METGASCO LTD — Capital/Financing Update 2011

Feb 28, 2011

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ASX / MEDIA RELEASE

ASX Code: MEL

1 March2011

OPERATIONS UPDATE

Metgasco is pleased to advise that good progress is being made on the current multi-lateral drilling program.

Harrier P01 spudded on 11 February 2011 and Harrier P02, spudded on 8 February 2011. The top hole sections of both of these wells have been drilled and cased to approximately 145 metres depth in preparation for the in-seam drilling activity.

Over the past week, Lucas Rig 25 has been drilling at Corella P18 to complete a singleinseam lateral well. This well has now been completed at 861 metres (MD) and the rig is preparing to run liner. Once the liner is installed, Metgasco plans to complete Corella P18 for production.

The drilling rig will move to Harrier P01 this week where it will continue drilling this multilateral pilot well. The rig will commence drilling from the cased top hole section and drill at an angle to enter the Richmond coal seam. Two horizontal in-seam laterals will be drilled from the Harrier P01 top hole with a target length of 1,000 metres per lateral (resulting in 2,000 metres of in-seam exposure per well).

Background on the Harrier Pilot Wells

The Harrier multi-lateral pilot program has been located near Corella P11 where Metgasco has had its lead pilot production well on test for three years and during this time has produced gas at rates of between 160,000 – 200,000 scf per day.

All wells in the multi-lateral pilot program will be drilled into the Richmond coal seam reservoir in the Walloon Coal Measures. This is the first of up to four wells to be drilled. The Harrier wells have been designed to achieve increased in-seam exposure to the resource and thereby result in gas production rates above those currently being achieved from Corella P11, which has a single in-seam horizontal section of 680 metres.

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Location of Harrier Pilot Wells

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Background on Metgasco

www.metgasco.com.au

Metgasco has a 100% interest in PEL 16, 13 and 426 in the Clarence Moreton Basin in NSW where we operate the largest acreage position in the basin. Metgasco currently has 2P gas reserves of 397 Petajoules and 3P gas reserves of 2,239 Petajoules from less than 10% of our acreage area. We are exploring for gas in coal seams, conventional and shale reservoirs and in 2010 discovered the Kingfisher gas field, the largest conventional discovery in NSW in over a century of exploration in the State. Metgasco is currently progressing its gas commercialisation agenda which includes gas and electricity supply to NSW and gas supply to Queensland. With gas in place resources likely to exceed the domestic markets requirements and sufficient to supply export scale projects, Metgasco is currently investigating LNG project development options.

For further information contact:	Address
David Johnson Glenda McLoughlin	Level 9, 77 Pacific Highway
Managing Director Chief Financial Officer	North Sydney NSW 2060
	Tel: +61 2 9923 9100
	Fax:+61 2 9923 9199

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