METGASCO LTD — Capital/Financing Update 2007

Sep 16, 2007

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17 September 2007

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

50% UPGRADE IN GAS RESERVES

� 2P gas reserves now 194 PJ (50% increase)

Metgasco Limited (ASX: MEL), a coal seam methane gas developer, has announced today it has received a further upgrade to its reserves in Casino, NSW. This follows an initial upgrade announced in July 2007.

MHA Associates (Denver, USA) has advised of a significant increase in 2P gas reserves as follows:

PEL 16 – Independently Certified Gas Reserves

Category	Previous ReservesJuly 2007PJ	Revised ReservesSeptember 2007PJ	Metgasco InterestRevised ReservesSeptember 2007PJ
Probable (2P)	129	194	182

Metgasco Managing Director, David Johnson said: “These results show that Metgasco has very substantial gas reserves and that we are well on track to achieving our 2P reserve target of 660 PJ over the next six months, which is a key milestone in our commercialisation strategy.

“It also demonstrates the high probability that continued exploration will allow us to convert a substantial proportion of our large 3P coal seam gas reserve position into the 2P category.”

This upgrade marks a further stage in the Company’s reserve upgrade program relating to its Stratheden joint venture with CS Energy.

Additional data obtained from the drilling program conducted over the past six months is continuing to be processed and will be provided to MHA over the coming months.

Metgasco is about to take delivery of an ADR 100 rig from Canada which will enable the company to commence a pilot product program.

“This rig is the first of its type to be used in Australia. This is industry leading technology and we expect it will provide a great boost to our production capacity.

“This is a very exciting stage in Metgasco’s development – we are making good headway in our developments and at the same time the Eastern Australian energy market is rapidly evolving. Demand for clean energy sources is increasing and a traded market is emerging which opens new commercial opportunities for junior developers such as Metgasco.”

Metgasco holds the largest certified gas reserves in NSW, which makes them well placed to cost effectively deliver gas to the fast growing regions of North East NSW and South East Queensland.

The Company is currently developing a 30MW gas fired power station in the Richmond Valley south of Casino. When complete it will be able to generate enough power to supply a large town. The project has been granted Major Project status by the NSW Department of Planning.

For further information contact: David Johnson Glenda McLoughlin Managing Director Chief Financial Officer

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