EMERALD RESOURCES NL — Interim / Quarterly Report 2009

Jan 31, 2010

==> picture [190 x 58] intentionally omitted <==

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

31 January, 2010

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

QUARTERLY ACTIVITIES AND CASHFLOW REPORT – DECEMBER 31, 2009

Please find attached the Quarterly Activities Report and Appendix 5B Quarterly Cashflow Report for the quarter ended December 31, 2009.

Yours sincerely,

==> picture [175 x 82] intentionally omitted <==

MIKE KRZUS Chief Executive Officer mkrzus@emeraldoilandgas.com

==> picture [172 x 52] intentionally omitted <==

ASX Release

31 January 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

Managing Director mkrzus@emeraldoilandgas.com

BOB BERVEN

Director bberven@emeraldoilandgas.com

JOHN HANNAFORD

Director jhannaford@emeraldoilandgas.com

MORGAN BARRON

Company Secretary mbarron@emeraldoilandgas.com

E-MAIL:

info@emeraldoilandgas.com

QUARTERLY ACTIVITIES REPORT FOR THREE MONTHS ENDED 31 DECEMBER 2009

Highlights

USA

• Appalachian Basin Gas Development Projects, Magoffin County, Kentucky

• Well operations completed on 7 wells in the P&J 8 well recompletion program.

• New company (Kentucky Energy Partners LLC) formed with local engineering/operating company to target high productivity gas projects - three gas projects currently in progress with first production expected in February.

• NW Alice Project, Jim Wells County, Texas.

• 170 acres around RJ Hunter #1 gas discovery well acquired @ 100% EMR working interest.

• In discussions with partners regarding new acreage acquired by Operator and resumption of drilling program.

WEBSITE:

www.emeraldoilandgas.com

Directors/Officers:

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

Issued Capital: 115,481,534 Shares (EMR) 9,161,639 Unlisted options

AUSTRALIA

• Canning Basin, WA

• Technical planning underway for well operations on Stokes Bay #1 during 2010 dry season to assess commerciality of gas discovery well.

• Production Licence accepted for West Kora

• Onshore Exploration Permit application for EP4/05-6 withdrawn and working interest in EP104 relinquished

Market Capitalisation: Undiluted $4.6m (@ 4.0 cents)

Cash on hand 31.12.09 $1.62million

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 1 –

USA Projects

Appalachian Gas, Kentucky and West Virginia

(1. Emerald earning 80% Working Interests in 8 wells; Operator: P&J Resources Inc)

• (2. Emerald 75% Equity Interest in Kentucky Energy Partners LLC)

OVERVIEW

Limited progress was made on Emerald's P&J Resources operated 8 well recompletion program in Magoffin County, Kentucky this quarter. Well operations have been completed on 7 of the 8 wells with mixed results and discussions are ongoing with P&J to determine actions required to complete the program and bring the wells to production.

During the quarter Emerald initiated a plan to selectively target high productivity wells and acreage in Magoffin county. A new company, Kentucky Energy Partners (KEP) was formed with a local operator/engineering consultant, Slone Energy LLC, to selectively take direct interests in leases and wells and rapidly bring new gas projects into production. Emerald holds a 75% equity interest in the new company. KEP projects will be progressed in parallel with the P&J Resources operated 8 well recompletion program.

Status as at the date of this report:

Kentucky

• Technical review underway to evaluate results of the P&J 8 well re-completion program and determine future actions required to deliver production. Unsuccessfully recompleted wells will be replaced under the agreements with P&J Resources.

• Kentucky Energy Partners LLC concurrently progressing three gas projects with initial production expected in February.

• Working with gas buyers and third parties in Magoffin County to optimise and expand area gas gathering/processing system.

West Virginia

• Completion and testing program for 2 gas wells in Wayne County, West Virginia on hold pending consolidation of gas production in Kentucky.

• No further activity planned in West Virginia.

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 2 –

LOCATION

==> picture [478 x 228] intentionally omitted <==

OPERATIONS

- Kentucky Magoffin County

P&J Gas Well Recompletion Program

Limited progress was achieved on the P&J operated 8 well recompletion program during the quarter, mainly due to operator performance issues. Results of the well operations completed on 7 of the 8 wells are mixed.

Three of the wells produced intermittently during the quarter at flow rates less than 100 Mcfd. However, all of these wells are believed to be performing below their production potential and production increases are expected after technical issues are addressed.

Recompletion operations on a further three wells were unsuccessful and these will be replaced with new wells at no cost to Emerald under the terms of the agreements with P&J.

One well remains to be assessed and the final well is awaiting operations to remove or bypass an open hole bridge plug preventing access to the reservoir.

Under the new agreements, Emerald’s wells are tied in to BTU Energy’s gathering system, which connects to the Jefferson Gas LLC gas sales pipeline. Emerald has been granted free access to the gathering system. BTU Energy then sells the gas on Emerald’s behalf under a gas sales agreement between BTU and Jefferson.

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 3 –

Kentucky Energy Partners LLC

Despite results to date with the P&J 8 Well Recompletion Program, Emerald continues to have confidence in the gas production potential of the area, based on technical studies performed during 2009.

The Appalachian basin is characterised by thousands of low productivity, shallow gas wells, typically capable of producing less than 100Mcfd. However, in the Magoffin County area of Eastern Kentucky, small, highly localised areas of relatively high productivity gas wells capable of rates ranging from several hundred Mcdf to over 1 MMcfd exist, typically covering no more than a few hundred acres, where certain geological characteristics are present. Emerald conducted extensive subsurface studies during 2009, identifying a number of these areas.

In November 2009, Emerald formed a new company, Kentucky Energy Partners LLC (KEP), with Slone Production LLC, a very competent local gas field operator and engineering consultant. KEP was created specifically to identify and acquire leases and wells targeting these high productivity areas for gas projects which can be brought to production quickly.

Emerald holds a 75% interest in the new company, with Slone owning the remaining 25%. Under the agreed arrangements Emerald will contribute 100% of the capital funding and provide sub-surface and petroleum engineering direction. Slone will provide facilities engineering, manage project implementation and production operations and provide incountry management of KEP's business.

KEP's current holdings include 12 gas wells, 2 oil wells and approximately 1350 acres of leases in three separate gas projects. The three gas projects are being progressed concurrently, with first production expected in February.

At the time of writing, an aggressive well assessment program involving two well service rigs, two well testing packages and well logging is underway to assess the gas wells to determine their condition and production potential. In parallel with the well assessment program, production facilities are being installed and pipeline rights of way are being secured to connect the wells to gas sales points as soon as practical.

Area Gas Infrastructure Initiative

Emerald is working with gas buyers and other parties in the area to commission an existing 8 inch gathering line linking Emerald's (50% owned) Amine plant with a Columbia gas tie-in point in Martin, Kentucky. When operational, this gas gathering/production system is expected to provide some 9 MMcfd of pipeline capacity to a sales point presenting more favourable gas sales terms and 5 MMcfd of sour gas processing capacity.

Appalachian Drilling Plans

Emerald's current objective is to rapidly build its Appalachian production base and revenue stream through "existing well" projects at a fraction of the cost of drilling new wells. Future drilling will be guided by results from the "existing well" activities and will be focussed in areas with demonstrated high productivity.

- West Virginia Wayne County

Plans to complete and stimulate the two Emerald wells drilled in Wayne County, West Virginia during 2008 have been deferred to concentrate efforts on realising and maximising steady state gas production in Kentucky.

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 4 –

North West Alice, Jim Wells County, Texas (Emerald 14% Working Interest; Operator: Noble Energy Inc.)

In 2009, the Operator, Noble Energy, completed processing and interpretation of the 3D seismic data covering the large, 100 Bcf anticlinal structure discovered by the RJ Hunter #1 well in March 2007. Based on the seismic, Noble identified three new drilling locations within the Area of Mutual Interest (AMI) area and acquired additional leases both inside and outside the AMI area to consolidate the position of the joint venture.

Noble recently advised joint venture partners of a company decision to exit its interests in this area of Texas to concentrate its efforts in other areas. Discussions are ongoing to assign interests in the new leases from the Noble. The remaining NW Alice interest holders intend to commence drilling operations as soon as practical once the leases have been transferred.

Emerald acquired leases with oil and gas rights over 170 acres containing and surrounding the RJ Hunter#1 discovery well. Joint Venture partners subsequently elected not to participate in these new leases and Emerald now holds these leases at 100% Working Interest. A recent technical review indicated that side tracking the RJ Hunter well is not feasible. Emerald is now considering options to re-drill the RJ Hunter #1 gas discovery well and complete it as a gas/condensate producer.

New Projects – USA

The Company continues to review and assess new oil and gas exploration project opportunities in the USA which have been sourced through current partners and other industry participants.

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 5 –

Australian Projects

EP104/R1, Canning Basin WA

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

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.

The Operator, Buru Energy has commenced technical planning for well operations to be conducted during the dry season in 2010 to determine if the Stokes Bay well is a potentially commercial gas discovery.

During the quarter, Buru Energy submitted an application on behalf of the joint venture to renew the R1 Retention lease surrounding Stokes Bay #1 for another five years. Emerald and a number of other joint venture partners also decided to relinquish their interests in EP104.

Production Licence Application L98-1, Canning Basin WA (Emerald 12.75% Working Interest; Operator: Buru Energy Ltd)

Emerald and its joint venture partners have accepted the Production Licence offered by the WA Department of Mines and Petroleum over the area including the West Kora oil discovery.

Exploration Permit Application EPA 4/05-6 Canning Basin, WA (Emerald 100% Working Interest and Operator)

After a comprehensive technical review of identified leads and prospects along the Pinnacle Reef trend using all available technical data, Emerald decided to withdraw its Application for EPA 4/05-6.

The technical review indicated the best exploration prospectivity along the Pinnacle fault trend lay in its offshore extension into Emerald's offshore permit areas. Prospectivity of the onshore portion of the trend was judged insufficient to justify the exploration program proposed in the 2006 exploration program supporting the original Application. Emerald will now focus its efforts on the prospective offshore portion of the Pinnacle reef trend.

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

Supported by insights from the recent technical review, 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 stratigraphical traps on the adjacent Lennard Shelf to the north.

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 6 –

==> picture [486 x 308] intentionally omitted <==

Emeralds current tenement holdings in the Canning Basin are:

Exploration Permit/Retention Licence/Applications Emerald Net Working Interest	Permit Size (approx sq km)
Retention Lease R1 12.75% Production Licence Application L98-1 12.75% EP463 100% TP24 100% WA-419-P 100% Total	290 200 200 400 8,000
	9,090

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 7 –

Corporate

At 31 December 2009 the consolidated entity had $1.62 million cash on hand.

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

Date	Headline
27/01/2010	Emerald Acquires Additional Appalachian Gas Acreage / Wells
6/01/2010	Change of Director`s Interest Notice x 3
6/01/2010	Details of Company Address
1/12/2009	100% Interest Acquired In NW Alice Well
26/11/2009	AGM Presentation
26/11/2009	Results of Meeting
25/11/2009	KEP LLC Formed to target High Productivity Gas Wells
30/10/2009	Quarterly Activities and Cashflow Report

For more information please contact:

Emerald Oil & Gas NL Tel: +618 9482 0510

MIKE KRZUS JOHN HANNAFORD Managing Director Director mkrzus@emeraldoilandgas.com jhannaford@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, West Virginia and Texas in the USA and in the Canning Basin of Western Australia. Emerald’s focus is on both conventional and nonconventional oil and gas prospects. Its primary objective is to achieve near term production and cashflow to build shareholder value and provide funds to fuel further growth.

Information in this report pertaining to exploration potential was compiled by Robert Berven, Emerald Oil & Gas NL’s Technical Director who is a Member of the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists CPG # 2498.

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.

• 8 –

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

Appendix 5B

Mining exploration entity quarterly report

Name of entity

Emerald Oil & Gas NL

ABN 009 795 046	Quarter ended(“currentquarter”)
009 795 046	31 December 2009

Consolidated statement of cash flows

Consolidated statement of cash flows
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 (6 months) $A’000
	(480) (8) (286) 40 348	(619) (19) (613) 94 348
	(386)	(809)
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) Net investing cash flows 1.13 Total operating and investing cash flows (carriedforward)	(7)	(7)
	(7)	(7)
	(393)	(816)

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 9 –

1.13 Total operating and investing cash flows (broughtforward)	(393)	(816)
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
Net financing cash flows	-	-
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 Cashat end ofquarter	(393) 2,016 (1)	(816) 2,439 (1)
	1,622	1,622

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
		161
		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

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 10 –

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 used $A’000
	-	-
	-	-

Estimated cash outflows for next quarter

Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	384
	267
	311
	160
Total	1,122

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)	1,622	2,016
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	1,622	2,016

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

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 11 –

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	115,481,534	115,481,534
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 1,500,000 2,000,000 5,000,000	- - - -	Exercise price 17.68 cents 25 cents 25 cents 10 cents	Exercise date 23/01/11 28/02/10 31/05/11 31/03/14
	-	-
	2,000,000 325,000	- -	30 cents 25 cents	31/12/09 31/12/09
7.11 Debentures (totals only)	-	-
7.12 Unsecured notes(totals only)	-	-

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 12 –

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:

==> picture [138 x 66] intentionally omitted <==

Date: 31 January 2009

(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.

== == == == == == == == == ==== == == == ==== == == == ==== == == ==

EMERALD OIL & GAS NL – DECEMBER QUARTERLY REPORT 2009

• 13 –