COMET RIDGE LIMITED — Annual Report 2008

Sep 29, 2008

ABN: 47 106 092 577

Comet Ridge

2007|08 ANNUAL REPORT

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strength

CAPITAL | MANAGEMENT | PORTFOLIO

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chairman of the board

JEFF SCHNEIDER | LETTER TO THE SHAREHOLDERS

Dear Shareholders,

Since the Comet Ridge Annual General Meeting in November 2007 the Board’s priorities have been to:

1. Assemble funds at the project level to be able to progress exploration and development on our US assets; and,

2. Increase our focus on our Australian Coal Seam Gas (CSG) permits.

I am pleased to be able to report considerable progress on both priorities.

In June 2008 the Company announced the completion of a milestone transaction with Pine Brook Road Partners, LLC (“Pine Brook”), a New York based private equity firm. This transaction sees our Denver based organisation and our US exploration assets assigned to a new jointly owned company called Comet Ridge Resources, LLC, (“Comet Ridge Resources”).

The key features of the transaction have been earlier described to shareholders and are further described in the Overview of Activities Report following. The preparedness of Pine Brook to invest up to US$100 million in support of the Company’s Denver based team is testimony to our staff’s professional and personal qualities and to the quality of the projects they have assembled.

The preparedness of Pine Brook to invest up to US$100 million in support of the Company’s Denver based team is testimony to our staff’s professional and personal qualities and to the quality of the projects they have assembled.

The transaction will enable Comet Ridge Limited shareholders to be exposed to the upside of our US exploration program without having to expend any company funds for approximately the next 18 months. This program will enable the US projects to be progressed and de-risked and with success the upside for shareholders remains substantial. At the end of this 18 month period the Board expects that Comet Ridge Limited’s ownership interests in Comet Ridge Resources will be 20%. Given exploration and development success the Board expects to maintain its ownership interest at this level.

Initial exploration data obtained from drilling at Florence are in line with our expectations. The commerciality of these efforts will only be known when production testing is complete later this calendar year.

The Company’s founding Managing Director since listing in April 2004, Mr Andy Lydyard, has been appointed CEO of Comet Ridge Resources. While he will continue as a non-executive director of Comet Ridge Limited he has, as a consequence of his appointment, resigned as Managing Director.

Comet Ridge Limited

contents

CHAIRMAN’S LETTER TO SHAREHOLDERS 1

**CHAIRMAN’S LETTER TO SHAREHOLDERS **	1
OVERVIEW OF ACTIVITIES	3
> INTRODUCTION	3
> USA ACTIVITIES	4
> AUSTRALIA ACTIVITIES	7
> HEALTH, SAFETY AND ENVIRONMENT > COMMUNITY	8 8
CORPORATE GOVERNANCE STATEMENT	9
DIRECTORS’ REPORT	14
> REMUNERATION REPORT	18
**AUDITOR’S INDEPENDENCE DECLARATION **	23
INCOME STATEMENT	24
BALANCE SHEET	25
STATEMENT OF CHANGES IN EQUITY	26
CASH FLOW STATEMENT	27
**NOTES TO THE FINANCIAL STATEMENTS **	28
DIRECTORS' DECLARATION	52
INDEPENDENT AUDITOR’S REPORT	53
SHAREHOLDER INFORMATION	55
CORPORATE DIRECTORY	56

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In August 2008 the Board appointed Mr David Bradshaw as the new Managing Director – effective 1 September 2008. Mr Bradshaw (who has been a board member since November 2007) brings a wealth of upstream oil and gas experience, including nine years as Chairman and CEO of Tipperary Corporation. Tipperary was the majority owner, and from 2002 the Operator, of the Fairview Coal Seam Gas Field in Queensland. This Company was sold to Santos in 2005 in a transaction valued at approximately AU$600 million. Fairview now forms the upstream cornerstone of Santos’ recently announced LNG project with Petronas.

The Board is delighted that Mr Bradshaw will apply his skills and experience to the benefit of Comet Ridge shareholders as its Brisbane based Managing Director. His priorities are to progress the Company’s coal seam gas assets and to oversee our investment in Comet Ridge Resources in the US.

The Board believes our coal seam gas acreage in Australia to be highly prospective. We plan to secure funding at the project level through promoted farm-down of our interests. It is our intention that Comet Ridge will retain substantial project interests and retain operatorship in the Galilee Basin permits.

With several LNG Project developments now planned in Queensland, the opportunity to sell significant volumes of gas at higher prices in the future now seems possible. With exploration success, the rewards for shareholders are potentially substantial.

The Company is now very well positioned in respect to both its US and Australian assets. We have the organisational capability to advance our US assets and are building this capability in respect to our Australian assets. In addition our US programme is now fully funded for the medium term. The Board believes the Company can secure funding at the project level via farmouts to progress our Australian assets.

I thank my fellow board members for their contributions during this past year. I also thank shareholders for their support during what has been a challenging period. I look forward to shareholders being rewarded for their support.

The Board would especially like to acknowledge the contribution of Mr Andy Lydyard and to thank him for his energetic efforts and leadership on behalf of all shareholders.

Yours faithfully,

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Jeff Schneider

Chairman

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overview of activities

Introduction

This past year will prove to be a pivotal year in the Company’s history. In June of this year the Company entered into a joint venture arrangement with a private equity capital provider, Pine Brook Road Partners, LLC (“Pine Brook”) whereby Pine Brook has made a capital commitment of up to US$100 million to fund the ongoing exploration and development of the projects that Comet Ridge Limited has assembled in the United States. Comet Ridge shareholders will be free-carried through approximately US$26 million of capital spending, which will see the projects significantly de-risked, before the Company will be required to contribute further capital. The Company will retain a 20% equity interest in the joint venture company and can maintain that interest by funding its pro-rata share. If the Company elects not to fund its share, its interest will still not be diluted below 5%.

Given the magnitude of the projected capital spending over the coming year and the prevailing difficult conditions in the capital markets, the Board of Directors strongly believes that securing significant funding for the US Company was in the best interests of shareholders. The funding allows the newly formed company to pursue its strategy and to compete aggressively. Pine Brook is a highly reputable and successful private equity firm and our ability to attract them to our company is testament to the quality of the team and projects that Comet Ridge has assembled in the US.

The capital provided by Pine Brook is being invested immediately. Indeed, in the days following closing of the transaction, the US company was able to move a drilling rig onto the Florence oil field redevelopment project in southeastern Colorado and commence drilling operations.

With the US projects, and the administrative costs associated with them, now fully funded for the next 12 to 18 months, your Board has turned its attention to advancing the Company’s increasingly valuable Australian coal seam gas permits/projects in Queensland and New South Wales.

With the US projects, and the administrative costs associated with them, now fully funded for the next 12 to 18 months, your Board has turned its attention to advancing the Company’s increasingly valuable Australian coal seam gas permits/projects in Queensland and New South Wales. The Board has demonstrated its firm commitment to the Australian portfolio by appointing Mr. David Bradshaw to the position of Managing Director in early September, 2008. Mr. Bradshaw, who until this appointment was one of the Company’s non-executive directors, will be based in Brisbane and brings significant coal seam gas exploration and development experience to the Company.

At the end of the 2007/08 financial year, Comet Ridge shareholders therefore have a meaningful equity interest in a well financed US exploration company that is already conducting operations plus direct interests in a strong portfolio of Australian coal seam gas projects.

3 | Comet Ridge Limited

That transaction was successfully completed... and provides the new US Company the capital it needs to aggressively pursue its exploration and development strategy without further call on Comet Ridge Limited Shareholders for some time.

Activities in the United States

The Pine Brook Road Partners Transaction

On 10 June 2008, the Board of Comet Ridge Limited announced that it had entered into agreements to form a new joint venture company, Comet Ridge Resources, LLC (“Comet Ridge Resources”), with a well respected US private equity firm; New York based Pine Brook Road Partners, LLC (“Pine Brook”). That transaction was successfully completed on 26 June 2008 and provides the new US Company the capital it needs to aggressively pursue its exploration and development strategy without further call on Comet Ridge Limited Shareholders for some time.

The transaction, while complicated by virtue of a series of entities being formed to hold the projects, is relatively simple. It comprises four main components:

• Comet Ridge Limited contributed its US properties and its management team to a new company called Comet Ridge Resources, LLC. In return it received a 43.59% equity interest in the new company.

• In return for its contribution of US$7 million cash and US$2 million worth of properties previously acquired from Strike Oil Limited, Pine Brook received a majority equity interest in Comet Ridge Resources.

• Pine Brook can increase its equity interest in Comet Ridge Resources to 80% by spending an additional US$19 million on exploring and developing the US projects.

• After Pine Brook has earned the 80% interest, Comet Ridge Limited can maintain its 20% equity interest by funding its pro-rata share of future capital costs, or, at its election, continue to be diluted to a minimum 5% equity interest with no further capital contributions.

Shareholder value will be created in the form of capital appreciation as reserves and production is added. Given the anticipated capital spending profile, it is unlikely that Comet Ridge Resources will be paying dividends as cash generated by the business will be reinvested in developing the Company’s existing and future projects.

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The various projects are held under two subsidiaries of Comet Ridge Resources, LLC, namely:

• 1 St. Helens Energy, LLC (“St. Helens”) which owns and operates the Grays Harbor project as well as a minority interest in the non-operated Chehalis Basin project in the State of Washington.

• Pine Ridge Oil & Gas, LLC (“Pine Ridge”) which owns and operates the Florence and Tow Creek/Bear River projects in Colorado.

As a result of the Strike Oil Limited acquisition and a number of other acquisitions completed prior to closing, Comet Ridge Resources has control of, and very high working interests in, its projects (75% to 100%).

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Florence

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Comet Ridge Resources, via Pine Ridge now has a 97.25% Working Interest in over 10,000 acres in the Florence oil field in southeastern Colorado. The field has produced in excess of 15 million barrels of oil in its 126 year life almost exclusively from the Cretaceous marine shales of the Pierre Formation. Production has historically been achieved from around 1,800 feet (550m) down to around 3,500 feet (1066m).

Comet Ridge Limited acquired approximately eight sq miles ( 21 sq km) of 3D seismic in the summer of 2007 and has generated a number of drillable locations from that data. Drilling on the project commenced in early July 2008. The first three wells drilled will be completed for production testing. Further drilling is planned once results of the production testing have been assessed.

Tow Creek/Bear River

Comet Ridge attempted a sidetrack of the CVU 31-4 well on the southern part of the Tow Creek anticline in Routt County, Colorado in September of 2007.

Comet Ridge Resources, via Pine Ridge, now has a 97.25% Working Interest in over 10,000 acres in the Florence oil field in south-

The original CVU 31-4 well was drilled in the winter of 2006. Oil and gas shows were encountered across the target Niobrara Formation and wire line logs revealed the section to be moderately to heavily fractured (the fractures provide the storage mechanism and the flow path for the oil and gas). During an attempt to complete the zone for production a work string became irretrievably stuck. Despite the drill bit and 30 feet (10m) of drill pipe being lodged in the wellbore, oil and gas were circulated out of the hole during the fishing operation.

eastern

Colorado. The field has produced in excess of 15 million barrels of oil in its 126 year life almost exclusively from the Cretaceous marine shales of the Pierre Formation.

The sidetrack hole proved just as frustrating, with extended rig repairs creating a situation where the drill string was left hanging stationary in the borehole for almost a week. During this time, as a result of the inability to move the drill string and maintain circulation, borehole conditions deteriorated to such an extent that the drill string became irretrievably stuck again.

As a result of the Company’s focus on securing capital and advancing the Florence and Grays Harbor projects, the strong oil and gas shows recorded over fractured intervals within the Niobrara in both the original well bore and the sidetrack hole remain untested. At this time, it is anticipated that Comet Ridge Resources will be focused on the Florence and Grays Harbor projects.

5 | Comet Ridge Limited

Comet Ridge Resources via St. Helens has amassed a 470,000 acre (1,902 sq km) leasehold and lease option position over the Grays Harbor Basin in western Washington.

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Grays Harbor

Comet Ridge Resources via St. Helens has amassed a 470,000 acre (1,902 sq km) leasehold and lease option position over the Grays Harbor Basin in western Washington. In June, 2008 the Company negotiated a twelve month extension to the lease option it has over 420,000 acres (1,700 sq km) with a large timber company at a cost of $300,000 or less than US$0.72 per acre. This extra time will enable St. Helens to acquire and interpret 3D and 2D seismic surveys over a number of the mapped prospects and leads prior to exercising its option to lease.

The prospects at Grays Harbor are conventional sandstone reservoirs in structural anticlinal traps. There is relatively sparse 2D seismic coverage over the mapped prospects so the Company will be shooting new 3D and 2D data to optimise the initial drilling locations planned for 2009. These surveys commenced in August, 2008.

Chehalis

In February 2008, the Company announced that it has sold down its interests in the Chehalis project in a cash and acreage trade. Comet Ridge Limited sold down 75% of its 40% working interest (retaining a 10% interest) in its existing ~ 75,000 acre (303 sq km) lease position but gained a 10% working interest in another 65,000 acres (263 sq km) resulting in a 10% project-wide interest. In addition, Comet Ridge Limited received an upfront cash payment of US$463,064 and a free carry through the drilling of five holes. Drilling has yet to commence due to permitting delays and rig availability.

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Activities in Australia

Shareholders will be aware of the significant changes in the Eastern Australian gas market and in particular the major developments in the coal seam gas business over the last twelve months. Vast volumes of gas have been proven to exist in the two world class coal seam gas plays in Queensland, namely the Permian coals of the Bowen Basin and the Jurassic aged coals of the Walloon Coal Measures. The almost seismic shift in the business has come about by a number of producers announcing plans to build LNG facilities on the Queensland coast. LNG prices in Asia have escalated rapidly to the point that spot sales of gas have reached as high as US$18/GJ, which is approaching ten times the prices being achieved as recently as three years ago. The significant gas reserves and the spectre of LNG parity pricing are attracting large international companies such as British Gas, Shell, Petronas and Conoco/Phillips into the market.

Comet Ridge has interests in two projects that offer significant coal seam gas potential, Mahalo and two contiguous permit applications in the eastern part of the Galilee Basin. While exploration of the Galilee Basin is not as advanced as the Bowen Basin, the industry has recognized that it is the next logical region to explore. Recently AGL reported that it had committed to spend AU$37 million to earn a 50% interest in a Galilee Basin permit, and bidding on a large number of exploration blocks at a recent permit tender conducted by the Queensland government was strong. The Board is intent on adding significant shareholder value through advancement of these projects.

Tipton West – Sale of Royalty

In July, 2007 the Company announced that it had sold its 1.5% royalty interest in the Tipton West field to Pure Energy Resources Limited for AU$3 million. The consideration represented fair value for the cash flow stream that was capped at AU$8 million and would have taken a significant number of years to realise.

Shareholders will be aware of the significant changes in the Eastern Australian gas market and in particular the major developments in the coal seam gas business over the last twelve months. Vast volumes of gas have been proven to exist in the two world class coal seam gas plays in Queensland, namely the Permian coals of the Bowen Basin and the Jurassic aged coals of the Walloon Coal Measures.

Mahalo (ATP 337P Farmout)

No further activity has occurred on the Mahalo project since the drilling of Mahalo 2. With a renewed focus on the Australian projects, the Board has made the advancement of this well-located coal seam gas project a priority.

ATP’s 743P and 744P Galilee Basin

Significant progress has been made towards securing agreements with our native title claimants on both permit applications. Finalisation of these agreements is expected early in the new financial year and the Company will then apply to have the permits granted by the Queensland Government. The Board is intent on assessing the gas resource potential of these two carefully selected permits immediately after grant (subject to rig availability).

PELs 427 & 428 Gunnedah Basin

Comet Ridge initially farmed out 75% of its interests in these two permits to Eastern Star Gas Limited. Eastern Star fulfilled its initial earning obligation by acquiring a total 103 kilometres of seismic over both permits in the middle of 2007. Eastern Star later transferred its interests and obligations into newly floated Orion Petroleum that has now taken over as operator of both permits. Orion currently owns 30% in PEL 427 and 20% in PEL 428 and can earn additional interests by carrying Comet Ridge through the drilling of a well on both permits.

7 | Comet Ridge Limited

Management is pleased to report that no lost time injuries occurred during the year. Despite this important achievement the Board and management team maintains elevated vigilance on safety matters.

Health, Safety & Environment

During the financial year there was one recordable incident involving a Company employee and there were none involving contractors on our project sites. The incident was not serious enough to be classified as a lost time injury.

Our goal as a Company is to be incident free in both our Company and contract workforce.

The Company continues vigorous management efforts to prevent all accidents and has developed an incentive scheme that encourage field personnel to lookout for themselves and each other.

All Company and contract personnel are empowered to shut down operations that are considered unsafe and 30 minute safety briefings are held before the commencement of each new shift.

Comet Ridge is privileged to operate in some spectacular areas, areas that demand special attention that transcends regulatory requirements. We seek to be a good neighbour and respect the fact that we share our operational areas with other land users.

Community

We seek to participate in the communities that we are active in. To this end the Company has donated US$6,600 to various charitable causes in the US states of Washington and Colorado. As we begin to operate in Australia, the same concern for stakeholders will be shown.

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INTRODUCTION

The Board of Directors of Comet Ridge Limited (the “Board”) is responsible for the corporate governance of the Company. The Board guides and monitors the business of Comet Ridge on behalf of shareholders, by whom they are elected and to whom they are accountable. The Board is responsible for setting corporate direction, defining policies, and monitoring the business of the Company, to ensure it is conducted appropriately and in the best interests of shareholders.

Comet has adopted systems of control and accountability as the basis for the administration of corporate governance.

The following additional information about the Company's corporate governance practices is set out on the Company's website at www.cometridge.com.au :

• (a) Board Charter, including details of materiality threshold;

• (b) Summary of policy and procedure for selection and appointment of new directors;

• (c) Summary of Code of Conduct for directors and key executives;

• (d) Code of Conduct for the Company;

• (e) Summary of Policy on Securities Trading;

• (f) Policy and procedure for selection of external auditor and rotation of audit engagement partners;

• (g) Summary of policy and procedures for compliance with continuous disclosure requirements;

• (h) Summary of arrangements regarding communication with and participation of shareholders;

• (i) Summary of Company's Risk Management Policy and internal compliance and control system; and

• (j) Summary of process for performance evaluation of the Board, Board committees, individual directors and key executives.

The ASX Corporate Governance Council has developed a set of guidelines, Principles of Good Corporate Governance and Best Practice Recommendations. This document articulates eight core principles that the ASX Corporate Governance Council believes underlie good corporate governance, together with best practice recommendations. Companies are required to disclose in their Annual Report the extent to which these recommendations have been complied with. They are not prescriptive and, if certain recommendations are not appropriate for the Company given its circumstances, the Company may choose not to adopt that particular practice. It must, however, disclose in its Annual Report which recommendations have not been followed and the reasons why. The Company has complied with each of the Eight Essential Corporate Governance Principles and the corresponding Recommendations as published by the Australian Securities Exchange Corporate Governance Council, other than in relation to the matters referred to below in respect of the independence of the Board and the existence of a Nomination Committee.

Role of the Board

The Board guides and monitors the business of Comet Ridge on behalf of shareholders, by whom they are elected and to whom they are accountable. The Board is responsible for setting corporate direction, defining policies, and monitoring the business of the Company, to ensure it is conducted appropriately and in the best interests of shareholders.

The role of the Board is to oversee and guide the management of the Company with the aim of protecting and enhancing the interests of its shareholders, taking into account the interests of other stakeholders including employees, customers, suppliers and the wider community.

9 | Comet Ridge Limited

The Board operates under a Charter and has a written Code of Conduct which establishes guidelines for its conduct. The purpose of the Code is to ensure that directors act honestly, responsibly, legally and ethically and in the best interests of the Company.

The Board is responsible for setting the strategic direction and establishing goals for management and the monitoring of the achievements against these goals.

Independence of Board and Chairman

The Best Practice Recommendations state a majority of the Board should be Independent Directors. The Board considers three out of five Directors to be independent (Jeffrey Schneider, Gillian Swaby and Gary Drobnack).

The Board notes that Mr Schneider (Non-Executive Chairman) and Ms Swaby do not strictly satisfy the test of independence as set out in the recommendations, however, the Board’s reasons for considering the two Directors to be independent are set out below under the heading “Identification of Independent Directors”. The Board considers that its current structure is appropriate to efficiently and independently carry out its functions, given the size and level of its current activities. Independent Directors form the Audit Committee and the Remuneration Committee.

Identification of Independent Directors

Mr Schneider is on the Board of Directors of Strike Oil Limited, a major shareholder of the Company. As a result he does not fall within the criteria as published by the ASX Corporate Governance Council ("Independence Criteria"). However, he fulfils the other Independence Criteria. The Board of Comet Ridge (in the absence of Mr Schneider) considers he is capable of making decisions and taking actions which are designed to be in the best interests of the Company, and therefore considers him to be independent. The Board notes the potential for conflict in matters where Strike Oil Limited is involved and recognises that in such circumstances Mr Schneider would declare such interest and not participate in the decision making process unless otherwise sanctioned by the Board, as is required under the Corporations Act.

Through her consultancy company, Strategic Consultants Pty Ltd, Ms Swaby provides company secretarial services and has been involved in the preparation of financial statements for the Company. In this regard, Ms Swaby fulfils a quasi-executive role. Ms Swaby is not a substantial shareholder of the Company and meets all of the other independence criteria. Having regard to issues of materiality, the Board, in the absence of Ms Swaby, considers that Ms Swaby's consultancy relationship with the Company does not impede her ability to act in the best interests of the Company. Furthermore, Ms Swaby no longer has a significant role in the preparation of the Company's financial accounts as this function is now fulfilled by an executive in a dedicated finance and administration role. For these reasons the Board considers Ms Swaby to be independent.

Skills, Experience, Expertise, and Term of Office of Each Director

The relevant details for each Director are contained in the profile for each Director in the Directors’ Report.

Statement Concerning Availability of Independent Professional Advise

If a Director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a Director then, provided the Director first obtains approval for incurring such expense from the Chairman, the Company will pay the reasonable expenses associated with obtaining such advice.

Board Committees

The Board has established Audit and Remuneration Committees which assist in the discharge of the Board’s responsibilities. Board approved charters set out the terms of reference and rules governing these Committees.

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Audit Committee

The Audit Committee assists the Board in discharging its responsibilities to ensure that the Company complies with appropriate and effective accounting, auditing, internal control, compliance and reporting practices in accordance with the Audit Committee Charter.

The role of the Audit Committee is to:

• Monitor the integrity of the financial statements of the Company, reviewing significant financial reporting judgements;

• Review the Company’s internal financial control system;

• Monitor and review the effectiveness of the Company’s internal audit function (if any);

• Monitor and review the external audit function including matters concerning appointment and remuneration, independence and non-audit services; and

• Perform such other functions as assigned by law, the Company’s constitution, or the Board.

The current members of the Audit Committee are:

• Gillian Swaby - Chairman: Non-Executive Director/Company Secretary

• Jeff Schneider: Non-Executive Director

• Gary Drobnack: Non-Executive Director

The members of the Audit Committee by virtue of their professional background experience and personal qualities are well qualified to carry out the functions of the Audit Committee.

Mr Schneider has over 30 years of experience in various management and executive roles in the resource industry, and is therefore well qualified by his industry knowledge to form the Audit Committee. In addition, Mr Schneider has acquired financial literacy through his relevant academic qualifications.

Ms Swaby has over 20 years experience in the Australian mining and exploration industry. Further, she has gained financial expertise through her academic qualifications and practical experience in management accounting and corporate financial management.

Mr Drobnack has over 34 years of business management and commercial experience in the timberlands and forest products businesses and, as a senior executive with a major US corporation, Weyerhaeuser, has worked extensively with the interpretation and evaluation of financial information. Mr Drobnack also provides a US perspective to the Audit Committee.

The Audit Committee meets at least twice a year and at any other time requested by a Board member, Company Secretary, or external auditor. The external auditors attend at least twice a year and on other occasions where circumstances warrant.

The number of meetings of the Audit Committee during the reporting period and the attendance record of members is set out in the Directors’ Report.

Nomination Committee

There is no formal Nomination Committee. The full Board considers those matters and issues arising that would usually fall to a Nomination Committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate Nomination Committee.

Remuneration Committee

The role of the Committee, in accordance with the Remuneration Committee Charter, is to assist the Board with respect to remuneration by reviewing and making appropriate recommendations on:

11 | Comet Ridge Limited

• a)Remuneration packages of Executive Directors, Non-Executive Directors and senior executives; and

• b)Employee incentive and equity based plans including the appropriateness of performance hurdles and total payments proposed.

The ASX Listing Rules and the Constitution require that the maximum aggregate amount of remuneration to be allocated among the Non-Executive Directors be approved by the shareholders in general meeting. In proposing the maximum amount of consideration by shareholders, and in determining the allocation, the Remuneration Committee will take into account the time demands made on directors and such factors as fees paid on Non-Executive Directors in comparable Australian companies.

The remuneration paid to Directors and senior executives is shown in the Remuneration Report contained in the Directors’ Report, which includes details on the Company’s remuneration policies.

The Chairman of the Board is the Chairman of the Remuneration Committee and the Committee shall meet at least twice a year and otherwise as required.

The current members of the Remuneration Committee are:

• Jeff Schneider - Chairman: Non-Executive Director

• Gary Drobnack: Non-Executive Director

The number of meetings of the Remuneration Committee during the reporting period and the attendance record of members is set out in the Directors’ Report.

Board Performance Evaluation

Improvement in Board effectiveness is a continuing obligation of the Board. An evaluation of Board performance was carried out including completion of a questionnaire focused on process structure, effectiveness and contributions.

Relationship with Shareholders

The Company places a high priority on communications with and accountability to shareholders. The Board recognises that shareholders, as the ultimate owners of the Company, are entitled to receive timely and relevant high quality information about their investment. Similarly, prospective investors should be able to make an informed decision when considering the purchase of shares in Comet Ridge.

To safeguard the effective dissemination of information, the Board has implemented procedures for compliance with continuous disclosure requirements and adopted a Shareholder Communications Policy. These reinforce the Company’s commitment to its continuous disclosure obligations imposed by law.

Information will be communicated to shareholders by:

• Ensuring that published financial and other statutory reports are prepared in accordance with applicable laws and industry best practice;

• Ensuring the disclosure of full and timely information about the Company’s activities in accordance with the general and continuous disclosure principles in the ASX Listing Rules, the Corporations Act in Australia and any other relevant legislation;

• Providing detailed reports from the Chairman and/or the Managing Director at the Annual General Meeting;

• Placing all material information released to the market (including Notices of Meeting and explanatory materials) on the Company’s website as soon as practical following release; and

• Placing the Company’s market announcements and financial data for the preceding three years on its website.

In addition, the website includes a facility to allow interested parties to subscribe to receive, electronically, public releases and other relevant material concerning the Company.

12 | 2007-08 Annual Report

Shareholders are encouraged to attend Annual General Meetings and ask questions of directors and senior management and also the Company’s external auditors, who are required to be in attendance. In the event that shareholders are unable to attend meetings, they are encouraged to lodge proxies signifying their approval or otherwise of the business to be considered.

Environment

The Company is committed to sustainable development of energy resources in an environmentally and socially responsible manner. All operational activities are conducted in strict compliance with the terms of relevant surface use agreements. Surface disturbances, critical wildlife habitat, view-sheds, noise levels, air quality and water quality impacts to the environment will, at a minimum, comply with all applicable legal and regulatory thresholds and otherwise be managed for minimal impact. The Company employs technology and best environmental practices to achieve this objective.

Safety

The Company believes that all injuries and industry related diseases are preventable. The Company’s safety policy focuses on assessing, mitigating, or where possible, eliminating, potential risk associated with any activity. Responsibility for an individual’s safety starts with the individual but the Company is committed to the creation and maintenance of a work environment and culture where we all think safety first. To meet these commitments, the Company has developed a six point health and safety policy which is the responsibility of all Company personnel. Contractors are also required to manage health and safety in line with this policy. Each person involved in our business has the authority and responsibility to delay or immediately stop activities where effective mitigation controls are not in place to manage identified hazards.

Securities Ownership and Dealings

The Company has a Policy for Trading in Company Securities which is binding on all directors and employees. The purpose of this policy is to provide a brief summary of the law on insider trading and other relevant laws, set out the restrictions on dealing in securities by people who work for or are associated with Comet Ridge and assist in maintaining market confidence in the integrity of dealings in Comet Ridge securities.

Existence and Terms of Any Schemes for Retirement Benefits for Non-Executive Directors

There are no termination and retirement benefits for Non-Executive Directors.

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Your Directors present their report on Comet Ridge Limited and its subsidiaries (the “Group”) for the financial year ended 30 June 2008. The Company was incorporated on 23 August 2003 and listed on the Australian Securities Exchange on 19 April 2004.

Directors and Company Secretary

The Directors in office at any time during or since the end of the year and at the date of this report are as follows:

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Jeff Schneider	—	Chairman (Non-Executive)
Qualifications	—	B.Com
Experience	—	Mr Schneider joined Comet Ridge on 28 August 2003. He has over
		30 years’ extensive experience in the global oil and gas industry,
		starting with Woodside Petroleum Limited, in 1978. He held a
		variety of roles over 24 years at Woodside, with his final role
		being Director, Australian Gas. In November 2002 he left Wood
		side to pursue other interests. Age: 58
Interest in Shares and Options	—	2,632,276 ordinary shares in Comet Ridge Limited and options to
		acquire a further 500,000 ordinary shares.
Special Responsibilities	—	Mr Schneider is chairman of the Remuneration Committee and a
		member of the Audit Committee.
Other Directorships	—	Strike Oil Limited.
David Bradshaw	—	Managing Director since 1 September 2008
		Director (Non-Executive) 7 November 2007 to 31 August 2008
Qualifications	—	BBA Accounting, MBA, CPA
Experience	—	Mr Bradshaw joined Comet Ridge on 7 November 2007. He has a
		broad-based and successful industry background in accounting, oil
		and gas financing and executive management, including the
		position of CEO and Chairman of the Board for Tipperary Corporation
		from 1997 thru 2005. Tipperary was majority owner of the very
		significant Fairview coal seam gas field in eastern Queensland,
		Australia. Mr Bradshaw also served as Director and Interim CEO of
		Trident Resources Corporation of Alberta, Canada, a coal seam gas
		producer. He currently serves as a Director of Triangle Petroleum
		Corporation, which is based in Alberta, Canada and is involved in
		gas shale exploration. Age: 54
Interest in Shares and Options	—	Nil
Other Directorships	—	Triangle Petroleum Corporation; Comet Ridge Resources, LLC
Gillian Swaby	—	Director (Non-Executive) and Company Secretary
Qualifications	—	B.Bus FCIS, FAICD
Experience	—	Ms Swaby was appointed Company Secretary on 28 August 2003
		and a Director on 9 January 2004. She has over 27 years’
		extensive experience in the Australian resources industry. She

14 | 2007-08 Annual Report

specialises in the areas of corporate secretarial practice, corporate law, accounting, financial management, and control. Ms Swaby is the principal of a corporate consulting company and past Chair of the Western Australia Council of Chartered Secretaries of Australia and a former director on their National Board. Age: 48 — Interest in Shares and Options 4,089,999 ordinary shares in Comet Ridge Limited and options to acquire a further 500,000 ordinary shares. — Special Responsibilities Ms Swaby is chairman of the Audit Committee. — Other Directorships Deep Yellow Limited. — Gary Drobnack Director (Non-Executive) Qualifications — B.S. (Forest Science) M.F. (Forest Management) (Yale University) Experience — Mr Drobnack joined Comet Ridge on 3 October 2006. He has over

Qualifications — B.S. (Forest Science) M.F. (Forest Management) (Yale University) Experience — Mr Drobnack joined Comet Ridge on 3 October 2006. He has over 34 years of business management and commercial experience, primarily in the timberlands and forest products businesses, where he was a senior executive with Weyerhaeuser Company. He has extensive U.S. and international experience including periods of residence in Indonesia, Hong Kong, Australia, and South Africa. At the time of his retirement from Weyerhaeuser, he headed Weyerhaeuser's international forest products/timberlands business in South America and Australasia. Age: 63 — Interest in Shares and Options Options to acquire 500,000 ordinary shares. Special Responsibilities — Mr Drobnack is a member of the Audit Committee and Remuneration Committees. — Other Directorships Mufindi Orphans, Inc.; prior directorships in numerous Weyerhaeuser offshore ventures. Andrew Lydyard — Managing Director to 31 August 2008. Non-Executive Director since that date. Qualifications — B.AppSc (Applied Geology) Experience — Mr Lydyard joined Comet Ridge on 1 October 2003. He has 26 years’ technical and managerial experience in the global oil and gas industry. He has extensive experience in the development and production of coal seam gas (CSG) operations, particularly in the San Juan and Powder River basins, in the USA. He was instrumental in building a substantial CSG business for J M Huber Corporation, as the Company’s Vice President, CSG. In 2001 he joined Strike Oil Limited to build the Company’s CSG business, before moving to Comet Ridge in 2003. In recognition of the increased emphasis on the United States, he relocated to Denver, Colorado in December 2005. Mr Lydyard accepted the position of President & CEO of Comet Ridge Resources, LLC in late June, 2008 and as a consequence resigned as Managing Director. Age: 51 — Interest in Shares and Options 3,625,000 ordinary shares in Comet Ridge Limited and options to acquire a further 3,000,000 ordinary shares. — Other Directorships Comet Ridge Resources, LLC

15 | Comet Ridge Limited

Interests in the Shares & Options of the Company and Related Bodies Corporate

During and since the end of the financial year a total of 1,500,000 options were granted to the following executives of the Company:

Executives G Mabie M Cuba P Jackson J Knox Total	Value of Options Options Granted Granted During Total as part of Year (Vesting Remuneration Number Remuneration Portion to Represented Granted (Total Value) 30 June 2008) by Options No US$ US$ %
	200,000 16,186 11,494 4.28 200,000 16,186 11,494 5.04 1,000,000 80,930 57,472 24.99 100,000 8,093 5,747 3.77
	1,500,000 121,395 86,207 9.81

No ordinary shares were issued during the financial year as a result of the exercise of options by key management personnel.

Details of unissued ordinary shares under options held by Directors and executives are as follows:

Directors J Schneider A Lydyard A Lydyard G Swaby G Drobnack S Ashton Executives G Mabie G Mabie G Mabie G Mabie M Cuba M Cuba M Cuba M Cuba P Jackson P Jackson J Knox J Knox J Knox Total	Vested No. Granted No. Grant Date	Terms and Conditions for each Grant Fair Value Exercise per option at price per First Last grant date option Exercise Exercise AU$ AU$ Date Date
	500,000 500,000 31/12/06 1,500,000 1,500,000 31/12/06 1,500,000 1,500,000 29/12/05 500,000 500,000 31/12/06 500,000 500,000 31/12/06 500,000 500,000 31/12/06 - 200,000 01/08/07 120,000 240,000 10/11/06 250,000 500,000 31/07/06 100,000 100,000 10/05/06 - 200,000 01/08/07 120,000 240,000 10/11/06 250,000 500,000 31/07/06 100,000 100,000 10/05/06 - 1,000,000 01/08/07 125,000 250,000 10/11/06 - 100,000 01/08/07 75,000 150,000 10/11/06 250,000 250,000 10/05/06 6,390,000 8,830,000	0.11 0.45 31/12/07 31/12/09 0.11 0.45 31/12/07 31/12/09 0.11 0.20 29/12/05 31/12/08 0.11 0.45 31/12/07 31/12/09 0.11 0.45 31/12/07 31/12/09 0.11 0.45 31/12/07 31/12/09 0.09 0.45 01/08/08 31/07/11 0.10 0.45 10/11/07 10/11/09 0.08 0.45 31/07/07 31/07/09 0.19 0.40 01/08/06 11/05/09 0.09 0.45 01/08/08 31/07/11 0.10 0.45 10/11/07 10/11/09 0.08 0.45 31/07/07 31/07/09 0.19 0.40 01/08/06 11/05/09 0.09 0.45 01/08/08 31/07/11 0.10 0.45 10/11/07 10/11/09 0.09 0.45 01/08/08 31/07/11 0.10 0.45 10/11/07 10/11/09 0.19 0.40 10/05/07 11/05/09

Principal Activities

The principal activities of the Group during the financial year were oil and gas exploration.

Operating Results

The consolidated loss of the Group after providing for income tax amounted to US$4,105,553 (2007: US$901,466).

16 | 2007-08 Annual Report

Dividends Paid or Recommended

No dividends have been paid during the financial year. No dividend is recommended for the current financial year.

Review of Operations

A review of activities of the Group is set out in the accompanying Overview of Activities.

Significant Changes in State of Affairs

Effective 26 June 2008, the Group contributed all of its US based oil and gas assets and employees into a new US based company called Comet Ridge Resources, LLC (“Comet Ridge Resources”) in exchange for a 43.59% equity interest. A private equity firm based in New York owns the majority of the shares. The private equity firm may increase its investment in the joint venture until the Group’s equity interest is diluted to 20%. Upon reaching the 20% ownership threshold, the Group may participate in the joint venture to maintain its 20% interest, or be diluted to no less than 5%. The private equity firm has made a commitment to spend up to US$100,000,000 in the joint venture.

After Balance Date Events

No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Likely Developments and Expected Results

Disclosure of information regarding likely developments in the operations of the Group in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Group. Therefore, this information has not been presented.

Environmental Issues

The Group’s operations are subject to environmental regulation under the laws of Australia and the United States of America. Group policy dictates compliance with its environmental performance obligations and at the date of this report is not aware of any breach of such regulations.

Indemnification and Insurance of Directors and Officers

During the year the Company insured directors and certain officers of the Company and related bodies corporate. The officers of the Company covered by the insurance policy include the directors named in this report. The Directors’ and Officers’ Liability Insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of the Company or a related body corporate. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover is subject to a confidentiality clause under the insurance policy.

17 | Comet Ridge Limited

Remuneration Report

This report outlines the remuneration arrangements in place for Directors and executives (“Key Management Personnel”) of Comet Ridge Limited (the “Company”). The following persons acted as directors during or since the end of the financial year:

• Jeff Schneider Chairman

• David Bradshaw Managing Director - Appointed 1 September 2008 Non-Executive Director - 7 November 2007 to 31 August 2008

• Gill Swaby Non-Executive Director and Company Secretary

• Gary Drobnack Non-Executive Director

• Andrew Lydyard Non-Executive Director - Appointed 1 September 2008 Managing Director - Through 31 August 2008.

• Simon Ashton Non-Executive Director - Resigned 22 February 2008

The term “executive” is used in the remuneration report to refer to the following persons. Except as noted the named

persons held their current position for the whole of the financial year and since the end of the financial year:

• Pat Jackson Vice President Exploration - 31 July 2007 to 26 June 2008

• Gary Mabie Vice President Operations - Resigned 26 June 2008 > Michael Cuba Vice President Land - Resigned 26 June 2008 > Jim Knox Controller - Resigned 26 June 2008

As a result of the contribution of the Company’s US based oil and assets and employees to Comet Ridge Resources, Mr Lydyard, Mr Jackson, Mr Mabie, Mr Cuba and Mr Knox resigned as employees effective 26 June 2008. Pursuant to a transition services agreement with Comet Ridge Resources, Mr Lydyard and Mr Knox will continue to perform limited transition-related services as employees of Comet Ridge Resources for the Group at no charge. The transition is expected to be finalised by 30 September 2008.

Remuneration Philosophy

The performance of the Company depends upon the quality of its Directors and executives. The philosophy of the Company in determining remuneration levels is to:

• attracting and retaining talented, qualified and effective directors and executives;

• motivating their short and long-term performance; and

• aligning their interests with those of the Company's shareholders.

Remuneration Committee

The Remuneration Committee, on behalf of the Board of Directors is responsible for determining and reviewing the compensation arrangements for the Directors, the Managing Director and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of the directors and senior executives on a periodic basis by reference to relevant employment market conditions with an overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

18 | 2007-08 Annual Report

Remuneration Structure

In accordance with best practice Corporate Governance, the structure of non-executive director and executive remuneration is separate and distinct. The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the higher calibre, whilst incurring a cost that is acceptable to shareholders.

Non-Executive Director Remuneration

The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 30 November 2007 when shareholders approved and aggregate remuneration of AU$200,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external shareholders as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each Director receives a fee for being a director of the company. The remuneration of Non-Executive Directors for the period ended 30 June 2008 is detailed in Table 1 of this report.

Executives and Executive Director Remuneration

Base Salary

The first step to attracting and retaining talented, qualified and effective senior management is paying base salaries which are competitive in the markets in which the Company operates. Competitive salary information on oil and gas exploration companies of a comparable size and with offices in the same geographical location has been acquired by independent consultants and used to develop appropriate salary ranges.

Short-term Bonus

Other than the Managing Director and VP of Exploration, the Company provides short-term bonuses to senior management on a discretionary basis, as authorised by the Board of Directors. The short-term bonuses are based on achieving the following measures where applicable to the executive:

• production performance;

• project exploration and development performance;

• additional oil and gas reserves delineated;

• performance of the Company in meeting its various other objectives;

• financial performance of the Company; and

• such other matters as determined by the Board of Directors in their discretion

In respect of the Managing Director a bonus of up to 50% of base salary can be achieved, to be determined by the Remuneration Committee having consideration to outcomes achieved during the year.

Outcomes to be considered include:

• grow and enhance Company personnel;

• develop new exploration projects;

• increase drilling activity;

• establish reserves and production; and

• acquisition of new projects

19 | Comet Ridge Limited

The above measures have been selected to align the interests of these individuals with the shareholders. The Remuneration Committee is responsible for assessing whether the measures are met.

The short term bonus payments may be adjusted up or down in line with under or over achievement against the measures. This is at the discretion of the Remuneration Committee.

Company Employee Share Incentive Option Plan

The Company believes that encouraging its employees to become shareholders is the best way of aligning their interests with those of its shareholders. Equity participation is accomplished through the Company’s employee option plan. Options are granted to Directors and employees taking into account a number of factors, including the amount and term of options previously granted, base salary and competitive factors.

Employment Contracts

Remuneration and other terms of employment for the following personnel are formalised in employment contracts for services.

Mr David Bradshaw, Managing Director (Appointed 1 September 2008)

Term of Agreement: 1 September 2008 to 31 December 2010 Base Salary: US$320,000 Termination Benefit: Base salary is to be paid through the remainder of the contract if terminated with out cause, limited to one year’s base salary. Termination Notice: The Company or Mr Bradshaw may terminate the agreement at anytime. No termination benefit is required if terminated for cause.

Mr Andrew Lydyard, Managing Director (Resigned 31 August 2008)

Term of Agreement: Three years commencing on 1 January 2006 Base Salary: US$264,000 as at 1 September 2007 Termination Benefit: Base salary is to be paid through the remainder of the contract if terminated without cause. Termination Notice: The Company or Mr Lydyard may terminate the agreement at any time. No termination benefit is required if terminated for cause.

Mr Pat Jackson, Vice President of Exploration (Resigned 26 June 2008)

Term of Agreement: Two years commencing on 31 July 2007 Base Salary: US$210,000 as of 1 January 2008 Termination Benefit Base salary is to be paid through the remainder of the contract and all options vest immediately and are exercisable within 90 days of termination if terminated without cause. Termination Notice: The Company may terminate the agreement at anytime. Mr Jackson may terminate the agreement with one month’s notice. No termination benefit is required if terminated for cause.

As a result of contribution of the Group’s US based oil and assets and employees to Comet Ridge Resources, Mr Lydyard and Mr Jackson resigned as US employees effective 26 June 2008. Pursuant to a transition services agreement with Comet Ridge Resources, Mr Lydyard will continue to perform limited transition-related services as an employee of Comet Ridge Resources for the Company at no charge. The transition is expected to be finalised by 30 September 2008.

20 | 2007-08 Annual Report

Table 1 Remuneration of Directors and Executives:

Year Ended 30 June 2008: Short-Term Post-Employment Share-Based Total Salary & Fees Cash Bonus Retirement 1 Options 2 Total Performance US$ US$ US$ US$ US$ Related Directors J Schneider 34,437 - - 24,894 59,331 0% D Bradshaw 22,836 - - - 22,836 0% G Swaby 74,881 - 2,845 24,894 102,620 0% G Drobnack 34,437 - - 24,894 59,331 0% A Lydyard 256,979 27,000 16,992 74,682 375,653 7% S Ashton 20,396 - 1,836 24,894 47,126 0% Executives G Mabie 190,321 - 11,419 33,047 234,787 0% M Cuba 183,761 - 11,026 33,048 227,835 0% P Jackson 185,767 - 11,146 66,750 263,663 0% J Knox 124,729 - 7,484 20,260 152,473 0%	Year Ended 30 June 2008: Short-Term Post-Employment Share-Based Total Salary & Fees Cash Bonus Retirement 1 Options 2 Total Performance US$ US$ US$ US$ US$ Related Directors J Schneider 34,437 - - 24,894 59,331 0% D Bradshaw 22,836 - - - 22,836 0% G Swaby 74,881 - 2,845 24,894 102,620 0% G Drobnack 34,437 - - 24,894 59,331 0% A Lydyard 256,979 27,000 16,992 74,682 375,653 7% S Ashton 20,396 - 1,836 24,894 47,126 0% Executives G Mabie 190,321 - 11,419 33,047 234,787 0% M Cuba 183,761 - 11,026 33,048 227,835 0% P Jackson 185,767 - 11,146 66,750 263,663 0% J Knox 124,729 - 7,484 20,260 152,473 0%
	34,437 - - 24,894 59,331 0% 22,836 - - - 22,836 0% 74,881 - 2,845 24,894 102,620 0% 34,437 - - 24,894 59,331 0% 256,979 27,000 16,992 74,682 375,653 7% 20,396 - 1,836 24,894 47,126 0% 190,321 - 11,419 33,047 234,787 0% 183,761 - 11,026 33,048 227,835 0% 185,767 - 11,146 66,750 263,663 0% 124,729 - 7,484 20,260 152,473 0%
Total	1,128,544 27,000 62,748 327,363 1,545,655 2%

Year Ended	30 June 2007:
	Short-Term		Post-Employment	Share-Based		Total
	Salary & Fees	Cash Bonus	Retirement 1	Options 2	Total	Performance
	US$	US$	US$	US$	US$	Related
Directors
J Schneider	27,710	-	-	23,610	51,320	0%
G Swaby	65,430	-	2,495	23,610	91,535	0%
G Drobnack	20,783	-	-	23,610	44,393	0%
A Lydyard	205,727	65,671	31,689	70,830	373,917	18%
S Ashton	27,710	-	2,495	23,610	53,815	0%
Executives
G Mabie	183,485	25,788	14,262	35,793	259,328	10%
M Cuba	168,819	24,355	13,469	35,793	242,436	10%
P Jackson	125,741	-	-	9,854	135,595	0%
J Knox	109,166	23,692	12,033	33,127	178,018	13%
Total	934,571	139,506	76,443	279,837	1,430,357	10%

1 Superannuation (Australian) or Section 401(k) (United States).

2 Represents value of options being recognised over the vesting period (portion expensed in the current period).

Meetings of Directors

During the year the following meetings of directors (including committees of directors) were held. Attendances by each Director during the year were:

J Schneider D Bradshaw G Swaby G Drobnack A Lydyard S Ashton	Directors’ Meetings Number eligible to Number attend attended	Committee Meetings	Committee Meetings
		Audit Committee Number eligible to Number attend attended	Remuneration Committee
			Number eligible to Number attend attended
	8 8 8 8 8 8 8 8 8 8 2 2	2 2 - - 2 2 2 2 - - - -	2 2 - - - - 2 2 - - -

Options

At the date of this report, the unissued ordinary shares of Comet Ridge Limited under option are as follows:

21 | Comet Ridge Limited

	Grant Date of Exercise Price Date Expiry AU$	Number Under Option 1,500,000 450,000 75,000 1,000,000 955,000 3,500,000 1,900,000 30,000 65,000 300,000 9,775,000
	29 December 2005 31 December 2008 0.20 10 May 2006 11 May 2009 0.40 26 June 2006 26 June 2009 0.45 31 July 2006 31 July 2009 0.45 10 November 2006 10 November 2009 0.45 31 December 2006 31 December 2009 0.45 01 August 2007 31 July 2011 0.45 05 September 2007 04 September 2011 0.45 03 December 2007 02 December 2011 0.45 07 December 2007 06 December 2011 0.45

During the year ended 30 June 2008, the following ordinary shares of Comet Ridge Limited were issued on the exercise of options granted. No further shares have been issued since that date. No amounts are unpaid on any of the shares.

	Grant	Exercise Price	Shares
	Date	AU$	Issued
18	August 2005	0.20	500,000

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

No person has applied for leave of a Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

Non-Audit Services and Auditor Independence

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Consolidated Entity are important.

The Board of Directors have reviewed all expenditures potentially related to non-audit services and determined that the Company’s auditors, HLB Mann Judd, did not provide any services in addition to their statutory duties. Had such expenditures occurred, the Board of Directors would need to make the determination that those expenditures do not impact the integrity and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board.

The Directors received an Independence Declaration from the auditors of the Company, HLB Mann Judd, and a copy as required under section 307C of the Corporation Act 2001 is set out on the following page and forms part of this Directors’ report for the year ended 30 June 2008.

Signed on behalf of and in accordance with a resolution of the Board of Directors.

==> picture [217 x 38] intentionally omitted <==

David Bradshaw Managing Director

Dated this 30th day of September 2008

22 | 2007-08 Annual Report

==> picture [468 x 52] intentionally omitted <==

==> picture [174 x 72] intentionally omitted <==

As lead auditor for the audit of the financial report of Comet Ridge Limited for the year ended 30 June 2008, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in

relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Comet Ridge Limited.

Perth, Western Australia 30 September 2008

==> picture [150 x 44] intentionally omitted <==

L DIGIALLONARDO Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au

==> picture [18 x 17] intentionally omitted <==

Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

International, a world-wide organisation of accounting firms and business advisers

23 | Comet Ridge Limited

FOR THE YEAR ENDED 30 JUNE 2008

Note CONTINUING OPERATIONS Revenue 2 Employee benefits expense Share option expense Corporate costs Exploration expenditure written off 3 Other exploration costs Impairment in value of financial asset 3 Consultancy costs Technology costs Property costs Insurance costs Depreciation and amortisation expense Other expenses 3 Profit (loss) before income tax Income tax expense 4 Profit (loss) for the year from continuing operations DISCONTINUED OPERATIONS Loss for the year from discontinued operations 25 Loss attributable to members of the parent entity EARNINGS (LOSS) PER SHARE FROM CONTINUING AND DISCONTINUED OPERATIONS: Basic 6 Diluted 6 FROM CONTINUING OPERATIONS: Basic 6 Diluted 6	Note	Consolidated Company
		2008 2007 2008 2007 US$ US$ US$ US$
		67,202 2,600,430 67,202 2,600,430 (293,483) (94,064) (293,483) (94,064) (412,340) (288,482) (412,340) (288,482) (457,428) (329,597) (457,428) (329,597) (6,306) (555,723) (6,306) (555,723) - - - - - - (2,846,221) (1,943,199) (1,646) (24,522) (1,646) (24,522) (612) (6,607) (612) (6,607) (3,222) (2,632) (3,222) (2,632) (33,101) (24,106) (33,101) (24,106) (9,180) (17,450) (9,180) (17,450) (109,216) (215,514) (109,216) (215,514)
		(1,259,332) 1,041,733 (4,105,553) (901,466) - - - -
		(1,259,332) 1,041,733 (4,105,553) (901,466)
		(2,846,221) (1,943,199) - -
		(4,105,553) (901,466) (4,105,553) (901,466)
		US Cents US Cents (3.90) (1.03) (3.90) (1.03) (1.20) 1.20 (1.20) 1.19
	6
	6
	6
	6

The accompanying notes form part of these financial statements.

24 | 2007-08 Annual Report

AS AT 30 JUNE 2008

Note ASSETS Current Assets Cash and cash equivalents 7 Receivables 8 Other financial assets 9 Total Current Assets Non-Current Assets Exploration and evaluation expenditure 10 Property, plant and equipment 11 Investment accounted for using the equity method 12 Other financial assets 9 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 14 Provisions 15 Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 16 Reserves 17 Accumulated losses TOTAL EQUITY	Note	Consolidated Company
		2008 2007 2008 2007 US$ US$ US$ US$
		765,182 2,629,340 178,208 1,739,861 1,217,198 3,327,795 300,640 2,813,392 41,437 300,682 39,552 36,677
		2,023,817 6,257,817 518,400 4,589,930
		2,147,513 8,199,019 2,147,513 1,755,264 - 120,074 - 8,821 7,000,000 - - - - 88,948 10,115,831 7,949,917
		9,147,513 8,408,041 12,263,344 9,714,002
		11,171,330 14,665,858 12,781,744 14,303,932
		1,151,759 1,391,262 385,819 349,299 - 35,328 - -
		1,151,759 1,426,590 385,819 349,299
		1,151,759 1,426,590 385,819 349,299
		10,019,571 13,239,268 12,395,925 13,954,633
		14,735,692 14,639,725 14,735,692 14,639,725 1,666,425 876,536 4,042,779 1,591,901 (6,382,546) (2,276,993) (6,382,546) (2,276,993)
		10,019,571 13,239,268 12,395,925 13,954,633

The accompanying notes form part of these financial statements.

25 | Comet Ridge Limited

FOR THE YEAR ENDED 30 JUNE 2008

CONSOLIDATED Balance at 1 July 2006 Shares issued during the year Transaction costs Loss attributable to members of parent entity Foreign currency translation Share options vested Balance at 30 June 2007 Shares issued during the year Loss attributable to members of parent entity Foreign currency translation Share options vested Balance at 30 June 2008 COMPANY Balance at 1 July 2006 Shares issued during the year Transaction costs Loss attributable to members of parent entity Foreign currency translation Share options vested Balance at 30 June 2007 Shares issued during the year Loss attributable to members of parent entity Foreign currency translation Share options vested Balance at 30 June 2008	Foreign Currency Issued Options Translation Accumulated Capital Reserve Reserve Losses Total Note US$ US$ US$ US$ US$	Foreign Currency Issued Options Translation Accumulated Capital Reserve Reserve Losses Total Note US$ US$ US$ US$ US$
	16 16 17 18 17 18 16 16 17 18 17 18	7,901,707 226,699 (158,306) (1,375,527) 6,594,573 6,948,212 - - - 6,948,212 (210,194) - - - (210,194) - - - (901,466) (901,466) - - 519,661 - 519,661 - 288,482 - - 288,482
		14,639,725 515,181 361,355 (2,276,993) 13,239,268
		95,967 - - - 95,967 - - - (4,105,553) (4,105,553) - - 377,549 - 377,549 - 412,340 - - 412,340
		14,735,692 927,521 738,904 (6,382,546) 10,019,571
		7,901,707 226,699 (158,306) (1,375,527) 6,594,573 6,948,212 - - - 6,948,212 (210,194) - - - (210,194) - - - (901,466) (901,466) - - 1,235,026 - 1,235,026 - 288,482 - - 288,482
		14,639,725 515,181 1,076,720 (2,276,993) 13,954,633
		95,967 - - - 95,967 - - - (4,105,553) (4,105,553) - - 2,038,538 - 2,038,538 - 412,340 - - 412,340
		14,735,692 927,521 3,115,258 (6,382,546) 12,395,925

The accompanying notes form part of these financial statements.

26 | 2007-08 Annual Report

FOR THE YEAR ENDED 30 JUNE 2008

Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received Interest paid Receipts from joint venture recoveries and other debtors Payments to suppliers and employees Net cash used in operating activities 7 CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation expenditure Proceeds from sale of investments Purchase of property, plant and equipment Payments for security deposits Payments to wholly-owned subsidiaries Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds on issue of debt Repayment of debt Proceeds from issue of shares Costs on issue of shares Net cash provided by financing activities Net decrease in cash held Cash at beginning of financial year Effect of exchange rates on cash holdings in foreign currencies Cash at end of financial year 7	Note	Consolidated Company
		2008 2007 2008 2007 US$ US$ US$ US$
		108,842 167,122 67,202 86,930 (7,222) - - - 1,074,988 4,915,570 - - (2,945,355) (6,548,317) (898,335) (656,390)
		(1,768,747) (1,465,625) (831,133) (569,460)
		(4,146,012) (5,803,901) (132,592) (391,058) 3,919,660 - 2,549,700 - (47,573) (75,478) - - (25,000) (25,000) - - - - (3,351,142) (6,033,793)
		(298,925) (5,904,379) (934,034) (6,424,851)
		1,000,000 - - - (1,000,000) - - - 95,967 6,948,212 95,967 6,948,212 - (210,194) - (210,194)
		95,967 6,738,018 95,967 6,738,018
		(1,971,705) (631,986) (1,669,200) (256,293) 2,629,340 3,078,043 1,739,861 1,812,871 107,547 183,283 107,547 183,283
		765,182 2,629,340 178,208 1,739,861

The accompanying notes form part of these financial statements.

27 | Comet Ridge Limited

FOR THE YEAR ENDED 30 JUNE 2008

Note 1: Statement of Significant Accounting Principals

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers the Consolidated Entity of Comet Ridge Limited and controlled entities, and Comet Ridge Limited as an individual company. Comet Ridge Limited is a listed public company, incorporated and domiciled in Australia.

The financial report of Comet Ridge Limited and subsidiaries, and Comet Ridge Limited as an individual Company, comply with all Australian equivalents to International Financial Reporting Standards (IFRS) in their entirety.

The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Going Concern

At 30 June 2008, the Consolidated Entity had working capital of $872,058 and had incurred losses of $4,105,553 for the year then ended. This loss includes a loss from discontinued operations of $2,846,221 relating to the disposal of the Consolidated Entity’s USA based oil and gas assets to Comet Ridge Resources, LLC in exchange for a 43.59% interest in that company. Since balance date, the Consolidated Entity’s working capital has reduced, and in the Directors’ opinion the ability of the Consolidated Entity to continue as a going concern is principally dependent upon the ability of the Company to raise further capital or to realise certain of its exploration assets.

The Directors believe that there is a reasonable expectation that additional capital can be raised, or exploration assets realised, sufficient to cover the Consolidated Entity’s funding requirements for a period of not less than twelve months from the date of this financial report to the date of signature of the next financial report. Based on this, the Directors are satisfied that the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

Should the Consolidated Entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the Consolidated Entity be unable to continue as a going concern.

Changes in Accounting Policies on Initial Application of Accounting Standards

In the year ended 30 June 2008, the Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2007. Details of the impact of the adoption of these new accounting standards are set

28 | 2007-08 Annual Report

out in the individual accounting policy notes set out below. The Group has also adopted the following Standards as listed below which only impacted on the Group’s financial statements with respect to disclosure:

• AASB 101 Presentation of Financial Instruments (revised October 2006)

• AASB 7 Financial Instruments – Disclosures

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2008. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to the Group accounting policies.

Statement of Compliance

The financial report was authorised for issue by the Directors on 25 September 2008 The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

Accounting Policies

(a)Principles of Consolidation

A subsidiary is any entity Comet Ridge Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. A list of subsidiaries is contained in Note 22 to the financial statements. All controlled entities have a June financial year-end. All intercompany balances and transactions between entities in the Consolidated Entity, including any unrealised gains or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the Company. Where subsidiaries have entered or left the Consolidated Entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

(b)Significant Accounting Judgements, Estimates and Assumptions

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Share-based payment transactions

The Consolidated Entity measures the cost of equity-settled transaction with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using the Black-Scholes model, using the assumptions detailed in Note 18.

(c)Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will be realised and the revenue can be reliably measured.

Sales of Oil and Gas

Revenue from the sales of oil and gas is recognised when the product is in the form in which it is to be sold and the property has passed to the purchaser. In the event the property has not passed on to the purchaser, revenue will be recorded when it can be established the product is for the purchaser’s account pursuant to an enforceable sales contract and the purchaser has assumed the risk of loss.

Interest Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

All revenue is stated net of the amount of goods and services tax (GST), if applicable.

(d)Borrowing Costs

Borrowing costs are recognised as an expense when incurred except those that relate to the acquisition, construction or production of qualifying assets where the borrowing cost is added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

29 | Comet Ridge Limited

(e)Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

(f)Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments. For purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents defined above, net of outstanding bank overdrafts.

(g)Receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days. Collectibility of trade debtors is reviewed on an ongoing basis. Receivables, which are known to be uncollectible, are written off. An allowance for doubtful debts is raised when some doubt as to collection exists.

(h)Inventories

Inventories are valued at the lower of cost and net realisable value.

(i)Foreign Currency Transactions and Balances

Functional and presentation currency

The financial statements for the Consolidated Entity are presented in United States dollars. The Company believes the US dollar is the best measure of performance because the Company’s primary operations are based in the United States. Assets and liabilities for each balance sheet are translated at the closing rate at the date of that balance sheet. Income and expenses are translated at the dates of the transactions. Components of equity are translated at the historical rates. Exchange differences are recognised as a separate component of equity. The functional currency of the Company is the Australian dollar and the functional currency of its US subsidiaries is the US dollar. The functional currency relates to the currency of the primary economic environment in which the entity operates.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the month-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

• (j)Investment in Associates

The Consolidated Entity’s investment in its associate is accounted for using the equity method of accounting in the consolidated financial statements. The associate is an entity in which the Consolidated Entity has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Consolidated Entity's share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Consolidated Entity determines whether it is necessary to recognise any additional impairment loss with respect to the Consolidated Entity’s net investment in the associate. The consolidated income statement reflects the Consolidated Entity's share of the results of operations of the associate.

Where there has been a change recognised directly in the associate's equity, the Consolidated Entity recognises its share of any changes and discloses this in the consolidated statement of changes in equity.

The reporting date of the associate is 31 December. The associate prepares its financial statements in accordance with US Generally Accepted Accounting Principles. Adjustments are made to the associate’s financial statements to conform its accounting policies to the Consolidated Entity for like events in similar circumstances.

30 | 2007-08 Annual Report

(k)Interests in Joint Ventures

The Consolidated Entity’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the consolidated income statement and balance sheet. Details of the Consolidated Entity’s interests are shown in Note 13 .

(l)Income Tax

The charge for current income tax expense is based on the profit/loss for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

• (m)Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the Consolidated Entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The depreciable amount of all plant and equipment is depreciated on a straight-line basis over their useful lives to the Consolidated Entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset	Depreciation Rate
Furniture and fittings	12 1/2% to 14%
Computer equipment	25% to 33 1/3%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

• (n)Exploration, Evaluation and Development Expenditure

• Exploration, evaluation and development costs are accumulated in respect of each separate area of interest. The Consolidated Entity’s capitalisation policy for its natural gas and crude oil exploration and development activities is to capitalise costs of productive exploratory wells, development dry holes and productive wells and costs to acquire mineral interests and evaluate them.

General and administrative expenditures, to the extent they can be directly related to the area of interest,

31 | Comet Ridge Limited

are capitalised as well. Exploratory dry holes are initially capitalised, but are expensed if and when the well is determined not to have found reserves in commercial quantities. Costs associated with exploratory test wells are capitalised until it is determined that the area of interest will be abandoned.

Exploration and evaluation costs are carried forward only to the extent that they are expected to be recovered by successful development or sale of the area of interest, or to the extent that exploration and evaluation activities in the area of interest have not reached a stage that permits a reasonable assessment of the existence of economically recoverable reserves. Once the determination is made to abandon an area of interest, all accumulated costs are written off in full against profit in which decision to abandon the area of interest is made. Once management has determined the existence of economically recoverable reserves for the area of interest, deferred costs are reclassified from exploratory to development costs.

Development costs related to an area of interest are carried forward to the extent that they are expected to be recovered either through exploitation of the area of interest or alternatively, by its sale. Once production has been established, all future developmental drilling costs, whether dry or productive, are reclassified from development costs to production costs and are amortised over the life of the area of interest according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. In the event that the indicators of impairment are present, an impairment loss is recorded based on the higher of an assets fair value less costs to sell.

Costs of site restoration are provided for over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of plant, equipment and building structures, waste removal and rehabilitation of the site in accordance with governing laws. Any changes in costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

• (o)Impairment of Assets

At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(p)Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Financial assets at fair value through profit and loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

32 | 2007-08 Annual Report

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

Derivative instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the Consolidated Entity assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement.

• (q)Trade and other payables

These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

• (r)Provisions

Provisions are recognised when the Consolidated Entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

• (s)Interest-bearing Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised.

• (t)Employee Benefits

Provision is made for the Consolidated Entity’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits have been measured at the amounts expected to be paid when the liability is settled.

• (u)Equity-settled Compensation

The Consolidated Entity provides benefits to employees in the form of share-based payments. The cost of these share-based payments is measured by reference to the fair value of the equity instruments at the date of which they are granted. The fair value is determined by an external valuer using a Black-Scholes model, further details of which are provided in Note 18 .

• (v)Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(w)Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(x)Issued Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

33 | Comet Ridge Limited

(y)Earnings Per Share

Basic earnings per share is calculated as net profit/loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit/loss attributable to members of the parent, adjusted for: > costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

Note 2: Revenue

CONTINUING OPERATIONS Interest revenue from: Third parties Total interest revenue Other Income: Gain on disposal of non-current investment Total other income DISCONTINUED OPERATIONS Oil and gas sales Interest revenue from third parties	Consolidated Company 2008 2007 2008 2007 US$ US$ US$ US$ 67,202 86,930 67,202 86,930 67,202 86,930 67,202 86,930 - 2,513,500 - 2,513,500 - 2,513,500 - 2,513,500 67,202 2,600,430 67,202 2,600,430 6,607 3,569 - - 42,089 80,192 - - 48,696 83,761 - - 115,898 2,684,191 67,202 2,600,430

Note 3: Loss from Ordinary Activities

Expenses Impairment in value of financial assets: Investments in subsidiaries Total impairments Exploration expenditure written off 1 Other expenses: Travel Contract labour Accounting and tax services (non audit) Office supplies Other administrative costs Total other expenses	Consolidated Company 2008 2007 2008 2007 US$ US$ US$ US$ - - 2,846,221 1,943,199
	- - 2,846,221 1,943,199
	6,306 555,723 6,306 555,723
	75,840 123,032 75,840 123,032 484 57,181 484 57,181 13,115 11,626 13,115 11,626 89 2,485 89 2,485 19,688 21,190 19,688 21,190
	109,216 215,514 109,216 215,514

• 1 In 2008 the Consolidated Entity impaired the bottom portion of the Coal View Unit 31-4 well after an unsuccessful attempt to sidetrack the well. In 2007 the Company drilled one well at Mahalo which was found not to contain hydrocarbons. In 2007 the Consolidated Entity impaired the bottom portion of the Peltier 11-12 well after it was found to be a marginal producer. Approximately half of the cost was written off as the top portion of the hole may be used for a sidetrack operation.

34 | 2007-08 Annual Report

Note 4: Income Tax Expense

(a)The components of tax expense (benefit) comprise: Current tax Recoupment of prior year tax losses not previously bought to account Tax benefit not recognised (b)The prima facie tax benefit on loss from ordinary activities is reconciled to income tax as follows: Prima facie tax benefit on loss from ordinary activities before income tax for both discontinued and continuing operations at 37% US, 30% AU (2007: 34% and 30%) Add: Tax effect of: other assessable income other non-allowable expenses share options expensed during year Less: Tax effect of: other allowable expenses Recoupment of prior year tax losses not previously brought to account Tax benefit not recognised Income tax attributable to parent entity	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	(2,006,690) (1,428,855) (345,738) 407,122 - - - (407,122) 2,006,690 1,428,855 345,738 -
	- - - -
	(1,345,514) (406,463) (1,231,666) (270,440) - 58 - 58 24,235 200,996 851,369 754,569 123,702 86,545 123,702 86,545
	(1,197,577) 287,599 (256,595) 841,172
	(809,113) (1,309,991) (89,143) (163,610) - - - (407,122) 2,006,690 1,428,855 345,738 -
	- - - -

The Consolidated Entity has unconfirmed carried forward income tax losses of approximately US$13,559,955 (2007: US$7,176,286). The potential deferred tax benefit of these tax losses has not been recognised as an asset because recovery of the tax losses is not considered probable in the context of AASB 112. The Consolidated Entity’s tax rate is 34% in the US and 30% Australia (2007: 37% and 30%). The benefit of these tax losses will only be realised if:

• (a) The companies within the Consolidated Entity derive future assessable income of a nature and of an amount sufficient to enable the benefit from the deduction for the losses to be realised;

• (b) The companies within the Consolidated Entity comply with the conditions for deductibility imposed by the law; and

• (c) No changes in tax legislation adversely affect the companies within the Consolidated Entity in realising the benefit from the deduction for the loss.

Note 5: Segment Reporting

The Consolidated Entity operates in one business segment, being oil and gas exploration. Segment information is

presented for the Consolidated Entity’s geographic segments, which are located in Australia and the United States.

35 | Comet Ridge Limited

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables and property, plant and equipment, net of accumulated depreciation. Segment liabilities consist principally of payables, employee benefits, accrued expenses and provisions. Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are the same as those charged for similar goods to parties outside of the group at arm’s length. These transfers are eliminated on consolidation.

Segment Revenue Interest received Gains on sale of non-current assets Oil and gas sales, net of royalties paid Segment Results Income (loss) after income tax Segment Assets Segment Liabilities Other Acquisitions of non-current segment assets Depreciation/ amortisation of segment assets Other non-cash segment expenses	Australia USA 1 Eliminations Total
	2008 2007 2008 2007 2008 2007 2008 2007 US$ US$ US$ US$ US$ US$ US$ US$
	67,202 86,926 42,089 80,196 - - 109,291 167,122 - 2,513,500 439,859 - - - 439,859 2,513,500 - - 6,607 3,569 - - 6,607 3,569 67,202 2,600,426 488,555 83,765 - - 555,757 2,684,191 (1,259,332) 1,041,729 (2,846,221) (1,943,195) - - (4,105,553) (901,466) 16,607,509 15,296,387 8,505,416 8,311,843 (13,941,595) (8,942,372)11,171,330 14,665,858 385,819 349,302 14,707,535 10,019,660 (13,941,595) (8,942,372) 1,151,759 1,426,590 147,592 440,815 4,497,328 6,031,168 - - 4,644,920 6,471,983 9,180 17,450 64,944 43,816 - - 74,124 61,266 418,646 844,205 2,293,389 982,177 - - 2,712,035 1,826,382

• 1 On 26 June 2008, the operations in the USA were transferred to a new USA based company called Comet Ridge Resources, LLC, in which Comet Ridge Limited has a 43.59% equity interest. These operations have been disclosed in the financial report as a “discontinued operation.” Refer to Note 25 .

Note 6: Earnings per Share

Note 6: Earnings per Share
Earnings used to calculate basic and dilutive EPS Weighted number shares outstanding during the year Weighted average number of options considered to have a dilutive effect 1 Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS	Consolidated/Company
	2008 2007 US$ US$
	(4,105,553) (901,466)
	No. No.
	105,375,950 87,140,723 20,000 657,317
	105,395,950 87,798,040

• 1 For the financial years ended 30 June 2008 and 2007, the effect of potential ordinary shares had an antidilutive effect. Therefore, basic and dilutive EPS are the same.

36 | 2007-08 Annual Report

Note 7: Cash and Cash Equivalents

Cash at bank and in hand Short-term bank deposits 1	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	234,100 903,312 55,187 13,833 531,082 1,726,028 123,021 1,726,028
	765,182 2,629,340 178,208 1,739,861

1 The effective interest rate on short-term bank deposits was 4.69% (2006: 4.96%); these deposits are available at call.

Reconciliation to Cash Flow Statement:

Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:

Cash and cash equivalents	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	765,182 2,629,340 178,208 1,739,861

Reconciliation of Cash Flow from Operations:

Loss from ordinary activities after income tax Non-cash flows in loss from ordinary activities: Depreciation and amortisation Write-off of capitalised expenditure Net gain on disposal of investments and other financial assets Impairment - investment in subsidiary Share options expensed Changes in assets and liabilities: (Increase)/decrease in receivables Increase in inventory (Increase)/decrease in prepayments and other current assets Increase/(decrease) in payables Increase in provisions Cash flow from operations	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	(4,105,553) (901,466) (4,105,553) (901,466) 74,124 61,266 9,180 17,450 2,299,695 1,537,900 6,306 555,723 (446,189) (2,513,500) - (2,513,500) - - 2,846,222 1,943,199 412,340 288,482 412,340 288,482 (98,620) 293,910 26,014 7,279 - (151,117) - - (3,100) (233,448) 3,658 28,090 16,125 125,110 (29,300) 5,086 82,431 27,238 - 197
	(1,768,747) (1,465,625) (831,133) (569,460)

37 | Comet Ridge Limited

Note 8: Trade and Other Receivables

Sale of Tipton West royalty interest 1 Purchase price adjustments on contribution of assets to associate Joint venture partners Advance payments to operators Oil sales, net of royalty GST receivable Other receivables Aging 60-90 days 90-120 days 120 + days 1	Consolidated Company 2008 2007 2008 2007 US$ US$ US$ US$ 287,610 2,525,100 287,610 2,525,100 907,877 - - - 8,580 265,409 - - - 205,452 - - - 3,569 - - 13,032 35,081 13,030 35,081 99 293,184 - 253,211
	1,217,198 3,327,795 300,640 2,813,392
	925,043 3,232,851 13,030 2,784,574 4,545 94,944 - 28,818 287,610 - 287,610 -
	1,217,198 3,327,795 300,640 2,813,392

• 1 Balance consists of AU$300,000 receivable for GST on the Tipton West sale. This balance is offset by a corresponding AU$300,000 payable. The Company is waiting on a ruling from the Australian Tax Office as to whether the proceeds from the Tipton West sale are subject to GST.

Note 9: Other Financial Assets

Current Prepayments Security bond deposits Inventory Non-Current Security bond deposits Investment in subsidiaries Loan to subsidiary Less: provision for impairment	Consolidated Company 2008 2007 2008 2007 US$ US$ US$ US$ 41,437 124,297 39,552 36,677 - 25,268 - - - 151,117 - - 41,437 300,682 39,552 36,677 - 88,948 - - - - 4,300,726 1,454,504 - - 11,108,282 8,942,372 - - (5,293,177) (2,446,959) - 88,948 10,115,831 7,949,917

38 | 2007-08 Annual Report

Note 10: Exploration, Evaluation and Development Expenditure

Exploration and evaluation phase: Balance at 1 July Additions Transfer to development and production phase Impairment expense Foreign currency translation Sales and derecognition Balance at 30 June Development and production phase: Balance at 1 July Additions Impairment expense Accumulated amortisation Sales and derecognition Balance at 30 June Total costs carried forward	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	8,111,641 3,090,104 1,755,264 1,633,909 4,239,492 6,371,505 147,592 409,979 - (88,173) - - (2,226,813) (1,537,900) (6,306) (555,723) 250,963 276,105 250,963 267,099 (8,227,770) - - -
	2,147,513 8,111,641 2,147,513 1,755,264
	87,378 - - - 5,225 88,173 - - (72,882) - - - (8,364) (795) - - (11,357) - - -
	- 87,378 - -
	2,147,513 8,199,019 2,147,513 1,755,264

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. The recoverability of the cash generating units in the development phase is determined by discounting the estimated future cash flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. Key assumptions include:

• For wells now in production - initial production rates based on current producing rates for those wells; > Estimated rates of production decline based on current trends;

• Hydrocarbon prices in effect at 30 June;

• Operating costs directly applicable to the wells;

• Discount rate of 10%

39 | Comet Ridge Limited

Note 11: Property, Plant and Equipment

Plant and Equipment Furniture & Fittings at cost Accumulated depreciation Computer Equipment at cost Accumulated amortisation Total Property, Plant and Equipment	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	- 20,455 - - - (3,067) - -
	- 17,388 - -
	- 186,939 - 48,661 - (84,253) - (39,840)
	- 102,686 - 8,821
	- 120,074 - 8,821

Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year:

2008 Consolidated Balance at the beginning of year Additions Depreciation expense Sales and disposals Foreign currency translation Carrying amount at the end of year Company Balance at the beginning of year Depreciation expense Sales and disposals Foreign currency translation Carrying amount at the end of year 2007 Consolidated Balance at the beginning of year Additions Depreciation expense Sales and disposals Foreign currency translation Carrying amount at the end of year Company Balance at the beginning of year Depreciation expense Sales and disposals Foreign currency translation Carrying amount at the end of year	Furniture & Computer Fittings Equipment Total US$ US$ US$
	17,388 102,686 120,074 16,540 31,033 47,573 (1,725) (64,034) (65,759) (32,203) (70,043) (102,246) - 358 358
	- - -
	- 8,821 8,821 - (9,180) (9,180) - - - - 359 359
	- - -
	18,920 94,528 113,448 2,079 73,399 75,478 (2,889) (57,582) (60,471) (512) (10,278) (10,790) (210) 2,619 2,409
	17,388 102,686 120,074
	748 33,837 34,585 (41) (17,409) (17,450) (512) (10,278) (10,790) (195) 2,671 2,476
	- 8,821 8,821

40 | 2007-08 Annual Report

Note 12: Investments Accounted for Using the Equity Method

Investment in Associate: Investment in Comet Ridge Resources, LLC (43.59%) Summarised Financial Information of Comet Ridge Resources, LLC: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net Assets Revenue Net Profit	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	7,000,000 - - -
	6,129,400 - - - 11,763,900 - - -
	17,893,300 - - -
	1,835,637 - - - - - - -
	1,835,637 - - -
	16,057,663 - - -
	- - - -
	- - - -

Effective 26 June 2008, the Consolidated Entity contributed all of its USA based oil and gas assets and employees into a new USA based company called Comet Ridge Resources, LLC in exchange for a 43.59% equity interest. A private equity firm based in New York City, USA owns the majority of the shares. The private equity firm may increase its investment in the joint venture until the Consolidated Entity's equity interest is diluted to 20%. Upon reaching the 20% ownership threshold, the Consolidated Entity may participate in the joint venture to maintain its 20% interest, or be diluted to no less than 5%. The private equity firm has made a commitment to spend up to US$100,000,000 in the joint venture.

41 | Comet Ridge Limited

Note 13: Interest in Unincorporated Joint Operating Arrangements

The principal activity of all the joint operating arrangements is oil and gas exploration. The Consolidated Entity’s share of assets employed in the joint operating arrangements is as follows:

Interest Held 2008 2007 Non-Current Assets Exploration & evaluation costs Mahalo (farmout ATP337P) 40.00% 40.00% PEL 427 1 70.00% 100.00% PEL 428 1 60.00% 80.00% ATP 743P 100.00% 100.00% ATP 744P 100.00% 100.00% Bear River 2 0.00% 33.75% Chehalis 2 0.00% 40.00% Florence 2 0.00% 39.00% Rocky Mtn 2 0.00% 50.00% Tow Creek 2 0.00% 37.50% Total exploration and Evaluation costs Production costs Bear River 2 0.00% 33.75% Tow Creek 2 0.00% 37.50% Less accumulated amortisation Total production costs Adminstrative assets Chehalis 0.00% 40.00% Less accumulated depreciation Total administrative assets Total Non-Current Assets Net Loss Revenues 2 Lease operating expense 2 Administrative expenses 2 Net loss	Interest Held 2008 2007	Consolidated Company
		2008 2007 2008 2007 US$ US$ US$ US$
		1,898,838 1,624,755 1,898,838 1,618,741 42,895 34,162 42,895 34,162 45,821 36,731 45,821 36,731 77,200 28,373 77,200 28,373 82,759 31,244 82,759 31,244 - 830,914 - - - 1,074,036 - - - 438,337 - - - 40,000 - - - 2,794,940 - -
		2,147,513 6,933,492 2,147,513 1,749,251
		- 75,170 - - - 13,003 - - - (795) - -
		- 87,378 - -
		- 1,595 - - - (797) - -
		- 798 - -
		2,147,513 7,021,668 2,147,513 1,749,251
		6,607 3,569 - - (73,038) (75,982) - - (28,560) (69,683) - -
		(94,991) (142,096) - -

• 1 The Company farmed out its interest in both permits that will see the Company carried through a seismic and drilling program. The farminee fulfilled its initial earning obligation during the financial year ended 30 June 2008 by acquiring 103 sq km of seismic over both permits. Once the farminee has fulfilled the earning obligation, the Company’s interest will decrease to 25% and 20% in PEL 427 and 428, respectively.

• 2 Effective 26 June 2008, the Consolidated Entity contributed all of its US-based oil and gas assets and employees into a joint venture with a New York based private equity firm in exchange for a 43.59% equity interest.

Note 14: Trade and Other Payables (Current)

Trade creditors Accrued expenses Exploration and development accruals Joint operating agreement advances	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	683,661 423,723 56,601 18,225 468,098 366,138 329,218 331,074 - 508,613 - - - 92,788 - -
	1,151,759 1,391,262 385,819 349,299

42 | 2007-08 Annual Report

Note 15: Provisions

Annual Leave Entitlements

Employees are eligible to carry over ten days of annual leave each calendar year. A liability has been recognised for employee entitlements relating to annual leave. The measurement and recognition criteria relating to employee benefits have been included in Note 1 .

Annual leave entitlements	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	- 35,328 - -

Defined contribution plans

US based employees are eligible to participate in a voluntary savings plan under Section 401(k) of the US tax code. The Consolidated Entity contributes 6% of the employee’s earnings into the plan. The contributions recognised as expense were US$83,788 and US$101,053 for the years ended 30 June 2008 and 2007, respectively. Effective with the contribution of the Consolidated Entity's US oil and gas based assets and employees to Comet Ridge Resources, LLC, Comet Ridge Resources LLC assumed all annual leave entitlements and contribution plans on 26 June 2008.

Analysis of Total Employee Liabilities

Consolidated Opening balance at 1 July 2007 Additions Annual leave entitlements assumed by Comet Ridge Resources, LLC Balance at 30 June 2008 Company Opening balance at 1 July 2007 Additions Balance at 30 June 2008	Annual leave Total US$ US$
	35,328 35,328 78,675 78,675 (114,003) (114,003)
	- -
	- - - -
	- -

43 | Comet Ridge Limited

Note 16: Issued Capital

Issued Capital: Balance at 30 June 2008 (105,375,950 fully paid ordinary shares) (2007: 104,874,950 fully paid ordinary shares) Ordinary Shares: Date Type Price AU$ Balance at 1 July 2006 Shares issued during the year: 09-Nov-2006 Options 0.20 17-Nov-2006 Options 0.20 18-Dec-2006 Entitlement issue 0.27 18-Dec-2006 Shortfall applications 0.28 04-Jan-2007 Shortfall placement 0.29 05-Feb-2007 Options 0.20 15-Jan-2007 Options 0.40 29-Mar-2007 Options 0.20 24-Apr-2007 Options 0.20 29-Jun-2007 Options 0.40 Share issue costs Balance at 30 June 2007 Shares issued during the year: 01-Jul-2007 Options 0.40 26-Jun-2008 Options 0.20 Share issue costs Balance at 30 June 2008	Issued Capital: Balance at 30 June 2008 (105,375,950 fully paid ordinary shares) (2007: 104,874,950 fully paid ordinary shares) Ordinary Shares: Date Type Price AU$ Balance at 1 July 2006 Shares issued during the year: 09-Nov-2006 Options 0.20 17-Nov-2006 Options 0.20 18-Dec-2006 Entitlement issue 0.27 18-Dec-2006 Shortfall applications 0.28 04-Jan-2007 Shortfall placement 0.29 05-Feb-2007 Options 0.20 15-Jan-2007 Options 0.40 29-Mar-2007 Options 0.20 24-Apr-2007 Options 0.20 29-Jun-2007 Options 0.40 Share issue costs Balance at 30 June 2007 Shares issued during the year: 01-Jul-2007 Options 0.40 26-Jun-2008 Options 0.20 Share issue costs Balance at 30 June 2008	Issued Capital: Balance at 30 June 2008 (105,375,950 fully paid ordinary shares) (2007: 104,874,950 fully paid ordinary shares) Ordinary Shares: Date Type Price AU$ Balance at 1 July 2006 Shares issued during the year: 09-Nov-2006 Options 0.20 17-Nov-2006 Options 0.20 18-Dec-2006 Entitlement issue 0.27 18-Dec-2006 Shortfall applications 0.28 04-Jan-2007 Shortfall placement 0.29 05-Feb-2007 Options 0.20 15-Jan-2007 Options 0.40 29-Mar-2007 Options 0.20 24-Apr-2007 Options 0.20 29-Jun-2007 Options 0.40 Share issue costs Balance at 30 June 2007 Shares issued during the year: 01-Jul-2007 Options 0.40 26-Jun-2008 Options 0.20 Share issue costs Balance at 30 June 2008	Consolidated/ Company
			2008 2007 US$ US$
			14,735,692 14,639,725
			Consolidated/ Company 2008 2007
			No. US$
	09-Nov-2006 Options 0.20 17-Nov-2006 Options 0.20 18-Dec-2006 Entitlement issue 0.27 18-Dec-2006 Shortfall applications 0.28 04-Jan-2007 Shortfall placement 0.29 05-Feb-2007 Options 0.20 15-Jan-2007 Options 0.40 29-Mar-2007 Options 0.20 24-Apr-2007 Options 0.20 29-Jun-2007 Options 0.40 01-Jul-2007 Options 0.40 26-Jun-2008 Options 0.20		70,728,240 7,901,707 200,000 30,865 500,000 77,162 13,992,212 2,956,204 2,901,826 613,083 11,477,258 2,445,000 50,000 7,737 1,400 433 4,000,000 642,642 1,000,000 167,000 24,014 8,086 - (210,194)
			104,874,950 14,639,725
			1,000 337 500,000 95,630 -
			105,375,950 14,735,692

Ordinary shares participate in any declared dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called; otherwise each shareholder has one vote on a show of hands.

Options

• (i) For information relating to the Comet Ridge Limited employee option plan, including details of options issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer to Note 18 .

(ii) For information relating to share options issued to executive directors during the financial year, refer to Note 24 .

Note 17: Reserves

Foreign Currency Translation Reserve

The foreign currency translation reserve records exchange differences arising on translation of the parent entity’s financial statements from Australian dollars to US dollars.

Options Reserve

The options reserve records items recognised as expenses on valuation of employee share options.

44 | 2007-08 Annual Report

Note 18: Share Based Payments

Employee Share Option Plan

Options are granted under the Company Employee Share Option Plan for no consideration. Options are granted for a three to four year period and entitlements to the options are vested on a time basis and do not reflect the performance conditions.

The expense recognised in the income statement in relation to share based payments amounts to US$412,340 (2007: US$288,482). The amount assessed at fair value at grant date of the options is allocated equally over the period from grant date to vesting date. Fair values at grant date are independently determined using the Black-Scholes method of valuation that takes into account the exercise price, the terms of the option, the vesting and market related criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and the risk of the underlying share and the risk free interest rate for the term of the option.

The following table illustrates the number and weighted average exercise price of, and movements in, share options issued during the year:

Outstanding at the beginning of the year Granted during the year Exercised during the year Expired during the year Outstanding at the end of the year	2008 2007
	Weighted Avg Weighted Avg Exercise Price Exercise Price No. AU$ No. AU$
	8,080,000 0.39 8,475,000 0.20 2,295,000 0.45 5,555,000 0.45 (500,000) 0.20 (5,750,000) 0.20 (100,000) 0.50 (200,000) 0.20
	9,775,000 0.41 8,080,000 0.39

The outstanding balance as at 30 June 2008 is represented by:

Number of	Price		Percent	Next Vesting	Expiration
Options	AU$	Exercisable	Exercisable	Date	Date
300,000	0.45	-	-	12/2008	12/2011
65,000	0.45	-	-	12/2008	12/2011
30,000	0.45	30,000	100%	N/A	09/2011
1,900,000	0.45	-	-	08/2008	01/2010
3,500,000	0.45	3,500,000	100%	N/A	12/2009
955,000	0.45	477,500	50%	11/2008	11/2009
75,000	0.45	75,000	100%	N/A	06/2009
450,000	0.40	450,000	100%	N/A	05/2009
1,000,000	0.45	500,000	50%	07/2008	07/2009
1,500,000	0.20	1,500,000	100%	N/A	12/2008
9,775,000	0.41	6,532,500

The following table lists the inputs to the model used for the years ended 30 June 2008 and 30 June 2007:

Volatility (%) Risk-free interest rate (%) Expected life of option (years) Exercise price (AU$) Weighted average share price at grant date (AU$)	2008 2007
	75% to 77% 85% to 100% 5.92% to 6.05% 5.63% to 5.80% 4 years 3 years 0.45 .45 to .50 0.25 0.28

45 | Comet Ridge Limited

Note 19: Financial Instruments

Categories of Financial Instruments

Categories of Financial Instruments
Financial assets: Cash and cash equivalents Loans and receivables Other financial assets Financial liabilities: Payables Provisions	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	765,182 2,629,340 178,208 1,739,861 1,217,198 3,327,795 300,640 2,813,392 41,437 300,682 39,552 36,677
	2,023,817 6,257,817 518,400 4,589,930
	1,151,759 1,391,626 385,819 349,299 - 35,328 - -
	1,151,759 1,426,954 385,819 349,299

Financial Risk Management Objectives

The Consolidated Entity is exposed to market risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by the Consolidated Entity’s accounting policies approved by the Board of Directors, which provide written principles on the use of financial derivatives.

(a) Market Risks

The Consolidated Entity’s activities expose it to the financial risks of changes in foreign currency exchange rates, interest rates and commodity prices. There has been no change in the Consolidated Entity’s exposure to market risks or the manner in which it manages and measures the risk from the previous period.

Foreign Currency Risk Management

The Consolidated Entity undertakes certain transactions denominated in foreign currencies, hence exposure to exchange rate fluctuations arise. Exchange rate exposures are monitored by the Board of Directors to ensure they are within approved parameters. There are no foreign exchange contracts in place to hedge the exchange rate.

The following table details the sensitivity to a 10% increase and decrease in the US dollar against the Australian dollar. This sensitivity analysis includes loans to foreign operations within the Consolidated Entity where the denomination of the loan is in a currency other than the currency of the lender or borrower. A positive number represents a stronger Australian dollar. For a weakening Australian dollar there would be an equal and opposite effect. There are no forward exchange contracts in place at 30 June 2008 or 2007.

10% increase in Australian dollar: Profit or loss Other equity	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	(4,341) (1,556) (4,341) (1,556) 14,963 422,217 1,409,123 1,316,455
	10,622 420,661 1,404,782 1,314,899

Carrying amount of monetary assets and liabilities:

Assets	478,849	4,553,253	14,415,862	13,495,625
Liabilities	385,819	349,302	385,819	349,302

46 | 2007-08 Annual Report

Interest Rate Risk

The Consolidated Entity is exposed to interest rate risk as it has deposited monies at both fixed and floating interest rates.

The sensitivity analysis below has been determined for non-derivative financial instruments at the reporting date and the stipulated change taking place at the beginning of the financial year. A 50 basis point increase or decrease is used when reporting interest rate risk reported internally to key management personnel and represents management’s assessment of the change in interest rates.

At the reporting date, if interest rates were 50 basis points higher or lower and all other variables held constant, the Consolidated Equity’s net profit would increase by $4,500 and decrease by $18,800 (2007 $16,200 and $18,300, respectively).

Commodity Price Risk

The Consolidated Entity is exposed to commodity price risk for its oil production. To date, there has not been enough production to justify entering into derivative financial instruments to manage its exposure to such risk.

(b) Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Consolidated Entity. The Consolidated Entity has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Consolidated Entity exposure and the credit ratings of its counterparties are continuously monitored by the Board of Directors. The Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any consolidated entity of counterparties having similar characteristics.

(c) Liquidity Risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Consolidated Entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The following table details the Consolidated Entity’s remaining contractual maturity for its non-derivative financial liabilities. These are based on the undiscounted cash flows of the financial liabilities based on the earliest date on which the Consolidated Entity is required to pay. The table includes both interest and principal cash flows:

Weighted Less than Average Effective One Month 1-3 Months 3 Months to Interest Rate US$ US$ 1 Year US$ Total US$ 2008 Consolidated Non-interest bearing creditors N/A 1,115,584 36,175 - 1,151,759 1,115,584 36,175 - 1,151,759 Company Non-interest bearing creditors N/A 363,002 22,817 - 385,819 363,002 22,817 - 385,819 2007 Consolidated Non-interest bearing creditors N/A 1,392,651 31,795 2,144 1,426,590 1,392,651 31,795 2,144 1,426,590 Company Non-interest bearing creditors N/A 330,912 18,387 - 349,299 330,912 18,387 - 349,299	Weighted Less than Average Effective One Month 1-3 Months 3 Months to Interest Rate US$ US$ 1 Year US$ Total US$ 2008 Consolidated Non-interest bearing creditors N/A 1,115,584 36,175 - 1,151,759 1,115,584 36,175 - 1,151,759 Company Non-interest bearing creditors N/A 363,002 22,817 - 385,819 363,002 22,817 - 385,819 2007 Consolidated Non-interest bearing creditors N/A 1,392,651 31,795 2,144 1,426,590 1,392,651 31,795 2,144 1,426,590 Company Non-interest bearing creditors N/A 330,912 18,387 - 349,299 330,912 18,387 - 349,299	Weighted Less than Average Effective One Month 1-3 Months 3 Months to Interest Rate US$ US$ 1 Year US$ Total US$ 2008 Consolidated Non-interest bearing creditors N/A 1,115,584 36,175 - 1,151,759 1,115,584 36,175 - 1,151,759 Company Non-interest bearing creditors N/A 363,002 22,817 - 385,819 363,002 22,817 - 385,819 2007 Consolidated Non-interest bearing creditors N/A 1,392,651 31,795 2,144 1,426,590 1,392,651 31,795 2,144 1,426,590 Company Non-interest bearing creditors N/A 330,912 18,387 - 349,299 330,912 18,387 - 349,299
	N/A N/A N/A N/A	1,115,584 36,175 - 1,151,759
		1,115,584 36,175 - 1,151,759
		363,002 22,817 - 385,819
		363,002 22,817 - 385,819
		1,392,651 31,795 2,144 1,426,590
		1,392,651 31,795 2,144 1,426,590
		330,912 18,387 - 349,299
		330,912 18,387 - 349,299

(d) Fair value of Financial Instruments

The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values.

47 | Comet Ridge Limited

Note 20: Commitments and Contingencies

Operating lease commitments: Not later than twelve months Between twelve months and five years	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	- 121,373 - - - 687,337 - -
	- 808,710 - -

The Consolidated Entity leases office space in the United States under a five year operating lease. In May 2007, the lease was amended to increase the amount of space leased as well as extend the lease term to 30 September 2012. Effective with the contribution of the Consolidated Entity’s US oil and gas based assets and employees to Comet Ridge Resources, LLC, Comet Ridge Resources, LLC assumed this office lease on 26 June 2008.

Private Equity Arrangement

On 10 June 2008, the Company announced a restructuring of its US based oil and gas assets and agreements with a New York based private equity firm to provide up to US$100 million of funding for the Company’s US exploration and development activities. As part of this arrangement, the Consolidated Entity agreed to pay a brokerage fee amounting to 3% of the private equity funding through 26 June 2011, except for the first US$750,000 which will be paid by the private equity firm. Assuming the private equity firm funded the entire commitment before 26 June 2011, the cost to the Consolidated Entity would be US$2.25 million.

Note 21: Related Party Transactions

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties.

Transactions with related parties:

Other Related Parties Fees for administration services paid to a related party of A Lydyard, Managing Director Fees for administration services paid to a related party of G Mabie, Vice President – Operations (USA)	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	24,981 36,300 - - 6,865 29,778 - -
	31,846 66,078 - -

Note 22: Subsidiaries

The consolidated financial statements of Comet Ridge Limited include the financial statements of the Company and the subsidiaries listed below:

Parent entity Comet Ridge Limited Subsidiaries Comet Ridge USA Inc. St Helens Energy, LLC	Country of Incorporation	Percentage Owned
		2008 2007
	Australia USA USA	100.00% 100.00% - 100.00%

48 | 2007-08 Annual Report

Note 23: Auditor’s Remuneration

Remuneration of the auditor of the Company for: Auditing/reviewing the report Remuneration of other auditors of subsidiaries for: Auditing/reviewing the financial reports of subsidiaries	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	23,403 27,838 25,455 27,838 24,716 25,560 - -
	48,119 53,398 25,455 27,838

Note 24: Director and Executives Disclosure

(a) Details of Key Management Personnel

(i) Directors
J Schneider	Chairman
D Bradshaw	Managing Director - Appointed 1 September 2008
	Non-Executive Director - 7 November 2007 to 31 August 2008
G Swaby	Non-Executive Director and Company Secretary
G Drobnack	Non-Executive Director
A Lydyard 1	Non-Executive Director - Appointed 1 September 2008
	Managing Director - Through 31 August 2008
S Ashton	Non-Executive Director - Resigned 22 February 2008
(ii) Executives
G Mabie 1	Vice President - Operations (USA) - Resigned effective 26 June 2008
M Cuba 1	Vice President - Land (USA) - Resigned effective 26 June 2008
P Jackson 1	Vice President - Exploration (USA) - Resigned effective 26 June 2008
J Knox1	Controller - Resigned effective 26 June 2008

• 1 As a result of contribution of the Company’s US based oil and assets and employees to Comet Ridge Resources, LLC, Mr Lydyard, Mr Jackson, Mr Mabie, Mr Cuba and Mr Knox resigned as employees effective 26 June 2008. Pursuant to a transition services agreement with Comet Ridge Resources, LLC, Mr Lydyard and Mr Knox will continue to perform limited transition-related services as employees of Comet Ridge Resources, LLC for the Consolidated Entity at no charge. The transition is expected to be finalised by 30 September 2008.

b) Key Management Personnel Compensation

Key Management Personnel compensation has been included in the Remuneration Report section of the Direc-

tor’s Report. The aggregate compensation made to Key Management Personnel of the Company and the Consolidated Equity is set out below:

Short-term employee benefits Short-term employee benefits Share-based payments	Consolidated Company
	2008 2007 2008 2007 US$ US$ US$ US$
	1,155,544 1,074,077 186,987 141,633 62,748 76,443 4,681 4,990 327,363 279,837 99,576 94,440
	1,545,655 1,430,357 291,244 241,063

49 | Comet Ridge Limited

c) Shareholdings of Key Management Personnel

30 June 2008 J Schneider A Lydyard S Ashton G Swaby M Cuba J Knox Total 30 June 2007 J Schneider A Lydyard S Ashton G Swaby M Cuba Total	Beginning Granted as On Exercise Net Change Ending Balance Remuneration of Options Other (1) Balance
	2,132,276 - - - 2,132,276 4,125,000 - - - 4,125,000 2,639,996 - - - 2,639,996 4,089,999 - - - 4,089,999 50,000 - - 100,000 150,000 - - - 50,000 50,000
	13,037,271 - - 150,000 13,187,271
	1,323,055 - 200,000 609,221 2,132,276 1,075,000 - 3,000,000 50,000 4,125,000 2,639,996 - - - 2,639,996 2,850,000 - 100,000 1,139,999 4,089,999 - - - 50,000 50,000
	7,888,051 - 3,300,000 1,849,220 13,037,271

1 Refers to shares purchased or sold during the financial year.

(d) Options holdings of Key Management Personnel

30 June 2008 J W Schneider G Swaby G Drobnack A Lydyard S Ashton G Mabie M Cuba P Jackson J Knox Total 30 June 2007 J Schneider G Swaby G Drobnack A Lydyard S Ashton G Mabie M Cuba P Jackson J Knox Total	Beginning Granted as Options Options Ending Balance Remuneration Exercised Expired Balance	Vested at End of Period
		Exercisable Not Exercisable
	500,000 - - - 500,000 500,000 - - - 500,000 500,000 - - - 500,000 3,000,000 - - - 3,000,000 500,000 - - - 500,000 840,000 200,000 - - 1,040,000 840,000 200,000 - - 1,040,000 250,000 1,000,000 - - 1,250,000 400,000 100,000 - - 500,000	500,000 - 500,000 - 500,000 - 3,000,000 - 500,000 - 470,000 - 470,000 - 125,000 - 325,000 -
	7,330,000 1,500,000 - - 8,830,000	6,390,000 -
	200,000 500,000 (200,000) - 500,000 100,000 500,000 (100,000) - 500,000 - 500,000 - - 500,000 4,500,000 1,500,000 (3,000,000) - 3,000,000 200,000 500,000 - (200,000) 500,000 100,000 740,000 - - 840,000 100,000 740,000 - - 840,000 - 250,000 - - 250,000 250,000 150,000 - - 400,000	- - - - - - 1,500,000 - - - 100,000 - 100,000 - - - 125,000 -
	5,450,000 5,380,000 (3,300,000) (200,000) 7,330,000	1,825,000 -

50 | 2007-08 Annual Report

Note 25: Discontinued Operations

On 26 June 2008, the Consolidated Entity contributed all of its USA based oil and gas assets and employees into a new USA based company called Comet Ridge Resources, LLC in exchange for a 43.59% equity interest. This qualifies as a “discontinued operation” and requires disclosure to be made in accordance with AASB 5. The results of the discontinued operation have been included separately in the income statement and are detailed below. The comparative profit/loss and cash flows from the discontinued operation have been re-presented to align disclosure with that of the current period.

Loss for the year from discontinued operations: Revenue_(Note 2_) Expenses: Employee benefits expense Corporate costs Explanation expenditure written off Other exporation costs Consultancy costs Technology costs Property costs Insurance costs Depreciation and ammortisation expense Other expenses Loss before income tax Applicable income tax expense Gain on disposal of operation Loss for the year from discontinued operations Cash flows from discontinued operations: Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash flows	Consolidated 2008 2007 US$ US$
	48,696 83,761 (239,609) (494,476) (43,005) (24,130) (2,293,389) (982,177) (92,772) (8,561) (81,924) (68,978) (67,416) (39,007) (159,435) (66,388) (4,604) (4,843) (64,944) (43,816) (287,678) (294,584)
	(3,286,080) (1,943,199) - -
	(3,286,080) (1,943,199) 439,859
	(2,846,221) (1,943,199)
	(937,614) (896,165) 635,109 520,472 - -
	(302,505) (375,693)

51 | Comet Ridge Limited

COMET RIDGE LIMITED

1. In the opinion of the Directors:

2. a. the financial statements and notes of the Company and the Consolidated Entity are in accordance with the Corporations Act 2001 including :

   • i giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2008 and of their performance for the year then ended; and

   • ii complying with Accounting Standards and Corporations Regulations 2001; and

3. b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

4. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2008.

This declaration is made on behalf of and in accordance with a resolution of the Board of Directors.

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David Bradshaw Managing Director

Dated this 30th day of September 2008

52 | 2007-08 Annual Report

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To the Members of Comet Ridge Limited Report on the Financial Report

We have audited the accompanying financial report of Comet Ridge Limited (“the company”), which comprises the balance sheet as at 30 June 2008, the income statement, statement of changes in equity, cash flow statement and notes to the financial statements for the year ended on that date, and the directors’ declaration for both the company and the consolidated entity as set out on pages 24 to 52. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

53 | Comet Ridge Limited

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion:

• (a) the financial report of Comet Ridge Limited is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and

• (ii)complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 1 to the financial report which indicates that the ability of the consolidated entity to continue as a going concern is principally dependent upon the ability of the company to raise further capital or to realise certain of its exploration assets. If the company is unable to raise further capital, or realise certain of its exploration assets, sufficient to cover the consolidated entity’s funding requirements for a period of not less than twelve months from the date of this financial report, there is significant uncertainty whether the consolidated entity will continue as a going concern and, therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Report on the Remuneration Report

We have audited the Remuneration Report included on pages 18 to 21 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Comet Ridge Limited for the year ended 30 June 2008 complies with section 300A of the Corporations Act 2001.

Perth, Western Australia 30 September 2008

HLB MANN JUDD Chartered Accountants L DIGIALLONARDO Partner

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au

Liability limited by a scheme approved under Professional Standards Legislation

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HLB Mann Judd (WA Partnership) is a member of

International, a world-wide organisation of accounting firms and business advisers

54 | 2007-08 Annual Report

COMET RIDGE LIMITED

The shareholder information set out below was applicable at 22 September 2008:

1. Number of Equity Holders

Ordinary Share Capital 105,375,950 fully paid ordinary shares are held by 942 individual shareholders.

2. Voting Rights

In accordance with the Company's constitution, on a show of hands every shareholder present in person or by a proxy, attorney or representative of a shareholder has one vote and on a poll every shareholder present in person or by a proxy, attorney or representative has in respect of fully paid shares, one vote for every share held. No class of option holder has a right to vote, however the shares issued upon exercise of options will rank pari passu with the then existing issued fully paid ordinary shares.

3. Distribution of Shareholdings

dings	dings	dings
Holdings			No. of Holders
1	-	1,000	14
1,001	-	5,000	87
5,001	-	10,000	134
10,001	-	100,000	524
100,001	-	Over	183
			942

No shareholders hold less than a marketable parcel of shares.

4. Substantial Shareholders

The following information is extracted from the Company’s Register of Substantial Shareholders:

Name	Number of Shares Held	Percentage Interest
Strike Oil Ltd	8,750,000	8.30%

The above shareholdings are disclosed pursuant to section 671 B(3) of the Corporations Act 2001 but the relevant interests shown do not necessarily represent the beneficial interest in the share capital of the Company or parties concerned.

5. The 20 Largest Holders of Ordinary Shares

The 20 Largest Holders of Ordinary Shares	The 20 Largest Holders of Ordinary Shares
Rank Name Number of Shares % Held
1 Strike Oil Ltd 2 Ms Gillian Swaby 3 Mr Andrew John Lydyard & Ms Cheryl Lee Lydyard 4 Mr Jeffrey Warrington Schneider 5 S&Y Ashton Nominees Pty Ltd 6 Calm Holdings Pty Ltd 7 Kabilia Investments Pty Ltd 8 Pontia Pty Ltd 9 Martin Place Securities Nominees Pty Ltd 10 Citicorp Nominees 11 ANZ Nominees Limited 12 Mr Harry Arthur Hill 13 Dr Goerge Lewkovitz Super 14 Mr Richard Geoffery 15 Angora Lane Pty Ltd 16 Matalot Pty Ltd 17 Mr Victor Samuel Palanyk 18 Parkes Holdings Pty Ltd 19 Parmelia Pty Ltd 20 Woolsthorpe Invesments Ltd	8,750,000 8.30% 4,089,999 3.88% 3,625,000 3.44% 2,632,276 2.50% 2,639,996 2.51% 2,450,640 2.33% 2,371,484 2.25% 1,940,185 1.84% 1,851,884 1.76% 1,185,000 1.12% 1,156,500 1.10% 1,000,000 0.95% 1,000,000 0.95% 1,000,000 0.95% 1,000,000 0.95% 942,500 0.89% 900,000 0.85% 880,000 0.84% 845,167 0.80% 800,000 0.76%
	41,060,631 38.97%

55 | Comet Ridge Limited

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The financial report covers both Comet Ridge Limited (the “Company”) as an individual entity and Comet Ridge Limited and its subsidiaries (the “Consolidated Entity”).

Comet Ridge Limited is a company limited by shares, incorporated and domiciled in Australia.

Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the Company. All press releases, financial statements and other information are available on our website at www.cometridge.com.au.

corporate directory COMET RIDGE LIMITED

Directors

Auditors

Mr Jeff Schneider (Non Executive Chairman) Mr David Bradshaw (Managing Director) Ms Gillian Swaby (Non Executive Director) Mr Gary Drobnack (Non Executive Director) Mr Andy Lydyard (Non Executive Director)

HLB Mann Judd 15 Rheola Street West Perth, Western Australia 6005

Investor Relations

David Waterhouse Waterhouse Investor Relations Level 1, Professional Suites 120 Collins Street Melbourne, Victoria 3000 Telephone: +613 9639 9099 Facsimile: +613 9639 3699 Email: dwaterhouse@waterhouseir.com.au

Company Secretary

Ms Gillian Swaby

Registered Office

C/- Endeavour Corporate Suite 8, 7 The Esplanade Mt Pleasant, Western Australia 6153 Telephone: +618 9316 9100 Facsimile: +618 9315 5475 Email: comet@cometridge.com.au Website: www.cometridge.com.au ABN: 47 106 092 577

Share Registry

Computershare Investor Services Pty Limited Level 2, Reserve Bank Building 45 St Georges Terrace Perth, Western Australia 6000 Telephone: +618 9323 2000 Facsimile: +618 9323 2033 Website: www.computershare.com.au

USA Operations

600 17th Street, Suite 800-South Denver, Colorado USA 80202 Telephone: +1 (303) 226 1300 Facsimile: +1 (303) 226 1301

Listed on Australian Securities Exchange Limited

Australian Operations

ASX CODE: COI

Level 3, Waterfront Place 1 Eagle Street

Design: Pite Creative Services, Inc. | www.pitecreative.com

Brisbane, Queensland 4000 Telephone: +617 3360 0215 Facsimile : +617 3360 0222

Comet Ridge

56 | 2007-08 Annual Report