METGASCO LTD — Capital/Financing Update 2005

Aug 15, 2005

16 August 2005

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

UPGRADE IN GAS RESOURCES TO 4.8 TCF

Metgasco advises that it has upgraded its contingent gas resource estimates from 1.05 TCF to between 4.8 TCF (high) and 3.8 TCF (low) for PEL16 in northern NSW.

As part of the recent pilot production drilling program, the Company has obtained further gas content isotherm data and has developed a better understanding of Gas in Place ("GIP"). In it's prospectus of December 2004, Metgasco had previously estimated gas contents to be 5.14 bcf/km² for a total of 1.05 Tcf. The reassessment has improved the average gas in place values which are now estimated at between 9.9 bcf/km² (high) and 7.9 bcf/km² (low).

In addition, the recent evaluation of re-processed seismic has allowed the Company to extend its assessment of the continuity of its resource base. Until recently the Company had seismic evidence of coal continuity over approximately one third of the area of the tenement. The recently re-processed seismic confirms the presence of the Walloon Coal Measures over a larger area. Additional pre existing seismic data which was not previously known has also been located and re processed. The impact of this new seismic information is to confirm the presence of the Walloon Coal Measures over an additional 30% of the tenement area. The Company does not have any seismic or drill hole information for approximately 40% of PEL 16, so no contingent gas resource has been inferred for this area.

As per the Society of Petroleum Engineers guidelines, the contingent gas resources were determined volumetrically using the average coal thicknesses, gas contents, coal densities, moisture and ash content throughout the target area.

Metgasco Managing Director David Johnson said "These recent results demonstrate the significance of the Walloon Coal Measures in the NSW portion of the Clarence Moreton basin. As one of the first Companies to begin exploring for coal seam gas in the Walloon Coal Measures, Metgasco has secured a land position in a strategic location that offers opportunities for several decades of growth."

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

Metgasco 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