COIL Invests in Methanol Australia

The directors of Cambrian Oil and Gas plc (COIL) said that the company has reached agreements to invest in Methanol Australia Limited, an Australian company listed on the Australian Stock Exchange (ASX).

The business of Methanol Australia is principally its 50-percent. interest in the Tassie Shoal Methanol Project and its 100-percent. interest in the Timor Sea LNG Project.

For the 6-month period ended Dec. 31, 2005, Methanol Australia announced on March 17, 2006, a loss of approximately A$653,000 and net assets as at Dec. 31 2005, of approximately A$1,245,000. Under ASX reporting requirements, on April 27, 2006, Methanol Australia reported a Mining Exploration Entity Quarterly Report, Appendix 5B, where it reported, inter alia, cash at the end of the quarter ended March 31, 2006, of approximately A$2,681,000.

The shares of Methanol Australia were suspended on July 18, 2006, pending the release of an announcement to the ASX. The shares recommenced trading on July 20, 2006, following the release of the announcement to the ASX concerning business developments in Methanol Australia. The ASX Announcement is reproduced in full below under the heading “ASX Announcement.”

In the ASX Announcement, Methanol Australia announced that COIL had acquired approximately 5.5 million ordinary shares from the trustee of Methanol Australia’s Share Trustee Scheme for A$1.1 million (approximately GBP450,000 or US$826,500) to acquire a 3.9-percent holding in Methanol Australia.

Further business developments

In the ASX Announcement, Methanol Australia announced that it was effecting a placing of up to 10 percent. of Methanol Australia’s issued share capital, seeking to raise up to A$3.15 million. COIL is intending to subscribe for all of the ordinary shares to be issued pursuant to the proposed placing. Following this subscription, COIL will hold 19,500,000 ordinary shares in Methanol Australia, representing 12.6 percent. of the issued share capital.

Also in the ASX Announcement, Methanol Australia announced that it is effecting a further fundraising in which its shareholders will be entitled to purchase new ordinary shares pro-rata to their existing shareholding in a ratio of one new ordinary share for every four held at a price of 22.5 cents. It is anticipated that this fundraising will raise proceeds for Methanol Australia of approximately A$8.7 million. For each new ordinary share subscribed, Methanol Australia will grant a warrant for one new ordinary share exercisable at an exercise price of 25 cents for the period up to April 30, 2007. COIL intends to underwrite 50 percent of this fundraising.

ASX Announcement

The ASX Announcement is reproduced in full in the below Appendix.

Placing of New Ordinary Shares

In line with the above investment, the Company has conditionally placed up to 50 million new ordinary shares of 1 pence each (the “Placing Shares”) at 3 pence per ordinary share through its broker W.H. Ireland Ltd, raising £1,500,000 gross of expenses (the “Placing”). The new ordinary shares are to be issued together with one warrant for each Placing Share subscribed, each warrant entitling the holder to subscribe for one ordinary share in the Company at 3 pence per ordinary share (the "Warrants"). Each Warrant granted shall be exercisable in whole or in part at any time up to 12 months from the date of admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules of London Stock Exchange plc (the “AIM Rules”). The Warrants will not be admitted to trading on AIM. As at the date of this announcement the Company has 108,227,159 Ordinary Shares in issue. Assuming the Placing is fully subscribed there will be 158,227,159 Ordinary Shares in the Company in issue.

As at the date of this announcement, Cambrian Mining plc (“Cambrian Mining”) holds 29,630,769 Ordinary Shares in the Company representing 27.4 per cent. of the issued share capital in the Company. As part of the Placing, Cambrian Mining is intending to subscribe for 15 million new ordinary shares, resulting in a small increase in its holding to 28 per cent. of the Company, assuming the Placing is fully subscribed. Related Party Transaction

As at the date of this announcement, Cambrian Mining holds 29,630,769 ordinary shares in the Company and is therefore is defined as a related party under the AIM Rules.

The intended subscription by Cambrian Mining represents, under the AIM Rules, a related party transaction. The Directors of the Company, other than John Byrne (who is a director of Cambrian Mining), consider, having consulted with its nominated adviser, that the terms of the subscription is fair and reasonable insofar as its shareholders are concerned.

Ongoing business update

COIL’s directors consider that further funds may be required to maximize the opportunities for the company’s shareholders and, subject to market conditions and shareholder approval, may conduct a further non-pre-emptive placing in due course.