METGASCO LTD — Capital/Financing Update 2007

Sep 4, 2007

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5 September 2007

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

VECTRA – METGASCO ALLIANCE

Metgasco (ASX:MEL) advises that the Company has entered into an alliance with Vectra CBM LLC (“Vectra”) of Denver, USA to provide drilling and well completion advisory services during the forthcoming pilot drilling program scheduled for 4Q 2007.

As previously advised, Metgasco intends to conduct two pilot drilling programs which will comprise drilling 8 surface to in-seam (“SIS”) wells.

Metgasco will draw upon the extensive experience of Vectra in drilling comparable wells into similar coals in the Arkoma basin in the US. The Arkoma basin is considered by both Vectra and the Company’s reserve certifiers, MHA petroleum associates, to be technically analogous to the Clarence Moreton basin where Metgasco operates. The Arkoma basin has been described by US Oil and Gas Investor as “one of the hottest natural gas plays in North America”[1] .

Vectra is a privately owned CBM drilling, completion and production company with offices in Denver, Colorado and Tulsa, Oklahoma. Since 2003, Vectra’s team of geologist and on-site drilling engineers have drilled and completed in excess of 250 SIS CBM wells in the Hartshorne Coals of the Arkoma basin in Oklahoma. The Hartshorne is a 1-3 metre thick coal which has low permeability and high gas content. Vectra’s typical SIS wells drilled are between 500 and 1,300 metres in length with an average single leg lateral in excess of 950 metres per well. Formation dips can exceed 100 degrees. Vectra utilizes a top drive, small foot print rig similar to the rig contracted by Metgasco. To date, Vectra has loaned its technical on-site assistance to Williams Production Company and Mahalo Energy (USA), Ltd.

Vectra’s knowledge gained overseeing US$50 million of drilling, completion and production expenditures, combined with a fit for purpose drilling rig to arrive next month from Canada and redesigned well completion techniques will allow Metgasco to immediately shift to “best practice” SIS drilling practice. Senior representatives of Vectra CBM LLC will be on-site in Casino during the upcoming pilot production drilling.

Metgasco’s Managing Director, David Johnson, said “We are bringing together all of the key elements for a successful pilot production program. By drawing on Vectra’s experience in similar coals, we should be able to significantly reduce the time and capital required to demonstrate the productive potential of the Walloon coals in the Clarence Moreton basin.”

1. Oil and Gas Investor – Coalbed Methane Special Report – December, 2005

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

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