level 4 20 Bridge Street SYDNEY NSW 2000

Dear Sirs

RE: DRILLING OF THE VALENTINE-1 AND STOKES BAY-1 WELLS IN EP 104/R1 CANNING BASIN, WESTERN AUSTRALIA

Please find the attached details regarding the drilling of the Valentine-1 and Stokes Bay-1 wells planned for August 2007.

Yours faithfully

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

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EMPIRE OIL & GAS N.L.

STOCK EXCHANGE RELEASE

19 July 2007

DRILLING OF THE VALENTINE-1 AND STOKES BAY-1 WELLS IN EP 104/R1 CANNING BASIN, WESTERN AUSTRALIA

Empire Oil & Gas N.L. (“Empire”), through its wholly-owned subsidiary, Gulliver Productions Pty Ltd, holds 14.8% in the EP 104/R1 Permits located in the Canning Basin adjacent the town of Derby, West Kimberley, Western Australia.

Empire has entered into EP 104/R1 farmout agreements with Emerald Oil and Gas Limited, (through its wholly-owned subsidiary Emerald Gas Limited), Phoenix Resources Plc and ARC Energy Limited (“ARC”) where ARC assumed the Operatorship effective 1 January 2007.

Empire, pursuant to these various farmouts will be carried through the drilling costs and any completion costs of the Valentine-1 well should it be a discovery well. Empire will contribute its 14.8% to the Stokes Bay-1 well with a carry through the cost of any completion of Stokes Bay-1 on a discovery should Valentine-1 not be completed as a discovery well.

ARC has advised the EP 104/R1 Joint Venture and the Farmees that the Valentine-1 and Stokes Bay-1 wells will be drilled from the same well location. Commencement of drilling is planned in approximately 30 days utilising Century Rig 18.

The Valentine-1 and Stokes Bay-1 wells are Empire’s next planned wells prior to commencement of its Onshore Carnarvon Basin drilling programme.

The first well, Valentine-1, is essentially a straight hole 3,345 metre test of the Devonian aged delta sands of the Virgin Hills Formation. Empire considers this Virgin Hills reservoir objective is prospective for both oil and gas. ARC considers that there is the potential for a large condensate-rich discovery for Valentine. ARC’s mapping of the Valentine Structure at the Virgin Hills Formation provides for having the potential to have trapped up to 1,091 billion cubic feet of recoverable gas and 19 million barrels of condensate at the P10 level. Empire has previously stated there is the potential for a similar amount of recoverable gas (1,200 billion cubic feet of gas). Empire also has stated previously it considers there is the potential for the Valentine Structure to have entrapped up to 200 million barrels of recoverable oil, if oil is present and the structure is filled to its spill point.

The Stokes Bay-1 well is planned to be drilled next from the same borehole as Valentine-1 as a deviated 2,500 metre test of the updip Point Torment gas pool. Point Torment-1, drilled in 1992, flowed gas at a rate of 4.3 million cubic feet of gas from the Carboniferous aged Anderson Formation sandstones. ARC considers that mapping of these Anderson Formation “gas sands” indicates that the Point Torment Structure has the potential to trap up to 158 billion cubic feet of recoverable gas at the P10 level. Empire has previously stated that there is similar gas potential, with the addition that Point Torment has the potential to have up to 10.3 million barrels of recoverable oil, if oil is present in the “Unit B Sands” and the “Deltaic Unit” of the Anderson Formation and if these sands are filled to their spill point.

Empire is looking forward to the drilling of both these wells that have been the subject of considerable technical work by Empire and now by the dedicated Canning Basin operator, ARC Energy Limited.

With both planned wells having the potential for gas discoveries, Empire has always recognised the growing market demand for gas and electricity in the Kimberley Region. With domestic gas prices now more buoyant, the economics of supplying gas to market demand are much more robust, especially in the coastal area adjacent to and including Derby and Broome and growing industries in the areas of both

the East and West Kimberley. ARC Energy has also recently announced that it has entered into a major gas sales agreement with Alcoa for gas from the Kimberley.

ARC Energy has provided information to the ASX in presentation material relevant to the drilling of both the Valentine-1 and Stokes Bay-1 wells that can be referred to on their own website.

For further information, please contact:

Mr Craig Marshall BSc (Hons), F.Aus. IMM, CPGeo Managing Director Empire Oil & Gas NL Suite 7 154 Hampden Road NEDLANDS WA 6009 Phone: 61 8 6389 2687 Facsimile: 61 8 9386 6812 E-mail: cmarshall@empireoil.com.au

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EMPIRE OIL & GAS NL

LOCATION OF VALENTINE‐1 AND STOKES BAY‐1 EP 104/R1 CANNING BASIN, WESTERN AUSTRALIA

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EMPIRE OIL & GAS NL

EP 104 AND RETENTION LEASE R1 CANNING BASIN, WESTERN AUSTRALIA AUGUST 2007 DRILLING PROGRAMME FOR VALENTINE‐1 AND STOKES BAY‐1

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