EMERALD RESOURCES NL — Interim / Quarterly Report 2010

Oct 28, 2010

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Suite 2, 12 Parliament Place West Perth WA 6005 Ph: 08 9482 0510 Fax: 08 9482 0505 Email: info@emeraldoilandgas.com www.emeraldoilandgas.com

29 October, 2010

Centralised Company Announcements Platform Australian Stock Exchange 10[th] floor, 20 Bond Street Sydney NSW 2000

QUARTERLY ACTIVITIES AND CASHFLOW REPORT SEPTEMBER 30, 2010

Please find attached the Quarterly Activities Report and Appendix 5B Quarterly Cashflow Report for the quarter ended September 30, 2010.

Yours sincerely,

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MIKE KRZUS Chief Executive Officer mkrzus@emeraldoilandgas.com

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ASX Release

29 October 2010

EMERALD OIL & GAS NL

Suite 2, 12 Parliament Place West Perth WA 6005 Tel: +61 8 9482 0510 Fax: +61 8 9482 0505

Contact:

MIKE KRZUS

QUARTERLY ACTIVITIES REPORT FOR THREE MONTHS ENDED 30 SEPTEMBER 2010

Highlights

USA

 NW Alice Project, Jim Wells County, Texas.

• Lake Alice Gas Unit #1 well expected to commence drilling early November

• Targeting 2 Yegua gas/condensate sands to appraise structure containing 100Bcf gas and 2.5 million barrels condensate

Managing Director mkrzus@emeraldoilandgas.com

MORGAN BARRON

Company Secretary mbarron@emeraldoilandgas.com

E-MAIL:

info@emeraldoilandgas.com

• Appalachian Basin Gas Development Projects , Magoffin County, Kentucky

• Beetree Project in final stages of commissioning with initial sales gas production between 500Mcfd and 1000Mcfd expected in November

WEBSITE:

www.emeraldoilandgas.com

Directors/Officers:

Jeremy Shervington - Chairman John Hannaford - Director Bob Berven – Director Mike Krzus – Managing Director

AUSTRALIA

 Canning Basin, WA

• Seismic feasibility studies underway for offshore exploration acreage

• Operator (Buru) planning well operations on Stokes Bay #1

Issued Capital:

270,303,764 Shares (EMR) 78,750,000 Listed options (EMRO) 19,322,754 Unlisted options

CORPORATE

• $2,750,000 before costs raised through rights issue and share placement

Market Capitalisation:

Undiluted $6.8m (@ 2.5 cents)

Cash on hand 30.9.10

$2.7m

ASX Codes: EMR, EMRO

EMERALD OIL & GAS NL – SEPTEMBER QUARTERLY REPORT 2010

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USA Projects

North West Alice, Jim Wells County, Texas (Emerald 35% Working Interest; Operator: OSO Exploration)

Highlights

• Turnkey drilling contract signed to drill Lake Alice Gas Unit #1 well, with rig expected on site first week November

• Targeting 2 Yegua sands expected to contain 2 Bcf gas and 50,000 Bbl condensate each, as well as shallow gas sands in the large gas bearing structure discovered by the RJ Hunter#1 well drilled in 2007 (Possible reserves likely to exceed 100Bcf gas and 2.5 million barrels oil)

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Project location Jim Wells County, South Texas

Lake Alice Gas Unit #1 Well

A turnkey drilling contract has been signed with Pioneer Drilling to drill Lake Alice Gas Unit #1. The rig expected to be on site to commence drilling early November.

The main targets for the planned Lake Alice Gas Unit #1 well are the same gas bearing Yegua sands intersected in the RJ Hunter #1 gas/condensate discovery well drilled in 2007. Both sands contain gas with similar composition and a condensate/gas ratio of 20 to 40 bbl/MMscf and a successful well outcome could be expected to yield approximate gas and condensate recoveries as follows for each of the two sands targeted:

• 2 MMcfd average initial production rate

• 2.0 Bcf gas & 50,000 Bbl condensate recovery

• Approximately 15 year production life

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NW Alice project area, current lease holdings and 3D survey area.

Subsequent to the transaction in Q3 2010, where Oso Exploration (“ Oso ”) and Emerald to purchased Noble Energy Inc interests in the NW Alice project area, the new Oso/EMR JV acquired an additional 700 lease acres adjacent to the lease containing the planned Lake Alice Gas Unit #1 well.

Emerald now holds a 35% Working Interest in approximately 5200 acres of oil and gas leases and has access to 27 square miles of high quality 3D seismic data over the gas bearing NW Alice structure near the town of Alice in Jim Wells County, Texas. This provides ample lease acreage with 3D coverage to follow-up drilling potential. Several drilling locations have already been identified.

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Regional Geology:

Emerald's NW Alice lease holdings are in the northern extension of a NE-SW Yegua gas trend containing several Yegua Gas Fields such as Ben Bolt, Braman, Starr Brite, Los Rubios and Four Sevens. These fields, in Jim Wells and Duval counties, have produced gas and condensate from several Yegua sands, but the two primary producing reservoirs are known locally as the Y-15 (Middle Yegua) and the Y-21 (Lower Yegua) sands. These sands are areally extensive, low-energy, shelf deposits having an average thickness of fifteen feet.

Shallow gas plays are also present in the Frio, Vicksburg and Stillwell sands over this area.

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3D Survey location showing proximity to other producing fields in Yegua Trend

NW Alice Field

The discovery well, RJ Hunter #1 was drilled in March 2007 to a total depth of 8500 feet. The well intersected 50 feet of net pay containing gas/condensate in two main gas bearing zones and smaller intervals in the Middle and Lower Yegua sands, as well as shallower gas sands. Unfortunately, highly over-pressured Lower Yegua gas sands caused the wellbore casing to collapse after perforating the sand, so no flow test was possible. A subsequent

EMERALD OIL & GAS NL – SEPTEMBER QUARTERLY REPORT 2010

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flow test from the Middle Yegua sand was not definitive, producing gas and anomalous fresh water volumes. The well was then suspended.

Using well data from the RJ Hunter well and offset well data, P3 reserves in the original 12 mi[2] Northwest Alice AMI area were estimated at approximately 100 BCF gas and 2.5 million barrels of condensate.

Based on the results from the RJ Hunter #1 well, Noble Energy (Operator), acquired, processed and interpreted 50mi[2] of 3D seismic data, which included the NW Alice AMI and the extension of the anticline structure to the North. Noble identified seven drilling locations based on the 3D seismic interpretation and acquired a number of additional leases both inside and outside the AMI area to consolidate its position around the most prospective areas.

Early in 2010 Noble took a corporate decision to focus on recent large international discoveries. Oso and Emerald then purchased Noble’s interests and facilitated their exit from the NW Alice area.

Appalachian Gas - Magoffin County, Kentucky Emerald 75% Equity Interest in Kentucky Energy Partners LLC)

Highlights:

• Beetree project in final stages of commissioning with initial sales gas production between 500Mcfd and 1000Mcfd expected in November

• 2000 lease acres with 14 potentially productive existing gas wells

• >500 Mcfd gas production demonstrated from other EMR wells awaiting gathering lines and hookup and ongoing well testing program to identify additional wells capable of economic production

LOCATION

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In November 2009, Emerald formed Kentucky Energy Partners (KEP) with Slone Production LLC, a competent local gas field operator and engineering consultant. Emerald holds a 75% interest, with Slone owning the remaining 25% in KEP. To date KEP has secured approximately 2000 acres of leases, containing 14 potentially productive existing gas wells in Magoffin County, Kentucky.

Three separate gas projects are being progressed concurrently to build Appalachian gas production. An ongoing well assessment program is assessing the condition, production potential and gas quality of wells on KEP's current leases and on leases prospective for future acquisition. In addition to the Beetree project, gas production potential in excess of 500 Mcfd has been demonstrated from other EMR wells awaiting gathering lines and hookup.

Gas from most of the existing wells in the area contains varying levels of Hydrogen Sulphide (H2S), which must be removed prior to sale. Where H2S levels are low, the H2S can be economically removed from the wellhead gas with dry chemical scrubbers (sweet gas). Gas with higher H2S which cannot be produced economically with wellhead treatment (sour gas), requires a gas processing plant to remove the sulphur compounds including H2S. Another local operator is in the process of commissioning a sour gas plant, which will be available for KEP gas and should help to unlock the sour gas potential of the area.

Emerald is initially targeting sweet gas to establish gas production to underpin investment in its first projects. However, the sour gas potential of the area is much greater than that of sweet gas. Sour gas opportunities will be considered once substantial sweet gas production is established from the Beetree project and the local sour gas plant is in operation.

A well assessment program is ongoing to assess the condition, production potential and gas quality of wells on KEP's current leases and on leases prospective for future acquisition.

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Beetree Project

The Beetree Project consists of a new 10 km gathering line and a new sales gas pipeline tap to provide gas market access for a number of stranded sweet gas wells.

The first 3 km section of line was completed in April. Construction of the remaining 7 km section commenced in September and is in the final stages of commissioning. Initial gas production rates between 500 Mcfd and 1000 Mcfd from between 2 and 4 wells is expected in November 2010. Additional existing gas wells are being identified for possible acquisition and connection to the line.

Beetree pipelining operations

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P&J Resources

In 2008, Emerald entered into several dealings with P&J Resources (P&J), a local operator based in Eastern Kentucky, to drill, recomplete and operate production from gas wells in Magoffin, County Kentucky and Wayne County, West Virginia in the USA.

P&J did not conduct operations to a standard acceptable to Emerald and subsequently filed for bankruptcy earlier this year.

Emerald successfully applied to the bankruptcy court for the right to assume operatorship of its 8 affected wells. The Company now plans to selectively acquire title to necessary leases and to re-bond several of Emerald's wells in Kentucky, with Kentucky Energy Partners (KEP) as operator. These wells will then be incorporated into KEP’s development plans and operations.

NOXXE LLC, Harris County and Galveston County, Texas (Emerald 31.5% Equity Interest)

Emerald is still pursuing its lawsuit against NOXXE.

Australian Projects

EP104/R1, Canning Basin WA (Emerald 12.75% Working Interest; Operator: Buru Energy Ltd)

The Operator, Buru Energy is planning well operations in November using coiled tubing to attempt to stimulate flow to obtain reservoir fluid samples to determine if Stokes Bay #1 is a potentially commercial discovery. Emerald elected not to participate in this well operation but still retains its rights to the well and to any discovery in EP104/R1.

Under the terms of the Joint Operating Agreement, if the well operation is successful (i.e. commercial gas or oil production is indicated) and Stokes Bay#1 is completed as a producing well, Emerald would have the option of backing into the well for its full working interest after the equivalent of a 900% of the costs of the well operation is recovered by the parties participating in the well operation. This would be recovered from production revenue less operating costs. Emerald's interest in the R1 Retention Lease and future wells is unaffected.

The Stokes Bay #1 well was drilled in October, 2007 in the EP 104/R1 Permits located in the Canning Basin, near the town of Derby, Western Australia. The well was suspended after large volumes of drilling mud were lost in what is believed to be a cavernous reef system in the Nullara Formation. Since then, two attempts were made by the Operator, Buru Energy Limited, to induce flow in the well and to obtain a gas sample. Both attempts failed, however wellhead pressures of around 1200 psi and gas accumulation in the well bore re-occurred after each attempt.

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Production Licence L15, Canning Basin WA

(Emerald option to acquire 12.75% Working Interest; Operator: Buru Energy Ltd)

Emerald holds an option to farm in to the West Kora Production Licence L15 (two rectangular blocks, 6054 and 6126 containing the West Kora-1 oil discovery) by paying 13% of West Kora #1 work over costs to earn a 12.75% WI.

West Kora-1 was drilled in 1984 in EP 104 by Esso Australia and had oil in the Anderson Formation. Approximately 20,000 barrels of oil were produced before the well was shut in due to increasing water cut.

Emerald is currently awaiting advice from Buru regarding the activity plans to re-establish oil production from West Kora #1.

EP463 & TP24 (Lacepede Islands) AND WA-419-P (Offshore) Canning Basin, WA (Emerald 100% Working interest, Operator)

Emerald continues to progress exploration studies to characterise leads and prospects in its strategic holdings along the structurally significant Pinnacle Fault zone in its projection offshore. The Pinnacle Fault is a key structural element between the Fitzroy Sub-Basin and the Lennard Shelf. It is believed to be the conduit for oil and gas migration from the Fitzroy Sub-Basin into structural and stratigraphic traps on the adjacent Lennard Shelf to the north.

Seismic feasibility studies are currently underway as part of Emerald's Year 2 Permit work commitments. Emerald will then seek to farm out a portion its 100% interest in this large permit area in anticipation of new seismic acquisition in 2011.

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Exploration Permit/Retention Licence/Applications Emerald Net Working Interest	Permit Size (approx sq km)
EP 104 12.75% Retention Lease R1 12.75% Production Licence L98-1 (option) 12.75% EP463 100% TP24 100% WA-419-P 100% Total	500 300 200 200 400 8,000
	9,600

Corporate

At 30 September 2010 the consolidated entity had $2.7m cash on hand.

On 30 July 2010, the Company signed an underwriting agreement for a fully underwritten rights issue and placement to raise $2.75m before costs.

The Company is continually reviewing fresh acquisition/corporate opportunities in the energy sector.

The Company made the following announcements during the quarter and up to the date of this quarterly report:

Date	Headline
22/10/2010	EGO:Further Testing ofStokesBay-1 Well/R1CanningBasin WA
22/10/2010	BRU: Further Testing ofthe StokesBay-1 Well
12/10/2010	Notice of Annual General Meeting/Proxy Form
30/09/2010	Annual Report to shareholders
21/09/2010	Change of Director`s Interest Notice
21/09/2010	Change of Director`s Interest Notice x 4
17/09/2010	Allotment ofSecurities andTop20 SecurityHolders
13/09/2010	Update- Allotment of EntitlementIssue Securities
9/09/2010	Withdrawal of Resolution/Cancellation of EGM
9/09/2010	Closure of Non-Renounceable Entitlements Issue
30/08/2010	Allotment of Placement Shares and Options
19/08/2010	Despatch of Non Renounceable Rights Issue Prospectus
19/08/2010	Allotment of Placement Shares and Options
12/08/2010	Notice of Extraordinary General Meeting/ProxyForm
11/08/2010	NOXXE Litigation Update
6/08/2010	Revised Appendix 3B
3/08/2010	Appendix 3B
2/08/2010	Disclosure Document
2/08/2010	Capital Raising toFundNW AliceDrillingProgram
2/08/2010	Quarterly Activities and Cash Flow Report

EMERALD OIL & GAS NL – SEPTEMBER QUARTERLY REPORT 2010

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For more information please contact:

Emerald Oil & Gas NL Tel: +618 9482 0510

MIKE KRZUS

Managing Director

mkrzus@emeraldoilandgas.com

About Emerald Oil & Gas NL

Emerald Oil & Gas NL (ASX: EMR) was listed on the ASX in June 2006. Emerald is an oil and gas exploration and production company with project interests in Kentucky and Texas in the USA and in the Canning Basin of Western Australia.

Statements regarding Emerald’s plans with respect to its petroleum properties are forward-looking statements. There can be no assurance that Emerald’s plans for development of its petroleum properties will proceed as currently expected. There can be no assurance that Emerald will be able to confirm the presence of additional petroleum deposits, that any discovery will prove to be economic or that an oil or gas field will successfully be developed on any of Emerald’s petroleum properties.

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Appendix 5B

Mining exploration entity quarterly report

Name of entity

Emerald Oil & Gas NL

ABN 009 795 046 Consolidated statement of cash flows		Quarter ended(“currentquarter”)	Quarter ended(“currentquarter”)
		30 September 2010
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for: (a) exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) - R&D rebate Net Operating Cash Flows		Current quarter $A’000	Year to date (12 months) $A’000
		108 (232) - (9) (513) - 2 - - 18	108 (232) - (9) (513) - 2 - - 18
		(626)	(626)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Unsolicited return of NOXXE equity contributions Net investing cash flows 1.13 Total operating and investing cash flows (carriedforward)		633	633
		633	633
		7	7

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1.13 Total operating and investing cash flows (broughtforward)	7	7
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other - Capital Raising Costs 1.20 Other-Subscriptions received	2,750 (190)	2,750 (190)
Net financing cash flows	2,560	2,560
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of quarter	2,567 172 -	2,567 172 -
	2,739	2,739

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		175
		Nil
1.25	Explanation necessary for an understanding of the transactions
	The amount above includes payments to directors and to companies associated with John Hannaford and Jeremy Shervington for this quarter and previous quarters. The payments to Ventnor Capital, accompany associated with John Hannaford relate to the provision of consulting fees, company secretarial services, accounting and bookkeeping, secretarial services and the provision serviced offices on commercial terms. The payments to Jeremy Shervington Legal Practice relate to the provision of legal services oncommercialterms.

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A

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Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount available $A’000	Amount used $A’000
	-		-
	-		-
Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration			$A’000
			860
			200
			50
			150
Total			1,260

On 30 July 2010, the Company signed an underwriting agreement for a fully underwritten rights issue and placement to raise $2.75m before costs.

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to therelateditemsinthe accountsis asfollows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	2,724	172
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	2,724	172

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter

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Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (cents)	Amount paid up per security (cents)
7.1 Preference+securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs,redemptions
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Increases through conversion of options (c) Release from escrow (d) Decreases through returns of capital, buy- backs	270,303,764	270,303,764
	137,500,000	137,500,000	$0.02	$0.02
7.5 +Convertible debt securities(description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted	-	-
	-	-
7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	661,638 2,000,000 5,000,000 11,661,115 78,750,000	- - - - 78,750,000	Exercise price 17.68 cents 25 cents 10 cents 10 cents 5 cents	Exercise date 23/01/11 31/05/11 31/03/14 30/06/12 31/08/12
	78,750,000	78,750,000	5 cents	31/08/12
	-	-
7.11 Debentures (totals only)	-	-
7.12 Unsecured notes(totals only)	-	-

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Compliance statement

1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

2 This statement does ~~/does not~~ * give a true and fair view of the matters disclosed.

Sign here:

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Date: 29 October 2010

(Director)

Print name: Mike Krzus

Notes

1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Cash Flow Statements apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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