METGASCO LTD — Capital/Financing Update 2007

Jul 24, 2007

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25 July 2007

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

UPGRADE IN PEL 16 GAS RESERVES

� 2P gas reserves now 129 PJ (480% increase)

Metgasco Limited (ASX: MEL) advises it has achieved a significant increase in gas reserves in the 2P category from its drilling program completed so far this year. Gas reserves in the 3P category (Possible) are largely unchanged at 1,156 PJ.

The drilling and testing results have been assessed by MHA Petroleum Consultants (Denver). MHA has provided an independent certification of gas reserves to the Company as follows:

PEL 16 – Independently Certified Gas Reserves

Category	Previous Reserves	Revised Reserves	Metgasco Interest
			Revised Reserves
	March 2006	July 2007	July 2007
Probable (2P)	22 PJ	129 PJ	113 PJ
PJ = Petajoules

This result reflects the first stage of 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 in the Stratheden Joint Venture area and the South Casino area will be finalised and provided to MHA over the coming months. Further core drilling, testing and analysis will be undertaken at South Casino during the remainder of calendar year 2007.

Metgasco Managing Director, David Johnson said: “These results demonstrate the emerging importance of the Walloon Coal Measures in the Clarence Moreton Basin. The results are an important milestone in achieving the Company’s gas reserve target of 660 PJ in 2P reserves. These results also demonstrate 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.”

“The increase in our reserve position is welcome at a time when there is increasing demand for gas in Australia as an environmentally friendly energy source. Our strong view is that Metgasco is very well placed by its geographic location to be able to cost effectively deliver gas to markets. We are making good progress on the development of our gas pipeline to Swanbank. “

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The reserve certification was prepared by Mr Tim Hower of MHA Petroleum Consultants, Denver, CO, USA. The methods employed in developing these reserve estimates are consistent with the Society of Petroleum Engineers guidelines on definitions of proved, probable and possible hydrocarbon reserves. MHA has consented to the use of the reserves figures in this announcement.

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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