METGASCO LTD — Capital/Financing Update 2005

May 15, 2005

16 May 2005

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

WEEKLY DRILLING REPORT

$MSC-03$

This well spudded on 15^th April and reached total depth of 684 metres on 28^th April. Over the past week this well has been drawn down to 200 metres. As at Monday 9.00am the well is being monitored for gas buildup. It is intended that the well will be drawn down further over the upcoming week and gas and water flows assessed to determine optimum production rates.

Following the completion of this well, it is intended that site rehabilitation works will commence in the coming week.

$MSC-04$

This is the second well in the south Casino trial production program. MSC-04 spudded on 15^th April and reached total depth of 684 metres on 29^th April. Production casing has been run and cemented and 22 metres of coal seam intervals have been under-reamed. This well is currently shut in until MSC-05 is completed and the drilling rig currently drilling MSC-05 becomes available to run liner and the downhole pump.

MSC-05

The third well in the pilot production program. MSC-05, spudded on $4^th$ May and reached total depth of 680 metres on 10^th May. The well will be cleaned, liner run and completed over the coming week. This well is located approximately 500 metres away from MSC-04.

During the drilling process for this well, significant quantities of gas as well as substantial quantities of coal were observed in drilling fluids returned to surface. These factors have led the Company to conclude that this well is a subject for cavity completion.

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 will comprise five production test wells and one core hole. The holes will be located between 200m and 600m apart and will consist of both single seam and multiple seam production completions to a depth of approximately 700m. The wells will be flow tested to establish gas production rates with the objective of reserve certification.

For further information contact: Glenda McLoughlin Chief Financial Officer Metoasco 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