METGASCO LTD — Capital/Financing Update 2005

Sep 13, 2005

14 September 2005

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

OPERATIONS UPDATE

Metgasco advise the following:

Current Operations:

Over the past three weeks, Metgasco has conducted a review of well performance and concluded that the dewatering pumps need to be downsized to enable continuous operation and to be seated lower in the well. Continuous testing of gas flows from the field has been hampered by a build up of coal fines in the pumps. A workover rig is currently onsite at Casino and has commenced the job of cleaning out and replacing the pumps. MSC-06 has been worked over and is currently being dewatered. All other wells are currently offline and are being worked over to optimise location of the dewatering pumps. This is expected to be completed within one week.

Prior to commencing this workover, those wells which have been operating continuously have been building gas flows in line with the reservoir simulation model.

Project Evaluation and Development:

Over the past month, Metgasco has retained independent petroleum engineers and geologists, Malkewicz Hueni Associates ("MHA") of Denver, to review the Metgasco project as a precursor to reserve certification. MHA has worked extensively in Australia on conventional and coal seam methane projects over the past 10 years. This review has involved the analysis of well production data from the appraisal drilling program at south Casino and the development of detailed well simulation models. Sensitivity testing has been undertaken to evaluate alternative development scenarios for the field. This review has identified horizontal drilling as the optimal method of developing the field and advises that this approach will optimise well productivity. The performance of the un-fractured vertical appraisal wells has been consistent with predictions under the reservoir simulation model to date. This provides a level of comfort that predictions of enhanced performance from the reservoir simulation model can be relied upon. Additional appraisal drilling to confirm these predicted outcomes is currently in the planning stage.

Future Operations:

The Company intends to undertake additional appraisal drilling next quarter. This is likely to entail drilling 2 horizontal wells.

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 9109

Metgasco Limited

ACN 088 198 383
Level 3, 32 Walker St
North Sydney NSW 2060
Tel: (02) 9923 9100 Fax: (02) 9923 9199 Website: www.metgasco.com.au