METGASCO LTD — Capital/Financing Update 2005

Oct 10, 2005

METGASCO LIMITED

ABN 24 088 196 383

SHORT FORM PROSPECTUS

FOR THE OFFER OF UP TO 13,300,000 SHARES AT AN ISSUE PRICE OF \$0.30 EACH TO RAISE UP TO \$3,990,000

Important Notice

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act. This Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type but refers to other documents the information of which is deemed to be incorporated in this Prospectus.

TABLE OF CONTENTS

$\ddagger$ .	CORPORATE DIRECTORY
$\mathbf{2}$	LETTER OF INVITATION FROM THE BOARD
3.	INVESTMENT OVERVIEW
4.	DETAILS OF THE OFFER
5.	INFORMATION DEEMED TO BE INCORPORATED IN PROSPECTUS
А.	COMPANY OVERVIEW
$\overline{I}$ .	TERMS AND CONDITIONS OF SHARES
8.	ADDITIONAL INFORMATION
9.	AUTHORITY OF DIRECTORS
10.	DEFINITIONS
11.	APPLICATION FORM

TIMETABLE OF EVENTS AND IMPORTANT DATES

Event	Date
Prospectus lodged with the ASIC and Opening Date	11 October 2005
Closing Date of Offer	21 October 2005
Proposed Date of First Share Issue	26 October 2005
Date of Annual General Meeting	23 November 2005
Proposed Date of Second Share Issue	25 November 2005

* These dates are indicative only and may change without prior notice.

IMPORTANT NOTICE

This Prospectus is dated 11 October 2005.

A copy of this Prospectus was lodged with the ASIC on 11 October 2005. The ASIC takes no responsibility for the contents of this Prospectus.

No Shares will be issued on the basis of this Prospectus later than thirteen (13) months after the date of this Prospectus. Application will be made within seven (7) days after the date of this Prospectus for permission for the Shares offered by this Prospectus to be listed for Official Quotation.

Applicants should read this document in its entirety and, if in any doubt, consult with their professional advisors before deciding whether to accept the Offer. There are risks associated with an investment in the Company and the securities offered under this Prospectus should be regarded as a speculative investment. The securities offered under this Prospectus carry no quarantee with respect to return on capital investment, payment of dividends or the future value of the Shares.

Certain abbreviations and other defined terms are used throughout this Prospectus. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations used are set out in Section 10 of this Prospectus.

WEB SITE - ELECTRONIC PROSPECTUS

A copy of this Prospectus can be downloaded from the website of the Company at www.metgasco.com.au. Any person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company must be an Australian resident and must only access the Prospectus from within Australia.

The Corporations Act prohibits any person passing onto another person an Application Form unless it is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any person may obtain a hard copy of this Prospectus free of charge by contacting the Company.

SHORT FORM PROSPECTUS

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type. Rather, the Prospectus incorporates by reference information contained in documents that have been lodged with the ASIC on certain dates.

This Prospectus refers to the disclosure document lodged by the Company with the ASIC on 11 November 2004 ("November 2004 Prospectus") for the Offer of 25,000,000 Shares at an issue price of 20 cents to raise a total of \$5,000,000. In referring to the November 2004 Prospectus, the Company:

• $(a)$ identifies the November 2004 Prospectus as being relevant to the Offer of Shares under this Prospectus and containing information that will provide investors and their professional advisers information to assist them in making an informed assessment of:
• $(i)$ the rights and liabilities attaching to the Shares; and
• the assets and liabilities, financial position and performance, profits and losses and $(ii)$ prospects of the Company;
• refers investors and their professional advisers to Section 5 of this Prospectus which $(b)$ summarises the information in the November 2004 Prospectus deemed to be incorporated in this Prospectus:
• $(c)$ informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the November 2004 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period; and

$(d)$ advises that the information in the November 2004 Prospectus will be primarily of interest to investors and their professional advisers or analysts.

TIMING OF SHARE ISSUES AND SHAREHOLDER APPROVAL

Under ASX Listing Rule 7.1 the Company may issue up to 15% of its issued capital in any 12 month period without obtaining the consent of its Shareholders. If the Offer made under this Prospectus is fully subscribed, the Company will be required to issue to successful Applicants approximately 20% of is current issued share capital. Since the Company does not yet have shareholder approval to issue more than 15% of its current issued share capital, it is proposed that the Company will issue, pursuant to this Prospectus, to successful Applicants, up to 15% of its current issued share capital as soon as possible after the Closing Date. The Company is proposing to seek shareholder approval for the issue of the excess over 15% of its issued capital pursuant to this Prospectus at its forthcoming annual general meeting, which is to be held on 23^rd November 2005 ("Second Share Issue"). Notices relating to the annual general meeting will be sent to Shareholders in the near future.

In order to comply with ASX Listing Rule 7.1 the Company will issue 9.850,000 Shares offered under this Prospectus as soon as practicable after the Closing Date ("First Share Issue"). The remainder of the Shares offered under this Prospectus ("Second Share Issue") will not be issued unless and until Shareholders have approved the issue at the annual general meeting. If the resolution to approve the issue of in excess of 15% of the issued share capital of the Company, comprising 3,450,000 Shares offered under this Prospectus, is not passed, no further shares will be issued pursuant to this Prospectus (ie other than the 9,850,000 shares referred to above).

The selection of successful Applicants who are to participate in the First Share Issue under this Prospectus and successful Applicants who are to participate in the Second Share Issue under this Prospectus, subject to Shareholder approval being obtained at the annual general meeting, will be made by the Directors in their absolute and uncontrolled discretion. Successful Applicants will be notified as soon as possible after the Closing Date of whether they have been selected to participate in the First Share Issue or the Second Share Issue. The Closing Date for receipt of Applications and payment of the Application Moneys is 21 October 2005 but the Directors reserve the right to close the Issue at any time prior to or after that date.

1. CORPORATE DIRECTORY

Directors

Dr Peter Edward Power (Chairman) David William Granger Johnson Glenda Ann McLoughlin Richard Orme Wood

Company Secretaries

Glenda Ann McLoughlin

Nicholas John Victor Geddes

Auditors

Gregory McLeay McLeay Chartered Accountants Suite 201, 105 Pitt St SYDNEY, NSW, 2000

Telephone: +61 2 9235 3800

Registered Office

Level 3 32 Walker St North Sydney NSW 2060

Telephone: +61 2 9923 9100 Facsimile: +61 2 9923 9199 Email: info@metgasco.com.au Website: www.metgasco.com.au

Share Registry

Computershare Investor Services Pty Limited GPO BOX 7115 Sydney Telephone: +61 3 9415 5000 Facsimile: +61 3 9473 2500 Investor Enquiries: 1 300 850 505

Solicitors

O'Loughlins Lawyers Level 2, 99 Frome St ADELAIDE SA 5000

Telephone: +61 8 8111 4000

$2¹$ LETTER OF INVITATION FROM THE BOARD

Dear Investor,

We are pleased to invite you to invest in Metgasco Ltd ("Metgasco" or "Company") by applying for Shares in accordance with this Prospectus.

Metgasco gained Official Quotation of its securities on ASX on 21 December 2004, with trading in the Company's Shares commencing on 23 December 2004.

Following the Company's admission to the Official List, the Company conducted the pilot production drilling and appraisal of gas resources in PEL16 as set out in Section 6 of this Prospectus.

The Company proposes to offer 13,300,000 shares at 30 cents to investors to raise \$3,990,000 (before costs) ("Offer"). Funds raised pursuant to the Offer will be used for drilling and appraisal, power project development. working capital and the costs of the Offer.

The primary purpose of this Prospectus, being a qualifying disclosure document, is to remove any restrictions that may attach to the securities issued under this Prospectus given that the Company is unable to rely on the "Case 1" exemption in Section 708A of the Corporations Act - which allows the secondary sale of securities issued under an exempt placement.

The Board takes this opportunity to thank potential investors and look forward to your continued support of the Company in the future.

Yours faithfully

AB ...

Dr Peter Power on behalf of the Board of Directors

11 October 2005

3. INVESTMENT OVERVIEW

$3.1$ Important Notice

This section is not intended to provide full information for investors intending to apply for Shares offered pursuant to this Prospectus. This Prospectus should be read and considered in its entirety.

$3.2$ Summary of the Offer

By this Prospectus, the Company invites investors to apply for up to 13,300,000 shares at an issue price of \$0.30 each to raise up to \$3,990,000.

$3.3$ Indicative Timetable

Event	Date
Prospectus lodged with the ASIC and Opening Date	11 October 2005
Closing Date of Offer (5.00pm EST)	21 October 2005
Proposed Date of First Share Issue	26 October 2005
Date of Annual General Meeting	23 November 2005
Proposed Date of Second Share Issue	25 November 2005

The above dates are indicative only and may change without notice. The Company reserves the right to extend the Closing Date or close the Offer early without notice.

$3.4$ Use of Proceeds

It is intended to apply funds raised from the Offer first towards expenses of the Offer estimated to be \$207,000 and thereafter towards drilling and appraisal, infrastructure development and general working capital.

Set out below is the intended use of funds in respect of the Offer:

Use of Funds	First Share Issue	Second Share Issue
Drilling and Appraisal	\$1,500,000	\$500,000
Infrastructure Development	\$298.000	\$245,000
Working Capital	\$1,000,000	\$240,000
Costs of Offer	\$157.000	50,000
TOTAL	\$2,955,000	\$1,035,000

$3.5$ Effect of the Offer and Pro Forma Balance Sheet

The principal effect of the Offer will be to:

• $(a)$ increase cash reserves by approximately \$3,790,000 after deducting estimated expenses of the Offer, assuming all Shares offered under this Prospectus are issued; and
• $(b)$ increase the number of Shares on issue from 65,715,000 as at the date of this Prospectus to up to 79,015,000 Shares, assuming all shares offered under this Prospectus are issued.

The Offer will have an effect on the Company's financial position. Set out below is:

• an audited consolidated statement of financial position of the Company as at 30 June 2005; and $(a)$
• a pro forma consolidated statement of financial position of the Company as at 30 June 2005 $(b)$ incorporating the effect of the Offer under the proposed First Share Issue.
• a pro forma consolidated statement of financial position of the Company as at 30 June 2005 $(c)$ incorporating the effect of the Offer under the proposed First and Second Share Issues.

STATEMENT OF FINANCIAL POSITION

	Audited As at 30 June 2005 \$	Adjustment First Share Issue	Proforma As at 30 June 2005	Adjustment First & Second Share Issue	Proforma As at 30 June 2005 \$
CURRENT ASSETS
Cash assets	2,713,902	2,798,000	5,511,902	3,783,000	6,496,902
Security deposits	81,067		81,067		81,067
Prepayments	97,195		97,195		97,195
Receivables	229,828		229,828		229,828
TOTAL CURRENT ASSETS	3,121,992		5,919,992		6,904,992
NON CURRENT ASSETS
Exploration and evaluation expenditure	2,506,481		2,506,481		2,506,481
Fixed assets	81,948		81,948		81,948
Security deposits	80,000		80,000		80,000
TOTAL NON CURRENT ASSETS	2,668,429		2,668,429		2,668,429
TOTAL ASSETS	5,790,421		8,588,421		9,573,421
CURRENT LIABILITIES
Accounts payable	999,648		999,648		999,648
Other
TOTAL CURRENT LIABILITIES	999,648		999,648		999,648
NET ASSETS	4,790,773		7,588,773		8,573,773
EQUITY
Contributed equity	5,727,154	2,955,000	8,682,154	3,990,000	9,717,154
Accumulated profits (losses)	(936, 381)	(157,000)	(1,093,381)	(207,000)	(1, 143, 381)
TOTAL EQUITY	4,790,773		7,588,773		8,573,773
Fully Paid Ordinary Shares (number)	65,715,000	9,850,000	75,565,000	3,450,000	79,015,000

Key Assumptions to the Pro Forma Statement of Financial Position

Included in the pro forma statement of financial position are the following adjustments:-

• $(i)$ The issue of 9,850,000 Shares offered under this Prospectus for the First Share Issue to raise up to \$2,955,000 before costs of the issue of \$157,000.
• $(ii)$ The payment of costs for the First Share Issue totalling \$157,000 which are paid from the proceeds of the Offer pursuant to this Prospectus.
• The issue of 3,450,000 Shares offered under this Prospectus for the Second Share Issue to raise up to $(iii)$ \$1,035,000 before costs of the Issue of \$50,000.
• $(iv)$ The payment of costs for the Second Share Issue totalling \$50,000 which are paid from the proceeds of the Offer pursuant to this Prospectus.

Note Disclosure for AASB 1047 requirements.

Impact of Adoption of Australian Equivalents to International Financial Reporting Standards

Metgasco has assessed the impact of adopting Australian Equivalents to International Reporting Standards (AIFRS) and has made an initial assessment of the accounting policy changes that will be required. In some cases choices of accounting policies are available, including elective exemptions under Accounting Standard AASB 1 - First-time adoption of Australian Equivalents to International Reporting Standards. These choices have been analysed to determine the most appropriate accounting policy for the consolidated entity.

The impacts on the financial statements of the adoption of AIFRS, which are known or can be reliably estimated for the year ended 30 June 2005, are provided below:

$(a)$ Share-based compensation

Under AIFRS, Accounting Standard AASB2 Share Based Payment is an expense which is recognised in the statement of financial performance for share-based compensation granted to an employee or a Director. The share-based compensation is measured by reference to the fair value of the equity instruments at the grant date (when the terms are agreed between the employer and the employee) and recognised as an expense over the periods during which the services are received from the employee vesting date. If the policy required under AIFRS has been applied during the year ended 30 June 2005 there would have been no impact on consolidated general & administrative expenses and the corresponding adjustment to the share-based payment reserve.

Other $(b)$

Other than the above, based on present knowledge and estimates, it is not considered that the adoption of AIFRS is likely to have any material effect on the financial statements for the year ended 30 June 2005.

Pro forma Capital Structure of the Company

Shares

Upon completion of the issue of Shares under this Prospectus, the capital structure of the Company will be as follows (assuming the Offer is fully subscribed):

Shares on issue as at the date of this Prospectus 1	65,715,000
Shares offered under the First Share Issue pursuant to this Prospectus	9,850,000
Shares on issue on completion of the First Share Issue	75.565.000
Shares offered under the Second Share Issue pursuant to this Prospectus	3.450.000
Shares on issue on completion of the First and Second Share Issues	79,015,000

Notes:

¹ Includes 19,690,914 Shares subject to escrow until 23 December 2006.

Options

The details of Options on issue in the Company as at the date of this Prospectus are as follows (all Options on issue are unquoted):

Exercisable at 30 cents on or before 30 June 2009	16,561.869
Total Options on issue	16.561.869

4. DETAILS OF THE OFFER

$4.1$ The Offer

By this Prospectus, the Company offers for subscription up to 13,300,000 Shares at an issue price of \$0.30 per Share to raise up to \$3,990,000.

The Shares offered under this Prospectus will rank equally with the existing Shares on issue.

$4.2$ Application for Shares

Applications for Shares must be made using the Application Form attached to this Prospectus.

Payment for the Shares must be made in full at the issue price of \$0.30 per Share. Applications for Shares must be for a minimum of 4,000 Shares and thereafter in multiples of 1,000 Shares. Completed Application Forms and accompanying cheques must be delivered to:

Computershare Investor Services Pty Limited Level 3, 60 Carrington St SYDNEY NSW 2000

Or mailed to:

Computershare Investor Services Pty Limited GPO Box 7115 SYDNEY NSW 2001

Cheques should be made payable to "Metgasco Ltd" and crossed "Not Negotiable". Completed Application Forms must reach the Share Registry by no later than the Closing Date.

$4.3$ Allotment

Allotment of Shares offered by this Prospectus pursuant to the First Share Issue will take place as soon as practicable after the Closing Date. Allotment of shares offered under this Prospectus pursuant to the Second Share Issue (subject to obtaining shareholder approval for the Second Share Issue at the annual general meeting) will take place as soon as practicable after the holding of the annual general meeting. Prior to allotment, all application monies under the Offer shall be held by the Company on trust. The Company, irrespective of whether the allotment of Shares takes place, will retain any interest earned on the Application monies.

The Directors reserve the right to allot Shares in full for any Application under the Offer or to allot any lesser number or to decline any Application. Directors may in their discretion give preference to Shareholders in accepting applications under the Offer. Where the number of Shares allotted under the Offer is less than the number applied for, or where no allotment is made, the surplus Application monies will be returned by cheque to the Applicant within seven (7) days of the allotment date.

4.4 ASX Listing

The Company will apply to ASX within seven (7) days after the date of this Prospectus for Official Quotation of the Shares offered under this Prospectus. If the ASX does not grant permission for Official Quotation of the Shares offered pursuant to this Prospectus within three (3) months after the date of this Prospectus, or such longer period as is permitted by the Corporations Act, none of the Shares offered by this Prospectus will be allotted or issued. In these circumstances, all Applications will be dealt with in accordance with the Corporations Act.

4.5 Applicants outside Australia

This Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction where, or to any person to whom, it would not be lawful to make such an offer or to issue this Prospectus. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law. No action has been taken to register or qualify these Shares or otherwise permit a public offering of the securities the subject of this Prospectus in any jurisdiction outside Australia.

It is the responsibility of applicants outside Australia to obtain all necessary approvals for the allotment and issue of Shares pursuant to this Prospectus. The return of a completed Application Form will be taken by the Company to constitute a representation and warranty by the applicant that all relevant approvals have been obtained.

4.6 No Underwriting

The Offer is not underwritten. However, the Company reserves the right to pay any licensed dealer a broker handling fee of up to 5% of the funds raised in respect of Application Forms submitted to the Company bearing a broker stamp. GST will be added to the 5% handling fee.

4.7 CHESS

The Company participates in the Clearing House Electronic Sub-register System (CHESS). CHESS is operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC), a wholly owned subsidiary of ASX. in accordance with the Listing Rules and the ASTC Settlement Rules.

Under CHESS, the Company will not issue certificates to investors. Instead, investors will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS statement.

4.8 Risk factors

Prospective investors in the Company should be aware that subscribing for Shares the subject of this Prospectus involves a number of risks. Refer to Section 5 of this Prospectus for an outline of the risks applicable to the Company.

The risk factors outlined in Section 5 and other general risks applicable to all investments in listed securities not specifically referred to, may in the future affect the value of the Shares. Accordingly, an investment in the Company should be considered speculative.

4.9 Privacy Act

If you complete an Application Form you will be providing personal information to the Company (directly or by the Company's share registry). The Company collects, holds and will use that information to assess your application, service your needs as a Shareholder, facilitate distribution of payments and corporate communications to you as a Shareholder and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Company share registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company or its registry if you wish to do so at the relevant contact numbers set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information are governed by legislation including the Privacy Act 1988 (as amended), the Corporations Act and certain rules such as the ASTC Settlement

Rules. You should note that if you do not provide the information required on the application for Shares, the Company may not be able to accept or process your application.

4.10 Enquiries

If you have any questions regarding the Offer, or any of the documents referred to in this Prospectus, please contact the Company Secretary Mr Nicholas Geddes on (02) 9252 1933.

$5¹$ INFORMATION DEEMED TO BE INCORPORATED IN PROSPECTUS.

$5.1$ Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type. However, it incorporates by reference information contained in previous documents that have been lodged with the ASIC.

The information to be incorporated by reference into this Prospectus is summarised below in sub-section 5.2 and will primarily be of interest to investors and their professional advisers or analysts.

The Company informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the November 2004 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period. The November 2004 Prospectus will also be available by searching the ASIC's records in relation to the Company, or by visiting the Company's website at www.metgasco.com.au.

$5.2$ Summary of Information Deemed to be Incorporated - November 2004 Prospectus

Set out below is a summary of the information contained in the November 2004 Prospectus that is deemed to be incorporated in this Prospectus to assist investors and their professional advisers to determine whether, for the purposes of making an informed investment decision in relation to the Shares offered by this Prospectus, they should obtain a copy of the November 2004 Prospectus.

The Sections referred to below are references to sections in the November 2004 Prospectus.

Section 1 - Offer Details

Section 1 gives a general summary of the Offer and contains information relating to the procedural aspects of the Offer under the November 2004 Prospectus. It details a number of aspects, for example, the Company's capital structure on completion of the Offer, the purpose of the Offer and use of funds, how to apply for shares, the Company's privacy statement and the listing of the Company on ASX.

Section 2 - Coal Seam Gas

Section 2 provides an introduction to the Coal Seam Methane Industry in Australia and the US.

Section 3 - The Eastern States Energy Market

Section 3 gives an overview of the markets for gas and electricity in Queensland and New South Wales

Section 4 - Business Profile

Section 4 contains an overview of the Casino gas project. This section includes detailed information on: the background of the project; the geology of PEL16; the characteristics of the coals seams in PEL16: water quality and volumes; an estimate of the gas in place in PEL16; and exploration and business strategy.

Section 5 - Board and Corporate Governance

Section 5 contains a brief outline of the experience and qualifications of each of the Directors of the Company and policies on corporate governance.

Section 6 - Risk Factors

Section 6 notes that an investment in the Company carries certain risks and describes a number of factors that may impact on the success and future profitability of the Company. The factors referred to include general risks associated with economic conditions and share market investment and specific risks

associated with the Company such as: exploration and appraisal risk, operating and production risk: estimation of capital and operating costs; estimation of resource size; limited operating history; tenement tenure; competition in gas sales; gas and power prices; ability to access financing; access to land; ongoing insurance coverage; reliance on key personnel; construction; changes in government policy and legislation; environmental and native title.

Section 7 - Independent Consulting Geologist's Report

Section 7 is the Independent Consulting Geologist's Report prepared by MBA Petroleum Consultants which includes: an overview of Metgasco's exploration interests; detailed description of the geology of the Clarence Moreton basin; an analysis of the coals of the Walloons in PEL16; an evaluation of the extent of seismic coverage of the Walloons within PEL16; a review of gas content and gas composition; a review of permeability at South Casino#2 and comments on water disposal. This analysis pre-dated the technical work which has subsequently been completed since listing which is described in Sections 6.1 (Company Overview) and 8.3 (Continuous Disclosure and Documents Available for Inspection) in this Prospectus.

Section 8 - Independent Energy Market Consultant's Report

Section 8 comprises a report by ACIL Tasman Pty Ltd on the market outlook for coal seam gas produced from PEL16. This includes: an overview of Australian energy markets and the role of gas; an analysis of the demand for gas; government policies impacting the demand and supply of gas and an analysis of the market for electricity and gas from PEL16.

Section 9 - Independent Accountant's Report

Section 9 is the Independent Accountant's Report prepared by McLeay Chartered Accountants. The report was included in the November 2004 Prospectus to assist investors and their professional advisers in making an assessment of the financial position of the Company.

The Independent Accountant's Report contains an audited Statement of Financial Position as at 30 September 2004 and an unaudited pro-forma Statement of Financial Position as at 11 November adjusted to show the financial effect on the Company assuming either of the minimum and maximum issue of Shares under the November 2004 Prospectus.

Section 10 - Solicitor's Report

The Solicitor's Report contains the results of the search of registers of the Department of Mineral Resources (NSW) relating to the validity of title to tenement PEL16. It also contains a review of: material contracts; native title law and applicable State and Commonwealth Legislation. The Solicitor's Report also provides general comments on the legal framework applying to NSW Petroleum Exploration Licences. Petroleum Assessment Leases and Petroleum Production Leases and their resulting obligations on the holders of a petroleum title. In addition, the Solicitor's report provides an overview of legislation relating to NSW Greenhouse Gas Abatement Certificates and Queensland Gas Electricity Certificates.

Section 11 - Additional Information

Section 11 sets out additional information required to be disclosed in the November 2004 Prospectus, including information relating to:

• $(a)$ Director's Interests including shareholdings and remuneration;
• $(b)$ A summary of the interests of persons named in the Prospectus.
• Details of the expenses of the Offer; $(c)$

• Details of the consents and disclaimers of responsibility of persons named in the November $(d)$ 2004 Prospectus and those persons who prepared reports for inclusion in the November 2004 Prospectus:

• $(e)$ a summary of the material contracts entered into by the Company which in the opinion of the Directors are or may be material in terms of the Offer of Shares under the November 2004 Prospectus or which may otherwise be material to a potential investor in making an informed investment decision. Those contracts are listed below:

• $(i)$ Country Energy Co-operative Agreement;
• $(ii)$ Burns and Roe Worley Agreement;
• $(iii)$ Sunoco Agreement; and
• $(iv)$ Employment Agreements with David Johnson, Glenda McLoughlin and Richard Wood.
• A statement that the Company is not currently involved in any material legal proceedings, nor $(f)$ any legal proceedings pending or threatened against the Company;
• The rights attaching to securities; $(g)$
• $(h)$ A summary of the Company's Employees and Officers option plan;
• The Director's Responsibility Statement and Consent to lodgement. ${i}$

Section 12 - Defined Terms

The Defined Terms section defines and explains various terms and abbreviations used in the November 2004 Prospectus.

$5.3$ Events subsequent to the November 2004 Prospectus

Investors are referred to Section 6 of this Prospectus for a summary of events subsequent to the November 2004 Prospectus.

COMPANY OVERVIEW 6.

$6.1$ Overview

A comprehensive overview of the Company is set out in the November 2004 Prospectus. Persons considering subscribing for Shares under this Prospectus should refer to Section 5 of this Prospectus for a summary of the information contained in the November 2004 Prospectus deemed to be incorporated in this Prospectus.

A summary of the key developments since the admission of the Company to the Official List are as follows:

• a. Finalisation of regulatory and technical planning for drilling at South Casino
• b. Entered into contract with Mitchells Drilling Contractors to undertake the pilot production drilling program at South Casino
• c. Completed 5 pilot production test wells. These wells are currently being dewatered and gas flow rates are being monitored. Details on these wells are provided below:

Well	Spud Date	Well Type	Total Depth	Net Coal Thickness	Well Status
			(M)	(M)
MSC-03	30.03.05	Development	680	14	Pilot Production Test
MSC-04	15.04.05	Development	684	15	Pilot Production Test
MSC-05	04.05.05	Development	680	15	Pilot Production Test
MSC-06	29.05.05	Development	671	20	Pilot Production Test
MSC-07	10.06.05	Development	680	29	Pilot Production Test
MSC-08	21.06.05	Pre-Collar Detailed Investigation	483	not measured	Cased & Suspended

• d. Completed one pre-collar well. The purpose of this well was to obtain further technical data. It is intended that this well will be completed at a later date for pilot production purposes.
• e. Completed isotherm testing from the pre-collar hole. This testing confirmed the high gas storage capacity of the coal seam reservoir.
• Completed re-processing of pre-existing seismic data. f.
• Commenced re-interpretation of re-processed seismic data for conventional gas and oil g. accumulations.
• h. Retained US based petroleum engineers Malkewicz Hueni to review the Casino project and provide advice on alternative approaches to adopt to improve well productivity.

• Data from drilling and the review of the project by Malkewicz Hueni has enable the Company to i. upgrade it's estimate of gas resources within PEL16 to between 4.8 Tcf (high) and 3.8Tcf (low).

• Entered into a Heads of Agreement with the Northern Co-op Meat Co Ltd to develop a power coj. generation facility on the site of the meatworks.

• k. Commenced the formal planning approval process for the 12MW demonstration power project at Casino.
• Issued request for tender for equipment for the 12MW power project and are currently evaluating $\mathbf{L}$ offers.
• m. Rehabilitated the drilling site at South Casino.

The immediate future plans of the Company are to:

• a. Upgrade the Company's field staff capabilities by replacing contractors with Company staff.
• b. Monitor the performance of the vertical unfracced pilot production wells.
• Drill and complete 2-3 horizontal wells at the South Casino site and place these on flow test. C.
• d. Commence the reserve certification process for coal seam methane resources.
• e. Finalise seismic re-interpretation of re-processed seismic data and evaluate options for conventional drilling program if warranted.
• f. Continue with the formal planning process and front end engineering for the 12MW power project at Casino.
• g. Complete pre-feasibility analysis of gas pipeline to Queensland.
• h. Commence pre-feasibility analysis of 200MW gas fired power project.
• i. Continue with commercial discussions with potential gas buyers.

$\overline{z}$ . TERMS AND CONDITIONS OF SHARES

The Shares to be issued pursuant to this Prospectus will rank pari passu in all respects with the Company's existing Shares.

$(a)$ The rights, privileges, liabilities and restrictions attaching to Shares are set out in the Constitution of the Company. A summary of the rights, privileges, liabilities and restrictions attaching to the shares to be issued pursuant to this Prospectus is set out in section 11.9 of the November 2004 Prospectus.

8. ADDITIONAL INFORMATION

$8.1$ Market Prices of Shares and Options

Official Trading of the Shares commenced on 23 December 2004.

The highest and lowest recorded market sale prices of the Shares quoted on ASX during the period from commencement of Official Quotation to the date of this Prospectus were 19 cents on 30^th June 2005 and 40 cents on 17th and 19th August 2005.

The last market sale price of the Shares on ASX on the last day that trading took place in the Shares prior to the date of this Prospectus was 35 cents on 5th October 2005.

$8.2$ Taxation

Investors should seek and rely on their own professional taxation advice in relation to an investment in the Company.

$8.3$ Continuous Disclosure and Documents Available for Inspection

The Company is listed on ASX and its Shares are quoted on ASX under the code "MEL".

The Company is a "disclosing entity" for the purposes of the Corporations Act. As such, it is subject to regular reporting and disclosure obligations, which require it to disclose to ASX any information of which it is or becomes aware concerning the Company and which a reasonable person would expect to have a material effect on the price or value of securities of the Company.

Copies of documents lodged with the ASIC in relation to the Company may be obtained from, or inspected at, an office of the ASIC. This includes the November 2004 Prospectus referred to in Section 5 of this Prospectus.

The Company will provide a copy of all documents used to notify ASX of information relating to the Company under the provisions of the Listing Rules since Official Quotation of its Shares on 23 December 2004. As at the time of lodging this Prospectus such documents were:

Date	ASX Announcement
7 Oct 2005	\$3.9 Million Placement
5 Oct 2005	Trading Halt
29 Sept 2005	Annual Report
26 Sept 2005	Investor Update
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Becoming a substantial holder
22 Sept 2005	Initial Director's Interest Notice
22 Sept 2005	Initial Director's Interest Notice
22 Sept 2005	Initial Director's Interest Notice
22 Sept 2005	Initial Director's Interest Notice

14 Sept 2005	Operations Update
13 Sept 2005	To Provide Energy to Casino Meatworks
7 Sept 2005	Release From Escrow
26 Aug 2005	Appointment of Company Secretary
16 Aug 2005	Upgrade in Gas Resources to 4.8 Tcf
26 Jul 2005	Fourth Quarter Activities Report
26 Jul 2005	Fourth Quarter Cashflow Report
28 Jun 2005	Weekly Drilling Report
20 Jun 2005	Weekly Drilling Report
14 June	Weekly Drilling Report
6 Jun 2005	Weekly Drilling Update
30 May 2005	Weekly Drilling Update
23 May 2005	Weekly Drilling Report
16 May 2005	Weekly Drilling Report
6 May 2005	Weekly Drilling Report
29 April 2005	Weekly Drilling Report
28 April 2005	Third Quarter Activities Report
28 April 2005	Third Quarter Cashflow Report
22 April 2005	Weekly Drilling Report
15 April 2005	Weekly Drilling Report
8 April 2005	Weekly Drilling Report
1 April 2005	Weekly Drilling Report
21 Mar 2005	Drilling Update
9 Mar 2005	Half Year Accounts
10 Feb 2005	Drilling Update
31 Jan 2005	Second Quarter Activities Report
31 Jan 2005	Second Quarter Cashflow Report
21 Dec 2004	Annual Report - Year Ended 30 June 2004
21 Dec 2004	Offer Information Statement - September 2002
21 Dec 2004	2003 Annual Report
21 Dec 2004	Financial Report - Year Ended 30/6/2002
21 Dec 2004	Constitution
21 Dec 2004	Option Terms & Conditions
21 Dec 2004	Rules of Employees & Officers Option Plan
21 Dec 2004	Statement re: Impact of International Accounting Standards
21 Dec 2004	Updated Statement of Commitments
21 Dec 2004	Statement Setting Out Securities Subject to Escrow
21 Dec 2004	Appendix 1A - ASX Listing Application & Agreement
21 Dec 2004	Distribution Schedule

21 Dec 2004	Top 20 shareholders
21 Dec 2004	Admission to Official List
21 Dec 2004	Disclosure Document

8.4 Interests of Directors and Advisers

A full disclosure of the interests of Directors, experts and promoters of the Company for the period commencing on incorporation of the Company and upon completion of the Offer under the November 2004 Prospectus is set out in Section 11 of the November 2004 Prospectus and other than as set out below, that information and disclosure remains current.

Other than as set out below or elsewhere in this Prospectus or the November 2004 Prospectus, no Director has, or had within two years before lodgement of this Prospectus with the ASIC, any interest in:

• the promotion or formation of Metgasco Ltd; $(a)$
• property acquired or proposed to be acquired by Metgasco Ltd in connection with its promotion $(b)$ or formation or the Offer; or
• $(c)$ the Offer.

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any Director:

• $(a)$ to induce him or her to become, or to qualify him or her as, a Director; or
• $(b)$ for services rendered by him or her in connection with the formation or promotion of Metgasco or the Offer.

The direct and indirect interests of the Directors in the securities of the Company as at the date of this Prospectus are as follows:

Director		Shares		Options
	Direct	Indirect	Direct	Indirect
Peter Power	466,727	466,727	4,480,575	$\tilde{\phantom{a}}$
David Johnson	12,269,399	$\mathbf{u}$	4,480,575	$\tilde{\phantom{a}}$
Glenda McLoughlin	2,240,288	3,547,683	4,480,575	$\mathbf{v}$
Richard Wood	700,090	$\blacksquare$	1,120,144	$\tilde{\phantom{a}}$

David Johnson, the Managing Director of the Company, has entered into an Employment Agreement with the Company with a term of three (3) years and cannot be terminated by the Company without cause on less than twelve (12) calendar months' notice or payment in lieu thereof. Remuneration payable under this agreement is \$200,000 per annum.

Glenda McLoughlin, the Chief Financial Officer of the Company, has entered into an Employment Agreement with the Company with a term of three (3) years and cannot be terminated by the Company without cause on less than twelve (12) calendar months' notice or payment in lieu thereof. Remuneration payable under this agreement is \$170,000 per annum.

Richard Wood, the Director Engineering and Operations of the Company, has entered into an Employment Agreement with the Company with a term of three (3) years and cannot be terminated by the Company without cause on less than twelve (12) calendar months' notice or payment in lieu thereof. Remuneration payable under this agreement is \$150,000 per annum.

O'Loughlins Lawyers have acted as solicitors to the Company providing general advice to the Company and assisting in the preparation of the Prospectus. The Company estimates it will pay O'Loughlins Lawyers a fee of up to \$7,500 for these services. During the two years preceding the lodgement of this Prospectus with ASIC, O'Loughlins Lawyers have received \$57,184 for the provision of legal services.

Taylor Collison has acted as Broker to the Offer to the Company in its initial public offering of shares on 23 December 2004 on the Australian Stock Exchange. Taylor Collison has received a fee of \$308,580 together with 2,000,000 options exercisable at \$0.30 per share exercisable up to 30 June 2009. Taylor Collison will act as Broker to the Offer and will receive a fee of approximately \$199,500.

$8.5$ Expenses of the Offer

The total expenses of the Offer, based on raising \$3,990,000 are estimated to be \$207,000 comprising legal and due diligence costs of \$7,500, commission of \$199,500. In addition the Company will pay ASX fees of \$7,385 relating to the Shares issued pursuant to the Offer.

8.6 Consents

The following persons have each consented to the inclusion of the following statements and statements identified in this Prospectus as being based on statements made by those persons, in the form and context in which they are included, and have not withdrawn that consent before lodgement of this Prospectus with the ASIC:

• McLeay Chartered Accountants whose Independent Accountants Report is included in the $(a)$ November 2004 Prospectus, has given and, at the time of lodgement of this Prospectus with ASIC has not withdrawn, its written consent to the inclusion of that report in this Prospectus (by virtue of the incorporation of the November 2004 Prospectus into this Prospectus by reference) in the form and context in which it is included and to be named in this Prospectus as Independent Accountant and auditor of the Company.
• $(b)$ MBA Petroleum Consultants whose Independent Consulting Geologist's Report is included in the November 2004 Prospectus, has given, and at the time of lodgement of this Prospectus with ASIC has not withdrawn, its written consent to the inclusion of that report in this Prospectus (by virtue of the incorporation of the November 2004 Prospectus into this Prospectus by reference) in the form and context in which it is included.
• $(c)$ ACIL Tasman Pty Ltd whose Independent Energy Market Consultant's Report is included in the November 2004 Prospectus, has given, and at the time of lodgement of this Prospectus with ASIC has not withdrawn, its written consent to the inclusion of that report in this Prospectus (by virtue of the incorporation of the November 2004 Prospectus into this Prospectus by reference) in the form and context in which it is included, and to be named as Independent Energy Market Consultant.
• $(d)$ O'Loughlins Lawvers whose Solicitors Report is included in the November 2004 Prospectus. has given, and at the time of lodgement of this Prospectus with ASIC has not withdrawn, its written consent to the inclusion of that report in this Prospectus (by virtue of the incorporation of the November 2004 Prospectus into this Prospectus by reference) in the form and context in which it is included, and to be named in this Prospectus as the solicitors to the Company.
• Computershare Investor Services Pty Limited has given and, as at the date hereof, not $(e)$ withdrawn, its written consent to be named as Share Registrar in the form and context in which it is named. Computershare Investor Services Pty Limited has had no involvement in the preparation of any part of the Prospectus other than being named as Share Registrar to the

Company. Computershare Investor Services Pty Limited has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of the Prospectus.

$\left\langle \mathsf{f} \right\rangle$ Taylor Collison Ltd has given its written consent to be named as Broker to the Offer in this Prospectus and has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

9. AUTHORITY OF DIRECTORS

Each of the Directors of Metgasco Ltd has consented to the lodgement of this Prospectus with the ASIC in accordance with Section 720 of the Corporations Act.

Dated the 11^th day of October 2005

Signed for and on behalf of METGASCOLTD BY DAVID JOHNSON

10. DEFINITIONS

Applicant means a person who applies for Shares under a valid Application Form.

Application Form means the application form attached to or accompanying this Prospectus.

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ACN 008 624 691).

Board means the Board of Directors unless the context indicates otherwise.

Business Day means a day other than a Saturday or Sunday on which banks are open for business in Sydney, New South Wales.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date for the Offer means 5.00 p.m. EST on 21 October 2005 (unless extended or closed earlier).

Company or Metgasco means Metgasco Ltd (ABN 24 088 196 383).

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company in office at the date of this Prospectus.

Dollars or \$ means Australian dollars unless otherwise stated.

EST means Eastern Standard Time, Sydney, New South Wales.

Listing Rules means the official Listing Rules of ASX.

November 2004 Prospectus means the prospectus lodged by the Company with the ASIC and dated 11 November 2004.

Offer means the invitation for investors to apply for Shares pursuant to this Prospectus as detailed in Section 4.1.

Offer Period means the period commencing on the Opening Date and ending on the Closing Date.

Official Quotation means official quotation of the Shares on ASX.

Opening Date means 11 October 2005.

Option means an option to subscribe for one Share in the Company.

Prospectus means the prospectus constituted by this document including any electronic or online version.

Share means one fully paid ordinary share in the Company.

Shareholder means a holder of Shares.

$11.$ APPLICATION FORM

APPLICATION FORM METGASCOLTD

ABN 24 088 196 383

To meet the requirements of the Corporations Act 2001, this Application Form must not be passed on to another person unless attached to the Prospectus of Metgasco Ltd (ABN 24 088 196 383) dated 11 October 2005 (Prospectus) Application Form.

	SHARE REGISTRAR'S USE ONLY		BROKER'S STAMP ONLY
А	I/We apply for						Shares at \$0.30 per Share		BROKER'S USE ONLY
В С	I/We lodge full application monies of: Complete full name details					\$					$\theta$	$\mathbf{1} \mathbf{0}$
	APPLICANT 1 GIVEN NAME(S) OR COMPANY NAME JOINT APPLICANT 2 OR DESIGNATED ACCOUNT				SURNAME
	JOINT APPLICANT 3 OR DESIGNATED ACCOUNT
D	Complete address details NUMBER AND STREET
	SUBURB, CITY OR TOWN AND POSTCODE									STATE
E HOME $\left( \quad \right)$ EMAIL ADDRESS	Telephone details		WORK $\left( \quad \right)$						CONTACT NAME
F PID	Participating Sponsored Applicants Only		HIN
G APPLICANT 1 Η.	Tax File Number/Exemption Details I/We shall apply this/these Tax File Number(s) or Exemption(s) to all my/our investments in the Company. Cheque Details			APPLICANT 2					APPLICANT 3
DRAWER DRAWER		BANK BANK		BRANCH BRANCH			TOTAL AMOUNT OF CHEQUE ENCLOSED AUD TOTAL AMOUNT OF CHEQUE ENCLOSED AUD

By returning this Application Form I/we hereby authorise the Company to complete and execute any document necessary to effect the issue of Shares to me/us and agree to be bound by the Constitution of the Company.

GUIDE TO THE APPLICATION FORM

Please complete all relevant sections of the Application Form using BLOCK LETTERS. These instructions are cross-referenced to each section of the Application Form. Further particulars and the correct form of registrable names to use on the Application Form are contained in the table below.

• Insert the number of Shares you wish to apply for. The application must be for a minimum of 4,000 Shares and thereafter in multiples of 1,000 Α Shares
• B Insert the relevant amount of Application Monies below. To calculate your Application Monies, multiply the number of Shares applied for by \$0.30
• $\ddot{\rm C}$ Write the full name you wish to appear on your statement of shareholders. This must be either your own name or the name of a company. Up to 3 joint Applicants may register. You should refer to the table below for the correct forms of registrable name. Applications using the wrong form of name may be rejected. Clearing House Electronic Sub Register System (CHESS) participants should complete their name and address in the same format as they are presently registered in the CHESS system.
• Ð Please enter your postal address for all correspondence. All communications to you from the Company will be mailed to the person(s) and address as shown. For joint Applications, only one address can be entered.
• Ė Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application.
• The Company will apply to ASX to participate in CHESS. If you are already a participant in CHESS, you may complete this section or forward E the Application Form to your sponsoring broker for completion prior to lodgement. Otherwise leave this section blank.
• G Enter your Tax File Number (TFN) or exemption category. Where applicable, please enter the TFN for each joint Applicant. Collection of TFNs is authorised by taxation laws. Quotation of your TFN is not compulsory and will not affect your Application.
• н Please complete cheque details as requested:
• Make your cheque payable to "Metgasco Ltd" in Australian currency and cross it "Not Negotiable". Your cheque must be drawn on an $\bullet$ Australian bank.
• The amount should agree with the amount shown in B.
• Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected.
• Pin (do not staple) your cheque(s) to the Application Form where indicated.

Lodgement of Applications

Return your completed Application Form with cheque(s) attached to:

Computershare Investor Services Pty Limited $-05$ Level 3, 60 Carrington Street SYDNEY NSW 2001

Computershare Investor Services Pty Limited GPO Box 7115 SYDNEY NSW 2000

Application Forms must be received no later than 5.00pm EST on 21 October 2005, subject to the right of the Company to vary the Closing Date. Investors are encouraged to submit their Application Form as soon as possible.

In the event that I/we receive this Prospectus electronically via the Internet, I/we declare that I/we have received this Prospectus personally, or a printout of it, accompanied by or attached to this Application Form prior to applying for Shares. Wee acknowledge that the Corporations Act prohibits any person from passing on to another person this Application Form unless it is attached to or accompanied by the complete and unaltered version of this Prospectus.

It is advisable to read the Prospectus before completing the Application Form. The Company will issue to any person free of charge, a printed copy of the Prospectus on request. While the Prospectus is current, the Company will send paper copies of the Prospectus, any supplementary prospectus and the application form, on request without charge.

Correct Form of Recistrable Title

Note that only legal entities are allowed to hold Shares. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to the Company. At least one full given name and the surname are required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the example of correct forms of registrable title helow

Type of Investor/Title	Correct Form of Registrable Title	Incorrect Form
Trusts	Mr John David Smith	John Smith Family Trust
(use Trustee(s) name)
Deceased Estates	Mr Michael Peter Smith	John Smith (Deceased)
Partnerships	Mr John Smith and Mr Michael Smith	John Smith and Son
(use Partners' names)
Clubs/Incorporated Bodies	<mr david="" john="" smith<="" td="">	ABC Tennis Association	ABC Tennis Association
Superannuation Funds	John Smith Pty Ltd	John Smith Superannuation Fund
	CSuper Funds

Put the name(s) of any joint applicant(s) and/or account description using <> as indicated above in designated space(s) at Section C on the Application Form.