METGASCO LTD — Capital/Financing Update 2006

Mar 26, 2006

27 March 2006

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

SECOND HORIZONTAL WELL COMPLETED

Metgasco (ASX:MEL) advises that it has completed drilling the second horizontal well. MSC-09 in this two well program. Vertical well, MSC-05 was intersected at 11.00 pm on Saturday. PE liner and pumps are currently being installed and this well will be flushed to remove coal fines over the coming week. Additional water flush treatments are expected to be undertaken over the next two weeks before this well commences drawdown and production testina.

Over the past week, the Company finalised installation of gas gathering lines and pressure testing at MSC-10. The gas line was connected and gas vented to the flare. A water flush treatment to remove coal fines was undertaken during the week. This well will be flushed from the vertical to the horizontal today and put back on line to produce gas to the flare.

Overview of Project

Metgasco holds 100% of PEL16 located near Casino and Lismore in northern New South Wales. PEL16 contains gas reserves of 1,080 BCF (3P) and 21 BCF (2P). These are the largest independently certified gas reserves in NSW. The Company has completed a pilot program of 5 vertical wells to test the gas production capability of the Richmond coal seam. This pilot program has now been extended to include drilling two horizontal wells.

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