METGASCO LTD — Capital/Financing Update 2007

Feb 20, 2007

21 February 2007

AUSTRALIAN STOCK EXCHANGE Via Electronic Lodgement

DRILLING REPORT

Metgasco (ASX:MEL) advises that the following drilling activity has taken place over the past week:

MMMC-01 Location: Objective: Drilling Activity:	(Metgasco earning 51% interest, Molopo 49%) PEL 13 Coring and associated testing of the Walloon coal measures. Coring was completed on 1 February with a total of 13.75 metres of coal core samples retrieved for testing. Wireline logging, permeability and stress testing have now been undertaken with results forwarded for analysis. Planned drilling activity on this well has now been completed.
Riflebird-E1 Location: Objective:	Metgasco 100% PEL 16 Coring and associated testing of the Walloon coal measures. This is the first of two wells required to expand 2P gas reserves to up to 100 PJ for the purposes of establishing sufficient supply volumes to the proposed Richmond Valley Power Station.
Spud Date: Drilling Activity:	15 January 2007 This well has been cored to a depth of 522 metres. Drilling operations on this well have been temporarily suspended while the well liner is re- installed. Free gas shows have been observed from the formations above the Richmond seam during drilling operations at this well.
Riflebird-E2 Location: Objective:	Metgasco 100% PEL 16 Coring and associated testing of the Walloon coal measures. This is the second of two wells required to expand 2P gas reserves to up to 100 PJ for the purposes of establishing sufficient supply volumes to the proposed Richmond Valley Power Station.
Spud Date: Drilling Activity:	22 January 2007 Drilling operations re-commenced on this well this week and the rig is currently drilling ahead at 130 metres.
Corella-E1 Location: Objective:	(Metgasco 85%, CS Energy earning 15%) PEL 16, Stratheden Joint Venture Area Coring and associated testing of the Walloon coal measures. This is the first of up to ten core wells being undertaken for the Company's joint venture with CS Energy. The goal of the joint venture drilling program is to establish up to 540 PJ in 2P gas reserves.
Spud Date:	27 January 2007

Drilling Activity:	During the week this well cored through a well developed sequence of Walloon Coal Measures exhibiting excellent free gas shows. This well has been cored to a depth of 563 metres. Currently a drill string has twisted off and equipment is being mobilised to retrieve the string prior to continuing coring.
Corella-E2 Location: Objective:	(Metgasco 85%, CS Energy earning 15%) PEL 16, Stratheden Joint Venture Area Coring and associated testing of the Walloon coal measures. This is the second of up to ten core wells being undertaken for the Company's joint venture with CS Energy. The goal of the joint venture drilling program is to establish up to 540 PJ in 2P gas reserves.
Spud Date: Drilling Activity:	5 February 2007 This well has been drilled to a depth of 160 metres and is currently drilling ahead.
Corella-E3 Location: Objective:	(Metgasco 85%, CS Energy earning 15%) PEL 16, Stratheden Joint Venture Area Coring and associated testing of the Walloon coal measures. This is the third of up to ten core wells being undertaken for the Company's joint venture with CS Energy. The goal of the joint venture drilling program is to establish up to 540 PJ in 2P gas reserves.
Spud Date: Drilling Activity:	12 February 2007 This well has been drilled to a depth of 131 metres and BOP casing has been set and cemented. No operations are planned for this well over the coming week.
Corella-E5 Location: Objective:	(Metgasco 85%, CS Energy earning 15%) PEL 16, Stratheden Joint Venture Area Coring and associated testing of the Walloon coal measures. This is the fourth of up to ten core wells being undertaken for the Company's joint venture with CS Energy. The goal of the joint venture drilling program is to establish up to 540 PJ in 2P gas reserves.
Spud Date: Drilling Activity:	19 February 2007 This well has been drilled to a depth of 84 metres. Conductor casing is currently being set.

For further information contact: David Johnson
Managing Director nase.
Glenda McLoughlin
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