EMERALD RESOURCES NL — Capital/Financing Update 2007

May 21, 2007

ASX/MEDIA ANNOUNCEMENT

Tuesday, 22 May 2007

ARC ENERGY ANNOUNCES ADDITIONAL INTEREST IN EP104 JV

PERTH, Western Australia: ARC Energy Limited (ASX:ARQ) advises it has reached agreement in principle with Emerald Oil & Gas NL ("Emerald") whereby Emerald will assign to ARC a part of its earning interest in the EP104/R1 licences in the Canning Basin. Under the terms of the agreement. ARC will pay 12% of the agreed earning expenditure for a 6% working interest in the licences. The agreement is subject to the finalisation of formal documentation and the consent and approval of the other joint venture parties.

At the completion of the earning program ARC will have 38.95% interest in EP 104.

Commenting on the acquisition, ARC Managing Director, Eric Streitberg, said:

"We are very pleased to have additional equity in the Valentine prospect which is the first well we will be drilling in our Canning Basin program and which has the potential to be a major gas-condensate discovery if hydrocarbons are present."

For enquiries please contact:

Eric Streitberg, Managing Director ARC Energy Limited Freecall: 1800 337 330 or Tel +61 8 9263 4600

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\$400 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.