METGASCO LTD — Capital/Financing Update 2005

Oct 6, 2005

7 October 2005

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

\$3.9 MILLION PLACEMENT

Metgasco is pleased to announce that it proposes to issue 13,300,000 shares at 30 cents to raise \$3,990,000 million.

It is proposed that 9,850,000 shares will be issued pursuant to a short form Prospectus which will be lodged with ASIC over the next few days. The shares that represent less than 15% of the Company's issued capital may be issued without shareholder approval pursuant to ASX Listing Rule 7.1. The balance of the shares, namely 3.450,000 shares (which will also be offered under the Prospectus), will not be issued until such time as shareholder approval for such issue is obtained at the annual general meeting of Metgasco Ltd which is to be held at 3.00pm (EST) on Wednesday, 23^rd November 2005. If shareholder approval for the issue of 3,450,000 shares is obtained at the annual general meeting of the Company, those shares will be issued shortly after the annual general meeting.

The Company is issuing a short form Prospectus for the issue to satisfy Sn 708A of the Corporations Act. This Prospectus will not be sent to shareholders but will be available on the Company's website at www.metgasco.com.au after lodgement with ASIC. Applications for shares must be made on the application form attached to the Prospectus.

Metgasco has obtained commitments from Taylor Collison, Montagu Stockbrokers, other brokers and institutions to apply for 13,300,000 shares which are to be offered under the Prospectus.

The funds from this offer will be used to undertake additional horizontal drilling in PEL16, investment in infrastructure development and to replenish working capital.

Overview of Project

Metgasco holds 100% of PEL16 located near Casino and Lismore in northern New South Wales. The Company is appraising the gas production potential of the Walloon Coal Measures in the Clarence Moreton Basin. The Walloon Coal Measures have been the subject of successful exploration and development activity in Queensland over the past four years. The trial production program comprises five production test wells and one core hole.

For further information contact: Glenda McLoughlin Chief Financial Officer Metgasco Ltd Tel: (02) 9923 9100 Fax: (02) 9923 9199

Metaasco Limited ACN 088 196 383 Level 3. 32 Walker St North Sydney NSW 2060
Tel: (02) 9923 9100 Fax: (02) 9923 9199 Website: www.metgasco.com.au