COMET RIDGE LIMITED — Annual Report 2013

Oct 24, 2013

Comet Ridge Limited

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ANNUAL REPORT 2013

COMPANY PROFILE

ABOUT COMET RIDGE

Comet Ridge is a coal seam gas explorer with an active exploration and appraisal work programme for CSG projects in eastern Australia.

The company also has interests in New Zealand and oil and gas interests in the Unites States through Comet Ridge Resources LLC (CRR), a US company based in Denver, Colorado.

The Brisbane based company, first listed on the Australian Stock Exchange (code: COI) in April 2004, has approximately 458 million shares on issue.

With increasing focus on gas as a fuel of choice in power generation and energy markets, both in Australia and overseas, Comet Ridge takes high equity positions in its large exploration permits, including a 100% interest in both its Galilee Basin and New Zealand assets. The company has a 35% interest in its Mahalo block in the Bowen Basin and recently increased its equity position in the northern part of the Gunnedah Basin in New South Wales.

The Board and Management are highly experienced in establishing and developing energy projects.

CONTENTS

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Highlights 2
Chairman’s Letter 5
Managing Director’s Report 6
Overview of Activities 8
Corporate Governance Statement 22
Directors’ Report 34
Remuneration Report 40
Auditor’s Independence Declaration 47
Annual Financial Statements 48
Statement of Profit or Loss & Other Comprehensive Income 50
Statement of Financial Position 51
Statement of Changes in Equity 52
Statement of Cash Flows 53
Notes to the Financial Statements 54
Directors’ Declaration 92
Independent Auditor’s Report 93
Additional Shareholder Information 95
Corporate Directory 97
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1

2013 HIGHLIGHTS

The Company successfully raised gross proceeds of approximately

$9.4 million IN AUGUST 2012 through a placement and a one for four entitlement offer which was well supported by shareholders

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Multi-well drilling programme completed at Mahalo block demonstrating HIGHLY PRODUCTIVE COALS

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Construction of facilities for PILOT SCHEMES at Mahalo Field Pilot and Mira 2 Field Pilot completed with dewatering commenced and initial GAS PRODUCTION recorded

2

THREE WELL GALILEE DRILLING campaign successfully executed demonstrating productive coals and easterly extension of Gunn Project Area

FARM-IN 20% EQUITY

earned in ATP 1015P in Galilee Basin increasing the Company's Galilee Basin footprint

Galilee Basin Gunn 2 well BARRELS Extended Production Test

flowed approximately 400 OF WATER /DAY confirming excellent coal productivity in the Gunn Project Area

3

Comet Ridge has a very exciting future as the Company moves towards the establishment of gas reserves

4

CHAIRMAN’S LETTER

Dear Shareholders,

Comet Ridge has had an active year in progressing it coal seam gas assets. This has centred on the Mahalo project in the Bowen Basin, which has seen the installation of two pilot projects in preparation for production testing. The Company also completed a pre-pilot drilling programme in the Galilee Basin that highlighted the strong potential of this emerging basin. The portfolio was strengthened during the year with Comet increasing its interest in the Galilee Basin as well as completing the purchase of additional interests in the Gunnedah Basin.

The progression to establishing gas reserves has been somewhat slower than we expected due to technical issues at the Mahalo project and restrictions on drilling in the Gunnedah. However, our Queensland based projects are gaining momentum with the Company targeting to have reserves certified at Mahalo early 2014.

A recent visit to Chinchilla and Roma showed overwhelming strong support for the coal seam gas industry, which is not surprising given the dramatic increase in economic activity and the wealth of the area as a result of coal seam gas development. Comet has maintained its commitment to community consultation in all areas where the Company has an active operational role. In particular, your board and I have been very pleased with the way the Galilee Basin local councils, development groups and the landowners in our tenement areas, have engaged with the coal seam gas industry.

of support for the industry, especially in light of the considerable success, free of significant problems, north of the border. One would think that as the gas shortage draws nearer, the NSW Government must remove unworkable roadblocks to the development of the industry with urgency. Geologically we believe our NSW licenses show significant promise and the Company has identified a number of leads, some of which have similarities to the highly prospective Pilliga trough.

The first shipment of LNG from Gladstone next year will be a significant milestone for the industry, exposing domestic producers to international markets and creating a step change in eastern Australian gas demand. Comet Ridge continues to believe that having deliverable gas reserves feeding into this market will prove lucrative and remains the Company's key priority.

I believe that Comet Ridge has a very exciting future as the Company moves towards the establishment of gas reserves. Reaching such a milestone puts Comet in a strong position that will be supported by the developing gas market.

I would like to express my thanks to the Board, management and staff very ably led by our Managing Director, Tor McCaul, for their efforts throughout the year. Progressing projects in the current operational environment has at times been difficult and the commitment Comet's team has shown over the year puts the Company in a strong position to realise its potential.

I look forward to the upcoming year and sincerely thank our loyal shareholders for their continued support.

The first shipment of LNG from Gladstone next year will be a significant milestone for the industry . . . creating a step change in eastern Australian gas demand.

Yours faithfully

James McKay

Non-executive Chairman

NSW is rapidly approaching a gas shortage and it is difficult to understand their Government's lack

5

MANAGING DIRECTOR’S REPORT

. . . we can commence the conversion of our large resource base to reserves at a time when the market for gas in eastern Australia is tightening significantly

Tor McCaul Managing Director

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It has been another busy year for the team at Comet Ridge Limited, with most of our technical focus directed towards our Queensland assets.

In Queensland, we have participated in the drilling of 14 wells over the past year, operating (being directly responsible for the drilling of) three of these. The Mahalo Block in the southern Bowen basin, about 240 km west of Gladstone in central Queensland, has seen the majority of our drilling activity, with 11 wells drilled since July 2012. Comet Ridge is the biggest equity holder in this block with 35% equity, with APLNG (30%), Santos (30%) and Stanwell Corporation (5%), the other participants. APLNG has managed most of the work in the field in the past year on behalf of the Joint Venture. The wells drilled included two pilots schemes (the Mahalo field pilot and Mira field pilot) of four wells each, plus three step-out core holes to further appraise the block. The pilot schemes also required the construction of additional facilities, which included separators and flowlines for gas and water, power generation, water tanks and gas flare facilities.

The pilot wells were drilled in two phases over the past year and the Joint Venture was very pleased with the drilling results achieved. Comet Ridge had been keen to see the first pilot scheme on-line and pumping water by late 2012 but unfortunately this wasn't achieved until April 2013. Gas production was recorded from two wells however not at sufficiently high rate to be considered commercial and the Joint Venture is

currently designing and planning stimulation on two wells, which we expect to occur in October this year. The second pilot (Mira) came on line in June this year and has demonstrated much better productivity. We expect to pump water consistently from the Mira pilot for at least a few months before being able to quantify gas rates. Looking forward our plan is to continue to have both pilots on-line and pumping water in the Mahalo Block, leading into the end of this calendar year, with continued dewatering leading to higher gas rates as we head into the early part of 2014, with the plan to achieve a reserves booking.

Unallocated gas reserves are becoming increasingly more difficult to find and subsequently we believe Mahalo holds significant value potential for the Company.

In ATP 744P in the Gunn Project Area, in the Galilee Basin, we hold 100% equity. The Gunn 2 well was drilled as the start of a three well programme in October 2012 and we ultimately completed this well (ran a downhole pump and tubing into the well) and put the well on an extended production test (EPT) earlier this year. This well flowed at a rate of 400 bwpd (barrels of water per day) confirming the productivity of coal in this area and providing valuable information to aid in the design of future appraisal. The Galilee basin holds the largest upside potential for the Company at this point, with 1870 PJ of 3C contingent resource, and we believe the commercial options around Galilee Basin gas could be a combination of (1) power/gas for coal mines in the east of the basin, (2) supply for LNG manufacture in Gladstone or (3) domestic/industrial gas supply - or a combination of some or all of those options.

6

Natural gas from coal seams has been safely and efficiently produced in Queensland for almost the past 20 YEARS

We followed the Gunn 2 well with two more wells a little further to the east in the ATP 1015P farm-in area. These wells confirmed the presence of coals over a wide area to the east of the Gunn Project Area and earned the Company 20% equity in the farmin area.

In his letter, our Chairman has highlighted our concern about the lack of physical exploration and appraisal progress that has been possible for the industry in New South Wales to this point. This has made a tightening eastern Australia gas market even tighter and in our view, increased the price pressure on gas customers. NSW imports 95% of its natural gas needs and has over one million retail gas customers who rely on natural gas daily to cook their dinner and heat their water and homes.

During the year, we completed the transaction that was announced during 2012 to purchase more equity in two of our blocks in north-central NSW in the Gunnedah Basin, PEL 427 and PEL 428, and also entered a new and very prospective block just to the east of these, PEL 6. Comet Ridge is now the conventional oil and gas Operator of these blocks whilst Santos is the CSG Operator. We look forward to working with Santos, to successfully explore and appraise these blocks. To date, our contingent resource base (3C) in these blocks exceeds 470 PJ net to Comet Ridge.

Notwithstanding the inability of the industry to actively explore in NSW over the past couple of years, we believe that the significant progress made by the industry in Queensland, and the economic revitalisation of many parts of rural Queensland through gas developments, will ultimately show the NSW Government that it needs to encourage gas exploration and

It now accounts for almost 100% of Queensland's gas production

100%

The Galilee basin holds the largest upside 1870PJ of 3C potential for the this point, withCompany at contingent resource

participated in the drilling of 14 wells over the past year, operating (being directly responsible for the drilling of) three of these. In ATP 744P in the Gunn Project Area, in the Galilee Basin, we hold 100% equity.

14 wells

volumes are no longer easy to find nor do Australian domestic gas prices remain amongst the cheapest in the world. Significant upward pressure on prices has already occurred and we expect the market to remain very tight over the next couple of years, as the Gladstone LNG schemes commence export in 2014 and 2015 and a range of domestic gas contracts expire with those customers looking to find extensions to these contracts.

development in that state. Natural gas has been safely and efficiently produced in Queensland, to supply homes and businesses, for the past 45 years. Natural gas from coal seams has been safely and efficiently produced in Queensland for almost the past 20 years, and now accounts for almost 100% of Queensland's gas production. There is a growing feeling in Australia, that a small minority of anti-fossil fuel extremists have strived to control the public agenda and the industry is now working much harder to get real information and facts out about the industry to balance these extreme and unsubstantiated claims. Indeed, part of this information flow revolves around how dependent our economy and our lives are on natural gas as a reliable source of clean energy.

The focus for our Company is quite simple. Over the past several years, through both exploration of our acreage position and low-cost acquisition in basins where we have some knowledge, we have built a very large contingent and prospective resource base, which is in excess of 5000 PJ net to Comet Ridge. Our plan is to continue to appraise our acreage in an efficient and technically focussed manner, such that we can commence the conversion of our large resource base to reserves at a time when the market for gas in eastern Australia is tightening significantly.

Subsequently, the Company remains hopeful that exploration and appraisal of our extensive NSW acreage position of 18,000 km will 2 be able to move forward in the short to medium term and we will ultimately be able to play our part in the gas supply story in NSW.

In terms of the gas market in Queensland and NSW, almost daily in the media we are reminded that the buying side of the market is feeling very exposed and in a strange new position, where gas

Tor McCaul Managing Director

7

OVERVIEW OF ACTIVITIES

Australia

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Australia
QLD
Galilee
ATP743P
ATP744P
ATP1015P
Galilee Basin QLD
Mahalo
Mahalo
ATP337P
Gladstone (LNG)
QLD
NSW
Brisbane Gunnedah
PEL427
Gunnedah PEL428
Basin PEL6
N.S.W.
Sydney
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New Zealand

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North
Waikato
PEP50280
Auckland
North Waikato
Buller
Block
Buller Block
PEP50279
Greymouth Wellington
Christchurch
Greymouth
PMP50100
N E W
Z E A L A N D
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Comet Ridge Limited (Comet Ridge or the Company) has an active exploration and appraisal work programme for coal seam gas resources and reserves in eastern Australia.

Comet Ridge Limited (Comet Ridge or the Company) has an active exploration and appraisal work programme for coal seam gas resources and reserves in eastern Australia. The Company also has CSG interests in New Zealand and oil and gas interests in the United States through Comet Ridge Resources LLC (CRR), a US company based in Denver, Colorado.

Comet Ridge has had an active financial year to June 2013, with a drilling programme and Extended Production Test (EPT) in the Galilee Basin and the installation of two pilot projects in the Mahalo block in ATP 337P, executed by its joint venture partner APLNG (the Origin, Conoco, Sinopec company). During the year, Comet Ridge increased its interest in the Galilee Basin with the completion of the first phase of a Farm-In into the Lake Galilee farm-in area as well as completing the purchase of northern NSW assets from Petrel Energy, increasing Comet Ridge's interest in the Gunnedah Basin.

8

Activities in Australia

Comet Ridge has interests in four coal seam gas assets in the Bowen and Galilee Basins in Queensland, and three in the Gunnedah Basin in New South Wales.

Comet Ridge Permits	Comet Ridge Permits	Basin	State	CSG Interest	2 Area (km )
ATP 743P		Galilee	QLD	100%	4,214
ATP 744P		Galilee	QLD	100%	6,615
ATP 1015P	Farm-in Area	Galilee	QLD	20%	825
ATP 337P Mahalo		Bowen	QLD	35%	910
PEL 6		Gunnedah	NSW	22.5%	5,162
PEL 427		Gunnedah	NSW	50%	7,010
PEL 428		Gunnedah	NSW	60%	6,018

The past 12 months have been an extremely active period for Comet Ridge with significant field activity as the Company focused on consolidating its acreage position in the Galilee and Gunnedah Basins and following this with exploration and appraisal work programmes in the Galilee Basin and Mahalo Block in the Bowen Basin.

In June 2012 Comet Ridge announced that it had executed an agreement to acquire Petrel Energy's interests in the Gunnedah Basin. After all necessary approvals, this transaction was completed in April 2013. Soon after this agreement was executed, in July 2012 Comet Ridge entered into a farm-in agreement with Queensland Energy Resources

(QER) Pty Ltd to enter ATP 1015P in the Galilee Basin. Both these strategic acquisitions have strengthened Comet Ridge's asset portfolio in these areas, where the Company already held material interests.

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9

Activities in Queensland

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LEGEND
Charters Towers
Bowen Comet Ridge Tenement
N ATP 1015P
Farm-in Area
ATP 743P Gunn Project Area
Comet Ridge well
Mackay Gas Pipeline
Gas Pipeline (proposed)
ATP 744P
100km
Moranbah
Farm-in Area
ATP 1015P
Clermont
Gunn Project Area Rockhampton
Emerald
Barcaldine
ATP 337P Gladstone
Mahalo JV Area
Blackall Biloela
G A L I L E E
B A S I N
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Considerable technical progress was made across both Queensland Basins during the year. A three well Galilee Basin exploration and appraisal programme commenced in September 2012, which included an Extended Production Test on one of the wells, Gunn 2.

In July 2012, Comet Ridge commenced a 12-well drilling programme at ATP 337 Mahalo, including two pilot projects. Included in the programme were two four-spot pilots at Mahalo and Mira and an additional four step out core holes. Only one of the core holes is yet to be drilled.

The additional equity obtained in PEL 427 and PEL 428, and the entry into PEL 6 in NSW, increases Comet Ridge's net resource position and is detailed in the table below:

The current work programme is focused on maturing Contingent Resources into Certified Reserves in the Mahalo Block during the coming year.

Resources (PJ)	Interest	1C	2C	3C	Prospective
(net to Comet Ridge)					Resources
Gunn Project Area (ATP 744P)	100%	-	67	1,870	597
ATP 337P Mahalo	35%	73	193	387	-
PEL 6, PEL 427 & PEL 428	22.5%, 50% & 60%	-	-	474	2,101
Total (Australia)		73	260	2,731	2,698

10

ATP 337P Mahalo Project

Comet Ridge's ATP 337P Mahalo asset is located in the Denison Trough area of Queensland's Bowen Basin near Rolleston, and covers an area of 910 km . Comet Ridge has a 2 35% interest in ATP 337P Mahalo with a clear focus on maximising 2P Reserves in the block.

In July 2012, the Joint Venture commenced work on the first fourwell pilot scheme with the drilling of the Mahalo 3, 4, 5 and 6 wells, north of Rolleston. Drilling was completed at the end of July. Each of the wells intersected approximately seven metres of net coal in the main Castor-Pollux seam as anticipated. This area of the block has shown good continuity and thickness of coal with very good to excellent permeability across the main reservoir section observed just after drilling. Following drilling of the four

Mahalo field pilot wells in mid-2012, the Joint Venture commenced drilling of the second pilot at Mira in December. Each of the wells intersected approximately eight and a half to nine metres of net coal. Like the Mahalo field, 13 km to the northwest, Mira continued to demonstrate excellent coal productivity. Completion operations were then undertaken, with both the Mahalo and Mira pilot wells set up for production with tubing and pumps installed.

These pilot programmes are a key component in the Joint Venture plan to book gas reserves across a large part of the Mahalo project area. Having two independent pilot schemes operating concurrently significantly increases the likelihood of achieving a commercial gas rate for establishing reserves, and also allows the Joint Venture to gather valuable data on optimal well

completion design for field development.

Drilling operations then stepped-out from the pilot area at Mira and coreholes were drilled southeast, south and southwest of the Mahalo and Mira pilot areas at the Scrubber Gully 2, Turkey's Nest 1 and Humboldt Creek 2 wells. Scrubber Gully 2 was a 5.2 km step-out from Mira and intersected 7.2 metres of net coal whilst Turkey's Nest 1 was drilled 5 km southwest of the Mahalo pilot intersecting 9.6 metres of net coal. Humboldt Creek 2 was drilled in the southern part of the block, intersecting 9.4 metres of net coal.

In the final quarter of the reporting year, the Mahalo and Mira pilots were commissioned. Preliminary analysis of data from the Mahalo Field pilot scheme confirms that productivities seen in the pumping wells are lower than that measured when the wells

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Mahalo Field Pilot
Mira Field Pilot N
Humbolt 1
Turkey’s Nest 2
Scrubber Gully 2
Scrubber Gully 1
ATP 337P LEGEND
MAHALO JV AREA Mahalo JV Area
CSG Exploration or
Humboldt Creek 2
Appraisal Well
Convential Well
CSG Pilot Well
0 5km
Gas Pipeline
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11

were drilled in 2012, with remedial work involving a work-over rig required to restore the productivity of these wells. This work is scheduled for October 2013. At the Mira pilot, the initial water rates observed were in line with the high productivity seen when the wells were drilled in January this year. A scheduled well shut-in for pressure build-up surveys at the Mira Field has confirmed the generally high productivities seen during testing when the wells were initially drilled. The wells are back on line to continue de-watering of the coal seams. A work-over to restore the bottomhole assembly on the Mira 3 well was successfully carried out in September 2013.

ATP 337P Mahalo is well placed with respect to existing infrastructure, with a pipeline connection to Gladstone available just to the west of the block. The Mahalo block holds significant value potential for Comet Ridge Limited, given the proximity of the Mahalo block to infrastructure, the shallow nature of the coals and the rapidly increasing demand for natural gas in Queensland.

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12

Galilee Basin Permits:

Comet Ridge has a 100% interest in two very large and adjacent permits on the eastern flank of

Queensland's Galilee Basin, ATP 743P and ATP 744P. The area remains only lightly explored to date.

After the end of the financial year, one third of ATP 743P was relinquished as part of the normal tenure management process with the Queensland Department of Natural Resources and Mines (DNRM). This relinquishment was effective 3 September 2013.

ATP 1015P Farm-in

In July 2012, Comet Ridge announced that it had signed a three-Stage farm-in agreement with Queensland Energy Resources Pty Limited (QER) to earn up to 75% of a farm-in area, located in the south east of permit ATP 1015P, adjacent to the Company's 100% held Gunn Project Area in ATP 744P.

The farm-in area consists of two separate blocks totaling approximately 825 km . These areas 2 represent 21% of QER's total permit area in ATP 1015P. QER will retain a 100% interest in the remaining area of ATP 1015P, while Comet Ridge has become Operator of the farm-in area.

This transaction creates a continuous acreage position across a key area in the Galilee Basin, expanding the Gunn Project Area to the east and

allowing it to be appraised as a single project.

On completion of each stage of the farm-in, Comet Ridge has the option to proceed with the subsequent stage. Having completed the Stage 1 work programme, Comet Ridge announced in March 2013 that the Company had elected to proceed to Stage 2 of the Farm-in by drilling a further three wells in the Farm-in area.

Galilee Basin Drilling Campaign

Comet Ridge commenced a threewell exploration and appraisal drilling programme in the Galilee Basin in October 2012 with the first well in the Company's 100% held ATP 744P and the following two wells in the farm-in area, part of ATP 1015P.

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Charters Towers Ayr Bowen
N ATP 743P
Farm-in Area
Cernan 1
ATP 1015P
Gunn 2
ATP 744P
Schmitt 1
LEGEND
Aramac Comet Ridge Tenement
ATP1015
Gunn Project Area
Farm-in Area 0 20km
Gunn Project Area
Comet Ridge Well
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13

The first well, Gunn 2, reached a total depth of 1,050 metres and intersected 16.2 metres of net coal in the Betts Creek Beds. Wireline conveyed testing tools were used to flow test four separate coal intervals in the Betts Creek Beds, including two coal intervals in the base of the section that had not been previously tested in the Gunn Project Area. All four coal intervals demonstrated good to excellent productivity.

The Schmitt 1 well, located in the farm-in area, 17 km further to the southeast, was fully cored through the Betts Creek Beds to determine key coal properties and reached a depth of 1,005 metres, intersecting 22 metres of net coal. Cernan 1, the final well in the programme, was located 13 km further east of Schmitt 1 and intersected 20.6 metres of net coal. These wells have confirmed the extension of the Gunn Project Area to the east into the farm-in area. Analysis of the data indicates that the Gunn Project Area and Farm-in area coals contain recoverable gas, over an estimated area of approximately 1,865 km .2

The Schmitt 1 and Cernan 1 wells earned Comet Ridge a 20 % equity interest in the farm-in area.

Gunn 2 Well Extended Production Test

In parallel with the drilling programme, the Gunn 2 well was completed for production in November 2012, with tubing and a downhole pump installed to enable water to be produced. During December 2012, surface facilities including water storage tanks, flowlines, metering facilities and power generation were installed on site and in early January 2013, these facilities were commissioned for operation.

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Gunn 2 well intersected 16.2m of coal
Schmitt 1 well intersected 22.0m of coal
Cernan 1 well intersected 22.6m of coal
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Analysis of data indicates
GUNN PROJECT AREA and
FARM-IN AREA coals
contain recoverable GAS 2
over an estimated area of approx. 1,865 km
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14

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The objective of the EPT was to provide information to test the completion methodology for a full pilot scheme and to obtain good quality water samples from the Betts Creek coal.

The well was perforated over a four metre interval from 952.5 to 956.5 metres which is bounded above and below by impermeable mudstone. The EPT was designed in this manner to ensure water would only be produced from the Betts Creek reservoir coal. By excluding water from other zones in the well, surface water handling requirements could be optimised and dewatering time could also be minimised.

The pump and other equipment performed as designed with no mechanical or electrical issues throughout the test. The water rate was progressively increased over a period of a few weeks, with the well reaching a stabilised production rate of approximately 400 bwpd (barrels of water per day) which is the limit of the pumping system under the current configuration. Analysis of the pressure data showed that the four metre coal interval, which was the subject of the test, has even greater flow capacity. Formation water samples from the coal were taken at regular intervals for very detailed laboratory analysis.

The progress of the EPT has been extremely pleasing, with this well an important milestone for the Company in the Galilee Basin. This is the first test for the Company on a completed well, where the well has been set up for long term production.

Another very important outcome from the EPT is that the simple completion style of the well (case, cement and perforate) has proved to be extremely effective in both connecting the wellbore to the fractures in the coal and also in isolating the coal from sandstones. This simple design can subsequently be applied to a pilot scheme to access selected coals.

The Company is now evaluating different methods of water treatment. This trial will aid in forming the basis of design for a pilot scheme in the Gunn Project Area with the intention of achieving independently certified gas reserves, which would be available for power generation, LNG manufacture or domestic gas markets.

15

New South Wales Projects

In 2012, Comet Ridge announced that it had signed an Asset Sale Agreement to acquire an interest in PEL 6, and further interests in PEL 427 and PEL 428 in the Gunnedah Basin in northern New South Wales for $750,000.

This transaction was completed during April 2013 and further consolidates Comet Ridge's position in the northern Gunnedah Basin given our expectation that ultimately significant volumes of natural gas are likely to be produced from the Gunnedah Basin for the NSW domestic market further south, based around Sydney and Newcastle.

These three contiguous licences are located immediately north and west of Santos' Narrabri CSG Project in the Bohena Trough, and cover a total area of approximately 18,000 km . 2 Comet Ridge currently holds between 22.5% and 60% CSG interest across these licences and between 97.5% and 100% conventional oil and gas equity (CSG and conventional equity are held independently in these blocks). Comet Ridge is the conventional interest operator. Santos operates the CSG interest.

Comet Ridge has been working with Santos to renew its Gunnedah Basin permits and plan the work programme for 2013 and beyond. To

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----- Start of picture text -----

PEL 427 Goondiwindi
QLD
NSW
Moree PEL 6
Grafton
Narrabri
Gunnedah
Tamworth
PEL 428
Gas pipeline
Proposed
Dubbo Gas pipeline
Newcastle
Orange Bathurst
SYDNEY
N
Wollongong
200km
Wagga Wagga
Basin
Gunnedah
----- End of picture text -----

date, PEL 427 has been extended for a period of three years and extensions are currently being processed for PEL 428 and PEL 6.

Bohena Trough just to the south of PEL 427, which holds significant 2P and 3P gas reserves for Santos.

These permits are strategically located as this area has the potential to mature into a major CSG producing province, with gas to flow south to meet an important part of NSW's gas needs.

The Company has identified a number of Permian-aged troughs throughout its acreage position and believes that several of these may contain large volumes of recoverable gas, which is evidenced in the

16

Activities in New Zealand

At the beginning of the year, Comet Ridge held a 100% interest in three petroleum permits in New Zealand, each with known coal resources and CSG potential.

PMP 50100 and PEP 50279 are located on the west coast of the South Island, and contain the gassy Greymouth Coal Fields. PEP 50280 is located adjacent to the Huntly coal mines in the North Waikato region on the North Island.

As detailed in last year's Annual Report, Comet Ridge had made application to NZ Petroleum and Minerals (NZP&M) to vary the work programme commitments on all three of the Comet Ridge 100% held blocks. The extensive technical work conducted over the previous two years by Comet Ridge (based around aerial magnetic and gravity surveying) which included extensive geological and geophysical analysis, had identified the parts of these three blocks that were most prospective for gas.

For the North Waikato exploration block (PEP 50280), an appropriate work programme could not be agreed with NZP&M and subsequently Comet Ridge elected to surrender the block in March 2013. For the west coast blocks, a suitable work programme for PEP 50279 was agreed with the permit being renewed for a further three years. As part of the three year extension, approximately three-quarters of the block area was relinquished and the Company has retained the key area

of the block where Contingent Resources have been previously booked.

PMP 50100, also on the west coast of the South Island, has been renewed for a term of 20 years after agreement on the work programme with New Zealand Petroleum and Minerals.

A strategic review of Comet Ridge's New Zealand portfolio is planned in the coming months.

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Activities in the United States

Comet Ridge Resources LLC (CRR), based in Denver, has continued the exploration and evaluation of its large acreage position in the Rockies including structural mapping, 3D seismic processing and interpretation, and drilling. As of July 2013, in SE Colorado CRR has drilled three wells; two have been completed and are undergoing initial testing. A fourth well is currently drilling. An existing old well was reentered and converted into a water disposal well and water handling facilities have been built and commissioned.

During the year, CRR issued three cash calls to Comet Ridge Limited. Given the strong focus that Comet Ridge Limited has on booking gas reserves for the eastern Australian market, the Company elected not to pay these US cash calls and consequently its interest in CRR has been reduced from 17.2% to 12.1%.

Early in the reporting year, CRR (through its subsidiary Pine Ridge Oil and Gas, LLC) completed the sale of the Florence oil field for US$12.25 million. In the Pacific Northwest, the Yeti 1 well at Grays Harbor was drilled to a total depth of 1381 metres in September 2012 and was plugged and abandoned following logging.

17

Health, Safety and Environment

Comet Ridge recognises the importance of effective HSE systems and has engaged the services of HSE professionals for specific safety and environmental advice.

No recordable health, safety or environmental (HSE) incidents were reported in the period 1 July 2012 through to 30 June 2013. Total Recordable Injury Frequency Rate (TRIFR) and Lost Time Injury Frequency Rate (LTIFR) remain at zero. No recordable environmental incidents occurred during this period.

A full review of the existing Safety Management Plan and Company HSE Policies has been undertaken with upgrades implemented as required. Safe Operating Procedures processes have also been developed, consistent with the Queensland Petroleum & Gas (Production & Safety) Legislation and good oilfield practice. These procedures are specific to Comet Ridge's operating parameters and all processes have been aligned according to AS 4801 Safety Management System specifically suited to coal seam gas production.

A full upgrade of the Comet Ridge Induction programme has been undertaken. It is envisaged that the new system will ultimately be accessed via the web so that personnel and contractors have global 24/7 access to facilitate efficiency for remote operations.

A formal Environmental Management Plan has also been developed in the reporting period. This plan captures all the required management plans associated with the environmental conditions set out in the

Environmental Authorities issued by the Queensland Government. The plan is consistent with good gasfield practice and will also be used to manage generic conditions associated with all Comet Ridge tenements.

Training is now underway for Comet Ridge personnel and appropriate contractors associated with key components of the safety and environmental systems to ensure consistency of approach. Training is assessed and records are maintained within the HSE IT system. Training will be ongoing as the Company matures to incorporate effective application of specific procedures.

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Community

Comet Ridge respects the communities in which it operates.

The Company strongly believes that co-existence and co-operation between landowners and exploration companies can be achieved while protecting the environment and landowners' livelihoods. Comet Ridge believes that Queensland has actively demonstrated that this coexistence and co-operation is possible for the past four decades. The company also wants to ensure the long term sustainability of our projects which in turn will generate very positive economic benefits for local communities.

Comet Ridge appreciates and values the consultation and negotiation process with landowners and acknowledges that the Company is a visitor in its exploration permit areas. The Company has met with many land owners and has successfully negotiated more than 15 landowner agreements to date.

Comet Ridge is committed to building strong relationships based on respect, honesty and trust with all stakeholders including regulators, governments, joint venture partners, landowners and local communities.

The Company has developed many excellent stakeholder relationships over the past few years, particularly in the Galilee Basin.

The Company's involvement as a founding member of the Galilee Basin Operators Forum (GBOF) has broadened its exposure to the key stakeholders in the Galilee Basin communities and strengthened its relationships there. The forum, an

18

informal group of coal seam gas exploration companies with petroleum exploration tenements in the Galilee Basin, was formed three years ago, initially to jointly fund a baseline water assessment for the basin.

This first hydrogeological assessment report for the Galilee Basin was delivered to the local community and a range of government organisations early in 2013 and is available for download on the GBOF website (www.gbof.com.au). Further detailed isotope studies, to help to identify which water zones are currently being produced by many agricultural bores in the basin, are being funded by GBOF and are structured as research projects in co-operation with the Queensland University of Technology.

Increasingly, Comet Ridge is engaging with stakeholders such as RAPAD (Central West Remote Area Planning and Development Board, MITEZ (Mt Isa to Townsville Economic Zone), AgForce, the Queensland Gas Commission and the wider community.

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As part of its commitment to keep the community informed, the Company held an open day in the Galilee Basin during November 2012, where local pastoralists and families were invited to visit and inspect the drilling rig and drilling operations, and have any questions answered by a range of Comet Ridge technical staff and consulting geologists and specialists. The open day was well attended and is a valuable part of the Company and the local community understanding each other's businesses.

During June 2013, the Company participated in and presented at a community water forum in Barcaldine in central western Queensland that was also attended by other GBOF companies, the Queensland Gas Commission, Agforce and a number of senior representatives from the Queensland Government and Queensland Water Commission.

Comet Ridge is also committed to keeping communities and stakeholders informed of current and proposed CSG activities through direct interaction and through our website.

Cultural Heritage

The Directors and management of the Company recognise and respect the cultural and spiritual significance of the land to the indigenous peoples of Australia and is committed to working closely with interested community groups and individuals to identify significant sites and any impact our exploration activities may have on them.

In order to assist the Company to meet its cultural heritage obligations,

Comet Ridge has adopted a Cultural Heritage Policy. The policy requires Comet Ridge to;

• Ÿ Conduct operations giving due consideration to and application of relevant Cultural Heritage legislation.

• Ÿ Ensure that all employees, contractors and management are aware of their obligation to never disturb or remove items of cultural significance; and

• Ÿ Ensure that all employees, contractors and management are aware of their obligation to immediately stop the job and report discoveries of items of cultural significance to senior Comet Ridge Management.

In addition, all employees, contractors and management are obliged to;

• Ÿ Give due consideration to cultural heritage issues and their significance in the wider community.

• Ÿ Immediately stop the job and report any discoveries of items of cultural significance, (e.g. skeletal remains, stone artefact scatters, stone tools, shell middens, scarred trees, stone arrangements and rock art).

• Ÿ Conduct operations with regard to areas of cultural significance. and

• Ÿ Endeavour to recognise and promote opportunities in its activities for Indigenous people for maintenance of their culture and traditions and economic independence by providing training, employment and investment opportunities where opportunities arise.

Comet Ridge is committed to the ongoing monitoring of the implementation of this policy and any amendments if required.

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The Company strongly believes that co-existence and co-operation between landowners and exploration companies can be achieved while protecting the environment and landowners' livelihoods.

21

CORPORATE GOVERNANCE STATEMENT

Introduction

The Board and management of Comet Ridge Limited (Comet Ridge or the Company) are committed to the creation of shareholder value and meeting the expectations of stakeholders for sound corporate governance.

During 2012/13, the Company’s corporate governance practices and policies have accorded with those outlined in the ASX Corporate Governance Council’s Principles and Recommendations (2nd Edition) (ASX Guidelines), (except as outlined below). Even where there is a deviation from the recommendations the Company continues to review and update its policies and practices in order that these keep abreast of the growth of the Company, the broadening of its activities, current legislation and good practice.

The ASX Corporate Governance Council’s (The Council) recommendations are not prescriptive but rather they are guidelines. If certain recommendations are not appropriate for the Company given its circumstances, it may elect not to adopt that particular practice in limited circumstances.

Where the Company’s Corporate Governance practices do not correlate with the practices recommended by the Council, the Company does not consider that the practices are appropriate due to the either size of the Board or the management team or due to the current activities and operations being carried on by and within the Company. Further details of all the recommendations can be found on the ASX Corporate Governance Council’s website at:

http://www.asx.com.au/governance/corporate-governance.htm

Additional information about the Company's corporate governance policies and practices including copies of the policies and charters listed below is set out on the Company's website at www.cometridge.com.au where copies of the Company’s Charters and Policies can be accessed.

Principle 1 – Lay solid foundations for management and oversight

1.1 Lay Solid Foundations for Management and Oversight

The Board guides and monitors the activities of Comet Ridge on behalf of shareholders, whom they are ultimately accountable to being subject to mandatory board rotations. 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.

To ensure that the Board is well equipped to discharge its responsibilities, it has adopted a formal charter for the operation of the Board. The charter defines the functions reserved to the Board and those delegated to management to facilitate accountability to Comet Ridge and its shareholders.

The Board has established three standing committees – the Audit Committee, Risk Committee and the Remuneration Committee. The composition, structure, purpose and responsibilities of those Committees are described below.

The Board may also delegate specific functions to ad-hoc committees from time to time on an ‘as needs’ basis. At the time of joining Comet Ridge, Directors and Senior Executives are provided with letters of appointment, together with key Company documents and information setting out their term of office, duties, rights and responsibilities, and entitlements on termination.

(ASX Recommendation 1.1)

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Comet Ridge Limited – Corporate Governance Statement

The Board delegates specific responsibilities to various Board Sub-Committees. The Board has established the following standing committees:

• An Audit Committee, which is responsible for overseeing the external and internal auditing functions of the Company’s activities;

• A Risk Committee, which comprises representatives of the Board and staff to advise and assist the Board in assessing risk factors associated with the operation of the Company; and

• A Remuneration Committee, which is responsible for making recommendations to the Board on remuneration packages for executives.

1.2 Process for Evaluating the Performance of Key Executives

Improvement in Board processes and effectiveness is a continuing objective and the purpose of the annual Board evaluation is to identify ways to improve performance. The Chairman is responsible for conducting an annual review of the Board’s performance.

An evaluation of the performance of the Board was completed last year and one is scheduled for later this year.

The Board assesses annually or as necessary the performance of the Managing Director benchmarking his performance against the role description in the employment contract and general industry standards expected of a Managing Director carrying on that role.

The Managing Director assesses, annually or as necessary, the performance of all key executives. Both qualitative and quantitative measures will be used consistent with performance targets set annually by the Managing Director in consultation with those executives. The Managing Director reports to the Remuneration Committee on their performance and who in turn will then consider any changes to remuneration and the establishment of new performance targets.

(ASX Recommendation 1.2)

Principle 2 – Structure the Board to Add Value

2.1 Composition and Operation of the Board

The names of the Directors of the Company in office at the date of this report and their qualifications are set out in the section of the Annual Report headed “Directors’ Report”.

Under the Constitution, the maximum number of Directors is nine (9). Further, the Constitution mandates that there be a minimum of three Directors, at least two of whom must reside in Australia. One third of the Directors retire annually on rotation in accordance with the Constitution, who are free to seek re-election by shareholders.

The composition of the Board is determined so as to provide the Company with a broad base of industry, business, technical, administrative, financial and corporate skills and experience considered necessary to achieve the strategic objectives of the Company.

Independence

When evaluating candidates, the Board has regard to the potential for conflicts of interest, whether actual or perceived, and the extent or materiality of these in the ongoing assessment of Director Independence. In this respect the Board has regard to the definition of "independence" in the ASX Guidelines.

An independent Director, in the view of the Board, is a Non-executive Director who is not a member of management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement. In determining the independent status of a Director, the Board, in accordance with the ASX Guidelines, considers whether the Director:

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Comet Ridge Limited – Corporate Governance Statement

• a) is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;

• b) within the last three years has been employed or has previously been employed in an executive capacity by the Company or another Group member;

• c) within the last three years has been a principal of a material professional adviser or a material consultant to the Company or another Group member, or an employee materially associated with the service provided;

• d) is a material supplier or customer of the Company or other Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and

• e) has a material contractual relationship with the Company or another Group member other than as a Director of the Company.

The Board considers that, fundamentally, the independence of Directors is based on their capacity to put the best interests of the Company and its shareholders ahead of all other interests, so that Directors are capable of exercising objective independent judgment.

The Board is of the view that the existence of one or more of the relationships in the definition will necessarily result in the relevant Director not being classified as independent, particularly given the criteria outlined above, and that the Company will seek to implement additional safeguards to ensure independence. An overall review of these considerations is conducted by the Board to determine whether individual Directors are independent.

Additional policies and practices, such as Directors not being present during discussions or decision making on matters in which they have or could be seen to potentially have a material conflict of interest, as well as Directors being excluded from taking part in the appointment of third party service providers where the Director has an interest, provide further separation and safeguards to independence. The Board has considered materiality thresholds in relation to independence, but has determined not to establish fixed thresholds, believing that, if taken in isolation and out of context, these can be misleading and inconclusive.

The criteria used to assess independence are reviewed from time to time. The results of this review are set out in the following table:-

Board Composition

Director	Board membership	Date of appointment
James McKay	Non-executive Chairman	16-Apr-09
Tor McCaul	Managing Director	16-Apr-09
Gillian Swaby	Independent Non-executive Director	09-Jan-04
Jeff Schneider	Independent Non-executive Director	28-Aug-03
Chris Pieters	Executive Director	16-Apr-09
Anthony Gilby	Non-executive Director	06-Oct-09

The Board considers that its current structure is appropriate to efficiently and independently carry out its functions, given the size of the Company and level of its current activities.

Identification of Independent Directors

Since reverting to the role of Non-executive Chairman in April 2009 Mr Schneider has not held any position which would fall within any of the relationships defined in the Council’s Independence Criteria that would affect his independent status.

Although in the past he did not strictly satisfy the criteria as published by the ASX Corporate Governance Council ("Independence Criteria"); he did however, fulfil the other Independence Criteria. The Board of Comet Ridge (in the absence of Mr Schneider) considers that given the effluxion of time since Mr Schneider carried out the role of executive chairman, resigned from the board of Strike Energy Limited and as that company no longer holds any interest in the Company, he now satisfies the criteria to be considered independent.

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Comet Ridge Limited – Corporate Governance Statement

Ms Swaby through her consultancy company, Strategic Consultants Pty Ltd, provided up until 16 April 2009 company secretarial services. In this capacity, Ms Swaby fulfilled a quasi-executive role. Since that time neither Ms Swaby nor an entity which she is related has provided the Company with similar services. Given that a period of more than three (3) years have now elapsed since Ms Swaby provided those services and she meets all of the other Independence Criteria, the Board, in the absence of Ms Swaby, considers that Ms Swaby now satisfies the criteria to be considered independent.

Mr Pieters was appointed by the Company in June 2013 as Commercial Director for an initial term of four (4) months. It is expected that his engagement will be concluded by the end of September 2013. Mr Pieters has provided his services to the Company in a capacity as a consultant.

As announced at the time of his appointment, a tightening of the gas market in eastern Australia provided the Company with a range of commercial opportunities, and the Company believed that the appointment of Mr Pieters to assist with exploring these opportunities especially given his knowledge of the Company, represented the best value for money and ensured that the role was filled by a candidate who could “hit the ground running”.

Mr Pieters is not a substantial shareholder of the Company and meets all of the other Independence Criteria. Having regard issues of materiality, the Board, in the absence of Mr Pieters, considers that Mr Pieters brief consultancy period does not impede his ability to act in the best interests of the Company. Therefore the Board considers Mr Pieters to be independent.

The Board is made up of six Directors, half of which are considered independent.

(ASX Recommendation 2.1).

The Non-executive Directors understand the benefits of conferring regularly without management present, and do so. The Board is also committed to ensuring that all Directors, whether independent or not, bring an independent judgment to bear on Board decisions. To facilitate this, the Board has agreed on a procedure for Directors to have access, in appropriate circumstances, to independent professional advice at the Company’s expense. 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. No Director availed him or herself of this entitlement during the year.

2.2 The Chairperson should be an Independent Director

The Chairperson (Mr McKay) if applying the Independence Criteria is not considered, to be independent, due to his family group of companies being a substantial shareholder of the Company. However the Board considers that Mr McKay is the most appropriate person for the role due to his commercial experience in such a capacity and that the interests of the Company and its shareholders are being more than adequately met by the current appointee.

(ASX Recommendation 2.2)

2.3 The Roles of Chairperson and Chief Executive Officer should not be shared by the same person

The roles of the Chairperson and the Managing Director were not shared at any time during the year under review. The role of the Chairman was fulfilled by Mr McKay, while the role of the Managing Director has been filled by Mr McCaul for the whole of the period. The roles of the Chairperson and the Managing Director are set out in the Board Charter.

(ASX Recommendation 2.3)

Board Should Establish a Nomination Committee

The full Board carries out the functions of a Nomination Committee in respect of the selection and appointment process for Directors. While there is no formal Nomination Committee as required by ASX Recommendation 2.4 the full Board deals with those matters and issues arising that would usually fall to a Nomination Committee. The Board has in place processes which raise the issues that would otherwise be considered by a Nomination Committee.

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Comet Ridge Limited – Corporate Governance Statement

The Board considers that no efficiencies or other benefits would be gained by establishing a separate Nomination Committee at this time due to the size of the Company and its current activities.

(ASX Recommendation 2.4)

Disclose Process for Evaluating the Performance of the Board, its Committees and Individual Directors

The Company has as disclosed above a formal process for the evaluation of the effectiveness, processes and structure of the Board. The Board is committed to regular assessment of its effectiveness and believes that the contribution of individual Directors is essential to improve the governance and guidance of the Company.

The review of the Board Directors focused on matters such as the structure, the effectiveness and contributions made by each Director and the progress towards the strategic objectives of the Company. The Chairman is responsible for conducting the annual review of the Board’s Performance, which involves open and constructive dialogue between the respective parties.

(ASX Recommendation 2.5)

Principle 3: Promote Ethical and Responsible Decision-Making

3.1 Establish a Code of Conduct and Disclose a Summary

The Company has adopted a Corporate Code of Conduct which sets out ethical standards and a Code of Conduct to which all Directors, Executives and employees will adhere whilst conducting their duties.

(ASX Recommendation 3.1)

The Code of Conduct for Executives forms part of this Corporate Code of Conduct. A copy of the Code of Conduct is available on the Comet Ridge website in the corporate governance section.

The Company is committed to increasing shareholder value and aims to ensure its shareholders are fully informed as to the true financial position and performance of the Group through timely and accurate disclosure of information and risk management practices and exemplary compliance with the continuous disclosure regime.

(ASX Recommendation 3.1)

The Company has adopted in compliance of ASX Listing Rule 12.12 (previously ASX Recommendation 3.2) a Policy for Trading in Company Securities which is binding on all Directors, employees and consultants of the Company. 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 Company and assist in maintaining market confidence in the integrity of dealings in Comet Ridge securities. The Policy has been posted on the Company’s website to ensure that there is public confidence and understanding of the Company’s policies governing trading by “potential insiders”.

All persons covered by the Policy may not deal in the securities in the Company without first seeking and obtaining a written acknowledgement from the Chairman or Managing Director of the Company (or in their absence the Company Secretary) prior to any trade, at which time they must confirm that they are not in possession of any unpublished pricesensitive information. The Company Secretary maintains a register of notifications and acknowledgements given in relation to trading in the Company’s securities.

3.2 Establish a Policy Concerning Diversity and Disclose the Policy and a Summary

Comet Ridge has a diversity policy which aims to create a workplace culture that attracts and retains well-qualified, diverse and motivated people right across the business. Diversity improves the quality of decision making, productivity and teamwork within a business and can result in better business outcomes.

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Comet Ridge Limited – Corporate Governance Statement

The Company is committed to diversity within the workplace and providing an environment in which employees have equal access to opportunities. The Company recognises that a commitment to diversity and inclusiveness will increase the probability of the Company achieving its strategic objectives. The Board has in accordance with Recommendation 3.2 adopted a Diversity Policy, a copy of which is available on the company’s website.

(A SX Recommendation 3.2)

3.3 Disclose in the Annual Report the Measurable Objectives for Achieving Gender Diversity.

The Company has given careful consideration to the adoption of measurable objectives for achieving gender diversity. The Board is of the view that there is no “one size fits all” approach to the implementation of a diversity policy for all Australian companies and accordingly has had regard to external guides, including possible forms of objectives published by the Australian Institute of Company Directors.

At this stage of the Company’s development the Board does not believe that setting a target in order to improve the number of women in a particular area of the business where women are not currently well represented in, is a realistic objective as there is a high probability there will not be sufficient movement in staff in the next 12-18 months to achieve such a target.

The Board considers that the best way forward for the Company at this stage of its development has been to introduce a programme which blends procedural objectives with a mentoring programme. The Board has set the following objectives for the purposes of implementing the Diversity Policy in order to promote gender diversity within the make-up of the Company’s Board Senior Management and employees:

• For vacancies at the Board and Senior Management Level the Nomination Committee is to ensure that a diverse candidate pool is accessed;

• Advertising any vacancies will be conducted more widely in sectors where a female audience is more prevalent;

• Requiring that at least one serious female candidate be present on every short list for each executive position and if a female candidate is not selected then the Board must be satisfied that there are objective reasons to support this decision;

• The introduction of a mentoring, coaching programme for any female employees to promote stronger representation in all areas;

• Reviewing all remuneration practices to ensure that they are free from gender bias and ensuring recruitment and selection processes do not contain gender bias; and

• Fostering a corporate culture which supports workplace diversity.

As this stage no separate Gender Diversity Committee has been established. The Nomination Committee will incorporate those roles and duties which a Gender Diversity Committee will otherwise carry out in exercising and implementing the above objectives.

3.4 Disclose in the Annual Report the Proportion of Women Employees in the Whole Organisation.

The Board is currently constituted by 4 Non-executive Directors and 2 Executive Directors. Of the Non- Executive Directors one is a woman representing 25% of the total number of Non-executive Directors.

There are no women currently employed or engaged as a consultant within the group in a Senior Executive role.

As at 30 June 2013, the total portion of women employees and consultants in the whole of the organisation including Members of the Board was 37.50%.

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Comet Ridge Limited – Corporate Governance Statement

Principle 4: Safeguard Integrity in Financial Reporting

4.1 Establish an Audit Committee

The Board has had established for the whole of the financial year under review an Audit Committee with a Charter that sets out the roles, responsibilities, composition, structure and membership requirements. A copy of the Charter is available on the Company’s website.

( ASX Recommendation 4.1)

The primary objective of the Committee is to assist the Board to discharge its responsibilities with regard to:

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

• Reviewing the Company’s internal financial control system;

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

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

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

4.2 Structure of the Audit Committee

The Committee has been appointed by the Board and currently comprises three (3) Non-executive Directors of which two are independent.

The members of the Audit Committee during the year were as follows, including the dates Members resigned from or were appointed to the Committee:-

Gillian Swaby: Independent Chair of the Audit Committee and Non-executive Director (appointed 09-Jan-2004) James McKay: Non-executive Director (appointed 21-Apr-2009) Christopher Pieters: Independent Non-executive Director (appointed 21-Apr-2009) (resigned 09-May-2013) Jeffery Schneider: Independent Non-executive Director (appointed 09-May-2013)

The Chair of the Committee is Gillian Swaby who is an independent director and not the Chairperson of the Board of Directors.

Each member of the Audit Committee has an appropriate knowledge of the Company’s affairs and has the financial and business expertise to effectively discharge the duties of the Committee. 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. At least one member has significant, recent and relevant financial experience.

Details of the experience and qualifications of the members of the audit committee can be found in the Directors’ Report preceding this statement.

The Audit Committee members’ attendance at meetings as compared to total meetings held is set out in the Directors’ Report. The external auditors attend the meetings at least twice a year and on other occasions where circumstances warrant as well as being available at the Company’s AGM to answer shareholders questions about the conduct of the audit and the preparation and content of the audit report. The Audit Committee keeps minutes of its meetings and includes them for review at the following Board Meeting.

(AS X Recommendations 4.2)

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Comet Ridge Limited – Corporate Governance Statement

4.3 Audit Committee to have a Formal Charter

The Committee has a documented charter. The current Charter was approved by the Board on 10 November 2009 and sets out the specific responsibilities delegated to the Committee by the Board. The charter is currently being reviewed and will be amended and updated if the findings of the review recommend the same.

The members of the Committee have direct access to any employee, the auditors and financial and legal advisers without management present. The Committee meets as often as is required but no less than three times a year.

The Committee reports to the Board on the following:-

• a) Assessment of whether external reporting is consistent with Committee members’ information and knowledge and is adequate for shareholder needs;

• b) Assessment of the management processes supporting external reporting;

• c) Procedures for the selection and appointment of the external auditor, rotation of external audit engagement partners, appointment and removal of the external auditors, review of the terms of engagement;

• d) Approving the audit plan of the external auditors, monitoring the effectiveness and independence of the external auditor, obtaining assurances that the audit is conducted in accordance with the Auditing Standards and all other relevant accounting policies and standards;

• e) Providing recommendations to the Board as to the role of the internal auditor/internal audit function, if any and recommendations for the appointment or, if necessary, the dismissal of the head of internal audit;

• f) Evaluating the adequacy, effectiveness and appropriateness of the Company’s administrative, operating and accounting control systems and policies;

• g) Reviewing and evaluating controls and processes in place to ensure compliance with the approved policies, controls, and with applicable accounting standards and other requirements relating to the preparation and presentation of financial results;

• h) Overseeing the Company’s financial reporting and disclosure processes and the outputs of that process;

• i) Determining the reliability, integrity and effectiveness of accounting policies and financial reporting and disclosure practices; and

• j) Reviewing the appropriateness of the accounting principles adopted by management in the composition and presentation of financial reports and approving all Significant Accounting Policies.

(ASX Recommendation 4.3)

Principle 5: Make Timely and Balanced Disclosure

5.1 Establish Written Policies to Ensure Compliance with ASX Listing Rule Disclosure Requirements

Comet Ridge has adopted policies and procedures to ensure compliance with its continuous disclosure obligations, and to ensure accountability at a senior management level for that compliance.

(A SX Recommendation 5.1)

The Board is committed to promoting investor confidence by ensuring that:

• The market has equal access to material information concerning the Company; and

• All Company announcements are factual and presented in a clear and balanced way.

The Company has recently amended its Continuous Disclosure Policy in compliance with Recommendation 5.1 to take into account the recommendations that have recently been enunciated in the revised Listing Rules Guidance Note 8. A copy of this policy is available on the Company’s website for download. Each employee and consultant engaged by the Company is provided with a copy of the same while impressing upon them during their induction the importance of the same. The Company Secretary has primary responsibility for discharging the Company's continuous disclosure obligations to the ASX. All officers and employees must immediately notify the Company Secretary of any material information which may need to be disclosed under Listing Rule 3.1.

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Comet Ridge Limited – Corporate Governance Statement

The Officers of the Company are committed to:

• Encouraging prompt disclosure of any material information which may need to be disclosed under Listing Rule 3.1; and

• Promoting an understanding of the importance of the continuous disclosure regime throughout the Company.

In addition the website contains a function to allow interested parties to subscribe to receive, electronic notification of public releases and other relevant material concerning the Company.

Principle 6: Respect the Rights of Shareholders

6.1 Design a Communications Policy for Effective Shareholder Communication

Comet Ridge respects the rights of its shareholders and 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 all of the Company’s press releases and market announcements for the last three years plus at least the last three years of financial data on its website.

Shareholders are encouraged to attend General Meetings, and particularly the Annual General Meeting, 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.

(ASX Recommendation 6.1)

Principle 7: Recognise and Manage Risk

7.1 Company to Establish Policies for the Oversight and Management of Material Business Risks

Comet Ridge recognises that effective risk management is central to achieving the operational and strategic objectives of the Company and to that end has developed a strategy for risk management and internal compliance and control systems which covers internal controls, management, financial and operational aspects of the Company's affairs.

The Board has appointed the Managing Director (who is assisted by senior management) as being responsible for ensuring the systems are maintained and complied with.

(ASX Recommendation 7.1)

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Comet Ridge Limited – Corporate Governance Statement

The Company has a formal risk policy and has established a Risk Committee which has the responsibility for identifying assessing, treating, monitoring and reporting in respect of identified risks and the management of these to the Board. The Committee shall comprise at least two board members in total, one of which must be the Managing Director who also chairs the Committee.

The members of the Risk Committee are appointed by the Board and Company personnel are required to attend Risk Committee meetings as and when requested.

Specific functions of the Risk Committee are to review and report to the Board that:-

• (i) the Group’s ongoing risk management programme effectively identifies all areas of potential risk;

• (ii) adequate policies and procedures have been designed and implemented to manage identified risks;

• (iii) a regular programme of audits is undertaken to test the adequacy of and compliance with prescribed policies; and

• (iv) proper remedial action is undertaken to redress areas of weakness.

The following form part of the normal procedures for the responsibility:-

• (i) evaluating the adequacy and effectiveness of the management reporting and control systems used to monitor adherence to policies and guidelines and limits approved by the Board for management of balance sheet risks;

• (ii) evaluating the adequacy and effectiveness of the Group’s financial and operational risk management control systems by reviewing risk registers and reports from management and external auditors;

• (iii) evaluating the structure and adequacy of the Group’s own insurances on an annual basis;

• (iv) reviewing and making recommendations on the strategic direction, objectives and effectiveness of the Group’s financial and operational risk management policies;

• (v) overseeing the establishment and maintenance of processes to ensure that there is:

• a. an adequate system of internal control, management of business risks and safeguard of assets; and

• b. a review of internal control systems and the operational effectiveness of the policies and procedures related to risk and control;

• (vi) evaluating the Group’s exposure to fraud and overseeing investigations of allegations of fraud or malfeasance;

• (vii) reviewing the Group’s main corporate governance practices for completeness and accuracy;

• (viii) overseeing the proper evaluation of the adequacy and effectiveness of the Group’s legal compliance control systems; and

• (ix) providing recommendations as to the propriety of related party transactions.

(ASX Recommendation 7.1)

The Risk Committee meets whenever necessary but no less than twice a year and keeps minutes of its meetings which are included for review at the following Board Meeting.

7.2 Board Should Require Management to Design and Implement the Risk Management and Internal Control System and Report to It

Management has implemented a Risk Management Policy. The policy requires the Managing Director’s Reports to the Board, are to encompass, on an exception–basis , the relevant risks for the attention of the Board. Areas of risk that are covered include:-

• Strategic – impacts on the ability to achieve Company strategy/goals;

• Operational – impacts on the operational aspects of the Company’s operations; and

• Personnel – impacts on individual employees.

The Company’s policies are designed to ensure strategic, operational, legal, and reputational risks are identified, assessed effectively and managed and monitored in an efficient manner.

(ASX Recommendation 7.2)

3 1

Comet Ridge Limited – Corporate Governance Statement

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 should be 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 about safety as a first step. To meet these commitments, the Company has appointed a dedicated Occupational Health and Safety Officer who meets at least once a month with the Managing Director in order to review the Company’s health and safety policies as well as continuing to develop the Company’s Safety Management Plan, Emergency Response Plan and Environmental Plan. Contractors are also required to manage health and safety in line with these plans and policy.

Each person involved in the Company’s operations has the authority and responsibility to delay or immediately stop activities where effective mitigation controls are not in place to manage identified hazards.

7.3 Board to Disclose Extent of CEO/CFO Assurances under s295A of Corporations Law

The Board has received declarations from the Managing Director and the Chief Financial Officer pursuant to s295A of the Corporations Act which state that the financial statements are founded on sound risk management and internal controls and that the system is operating effectively in all material respects in relation to financial reporting risks.

(ASX Recommendation 7.3)

Principle 8: Remunerate Fairly and Responsibly

8.1 Board to Establish a Remuneration Committee

Comet Ridge has established a 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:-

• 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.

(ASX Recommendation 8.1)

The current members of the Remuneration Committee are as follows, including dates of their appointment to the Committee:-

Jeffrey Schneider Chair of the Committee and Non-executive Director (appointed 01-Jun-2004) Anthony Gilby Independent Non-executive Director (appointed 11-Nov-2013) Christopher Pieters Independent Non-executive Director (appointed 28-Jul-2010)

The Remuneration Committee shall meet at least twice a year and otherwise as required. 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.

(ASX Recommendation 8.1)

3 2

Comet Ridge Limited – Corporate Governance Statement

8.2 Constitution of Remuneration Committee

The Remuneration Committee has 3 members and is constituted by a majority of independent directors. The Chair of the Committee is an independent non-executive director having been appointed as chair of the committee 23 April 2012.

8.3 Distinguish the Structure of Non-executive Directors’ Remuneration from that of Executive Directors and Senior Executives

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 a 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 to Non-executive Directors in comparable Australian companies.

The remuneration paid to Directors is shown in the Remuneration Report contained in the Directors’ Report, which includes details on the Company’s remuneration policies. There are no termination and retirement benefits for Nonexecutive Directors other than statutory superannuation entitlements.

3 3

DIRECTORS’ REPORT

Your Directors present their report on Comet Ridge Limited (Comet Ridge or the Company) and the consolidated entity (the group) for the financial year ended 30 June 2013. The Company was incorporated on 23 August 2003 and listed on the Australian Securities Exchange on 19 April 2004.

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James McKay
Non-executive Chairman
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Tor McCaul
Managing Director
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Chris Pieters
Commercial Director
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Gillian Swaby
Non-executive Director
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Jeff Schneider
Non-executive Director
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Anthony Gilby
Non-executive Director
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35

1. Information on Directors

The following persons were the Directors of Comet Ridge Limited who held office at any time during the year and up to the date of this Report.

James McKay - B.Com LLB, Non-executive Chairman (Director since April 2009)

Special Responsibilities

Chairman Member of Audit Committee

Experience

James McKay brings to Comet Ridge a strong commercial background, with sound financial business management and legal expertise. He has been involved in the establishment and development of a number of businesses.

James is a Director of Walcot Capital, a private venture capital business specialising in energy investment. He was the former Chairman of CSG explorer Sunshine Gas Limited having overseen its merger with Queensland Gas Company for in excess of $1billion in 2008 as well as being a past president of the Australasian Cemeteries and Crematoria Association.

Interest in Shares and Options

33,889,551 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Nil.

Tor McCaul - B.E. (Hons/Petroleum), B.Econ, MBA, Managing Director (Director since April 2009)

Special Responsibilities

Managing Director Chairperson of Risk Committee

Experience

Tor McCaul was appointed Managing Director of Comet Ridge in April 2009 when the Company merged with Chartwell Energy Limited. He previously held the position of Chief Executive Officer of Chartwell having commenced with the Company in 2008. Prior to this Tor spent 11 years working in Asia for British independent companies in a wide variety of technical, finance, commercial and management roles.

Tor has 25 years oil and gas experience. Following his graduation from UNSW in 1987, Tor spent the next nine years based in Brisbane working for operating companies such as Lasmo PLC and MIM Exploration Pty Ltd in technical roles on projects in Queensland, New Zealand and Papua New Guinea before moving to Asia.

He is a member of the Society of Petroleum Engineers and has served on the executive committee, including as Chairman, for the Queensland section. Tor is a past member of the UNSW Centre for Petroleum Engineering Advisory Committee and is the current Vice President of the Queensland Petroleum and Exploration Association.

Interest in Shares and Options

4,210,000 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Nil.

Chris Pieters - B.Sc (Hons) B.Bus, Commercial Director (Director since April 2009. Appointed Commercial Director 6 June 2013)

Special Responsibilities

Member of Remuneration Committee Member of Audit Committee (resigned 9 May 2013)

Experience

Chris Pieters is Managing Director and co-founder of Walcot Capital, a private venture capital business specialising in energy investment and the former Managing Director of Tlou Energy Limited a private unlisted public Company with Coal Bed Methane exploration interests in Southern Africa.

Previously he was Chief Commercial Officer of Sunshine Gas Limited prior to its merger with the Queensland Gas Company in 2008. Chris also held other technical and business development roles at Sunshine Gas.

He is a member of the Petroleum Exploration Society of Australia.

Interest in Shares and Options

1,050,000 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Tlou Energy Limited (appointed 23 July 2009)

3 6

Gillian Swaby - B.Bus, FAICD, FCIS, Non-executive Director (Director since January 2004)

Special Responsibilities

Chairperson of the Audit Committee

Experience

Gillian Swaby has been involved in financial and corporate administration for listed companies, as both Director and Company Secretary covering a broad range of industry sectors, for over 30 years. Ms Swaby has extensive experience in the area of secretarial practice, management accounting and corporate and financial management.

Gillian Swaby is past Chair of the Western Australian Council of Chartered Secretaries of Australia, a former Director on their National Board and a lecturer for the Securities Institute of Australia. Ms Swaby is the principal of a corporate consulting Company and was a member of the Paladin Board for a period of 10 years before accepting her current roles as the Company Secretary and EGM-Corporate Services.

Interest in Shares and Options

Nil

Directorships Held in Other Listed Entities in Last 3 Years

Non-executive Director Deep Yellow Limited

Jeff Schneider - B.Com, Non-executive Director (Director since August 2003)

Special Responsibilities

Chairperson of Remuneration Committee Member of Audit Committee (appointed 9 May 2013)

Experience

Jeff Schneider joined the Board of Comet Ridge and was elected Chairman on 28 August 2003; He resigned as the Chairman on 11 November 2009. He holds a degree in commerce and has over 30 years’ experience in the oil and gas industry, including 24 years with Woodside Petroleum Limited.

His roles at Woodside included General Manager Commercial, accountable for business and strategic planning, mergers and acquisitions, product marketing and the business performance of Woodside’s North West Shelf investment. Other roles within Woodside included Director Australian gas where he was responsible for the commercialisation of reserves in the Otway Basin, Timor Sea and Browse Basin.

Jeff also holds Non-executive director positions on the ASX listed entities Green Rock Energy Limited and Cooper Energy Limited. He has extensive corporate governance and board experience as both a non-executive director and chairman in resources companies.

Interest in Shares and Options

4,248,416 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Green Rock Energy Limited (resigned 8 March 2013)

Cooper Energy Limited

Anthony Gilby - B.Sc. (First Class Honours), Non-executive Director (Director since April 2009)

Special Responsibilities

Member of Remuneration Committee

Member of Risk Committee

Experience

Anthony Gilby began his career as a geologist for Delhi Petroleum in the Cooper Basin. He then held roles in exploration geology and geophysics as well as petrophysics both in Delhi Petroleum and ESSO (post the Delhi acquisitions).

Following a 12-month stint working in the Exxon Production Research Centre in Houston, Tony returned to Australia eventually working for MIM Petroleum and the Louisiana Land and Exploration Company before taking on a variety of consulting roles as well as the acquisition of prospective Queensland acreage in a private capacity. This work culminated in the founding of Sunshine Gas and his role as Managing Director.

Tony is a member of the Petroleum Exploration Society of Australia and the American Association of Petroleum Geologists.

Interest in Shares and Options

24,215,848 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Tlou Energy Limited (appointed 23 July 2009)

37

1. Principal Activities

The principal activities of the group during the financial year were to carry out coal seam gas (CSG) exploration and appraisal. The group has tenement interests and a suite of prospective projects in Australia and New Zealand and an investment in a limited liability company based in the United States.

There have been no significant changes in the nature of the group's principal activities during the financial year.

2. Review of Operations and Financial Position

The loss after tax of the group for the financial year ended 30 June 2013 amounted to $6,986,546 (2012: profit of $3,682,762). The most significant items contributing to the loss for the year were:

• (a) the impairment expense of $3,575,370 with respect to exploration permits ATP743 in the Galilee Basin in Queensland and PMP50100 and PEP50279 in New Zealand;

• (b) the write off of the capitalised exploration expenditure amounting to $1,366,978 on New Zealand permit PEP 50280; and (c) the impairment of the investment in Comet Ridge Resources LLC amounting to $1,345,302 arising from the dilution of the group’s investment in the limited partnership.

The material items in the prior year profit were the gain on the part sale of joint venture interest in Mahahlo amounting to $6,251,818 and research and development tax offset of $424,454 (2013: $182,045). Please refer to the Overview of Activities Report on page 8 for further information on the operations of the group.

3. Significant Affairs

The following significant changes in the state of affairs of the group occurred during the financial year ended 30 June 2013:

(a) Capital raising

In August and early September 2012, the group successfully completed a capital raising through a 1 for 4 accelerated nonrenounceable entitlement offer. The offer price was $0.10 per share, a 16.7 per cent discount to the Theoretical Ex-Rights Price at the time of the announcement of the capital raising. Due to strong demand from investors, a placement of $2.5 million was also undertaken at the same time.

The net proceeds from the entitlement offer and placement were approximately $8.9 million to be used to fund exploration and appraisal activities for 2012/13 and provide for additional working capital.

(b) Impairment of exploration expenditure

The terms and conditions for all New Zealand permits were renegotiated in order to obtain more commercially realistic work programs. With respect to PMP50100 and PEP50279, acceptable work programs were agreed but on a reduced area for each of these permits which resulted in approximately 17% of PMP50100 a

nd 77% of PEP50279 being relinquished. In each case, while the most prospective area containing the existing resource booking was retained, an impairment expense amounting to $1,165,091 was recognised with respect to the aero-gravity and aero-magnetic survey costs which were undertaken in 2010 and 2011 and related to the whole permit area.

The Galilee Basin permits i.e. ATP743 and ATP744 were also reviewed for impairment as they are due for renewal in September and October 2013. While it is expected that these permits will be renewed, it is also expected (as is normal in these circumstances) that one third of each permit area will be relinquished on renewal. With respect to ATP743, as the carrying value of exploration expenditure relates to the permit as a whole, one third of the carrying value for this permit has been impaired amounting to $2,410,279. With respect to ATP744, the balance of exploration expenditure relates to the area containing the existing resource booking. As this area is expected to be retained on renewal, no impairment has been recognised for this permit.

The above impairments total $3,575,370.

(c) Exploration and evaluation expenditure written off

As a result of the negotiations to obtain more realistic work programs for the New Zealand permits, suitable terms for the exploration programme could not be agreed, as a result, the 100% interest in PEP50280 was relinquished and all previously capitalised exploration expenditure for this permit amounting to $1,366,978 was written off.

The remaining amount of $325,000 represents the group’s present obligations under the Stanwell agreement. Under the agreement, Stanwell were required to pay the cash calls of both Comet (35%) and Stanwell (5%) up to a capped amount of $8million. Cash calls over the capped amount are funded by Comet. Even though the capped amount was reached subsequent to year-end, Comet has accrued an additional 5% of joint venture payables with respect to Stanwell’s 5% interest in the joint venture at balance date.

• (d) Finalisation of the acquisition of the Petrel Energy Ltd interests in the Gunnedah Basin.

The purchase price was $750,000 cash and increased the group’s CSG interests to 50% in PEL 427, 60% in PEL 428 and 22.5% in PEL 6. Comet Ridge now also holds 100% of the conventional oil and gas interests in PELs 427 and 428 and a 97.5% interest in PEL 6.

38

(e) Farm-in with Queensland Energy Resources Pty Limited (QER)

In July 2012, Comet Ridge entered into a three-stage farm-in agreement with QER to earn up to 75 per cent of a farm-in area, located in the south east of permit ATP 1015P, adjacent to the Company’s 100 per cent held Gunn project area in ATP 744P. On completion of each stage of the farm-in, Comet Ridge has the option to proceed with the subsequent stage. The farm-in area consists of two separate areas totalling approximately 825 km2. These areas represent 21 per cent of the total permit area in ATP 1015P. QER will retain a 100 per cent interest in the remaining area of ATP 1015P. Comet Ridge is the operator of the farm-in area. The transaction creates a continuous acreage position across COI’s key area in the Galilee Basin, expanding the Gunn Project Area to the east and allowing it to be appraised as a single project.

The completion of the Galilee drilling programme in late 2012 earned Comet Ridge a 20 per cent equity interest in the ATP 1015P farm-in area. The Company has elected to move to Stage 2 of the Farm-in by drilling three further wells in the Farmin area.

4. Dividends Paid or Recommended

The Directors recommend that no dividend be paid or declared at this point in time. No amounts have been paid or declared by way of dividend during the financial year.

5. After Balance Date Events

On 30 July 2013, the Company completed a placement to institutional investors and sophisticated investors. The placement raised a total $9 million through the issue of 50 million shares at 18 cents per share. The costs incurred with respect to the issue amounted to $540,000. 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 other

6. Future Developments and Expected Results

The group proposes to continue its exploration programmes and investment activities.

The immediate focus is on ATP 337P Mahalo where the objective of the current work programme is to convert the existing Contingent Resource booking in to Certified Reserves during the coming year. Two pilot schemes are currently operating concurrently which significantly increases the likelihood of achieving a commercial gas rate for establishing reserves. ATP 337P Mahalo is well placed with respect to existing infrastructure, with a pipeline connection to Gladstone available just to the west of the block.

Based on the promising results achieved from the 2012/2013 Galilee Basin drilling programme and the associated Extended Production Test at Gunn 2, the group has elected to proceed with Stage 2 of its farm-in agreement with Queensland Energy Resources Pty Limited. This will involve drilling three wells in the Lake Galilee farm-in area (part of ATP 1015P) and will increase the group’s interest in the farm-in area to 50%. The farm-in creates a continuous area across a key part of the Galilee Basin expanding the group’s Gunn Project Area to the east and allowing it to be appraised as a single project. The objective with this project is to also convert the existing Contingent Resources bookings in to Certified Reserves.

The acquisition of Petrel Limited’s interests in PEL 427, PEL 428 and PEL 6 in 2012/2013 significantly increased the group’s interests in the Gunnedah Basin. These permits are strategically located as this area has the potential to mature into a major CSG producing province, with gas to flow south to Newcastle and Sydney to meet an important part of NSW’s gas needs. With respect to the Gunnedah Basin permits, the group has identified a number of Permian-aged troughs throughout its acreage position and believes that several of these may contain large volumes of recoverable gas, which is evidenced in the Bohena Trough just to the south of PEL 427.

Further information on the operations of the group and likely future developments are set out in the Overview of Activities.

The immediate programme is to work with the joint venture partner to finalise the permit renewals and plan the ongoing work programme.

With the exception of PEP 50280 which was relinquished in March 2013 because a suitable work programme could not be agreed, the exploration permits for both PMP 50100 and PEP 50279 have been renewed with reduced areas. However, in both cases the areas containing the existing resource bookings has been retained. The current plan is to undertake a strategic review of the New Zealand portfolio by early 2014 in order to establish a plan for the nature, timing and extent of the exploration activity required.

7. Environmental Regulations

The group's operations are subject to environmental regulation under the laws of Australia, New Zealand and USA where it undertakes its exploration, development and production activities. It is the group’s policy to engage appropriately experienced contractors and consultants to advise on and ensure compliance with its environmental performance obligations.

There have been no reports of breaches of any environmental regulations or obligations in the financial year and as at the date of this report.

39

8. Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2013 has been received and is attached to this report.

10. Meetings of Directors

The number of meetings of the Company's Board of Directors and of each Board committee held during the financial year ended 30 June 2013 and the number of meetings attended by each director were:

	Board	Board	Audit Committee	Audit Committee	Remuneration Committee	Remuneration Committee	Risk Committee	Risk Committee
	Number	Number	Number	Number	Number	Number	Number	Number
	eligible to	attended	eligible	attended	eligible to	attended	eligible to	attended
	attend		to attend		attend		attend
J McKay	10	10	3	3	*	*	*	*
T McCaul	10	10	*	*	*	*	3	3
J Schneider	10	10	*	*	2	2	*	*
G Swaby	10	9	3	3	*	*	*	*
C Pieters	10	9	3	3	2	2	*	*
A Gilby	10	8	*	*	2	2	3	3

• = Not a member of the relevant committee

11. Remuneration Report – audited

This report outlines the remuneration arrangements in place for the non-executive Directors, executive Directors and other Key Management Personnel of the Company.

Remuneration committee

The Board has established a Remuneration Committee which provides advice and specific recommendations on the remuneration packages and other terms of employment for executive Directors, other senior executives; and non-executive Directors including:

• the level of non-executive director fees

• the amount and nature of remuneration arrangements for executive Directors and other executives, and

• the type and nature of incentive arrangements including key performance targets effecting the remuneration of the executive team.

The objective of the remuneration committee is to ensure that the remuneration policies and arrangements are fair and competitive and aligned with the long term interest of the Company.

The level of remuneration and other terms and conditions of employment for executive Directors and Company executives are reviewed annually having regard to performance and relevant comparative information, and are approved by the Board after the Remuneration Committee has sought independent professional advice, as required. In this respect, consideration is given to normal commercial rates of remuneration for similar levels of responsibility.

The Corporate Governance Statement provides further information on the role of this Committee.

Non-executive director remuneration

The Board's policy is to remunerate non-executive Directors at market rates for time, commitment and responsibilities. The Remuneration Committee determines payments to the non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. No advice was sought during the 2013 financial year.

The maximum aggregate amount of fees that can be paid to non-executive Directors is subject to approval by shareholders at the Annual General Meeting. The latest determination was at the Annual General Meeting held on 11 November 2009 when shareholders approved an aggregate remuneration of AU$500,000 per year.

Fees for non-executive Directors are not linked to the performance of the group, however, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company. There is no minimum holding prescribed in the Constitution.

40

Non-executive Directors’ fees (inclusive of superannuation) have been paid on the following basis:

Non-executive Directors’ fees (inclusive of superannuation) have been	paid on the following basis:
	2013	2012
Base Fees	$	$
Chair	96,000	76,300
Other non-executive Directors	60,000	38,150
Additional Fees
Chair of Audit Committee	10,000	-
Chairs of Remuneration and Risk Committees	5,000	-
Members of committees	3,000	-

Executive Remuneration Policy

The objective of the executive remuneration policy is to ensure that the group's remuneration arrangements are competitive and reasonable, enabling it to attract and retain the right calibre of staff and to align the remuneration of executive Directors and other executives with shareholder and business objectives. Executive remuneration arrangements comprise a fixed remuneration component and may also include specific long-term incentives based on key performance areas affecting the group's financial and/or operational results as follows:

• (a) a base salary (which is based on factors such as length of service, qualifications and experience), superannuation, fringe benefits and performance incentives.

• (b) short-term performance incentives in the form of cash bonuses which are paid only when predetermined key performance indicators have been met.

• (c) executives engaged through professional service entities are paid fees based on an agreed market based hourly rate for the services provided and may also be entitled to short term performance based incentives; and

• (d) long-term performance based incentives comprising performance rights which are designed to align the remuneration of executives with the business objectives of the Company and its shareholders.

The Remuneration Committee reviews executive remuneration arrangements annually by reference to the group’s performance, executive performance and comparable information from industry sectors.

Executive and non-executive Directors and other employed executives receive the superannuation guarantee contribution required by the Commonwealth Government, which was up to 30 June 2013 9% (to a maximum of $16,470), and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid is valued at either cost or the fair value to the Company and expensed.

Share trading policy

Shares issued under any of the group's employee equity plans are subject to, and conditional upon, compliance with the group's Securities Trading Policy. Executives are prohibited from limiting risk attached to those instruments by use of derivatives or other means.

Key Management Personnel

Key Management Personnel comprise all of the Directors of the Company.

Key Management Personnel	comprise all of the Directors of the Company.
James McKay	Non-executive
Tor McCaul	Managing Director
Jeffrey Schneider	Non-executive
Gillian Swaby	Non-executive
Christopher Pieters	Executive (Non-executive to 6 June 2013 when appointed as Commercial Director)
Anthony Gilby	Non-executive

There are no other Key Management Personnel of the group.

41

Details of Remuneration

Details of remuneration of each of the Key Management Personnel of the group during the financial year are set out in the following table:

Benefits and Payments for the Year Ended 30 June 2013 Directors J McKay T McCaul J Schneider G Swaby C Pieters A Gilby Total Key Management Personnel

Short-term Benefits Post Employment Long term Benefits Share-based Payments Salary & Fees Cash Bonus Super- annuation Long Service Leave Total Cash Remuneration Performance Rights Total $ $ $ $ $ $ $ 87,683 - 7,892 - 95,575 - 95,575 363,530 - 16,470 8,802 388,802 269,250 658,052 54,475 - 4,813 - 59,288 - 59,288 56,915 - 5,122 - 62,037 - 62,037 89,099 - 4,688 - 93,787 - 93,787 54,163 - 4,875 - 59,038 - 59,038

705,865 - 43,860 8,802 758,527 269,250 1,027,777

The remuneration report for the 2012 financial year was passed with 96% of those voting, voting in favour. No specific feedback on its remuneration practices was received at the AGM or has been received at any time throughout the year.

Benefits and Payments for the Year Ended 30 June 2012 Directors J McKay T McCaul J Schneider G Swaby C Pieters A Gilby Total Key Management Personnel

Short-term Benefits Post Employment Long term Benefits Share based Payments Salary & Fees Cash Bonus Super- annuation Long Service Leave Total Cash Remuneration Performance Rights Total $ $ $ $ $ $ $ 70,000 - 6,300 - 76,300 - 76,300 303,808 - 15,775 8,839 328,422 38,062 366,484 35,000 - 3,150 - 38,150 - 38,150 35,000 - 3,150 - 38,150 - 38,150 35,000 - 3,150 - 38,150 - 38,150 35,000 - 3,150 - 38,150 - 38,150

513,808 - 34,675 8,839 557,322 38,062 595,384

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

				At risk		At risk
Name	Fixed Remuneration		Short	term incentives	Long term incentives
	2013	2012	2013	2012	2013	2012
Executive Directors
Tor McCaul	59.1%	89.6%	0.0%	0.0%	38.0%	10.4%

Long term incentives are provided by way of performance rights and the percentages disclosed above are based on the value of the performance rights expensed during the year.

Service agreements

Remuneration and other terms of employment for the Managing Director and the Commercial Director are formalised in employment contracts. The contracts provide for the provision of performance related bonuses and participation in the Comet Ridge Employee Performance Rights Plan. Other major provisions of the employment agreements are set out below.

Tor McCaul

Term of Agreement: Base Salary: Termination Benefit:

Termination Notice:

Managing Director (Appointed 16 April 2009) No fixed term

$380,000 per annum (inclusive of superannuation)

Three (3) months base salary is to be paid in lieu of notice of termination. Six (6) months is payable if services are terminated due to change of control event.

The Company or Mr McCaul may terminate the Agreement at any time providing each other a minimum of three 3 months’ notice. No termination benefit is required if terminated for cause.

42

Chris Pieters Commercial Director (Appointed 6 June 2013) Term of Agreement: Four months with options for parties to extend as needed Remuneration: Services provided as a consultant at $2,000 per day Termination Benefit: No termination benefits payable Termination Notice: Either party may terminate the Agreement with a minimum of fourteen days’ notice

Share-based compensation

Long term incentives are provided to certain employees through the Comet Ridge Share Incentive Option Plan (up to date of the 2010 AGM) and the Comet Ridge Limited Employee Performance Share Rights Plan as approved by shareholders at the 2010 Annual General Meeting.

No options over shares in Comet Ridge Limited have been granted under the Comet Ridge Share Option Plan in the current year to Key Management Personnel.

Options

Share Options are granted on terms determined by the Directors or as approved by the Company at a general meeting. Options are granted for no consideration with entitlement vesting on a time basis (service condition) and/or on specific performance based criteria such as share price increases or reserves certification.

Performance Rights

Performance rights, which have a maximum term of seven years, are issued for no consideration and provide an equity based reward for employees that is linked with the success of performance conditions determined when the performance rights are granted. The performance criteria are determined on a case by case basis by the Board. These performance criteria are likely to be matters such as length of employment, successful operational results and/or direct increase in shareholder value linked to the share price of the Company or reserve targets.

The fair value of performance rights at grant date that are issued subject only to a service condition is determined by reference to the quoted price of the Company's shares on the ASX. The fair value of performance rights at grant date issued subject to a market condition e.g. VWAP is determined using generally accepted valuation techniques including Black-Scholes option pricing model and Monte Carlo simulation that take into account the term of the performance right, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the performance right and an appropriate probability weighting to factor the likelihood of the satisfaction of non-vesting conditions.

The maximum number of performance rights issued, is determined by aggregating the number of performance rights on issue with the number of shares issued during the previous five years under the plan or any other employee incentive scheme, cannot exceed 5% of the total number of shares on issue.

The terms and conditions of each grant of performance rights effecting remuneration in the current or a future period with respect to Key Management Personnel are as follows:

Grant Date	Number of Performance Rights	Vesting Date	Expiry Date	Share Price at Grant date	Performance Condition	% Vested
23-Nov-11	175,000	05-Jul-12	05-Jul-13	14.5 cents	12 months service	100%
23-Nov-11	175,000	05-Jul-12	05-Jul-13	14.5 cents	24 months service	100%
01-Jul-12	1,000,000	27-Feb-13	30-Jun-16	11.0 cents	VWAP	100%
15-Nov-12	800,000	VWAP	14-Jul-13	16.0 cents	VWAP	*20%

• Because of the share price at grant date, the VWAP condition was only partially satisfied resulting in 20% of the performance rights vesting.

Comparison of Key Management Personnel remuneration to Company performance

The table below shows the total remuneration cost of the Key Management Personnel, earnings per ordinary share (EPS), dividends paid or declared, and the closing price of ordinary shares on ASX at year end for the current year and previous year.

Financial	Year	Total Remuneration	EPS/ (Loss)	Dividends	Share Price
		$	Cents	Cents	Cents
2013		1,026,777	(1.70)	-	22.00
2012		595,384	1.12	-	10.50
2011		533,900	0.40	-	10.05
2010		523,902	(1.59)	-	15.00
2009		1,648,407	(14.15)	-	32.00

END OF AUDITED REMUNERATION REPORT

43

11. Options and Performance Rights

At the date of this report, the following options for ordinary shares in Comet Ridge Limited were on issue. All options issued below are issued to executives who are not included in Key Management Personnel:

Number of	Exercise	%	Expiry
Options	Price Cents	Exercisable	Date
500,000	50	100	30-Nov-13
500,000	65	0	31-Jan-14
500,000	50	100	28-Feb-14
1,000,000	65	0	31-Mar-14
2,500,000

No ordinary shares were issued during the current financial year or since year-end as a result of the exercise of options.

Movements in the number of performance rights on issue and the number of ordinary shares issued during the year ended 30 June 2013 as a result of performance rights vesting during the year are as follows:

Grant Date 1-Oct-11 1-Oct-11 3-Oct-11 3-Oct-11 4-Oct-11 4-Oct-11 23-Nov-11 23-Nov-11 21-Mar-12 21-Mar-12 1-Jul-12 1-Jul-12 1-Jul-12 1-Jul-12 15-Nov-12

Number 01-Jul-12 Granted Expired Shares Issued Number 30-Jun-13 Vesting Date 105,000 - - (105,000) - 1-Jul-12 105,000 - - - 105,000 1-Jul-13 360,000 - - (360,000) - 1-Jul-12 360,000 - (30,000) - 330,000 1-Jul-13 230,000 - - (230,000) - 1-Jul-12 230,000 - - - 230,000 1-Jul-13 175,000 - - (175,000) - 1-Jul-12 175,000 - - - 175,000 1-Jul-13 500,000 - - (500,000) - 31-Dec-12 500,000 - - - 500,000 31-Dec-13 - 4,000,000 (150,000) (3,850,000) - 28-Feb-13 - 605,000 (5,000) - 600,000 1-Jul-13 - 605,000 (5,000) - 600,000 1-Jul-14 - 500,000 - - 500,000 1-Jul-15 - 800,000 - - 800,000 14-Jul-13 2,740,000 6,510,000 (190,000) (5,220,000) 3,840,000

Since the end of the year, up to the date of this report, the movements in the number of performance rights on issue and the number of ordinary shares issued during the period as a result of performance rights vesting during the period are as follows:

Grant Date 1-Oct-11 3-Oct-11 4-Oct-11 23-Nov-11 21-Mar-12 1-Jul-12 1-Jul-12 1-Jul-12 15-Nov-12 1-Jul-13 1-Jul-13

Number 01-Jul-13 Granted Expired Shares Issued Number at Report Date Vesting Date 105,000 - - (105,000) - 1-Jul-13 330,000 - - (330,000) - 1-Jul-13 230,000 - - (230,000) - 1-Jul-13 175,000 - - (175,000) - 1-Jul-13 500,000 - - - 500,000 31-Dec-13 600,000 - - (600,000) - 1-Jul-13 600,000 - - - 600,000 1-Jul-14 500,000 - - - 500,000 1-Jul-15 800,000 - (640,000) (160,000) - 14-Jul-13 - 50,000 - - 50,000 1-Jul-14 - 50,000 - - 50,000 1-Jul-15 3,840,000 100,000 (640,000) (1,600,000) 1,700,000

Performance rights are issued for no consideration and no amount is payable on vesting.

44

• Included in these performance rights are performance rights granted as remuneration to the Managing Director and the five most highly remunerated officers during the year. Details of the performance rights granted to Key Management Personnel are disclosed in the Remuneration Report above. The following performance rights were granted to officers who are among the five highest remunerated officers of the Company and the group, but are not Key Management Personnel and therefore not disclosed in the Remuneration Report.

Name of Officer Grant Date Stephen Rodgers 21-Mar-12 Dale Aaskow 21-Mar-12	Number of Performance Rights Vesting Date Expiry Date 125,000 31-Dec-13 07-Jul-14 125,000 31-Dec-13 07-Jul-14 250,000

13. Insurance of Directors and Officers

The Company has entered into agreements with Directors to indemnify them against any claims and related expenses that may arise in their capacity as Directors and officers of the Company or a related body corporate, except where the liability arises out of conduct involving a lack of good faith and subject to the provisions of the Corporations Act 2001.

During the financial year, the Company paid premiums for Directors’ and officers’ liability Insurance. The contract prohibits disclosure of the details of the nature of the liabilities covered or the premium paid.

The Company has not during or since the end of the financial period indemnified or agreed to indemnify an Auditor of the Company.

14. Proceedings on behalf of Company

No person has applied for leave of Court under section 237 of the Corporations Act 2001 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.

15. Company secretary

Mr Stephen Rodgers was appointed Company Secretary on 16 April 2009 and continues in office at the date of this report. He is a lawyer with more than 20 years’ experience and holds a Bachelor of Laws degree from Queensland University of Technology.

After practising law with several firms in Brisbane over a 12-year period he then operated his own specialist commercial and property law practice for 7 years. Mr Rodgers then joined the successful team at Sunshine Gas Limited, where he was the inhouse Legal and Commercial Counsel - a broad role which also included assisting the Company Secretary with many of the facets of that position. During this period, Mr Rodgers gained invaluable experience in the operation and running of an ASX200 coal seam gas company as well as being an instrumental member of the team which led the takeover negotiations and implementation of QGC's friendly acquisition of that Company.

Since 2007, Mr Rodgers has been the Company Secretary of Chartwell Energy Limited (now a subsidiary of Comet Ridge Limited), a position which he continues to hold. He also holds the position of Company Secretary of Tlou Energy Limited, an ASX listed CSG exploration company operating in southern Africa. Mr Rodgers brings to Comet Ridge strong legal and commercial experience with a particular emphasis on the coal seam gas industry.

45

16. Non-audit services

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 group are important.

The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed to ensure they do not impact the impartiality and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

Details of the amounts paid or payable to the auditor for audit services provided during the year are set out in the financial statements.

During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms:

related practices and non-related audit firms:
Pitcher Partners (formerly Johnston Rorke) Tax consulting and compliance services Total remuneration for non-audit services	2013 2012 $ $ 14,300 13,410
	14,300 13,410

This report is made in accordance with a resolution of the Board of Directors.

==> picture [105 x 43] intentionally omitted <==

Tor McCaul Managing Director

Brisbane, Queensland, 19 September 2013

46

==> picture [273 x 186] intentionally omitted <==

The Directors Comet Ridge Limited 283 Elizabeth Street Brisbane, QLD, 4000

Auditor’s Independence Declaration

As lead auditor for the audit of Comet Ridge Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

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

This declaration is in respect of Comet Ridge Limited and the entities it controlled during the period.

PITCHER PARTNERS

==> picture [70 x 47] intentionally omitted <==

J.J. EVANS Partner

Brisbane, Queensland, 19 September 2013

==> picture [534 x 7] intentionally omitted <==

47

ANNUAL FINANCIAL STATEMENTS 2013

48

Comet Ridge Limited ABN 47 106 092 577

Contents

Statement of Comprehensive Income	Statement of Comprehensive Income	50
Statement of Financial Position		51
Statement of Changes in Equity	Comet Ridge Limited	52
Statement of Cash Flows		53
Notes to the Consolidated Financial Statements		54
Directors’ Declaration		92
Independent Auditor’s Report		93

49

Comet Ridge Limited - Annual Report 30 June 2013

Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2013

Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2013
Note Revenue Interest Gain on sale of interest in joint venture 2 Research & development tax offset 2 Other income 2 Expenses Employee benefits expense 3 Contractors and consultants costs 3 Depreciation and amortisation expense Impairment – exploration & evaluation expenditure 12 Impairment – available-for-sale financial assets 3 Exploration and evaluation expenditure written off 12 Exploration permit restoration and rehabilitation Professional fees Corporate expenses Occupancy costs 3 Other expenses 3 (LOSS)/PROFIT BEFORE INCOME TAX Income tax credit/(expense) 4 (LOSS)/PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Changes in fair value of available for sale financial assets TOTAL OTHER COMPREHENSIVE (LOSS)/INCOME TOTAL COMPREHENSIVE (LOSS)/INCOME (Loss)/profit attributable to: Owners of the parent Non-controlling interests Total comprehensive (loss)/income attributable to: Owners of the parent Non-controlling interests (LOSS)/EARNINGS PER SHARE Basic (loss)/earnings per share 5 Diluted (loss)/earnings per share 5	Consolidated 2013 2012 $ $ 304,641 329,008 - 6,251,818 182,045 424,454 19,691 3,589 (1,457,658) (903,680) (454,815) (244,257) (31,101) (43,688) (3,575,370) - (397,329) - (1,691,978) - (94,994) - (248,297) (405,539) (347,238) (210,493) (209,476) (153,072) (535,716) (272,181)
	(8,537,583) 4,775,959 1,551,037 (1,093,197)
	(6,986,546) 3,682,762
	928,440 368,042 (947,973) -
	(19,533) 386,042
	(7,006,079) 4,050,804
	(6,986,546) 3,682,762 - -
	(6,986,546) 3,682,762
	(7,006,079) 4,050,804 - -
	(7,006,079) 4,050,804
	Cents Cents (1.78) 1.20
	(1.78) 1.19

The above Statement of Profit or Loss and Comprehensive Income should be read in conjunction with the accompanying notes.

50

Comet Ridge Limited - Annual Report 30 June 2013

Statement of Financial Position as at 30 June 2013

Statement of Financial Position as at 30 June 2013
Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 7 Inventories 8 Other assets 9 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Available-for-sale financial assets 10 Property, plant and equipment 11 Exploration and evaluation expenditure 12 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 13 Provisions 14 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions 14 Deferred tax liabilities 15 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 16 Reserves 17 Accumulated losses TOTAL EQUITY	Consolidated 2013 2012 $ $ 4,464,130 6,081,148 818,937 150,203 108,389 100,882 473,760 328,734
	5,865,216 6,660,967
	3,255,779 4,362,692 103,847 73,816 44,288,615 36,532,267
	47,648,241 40,968,775
	53,513,457 47,629,742
	5,580,597 573,547 164,871 54,359
	5,745,468 627,906
	48,339 14,386 596,447 2,352,360
	644,786 2,366,746
	6,390,254 2,994,652
	47,123,203 44,635,090
	74,689,218 65,265,125 2,290,683 2,240,117 (29,856,698) (22,870,152)
	47,123,203 44,635,090

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

51

Comet Ridge Limited - Annual Report 30 June 2013

Statement of Changes in Equity for the year ended 30 June 2013

Consolidated Balance at 1 July 2011 Profit for the year Other comprehensive profit for the year Total comprehensive profit for the year Transactions with owners in their capacity as owners Share based payments Balance at 30 June 2012 Balance at 1 July 2012 Loss for the year Impairment Transfer to profit or loss Other comprehensive income for the year Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners Contributions of equity net of transaction costs Shares issued on vesting of performance rights Share based payments Balance at 30 June 2013	Contributed Equity Foreign Currency Translation Reserve Available- for-sale Reserve Share Based Payments Reserve Accumulated Losses Total $ $ $ $ $ $ 65,265,125 (584,181) 947,973 1,279,066 (26,552,914) 40,355,069 - - - - 3,682,762 3,682,762 - 368,042 - - - 368,042
	- 368,042 - - 3,682,762 4,050,804
	- - - 229,217 - 229,217
	- - - 229,217 - 229,217
	65,265,125 (216,139) 947,973 1,508,283 (22,870,152) 44,635,090
	65,265,125 (216,139) 947,973 1,508,283 (22,870,152) 44,635,090 - - - - (6,986,546) (6,986,546) - - (1,345,302) - - (1,345,302) - - 397,329 - - 397,329 - 928,440 - - - 928,440
	- 928,440 (947,973) - (6,986,546) (7,006,079)
	8,900,778 - - - - 8,900,778 523,315 - - (523,315) - - - - - 593,414 - 593,414
	9,424,093 - - 70,099 - 9,494,192
	74,689,218 712,301 - 1,578,382 (29,856,698) 47,123,203

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

52

Comet Ridge Limited - Annual Report 30 June 2013

Statement of Cash Flows for the year ended 30 June 2013

Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received Research & Development tax offset received Payments to suppliers and employees Income tax paid NET CASH USED IN OPERATING ACTIVITIES 25 CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation assets Proceeds from sale of part interest in Mahalo JV Payments related to sale of part interest in Mahalo JV Payment for property, plant and equipment Payments for term deposits NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Share issue costs NET CASH PROVIDED BY FINANCING ACTIVITIES Net decrease in cash held Cash at the beginning of the year Effects of exchange rate changes on cash CASH AT THE END OF THE YEAR 6	Consolidated 2013 2012 $ $ 337,967 299,189 182,045 424,454 (1,513,500) (1,854,739) (204,876) -
	(1,198,364) (1,131,096)
	(8,996,367) (6,164,796) - 7,000,000 - (594,788) (60,077) (32,589) (200,000) -
	(9,256,444) 207,827
	9,392,760 - (491,982) -
	8,900,778 -
	(1,554,030) (923,269) 6,081,148 7,018,398 (62,988) (13,981)
	4,464,130 6,081,148

The above Statement of Cash Flows should be read in conjunction with the accompanying notes

53

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all of the years presented unless otherwise stated.

(a) General information

These financial statements include the consolidated financial statements and notes of Comet Ridge Limited and its controlled entities (the group). Comet Ridge Limited is a for-profit entity for the purpose of preparing the financial statements. Disclosures with respect to the parent entity are included in note 30. The financial statements were approved for issue by the Directors on 19 September 2013.

Comet Ridge Limited is a public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Level 3, 283 Elizabeth Street BRISBANE QLD 4000

(b) Basis of preparation

(i) Compliance with Accounting Standards

These financial statements are a general purpose financial report that has been prepared in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations and other authoritive pronouncements of the Australian Accounting Standards Board) and the Corporations Act 2001. The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(ii) Historical cost convention

The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by ‑ the measurement at fair value of selected non current assets, financial assets and financial liabilities.

(iii) Going concern

The consolidated financial statements have been prepared on a going concern basis which contemplates that the group will continue to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

At reporting date the Company had cash of $4,464,130. Since year end, the Company has raised an additional $8.64 million (net) from a placement to institutional shareholders and sophisticated investors.

The Directors recognise the need to raise additional cash funds to fund future exploration activity and meet other necessary corporate expenditure. Accordingly, when necessary, the group will investigate various options for the raising of additional funds which may include but is not limited to an issue of shares, a farm-out of an interest in one or more exploration tenements or the sale of exploration assets where increased value has been created through previous exploration activity.

At the date of this financial report, as there is no immediate need to raise additional funds, none of the above fund-raising options have been commenced and no guarantee can be given that a successful outcome will eventuate. As a result, the Directors have concluded that there is uncertainty regarding the group's and the Company's ability to continue as a going concern and therefore the group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the various funding options available and the group’s past success in raising funds, the Directors have a reasonable expectation that the group and the Company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report.

The financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts or to the amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.

(iv) Reverse acquisition

In April 2009 Comet Ridge Limited acquired Chartwell Energy Limited resulting in Chartwell Energy Limited becoming a wholly owned subsidiary ("legal subsidiary"). Pursuant to Australian Accounting Standard AASB 3 Business Combinations this transaction represented a reverse acquisition with the result that Chartwell Energy Limited was identified as the accounting acquirer of Comet Ridge Limited (the "acquiree" and "legal parent").

The consolidated financial statements are issued under the name of the legal parent (Comet Ridge Limited) but are deemed to be a continuation of the financial statements of the legal subsidiary (Chartwell Energy Limited).

54

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(b) Basis of preparation (continued)

• (v) New and amended standards adopted

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. However, amendments made to AASB 101 Presentation of Financial Statements effective 1 July 2012 now require the statement of comprehensive income to show items of comprehensive income grouped into those that are not permitted to be reclassified to profit or loss in a future period and those that may have to be reclassified if certain conditions are met.

(vi) Early adoption of standards

The group has not elected to apply any pronouncements before their operative date in preparation of these financial statements.

• (vii) Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement when applying the group's accounting policies. These estimates and judgements significant to the financial statements are disclosed in note 1(ab).

(c) Principles of consolidation

• (i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries as at 30 June 2013 and the results of the subsidiaries for the year then ended.

Subsidiaries are all those entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

The financial statements of subsidiaries are prepared for the same reporting period as the parent entity.

Investments in subsidiaries are accounted for at cost in the separate financial statements of Comet Ridge Limited.

(ii) Jointly controlled assets

The proportionate interests in the assets, liabilities, revenue and expenses of a joint venture activity have been incorporated in the financial statements under the appropriate headings. Details of the joint ventures are set out in note 28.

(iii) Changes in ownership interests

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and noncontrolling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to noncontrolling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the parent entity.

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This means that any amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

55

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(d) Foreign currency translation

• (i) Functional and presentation currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Comet Ridge Limited’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary assets such as equities classified as availablefor-sale financial assets are included in the fair value reserve in equity.

(iii) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated as a separate component of equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences that have been accumulated in equity are recognised in the statement of comprehensive income, as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(e) Income taxes

The income tax expense (revenue) for the year is the tax payable on the current year's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the year in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to (recovered from) the relevant tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

56

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(e) Income taxes (continued)

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right of offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is recognised in other comprehensive income or directly in equity, respectively.

Tax consolidation

Comet Ridge Limited and its wholly owned Australian subsidiaries (Chartwell Energy Pty Ltd, Comet Ridge Mahalo Pty Ltd, Comet Ridge Gunnedah Pty Ltd, Davidson Prospecting Pty Ltd and Comet Ridge NZ Pty Ltd) have implemented the tax consolidation legislation and formed a tax consolidated group from 1 July 2009. The members of the tax consolidated group have entered into a tax funding agreement such that each member recognises the assets, liabilities, expenses and revenues in relation to its own transactions, events and balances only. This means:

• the parent entity recognises all current and deferred tax amounts relating to its own transactions, events and balances;

• the subsidiaries recognise all current and deferred tax amounts relating to its own transactions, events and balances; and

• current tax liabilities and deferred tax assets arising with respect to losses in subsidiaries are transferred from the subsidiaries to the parent entity as inter-company payables or receivables.

The tax consolidated group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax consolidated group arising under the joint and several liability requirements of the tax consolidation system, in the event of default of the parent entity to meet its payment obligations.

(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 with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.

(g) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected more than 12 months after reporting date.

Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in profit or loss as part of other expenses. When a trade receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value. Costs are assigned on the specific identification basis.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(i) Property, plant and equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The depreciable amount of all plant and equipment is calculated on a straight-line basis over the asset's useful life to the group commencing from the time the asset is held ready for use. The depreciation rates used are:

Class of fixed asset

Plant and Equipment 10% - 33%

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income.

(j) Intangible assets

(i) Goodwill

Goodwill is initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investment in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(k) Exploration, evaluation and development expenditure

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the group has obtained the legal rights to explore an area are expensed in the profit or loss.

Exploration and evaluation assets are only recognised if the rights to the area of interest are current and either:

• the expenditures are expected to be recouped through successful development and exploitation of the area of interest or by its sale; or

• activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.

Once the technical feasibility and commercial viability of the area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation assets to property and development assets within property, plant and equipment.

Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration and evaluation activity that gives rise to the need for restoration. Accordingly, these costs will be recognised gradually over the life of the project as the activities occur.

(l) Investments and other financial assets

(i) Classification and measurement

The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held to maturity, re-evaluates this classification at the end of each reporting period.

Financial assets are initially measured at fair value plus transaction costs, except where the asset is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately.

Financial assets are subsequently measured at either fair value or amortised cost using the effective interest method, or cost.

Fair value represents the amount for which an asset could be exchanged between knowledgeable, willing parties. For listed investments, quoted prices in an active market are used to determine fair value. For unlisted investments, valuation techniques are adopted to determine fair value including reviewing publically available data from recent, comparable arm's length transactions or by reference to valuation and pricing models for similar financial assets.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(l) Investments and other financial assets (continued)

• (i) Classification and measurement (continued)

Amortised cost is calculated as:

• the amount at which the financial asset is measured at initial recognition less any principal repayments received;

• minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and

• less any reduction for impairment.

The effective interest method is used to allocate interest income over the relevant period and is equivalent to the rate that exactly discounts estimated future cash receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

The group’s financial assets comprise only non-derivative financial instruments consisting of equity securities, trade and other receivables, cash and cash equivalents and term deposits.

i. Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of shortterm profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Assets in this category are classified as current assets if they are expected to settle within 12 months; otherwise they are classified as non-current.

ii. 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 subsequently measured at amortised cost. They are included in current assets except those with maturities greater than 12 months after reporting date which are classified as non-current.

iii. Held-to-maturity

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group's intention to hold these investments to maturity. They are subsequently measured at amortised cost. Held-to-maturity financial assets are included in non-current assets except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets.

iv. Available-for-sale

Available-for-sale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are subsequently measured at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period.

The group does not designate any interests in subsidiaries, associates or joint ventures as being subject to the requirements of accounting standards specifically applicable to financial instruments.

• (ii) Recognition and de-recognition

Financial assets are recognised on trade-date - the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains or losses from investment securities.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(l) Investments and other financial assets (continued)

• (iii) Impairment

At the end of each reporting period, the group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

i. Assets carried at the amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Impairment testing of trade receivables is described in note 1(g).

ii. Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.

If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(m) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of impairment at each reporting date.

(n) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest rate method.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(o) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.

The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or redemption of the note. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the Statement of Financial Position date.

(p) Employee benefits

(i) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months after the end of the reporting period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term employee benefit obligations

The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when actual settlement is expected to occur.

(iii) Superannuation

The group makes contributions to defined contribution superannuation funds. Contributions are recognised as an expense as they become payable.

(iv) Share-based payments

Share-based compensation benefits are provided to employees under the Comet Ridge Share Incentive Option Plan, the Comet Ridge Limited Employee Performance Share Rights Plan or under terms and conditions as determined by the Directors.

The fair value of options granted is recognised as an employee benefits expense with a corresponding increase in equity. The total amount expensed is determined by reference to the fair value of the options granted, which includes any market performance conditions but excludes the impact of any non-market performance vesting conditions and the impact of any non-vesting conditions.

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

(q) Provisions

Provisions are recognised when the group 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.

(r) Contributed equity

Ordinary shares are classified as equity.

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

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(s) Revenue

Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable the future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established.

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

(t) 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 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 statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(u) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(v) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

(w) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(x) Business combinations

The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(x) Business combinations (continued)

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

Reverse acquisitions

In some business combinations, commonly referred to as reverse acquisitions, the acquirer is the entity whose equity interests have been acquired (the legal subsidiary) and the issuing entity is the acquiree (the legal parent). The legal subsidiary is the acquirer if it has the power to govern the financial and operating policies of the legal parent so as to obtain benefits from its activities.

In a reverse acquisition, the cost of the business combination is deemed to have been incurred by the legal subsidiary (i.e. the acquirer for accounting purposes) in the form of equity instruments issued to the owners of the legal parent (i.e. the acquiree for accounting purposes). If the published price of the equity instruments of the legal subsidiary is used to determine the cost of the combination, a calculation is made to determine the number of equity instruments the legal subsidiary would have had to issue to provide the same percentage ownership interest of the combined entity to the owners of the legal parent as they have in the combined entity as a result of the reverse acquisition. The fair value of the number of equity instruments so calculated is used as the cost of the combination.

If the fair value of the equity instruments of the legal subsidiary is not otherwise clearly evident, the total fair value of all the issued equity instruments of the legal parent before the business combination is used as the basis for determining the cost of the combination.

Consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent, but represent a continuation of the financial statements of the legal subsidiary (i.e. the acquirer for accounting purposes).

Reverse acquisition accounting determines the allocation of the cost of the business combination as at the acquisition date but does not apply to transactions after the combination.

(y) Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less any cumulative amortisation.

Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

(z) Leases

Leases are classified at commencement as either finance leases or operating leases.

Finance leases

Leases of property, plant and equipment where substantially all the risks and rewards of ownership are transferred to the group are classified as finance leases. Finance leases are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period at the interest rate implicit in the lease. Leased assets are depreciated on a straight line basis over the asset's estimated useful life or over the shorter of the asset's useful life and the lease term where there is no reasonable certainty that the group will obtain ownership at the end the lease term.

Operating leases

Leases where a significant portion of the risks and rewards of ownership are not transferred to the group are classified as operating leases. Operating lease payments (net of any incentives received from the leasor) are charged to profit or loss on a straight line basis over the period of the lease.

(aa) Comparatives

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

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

• (ab) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the group and that are believed to be reasonable under the circumstances.

Critical estimates and judgements are as follows:

• (i) Recoverability of exploration and evaluation expenditure

The group assesses the recoverability of the carrying value of capitalised exploration and evaluation expenditure at each reporting date (or during the year should the need arise). In completing this assessment, regard is given to the group's intentions with respect to proposed future exploration and development plans for individual areas, to the success or otherwise of activities undertaken in individual areas, to the likely success of future planned exploration activities, and to any potential plans for divestment of individual areas. Any required impairment of capitalised exploration and evaluation expenditure is completed based on the results of the assessment. Furthermore, for various areas of interest, exploration and evaluation activities may not have reached a stage to allow a reasonable assessment to be made regarding the existence of economically recoverable reserves. Accordingly, exploration and evaluation assets may be subject to further impairment in the future.

During the year the impairment expenses recognised with respect to exploration and evaluation expenditure amounted to $3,575,370 (2012: $nil).

The terms and conditions for all New Zealand permits were renegotiated in order to obtain more commercially realistic work programs. With respect to PMP50100 and PEP50279, acceptable work programs were agreed but on a reduced area for each of these permits which resulted in approximately 17% of PMP50100 and 77% of PEP50279 being relinquished. In each case, while the most prospective area containing the existing resource booking was retained, an impairment expense amounting to $1,165,091 was recognised with respect to the aero-gravity and aero-magnetic survey costs which were undertaken in 2010 and 2011 and related to the whole permit area.

The Galilee Basin permits i.e. ATP743 and ATP744 are due for renewal in September and October 2013. While it is expected that these permits will be renewed, it is also expected (as is normal in these circumstances) that one third of each permit area will be relinquished on renewal. With respect to ATP743, as the carrying value of exploration expenditure relates to the permit as a whole, one third of the carrying value for this permit has been impaired amounting to $2,410,279. With respect to ATP744, the carrying value of exploration and evaluation expenditure relates to the area containing the existing resource booking. As this area is expected to be retained on renewal, no impairment has been recognised for this permit.

In addition, exploration and evaluation expenditure amounting to $1,691,978 was written off. Of this amount, $1,366,978 relates to the surrender of New Zealand permit PEP50280. Suitable terms for the exploration programme could not be agreed with the New Zealand statutory authorities. As a result, the 100% interest in PEP50280 was relinquished and all previously capitalised exploration expenditure for this permit was written off.

The remaining amount of $325,000 represents the group’s present obligations under the Stanwell agreement. Under the agreement, Stanwell were required to pay the cash calls of both Comet (35%) and Stanwell (5%) up to a capped amount of $8million. Cash calls over the capped amount are funded by Comet. Even though the capped amount was reached subsequent to year-end, Comet has accrued an additional 5% of joint venture payables with respect to Stanwell’s 5% interest in the joint venture at balance date.

• (ii) Loans to subsidiaries and investments in subsidiaries

The parent entity has recorded investments in subsidiaries at cost of $48,289,611 (2012: $48,289,411) less provisions for impairment $38,910,206 (2012: $37,675,396). The parent entity has also loaned funds to its subsidiaries of $14,713,592 (2012: $15,300,805) primarily to undertake exploration expenditure. The parent entity has impaired the carrying amount of the loans by $12,612,134 (2012: $10,510,955). The impairment of the investments and loans has been based on the underlying net assets of the subsidiaries. In future periods, as the underlying exploration and evaluation activities progress on various tenements, and with changes in other market conditions, the carrying amounts of the investments and loans may need to be reassessed in line with the net asset position of the subsidiaries or as otherwise appropriate.

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(ab) Critical accounting estimates and judgements

• (iii) Fair value of available-for-sale financial assets

Comet Ridge USA Inc. (CRUSA), a wholly owned subsidiary of Comet Ridge Limited, owns a 12.08 per cent (2012: 17.26 per cent) minority interest in Comet Ridge Resources, LLC (“CRR”). CRR operations include oil and gas exploration and evaluation and oil production in the state of Colorado USA. Pine Brook Road Partners LLC (Pine Brook), a private equity firm based in New York City, USA holds the majority interest at approximately 87.5 per cent (2012: 82.5 per cent). Comet Ridge Limited may retain its minority interest in CRR by contributing cash as and when requested to fund CRR’s ongoing exploration and evaluation programme. Under the arrangements with the private equity fund, should the group not contribute, its interest will decline to no less than 5 per cent

The group has classified its interest in CRR as an available-for-sale financial asset and, in accordance with AASB 139 Financial Instruments: Recognition and Measurement, values the investment at fair value. The fair value measurement of the 'available-forsale' financial asset is based on the group's proportionate interest in the net assets of CRR discounted for minority interest and liquidity considerations. As the valuation technique for this asset is based on significant unobservable inputs, the asset is included in level 3. This is considered the most reliable valuation method given:

• the group has a minority equity interest in an unlisted company (CRR);

• the nature of CRR’s activities, being oil and gas production and exploration;

• the oil and gas reserves and resources interests of CRR are either carried at fair value or on a basis consistent with the group's accounting policy for the recognition and measurement of exploration and evaluation expenditure; and

• • the continued contributions to CRR by Pine Brook.

During the year, Comet Ridge Resources LLC (CRR) impaired the carrying amount of its exploration and evaluation expenditure with respect of the Yeti well and all of the Grays Harbour acreage. The impairment expense which amounted to US$16,539,811 has substantially reduced the net assets of CRR and, as a result, the value of Comet Ridge's investment in CRR has also reduced. Also, during the year, in accordance with its Shareholder Agreement with CRR, Comet Ridge decided not to pay cash calls made during the period. This has resulted in Comet Ridge's interest in CRR LLC being diluted down from 17.26 per cent to 12.08 per cent.

As a result, the value of the investment in CRR has been reduced by $1,345,302. Of this amount, $947,973 has been applied to reverse the previously recognised increase in fair value reflected in the "Available-for Sale" reserve. With respect to the remaining balance i.e. $397,329, this has been expensed as the impairment is considered to be a permanent reduction in value of CRR.

Because of the movement in the A$:US$ exchange rate, an exchange gain on translation of $238,389 (2012: gain of $222,736) has been recognised and has increased the fair value of the investment in CRR. The corresponding amount has been recognised in the Foreign Currency Translation Reserve in equity.

A reconciliation of the movements in the carrying value of the investment in CRR is shown in note 10.

(ac) New accounting standards and interpretations for application in future periods

A number of Australian Accounting Standards and Interpretations have been issued or amended but are not yet mandatory for the 30 June 2013 annual reporting period and have not been early adopted by the group for the preparation of these financial statements. The group’s assessment of the impact of these new or amended Standards and Interpretations, most relevant to the group, are set out below:

AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures (effective from 1 January 2015)

This standard provides guidance on the classification and measurement of financial assets and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption. AASB 9 permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Upon realisation the accumulated changes in fair value are not recycled to profit or loss. Currently, in accordance with AASB 139 Financial Instruments: Recognition and Measurement, a gain or loss on an available-for-sale financial asset is recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses until the financial asset is derecognised. At that time, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.

Changes in the fair value of other financial assets carried at fair value are reported in profit or loss. The de-recognition rules have been transferred form AASB 139 Financial Instruments: Recognition and Measurement and have not been changed.

In the current financial period, in accordance with AASB 139 Financial Instruments: Recognition and Measurement, the group recognised in profit or loss an impairment loss on its investment in Comet Ridge Resources LLC (CRR) of $397,329. In accordance with the requirements of AASB 9 this impairment loss may be recognised in other comprehensive income. The full impact of this standard is yet to be fully assessed but at the present time the group does not intend to change its accounting treatment, consequently adoption of this standard from 1 January 2015 is not expected to have a material impact on the group.

65

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(ac) New accounting standards and interpretations for application in future periods (continued)

Changes in the fair value of all other financial assets carried at fair value are reported in the profit or loss. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities.

The de-recognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The full impact of this standard is yet to be fully assessed, but, other than the effects mentioned above, adoption of this standard from 1 January 2015 is not expected to have a material impact on the group. The group has not yet decided when to adopt AASB 9.

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. Control exists when the investor can use its power to affect the amount of its returns. There is also new guidance on participating and protective rights and on agent/principal relationships. The group does not expect the new standard to have a significant impact on the composition of its financial statement.

AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account for their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

Adoption of this standard from 1 January 2013 is not expected to have a material impact on the group.

AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the group’s investments.

This standard is not expected to have a material impact on the group.

The amendments to AASB 127 only deal with separate financial statements, with the consolidated financial statement requirements having moved to AASB 10. It carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications.

Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a “partial disposal” concept. The group will adopt the new standards from their operative date. They will therefore be applied in the financial statements for the annual reporting period ending 30 June 2014 and are not expected to have any material impact.

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The group does not expect that any of its current measurement techniques will have to change as a result of the new guidance. It is therefore not expected that the new rules will have a material impact on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The group will adopt the new standard from its operative date, which means that it will be applied in the annual reporting period ending 30 June 2014.

66

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 1. Summary of Significant Accounting Policies (continued)

(ac) New accounting standards and interpretations for application in future periods (continued)

Revised AASB 119 Employee Benefits and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011)

In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so-called ‘corridor’ method), the immediate recognition of all past service cost in profit or loss and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments will have to be implemented retrospectively.

This standard is not expected to have a material impact on the group.

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (effective from 1 July 2013)

This amendment proposes the removal of individual Key Management Personnel (KMP) disclosure requirements from AASB124. This is to eliminate replication with the Corporations Act 2001 and achieve consistency with the international equivalent standard. These amendments will remove the duplication of information relating to individual KMP in the notes to the financial statements and the directors' report. As a result, individual KMP disclosures will be reduced as a result of these amendments, but there will be no impact on the aggregate amounts recognised in the financial statements.

AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures Offsetting Financial Assets and Financial Liabilities (effective from 1 January 2013) and AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (effective from 1 January 2014)

The amendments to AASB132 clarify when an entity has a legally enforceable right to set-off financial assets and financial liabilities permitting entities to present balances net on the balance sheet. The amendments to AASB 7 increase the disclosure about offset positions, including the gross position and the nature of the arrangements. The Directors have not yet assessed the impact of the amendments, if any.

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle (effective from 1 January 2013)

These amendments introduce various changes to AASBs but are not expected to have any material impact on the group.

AASB 2013-3 Amendments to Australian Accounting Standards AASB136 – Recoverable Amount Disclosures for Non-Financial Assets (effective from 1 January 2014)

These amendments introduce additional disclosure requirements where the recoverable amount of impaired assets is based on fair value less cost of disposal. There will be no impact on the group’s disclosures as the group does not determine the recoverable amounts of impaired asset using fair value less cost of disposal.

AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivative and Continuation of Hedge Accounting (effective from 1 January 2014)

These amendments to AASB139 permit the continuation of hedge accounting in circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. There will be no impact on the group as it does not hold hedging instruments.

AASB2013-5 Amendments to Australian Accounting StandardsAASB10 – Investment Entities (effective from 1 January 2014)

These amendments to AASB10 (and others) define an investment entity and require that, with limited exceptions, an investment entity not consolidate its subsidiaries or apply AASB 3 when it obtains control of another entity. Instead, an investment entity is to measure unconsolidated subsidiaries at fair value through profit or loss in accordance with AASB 9. There will be no impact on the group as it does not meet the definition of an investment entity.

Interpretation 21 – Levies

This interpretation clarifies the circumstances which a liability to pay a levy imposed by a government, other than for income taxes and fines/breaches imposed for breaches of legislation, should be recognised, and whether that liability should be recognised in full at a specific date or progressively over a period of time. It is not expected that there will be any impact on the group.

67

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 2. Revenue (a) Gain on sale of interest in joint venture On 28 December 2011, Comet Ridge completed the sale of a 5% interest in the Mahalo JV (part of ATP 337) i.e. 12.5% of its 40% interest to Stanwell Corporation Limited. The gain on sale is calculated as follows: Proceeds from sale Carrying amount of exploration and evaluation assets sold Costs allocated Under the Share Purchase and Option Agreement, further consideration may be received by Comet Ridge but this is contingent on the results of the upcoming exploration programme, the extent of reserves booked, if any, and whether Stanwell Corporation Limited exercises its option to acquire a further interest in the joint venture. (b) Research & development tax offset During the 2013 year Comet Ridge received a Research and Development tax offset from the Australian Taxation Office with respect to the application submitted in the 2011 year. The research and development application related to the geological modelling developed from the aero-magnetic and aero-gravity surveying conducted in 2011. The amount received in the prior year related to the drilling programme undertaken in the Galilee Basin during the 2010 financial year. As part of the drilling programme, Comet Ridge conducted research into the performance of various types of drill bits with a view to using the same drill rig for both drilling and coring operations. (c) Other income Other income includes the following specific items: Foreign exchange gains (net) Total other income Note 3. Expenses (Loss)/profit before income tax includes the following specific expenses: (a) Employee benefits expense Defined contribution superannuation expense Share based payments expense Other employee benefits expense (b) Contractor and consultants’ costs Contractors’ fees Consulting fees	Consolidated 2013 2012 $ $ - 6,251,818	Consolidated 2013 2012 $ $ - 6,251,818
	182,045	7,000,000 (153,394) (594,788)
		6,251,818
		424,454
	19,691	3,589
	19,691	3,589
	Consolidated 2013 2012 $ $ (84,224) (89,598) (593,414) (229,217) (780,020) (584,865)
	(1,457,658) (903,680)
	(411,215) (240,657) (43,600) (3,600)
	(454,815) (244,257)

68

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 3. Expenses (continued) (c) Impairment of available-for-sale financial assets Fair value adjustment Amount transferred from available-for-sale reserve (d) Occupancy costs Rental expense relating to operating leases – minimum lease rentals Other occupancy costs (e) Other expenses Other administration and office costs Note 4. Income Tax (a) Recognised in the Statement of Profit or Loss and Other Comprehensive Income Current tax (overprovision prior year) Deferred tax credit relating to the origination and reversal of temporary differences Income tax credit/(expense) Deferred income tax credit included in income tax expense comprises: Increase in deferred tax asset (note 15) Increase in deferred tax liability (note 15) (b) Numerical reconciliation of income tax expense to prima facie tax on accounting profit (Loss)/profit before income tax Income tax credit/(expense) at the Australian tax rate of 30% (2012:30%) (Under)/over provision prior year Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Share options expensed R & D tax offset received Other non-deductible items Previously unrecognised tax losses used to reduce deferred tax expense Capital and other tax losses not recognised as deferred tax assets Income tax credit/(expense) (c) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Temporary differences and tax losses (gross)	Consolidated 2013 2012 $ $ (1,345,302) - 947,973 -
	(397,329) -
	(179,580) (145,677) (29,896) (7,395)
	(209,476) (153,072)
	(535,704) (272,181)
	(535,704) (272,181)
	Consolidated 2013 2012 $ $ (204,876) 2,532 1,755,913 (1,095,729)
	1,551,037 (1,093,197)
	4,072,820 402,327 (2,316,907) (1,498,056)
	1,755,913 (1,095,729)
	(8,537,583) 4,775,959
	2,561,275 (1,432,788) (204,876) 2,532 (178,024) (68,765) 54,614 127,336 (33,055) (3,623) - 282,111 (648,897) -
	1,551,037 (1,093,197)
	9,138,510 8,669,442

The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the group can utilise the benefits from the deferred tax assets.

69

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

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||||
|---|---|---|
|Note 4.|Income Tax (continued)|Consolidated|
|2013|2012|
|$|$|
|(d)|-|-|

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(d) Franking credits The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

(i) franking credits that will arise from the payment of the amount of the provision for income tax; (ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

(iii) franking credits that will arise from the receipt of dividends recognised as receivable at the reporting date.

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|||||
|---|---|---|---|
|Note 5.|Earnings per share|Consolidated|
|2013|2012|
|$|$|
|(a)|Reconciliation of earnings used in calculating basic and diluted earnings per share|
|(Loss)/profit for the year|(6,986,546)|3,682,762|
|(Loss)/profit used in calculation of the basic and dilutive earnings per share|(6,986,546)|3,682,762|
|(b)|Weighted average number of ordinary shares used as the denominator|Number|Number|
|Weighted average number of ordinary shares used in calculating basic earnings per share|392,455,161|307,351,144|
|Adjustments for the calculation of diluted earnings per share:|
|Options/performance rights|-|1,081,038|
|Weighted average number of ordinary shares used in calculating diluted earnings per share|392,455,161|308,432,182|

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(c) Options and performance rights are considered to be "potential ordinary shares" and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. Details relating to options and performance rights are set out in note 18.

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||||
|---|---|---|
|Note 6.|Cash and Cash Equivalents|Consolidated|
|2013|2012|
|$|$|
|Cash at bank and on hand|4,464,130|6,081,148|
|Note 7.|Trade and Other Receivables|Consolidated|
|2013|2012|
|$|$|
|Current|
|Other receivables|818,937|150,203|

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Other receivables comprise the group’s share of cash calls receivable by joint arrangements in which the group has an interest and GST refunds. At 30 June 2013 $Nil (2012: $Nil) of the cash call receivables were past due and no provision for impairment has been recognised. The carrying amounts of other receivables are assumed to approximate their fair values due to their short term nature.

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|---|---|---|
|Note 8.|Inventories|Consolidated|
|2013|2012|
|$|$|
|Consumables – at cost|108,389|100,882|

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70

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 9. Other Assets Prepayments Deposit Restricted cash	Consolidated 2013 2012 $ $ 78,760 58,734 - 75,000 395,000 195,000
	473,760 328,734

Restricted cash

Restricted cash represents funds held on term deposit which support guarantees provided by the group's bankers to the State of Queensland in respect of the group's exploration permits and environmental guarantees and to the landlord of the Brisbane office premises to support the group's obligations under the lease. Refer note 19(b).

Note 10. Available-for-sale Financial Assets Investment in Comet Ridge Resources LLC Movement in carrying amounts Balance at the beginning of the year Fair Value adjustment Foreign exchange movements Balance at the end of the year	Consolidated 2013 2012 $ $ 3,255,779 4,362,692
	4,362,692 4,139,956 (1,345,302) - 238,389 222,736
	3,255,779 4,362,692

Comet Ridge USA Inc., a wholly owned subsidiary of Comet Ridge Limited, owns a 12.08% (2012: 17.26%) minority interest in Comet Ridge Resources, LLC (“CRR”). CRR's operations include oil and gas exploration and evaluation and oil production in the state of Colorado, USA. A private equity firm based in New York City, USA holds the majority interest at approximately 87.5% (2012: 82.5%).

CRR is not a controlled entity of Comet Ridge Limited as Comet Ridge Limited is not able to govern the activities of the entity so as to obtain benefits from it. The group may retain its minority 12.08% interest in CRR by contributing cash to CRR as and when requested to fund CRR’s ongoing exploration and evaluation programme. Should the group not contribute, its interest will decline to no less than 5% under the arrangements with the private equity fund.

For further information on the fair value adjustment and impairment refer note 1(ab) critical accounting estimates and judgements.

Note 11. Property, Plant and Equipment Plant and equipment at cost Accumulated depreciation Movements in carrying amounts Balance at the beginning of the year Additions Depreciation Foreign exchange movements Carrying amount at the end of the year	Consolidated 2013 2012 $ $ 145,878 149,600 (42,031) (75,784)
	103,847 73,816
	73,816 84,643 60,077 32,589 (31,101) (43,688) 1,055 272
	103,847 73,816

71

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 12. Exploration and Evaluation Expenditure Exploration and evaluation expenditure Less: provision for impairment Movements in exploration and evaluation phase Balance at the beginning of the year Exploration and evaluation expenditure during the year Acquisition of additional Gunnedah Basin permit interests Impairment expense Exploration and evaluation expenditure written off Disposals (note 2(a)) Restoration and rehabilitation Foreign currency translation Balance at the end of year	Consolidated 2013 2012 $ $ 49,507,675 40,410,485 (5,219,060) (3,878,218)
	44,288,615 36,532,267
	36,532,267 31,568,569 11,602,688 4,981,366 750,000 - (3,575,370) - (1,691,978) - - (153,394) 25,000 - 646,008 135,726
	44,288,615 36,532,267

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest. Further information regarding the activity in each area of interest is shown in note 26 - Segment Information. Further information regarding impairment and write-offs is shown in note 1(ab) critical accounting estimates and judgements.

Interest in jointly controlled assets

The carrying amount of exploration and evaluation expenditure includes the group's interest in the exploration and evaluation expenditure of a number of joint controlled assets. The amounts of exploration and evaluation expenditure employed in the joint operating arrangements are shown in note 28.

An application for the renewal of PEL 428 which expired on14 September 2012 was submitted by the joint venture in August 2012 for a further three years. It is anticipated that this renewal will be processed in the normal course of business and no impairment of the carrying amount of the exploration and evaluation assets with respect to this tenement is considered necessary.

Note 13.	Trade and Other Payables	Consolidated
		2013	2012
		$	$
Current
Trade payables		5,580,597	573,547

Trade payables includes $3,377,579 (2012: $22,584) representing the group’s share of joint arrangement liabilities (refer note 28).

Note 14. Provisions Current Employee benefits Restoration and rehabilitation Non-Current Employee benefits Restoration and rehabilitation	Consolidated 2013 2012 $ $ 64,871 54,359 100,000 -
	164,871 54,359
	23,339 14,386 25,000 -
	48,339 14,386
	213,210 68,745

72

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 14. Provisions (continued) Movements in carrying amounts of restoration and rehabilitation Balance at the beginning of the year Additions charged to profit or loss Additions capitalised to exploration and evaluation expenditure Foreign exchange movements Carrying amount at the end of the year Note 15. Deferred Tax Liability Deferred tax liability The balance of deferred tax liability comprises: Deferred tax assets Tax losses Capital expenditure Provisions Deferred tax liabilities Exploration and evaluation expenditure Accrued interest Net deferred tax asset Deferred tax assets not recognised Net deferred tax liability recognised in accounts Movements Opening balance (Credited)/charged to profit or loss Closing balance Note 16. Contributed Equity Ordinary shares – fully paid	Consolidated 2013 2012 $ $ - - 94,994 - 25,000 5,006 -
	125,000 -
	Consolidated 2013 2012 $ $ 596,447 2,352,360
	15,225,385 11,123,190 139,936 74,967 67,501 20,624
	15,432,322 11,218,781
	(13,286,585) (10,959,680) (630) (10,628)
	(13,287,215) (10,970,308)
	2,145,107 248,473 (2,741,554) (2,600,833)
	(596,447) (2,352,360)
	2,352,360 1,256,631 (1,755,913) 1,095,729
	596,447 2,352,360
	Consolidated 2013 2012 $ $ 74,689,218 65,265,125

73

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 16. Contributed Equity (continued) Movements in ordinary shares Balance at the beginning of the year Performance rights vested during the year (refer note 18) Share placement (25,000,000 shares @ 10 cents) Rights issue (68,927,602 shares @10 cents) Share issue costs Balance at the end of the year	Consolidated Consolidated 2013 2012 2013 2012 Number of Shares $ $ 307,351,144 307,351,144 65,265,12565,265,125 5,220,000 - 523,315 - 25,000,000 - 2,500,000 - 68,927,602 - 6,892,760 - - - (491,982) -
	406,498,746 307,351,144 74,689,21865,265,125

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll, each share is entitled to one vote.

The Company does not have authorised capital or par value in respect of its issued shares.

Options and performance rights

At 30 June 2013, the following options for ordinary shares in Comet Ridge were on issue:

	Number				% Exercisable
2013		2012	Exercise Price	2013		2012	Expiry Date
500,000		500,000	$0.50	100%		100%	30-Nov-2013
500,000		500,000	$0.65	0%		0%	31-Jan-2014
500,000		500,000	$0.50	100%		100%	28-Feb-2014
1,000,000		1,000,000	$0.65	0%		0%	31-Mar-2014
2,500,000		2,500,000

At 30 June 2013, the following performance rights for ordinary shares in Comet Ridge were on issue:

	Number
2013		2012	Grant Date	Expiry date
75,000		280,000	01-Oct-11	05-Jul-13
360,000		650,000	03-Oct-11	05-Jul-13
230,000		460,000	04-Oct-11	05-Jul-13
175,000		350,000	23-Nov-11	07-Jan-13
500,000		1,000,000	21-Mar-12	07-Jan-14
600,000		-	01-Jul-12	01-Jul-13
600,000		-	01-Jul-12	01-Jul-14
500,000		-	01-Jul-12	01-Jul-15
800,000		-	15-Nov-12	14-Jul-13
3,840,000		2,740,000

Capital risk management

When managing capital, management’s objective is to ensure the group continues as a going concern and to maintain a structure that ensures the lowest cost of capital available and to ensure adequate capital is available for exploration and evaluation of tenements. In order to maintain or adjust the capital structure, the group may seek to issue new shares.

Consistent with others in the industry, the group monitors capital on the basis of forecast exploration and exploration expenditure required to reach a stage which permits a reasonable assessment of the existence or otherwise of an economically recoverable reserve. Total capital is calculated as ‘equity’ as shown in the statement of financial position.

There were no changes in the group's approach to capital management during the year. The group is not subject to externally imposed capital requirements.

74

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 17. Reserves Foreign currency translation Available-for-sale financial assets Share based payments	Consolidated 2013 2012 $ $ 712,301 (216,139) - 947,973 1,578,382 1,508,283
	2,290,683 2,240,117

Foreign currency translation reserve

The foreign currency translation reserve records exchange differences arising on translation of foreign controlled entities.

Share based payments reserve

The option reserve is used to record the expense associated with options granted to employees under equity-settled share based payment arrangements. It is also used to record fair value of options granted for other goods and services as well as acquisition of other assets.

Available- for-sale reserve

Changes in the fair value of available-for-sale financial assets are taken to this reserve as described in note 1(l). Amounts are recognised in profit or loss when associated assets are sold or impaired.

Note 18. Share-based Payments

Employee share options

Options are granted either under the Company's Employee Share Incentive Option Plan, or on terms determined by the Directors or otherwise approved by the Company at a general meeting. The options are granted 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/or on specific performance based criteria such as share price increases or reserves certification.

Options granted either under the plan or otherwise as described above carry no dividend or voting rights. When exercisable, each option is convertible to one ordinary share.

The expense recognised in the statement of comprehensive income in relation to employee share options amounts to $Nil (2012: $Nil). The amount assessed as fair value at the grant date of the options is allocated equally over the period from grant date to vesting date. Fair values at ‑ grant date are 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.

There were no employee share options granted during the year ended 30 June 2013. The following table shows the number, movements and weighted average exercise price of share options issued for the 2013 year:

Grant Date Expiry date Exercise price 13-Apr 10 (1) 30-Nov-13 $0.500 13-Apr 10 (1) 31-Jan-14 $0.650 18-Jun-10 (2) 28-Feb-14 $0.500 18-Jun-10 (2) 31-Mar-14 $0.650 Total options Weighted average exercise price	Opening Balance July 2012 Granted During the Year Exercised During the Year Expired During the year Closing Balance June 2013 Vested & Exercisable 500,000 - - - 500,000 500,000 500,000 - - - 500,000 - 500,000 - - - 500,000 500,000 1,000,000 - - - 1,000,000 -
	2,500,000 - - - 2,500,000 1,000,000
	0.590 - - - 0.590

75

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 18. Share-based Payments (continued)

Employee share options (continued)

The following table shows the number, movements and weighted average exercise price of share options issued for the 2012 year:

Grant Date Expiry date Exercise price 22-Sep-08 30-Jun-12 $0.169 22-Sep-08 30-Jun-12 $0.269 28-Jan-09 30-Jun-12 $0.169 03-Mar-09 01-Aug-11 $0.419 03-Mar-09 03-Dec-11 $0.419 Total options on acquisition of subsidiary 01-Aug-07 31-Jul-11 $0.419 05-Sep-07 04-Sep-11 $0.419 03-Dec-07 02-Dec-11 $0.419 01-Dec-07 06-Dec-11 $0.419 16-Apr-09 30-Jun-12 $0.269 13-Apr 10 (1) 30-Nov-13 $0.500 13-Apr 10 (1) 31-Jan-14 $0.650 18-Jun-10 (2) 28-Feb-14 $0.500 18-Jun-10 (2) 31-Mar-14 $0.650 Total plan options Total options Weighted average exercise price	Opening Balance July 2011 Granted During the Year Exercised During the Year Expired During the year Closing Balance June 2012 Vested & Exercisable 14,677,500 - - (14,677,500) - - 5,150,000 - - (5,150,000) - - 515,000 - - (515,000) - - 1,900,000 - - (1,900,000) - - 65,000 - - (65,000) - -
	22,307,500 - - (22,307,500) -
	1,900,000 - - (1,900,000) - - 30,000 - - (30,000) - - 65,000 - - (65,000) - - 300,000 - - (300,000) - - 2,000,000 - - (2,000,000) - - 500,000 - - - 500,000 500,000 500,000 - - - 500,000 - 500,000 - - - 500,000 500,000 1,000,000 - - - 1,000,000 -
	6,795,000 - - (4,295,000) 2,500,000 1,000,000
	29,102,500 - - (26,602,500) 2,500,000 1,000,000
	0.266 - - 0.240 0.590

The weighted average remaining contractual life of share options outstanding at the end of the year was 0.64 years (2012: 1.6 years).

The terms and conditions of the options on issue at 30 June 2013 are as follows:

1. An employee was issued options in two tranches of 500,000 each as a part of their employment agreement. The first tranche vests 12 months from the date of commencement of employment. The second tranche will vest upon the certification of 250 PJ of proven and probable gas reserves or the certification of 750 PJ of proven, probable and possible gas reserves.

2. An employee was issued options in two tranches. The first tranche of 500,000 options vests 12 months from the date of commencement of employment. The second tranche of 1,000,000 options will vest upon a 6 week VWAP (volume weighted average share price) being equal to or greater than $0.80.

Employee performance rights

Performance rights are provided to certain employees via the Comet Ridge Limited Employee Performance Share Rights Plan as approved by shareholders at the 2010 Annual General Meeting. Performance rights are granted on terms determined by the Directors.

Performance rights, which have a maximum term of seven years, are issued for no consideration and provide an equity based reward for employees that is linked with the success of performance conditions determined when the performance rights are granted. The performance criteria are determined on a case by case basis by the Board. These performance criteria are likely to be matters such as length of employment, successful operational results and/or direct increase in shareholder value linked to the share price of the Company or reserve targets.

The fair value of performance rights at grant date that are issued subject only to a service condition is determined by reference to the quoted price of the Company's shares on the ASX. The fair value of performance rights at grant date issued subject to a market condition e.g. VWAP is determined using generally accepted valuation techniques including Black-Scholes option pricing model and Monte Carlo simulation that take into account the term of the performance right, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the performance right and an appropriate probability weighting to factor the likelihood of the satisfaction of non-vesting conditions.

76

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 18. Share-based Payments (continued)

Employee performance rights (continued)

The maximum number of performance rights issued is determined by aggregating the number of performance rights on issue with the number of shares issued during the previous five years under the plan or any other employee incentive scheme, cannot exceed 5% of the total number of shares on issue.

The following table shows the number and movements of performance rights granted for the 2013 year:

Grant Date Expiry date Share Price at Grant Date (cents) 1-Oct-11 05-Jul-13 13.5 1-Oct-11 05-Jul-13 13.5 3-Oct-11 05-Jul-13 13.5 3-Oct-11 05-Jul-14 13.5 4-Oct-11 07-Jan-13 13.5 4-Oct-11 07-Jan-14 13.5 23-Nov-11 05-Jul-12 14.5 23-Nov-11 05-Jul-13 14.5 21-Mar-12 07-Jan-14 12.5 21-Mar-12 07-Jan-14 12.5 1-Jul-12 30-Jun-16 11.0 1-Jul-12 30-Jun-16 11.0 1-Jul-12 30-Jun-16 11.0 1-Jul-12 30-Jun-16 11.0 15-Nov-12 14-Jul-13 16.0

Opening Balance July 2012 Granted During the Year Vested During the Year Expired During the year Closing Balance June 2013 105,000 - (105,000) - - 105,000 - - - 105,000 360,000 - (360,000) - - 360,000 - - (30,000) 330,000 230,000 - (230,000) - - 230,000 - - - 230,000 175,000 - (175,000) - - 175,000 - - - 175,000 500,000 - (500,000) - - 500,000 - - - 500,000 - 4,000,000 (3,850,000) (150,000) - - 605,000 - (5,000) 600,000 - 605,000 - (5,000) 600,000 - 500,000 - - 500,000 - 800,000 - - 800,000

2,740,000 6,510,000 (5,220,000) (190,000) 3,840,000

All performance rights granted during the 2013 year were subject to the employee or contractor satisfying a period of employment service condition. In addition, the following performance rights were issued subject to a market condition determined by the Comet Ridge Limited share price reaching a specific target based on a ten day volume weighted share price (VWAP).

		Granted During	Share Price
Grant Date	Expiry date	the Year	VWAP Condition	% Vest
1-Jul-12	30-Jun-16	4,000,000	25 cents or above	100%
15-Nov-12	14-Jul-13	800,000	32 cents or above	100%
			25 cents or above	50%
			20 cents or above	20%

The following table lists the inputs to the model used to value the performance rights granted.

	Grant	Grant
Input	4,000,000	800,000
Term (years)	4.0	0.62
Share price at grant date (cents)	11.0	16.0
Share price target (cents)	25.0	20.0 to 32.0
Expected share price volatility	90%	90%
Risk free interest rate	2.74%	2.74%
Value per performance right (cents)	8.0	6.0

Ordinary shares were issued for all performance rights that vested during the 2013 year.

77

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 18. Share-based Payments (continued)

Employee performance rights (continued)

The following table shows the number and movements of performance rights granted for the 2012 year:

Grant Date Expiry date Share Price at Grant Date (cents) 01-Oct-11 05-Jul-13 13.5 03-Oct-11 05-Jul-13 13.5 04-Oct-11 05-Jul-13 13.5 23-Nov-11 05-Jul-14 14.5 21-Mar-12 07-Jan-13 12.5 21-Mar-12 07-Jan-14 12.5	Opening Balance July 2011 Granted During the Year Vested During the Year Expired During the year Closing Balance June 2012 - 280,000 - - 280,000 - 720,000 - (70,000) 650,000 - 460,000 - - 460,000 - 350,000 - - 350,000 - 500,000 - - 500,000 - 500,000 - - 500,000
	- 2,810,000 - (70,000) 2,740,000

All performance rights granted during the 2012 year were subject only to the employee/contractor satisfying a continuation of employment service condition. As a result, the fair value of performance rights granted is based on the Comet Ridge Limited share price at grant date

The total expenses arising from share-based payment transaction recognised during the year as part of employee benefit expense is disclosed in note 3.

Note 19. Commitments (a) Operating lease commitments Commitments for minimum lease payments for non-cancellable operating leases for offices and equipment contracted for but not recognised in the financial statements. Payable – minimum lease payments • not later than 12 months • between 12 months and 5 years	Consolidated 2013 2012 $ $ 198,101 210,783 411,858 112,404
	609,959 323,187

(b) Bank guarantees Westpac Banking Corporation have provided bank guarantees totalling $393,256 (2012: $193,256) as follows:

• $148,256 (2012: $148,256) to the State of Queensland in respect of the group's exploration permits and environmental guarantees;

• $200,000 (2012 $nil) to the State of NSW to support the group’s exploration permits and environmental guarantees; and

• $45,000 (2012: $45,000) to the landlord of the Brisbane office premises to support the group's obligations under the lease.

The bank guarantees are secured by term deposits.

(c) Exploration expenditure

In order to maintain an interest in the exploration tenements in which it is involved, the group is required to meet certain conditions imposed by the various statutory authorities granting the exploration tenements or that are imposed by the joint venture agreements entered into by the group. These conditions include minimum expenditure commitments. The timing and amount of minimum exploration expenditure obligations of the group may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant area of interest. The group's minimum expenditure obligations, which are not provided for in the financial statements are as follows:

Minimum expenditure requirements • not later than 12 months • between 12 months and 5 years	Consolidated 2013 2012 $ $ 4,246,381 5,219,602 12,097,950 6,971,350
	16,344,331 12,190,952

The commitments shown above include the amounts with respect to the group's interest in jointly controlled assets (refer note 28).

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 20. Financial Risk Management

Overview

The group's principal financial instruments comprise receivables, payables, available for sale financial assets, cash and term deposits. The main risks arising from the group's financial assets are interest rate risk, foreign currency risk, credit risk and liquidity risk.

This note presents information about the group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk. Other than as disclosed, there have been no significant changes since the previous financial year to the exposure or management of these risks.

Key risks are monitored and reviewed as circumstances change (e.g. acquisition of new entity or project) and policies are created or revised as required. The overall objective of the group's financial risk management policy is to support the delivery of the group's financial targets whilst protecting future financial security.

Given the nature and size of the business and uncertainty as to the timing and amount of cash inflows and outflows, the group does not enter into derivative transactions to mitigate the financial risks. In addition, the group's policy is that no trading in financial instruments shall be undertaken for the purpose of making speculative gains. As the group's operations change, the Directors will review this policy.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board reviews and agrees policies for managing the group's financial risks as summarised below.

The group holds the following financial instruments:

The group holds the following financial instruments:
Financial Assets Cash and cash equivalents Trade and other receivables Restricted cash Available-for-sale financial assets Financial Liabilities Trade and other payables	Consolidated 2013 2012 $ $ 4,464,130 6,081,148 818,937 150,203 395,000 195,000 3,255,779 4,362,692
	8,933,846 10,789,043
	5,580,597 573,547
	5,580,597 573,547

(a) Interest rate risk

Exposure to interest rate risk arises on cash and term deposits recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments.

A forward business cash requirement estimate is made, identifying cash requirements for the following period (generally up to one year) and interest rate term deposit information is obtained from a variety of banks over a variety of periods (usually one month up to six month term deposits) accordingly. The funds to invest are then scheduled in an optimised fashion to maximise interest returns.

Interest Rate Sensitivity

A sensitivity of 1% interest rate has been selected as this is considered reasonable given the current market conditions. A 1% movement in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2012.

performed on the same basis for 2012.
	Profit or Loss			Equity
	Increase	Decrease	1% Increase		1% Decrease
	$	$	$		$
Consolidated – 30 June 2013
Cash and cash equivalents and restricted cash	48,591	(48,591)	48,591		(48,591)
Consolidated – 30 June 2012
Cash and cash equivalents and restricted cash	62,761	(62,761)	62,761		(62,761)
Interest rate risk on other financial instruments is immaterial.

79

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 20. Financial Risk Management (continued)

Overview (continued)

(b) Liquidity risk

Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The Board's approach to managing liquidity is to ensure, as far as possible, that the group will always have sufficient liquidity to meet its obligations when due.

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. This is based on the undiscounted cash flows of the financial liabilities based on the earliest date on which they are required to be paid. The following table details the remaining contractual maturity for non-derivative financial liabilities.

liabilities.
Consolidated – 30 June 2013 Trade and other payables Consolidated – 30 June 2012 Trade and other payables	Within 1 year Between 1 and 2 years Total Contractual Cash flows Carrying Amount $ $ $ $ 5,580,597 - 5,580,597 5,580,597
	573,547 - 573,547 573,547

(c) Foreign exchange risk

As a result of activities overseas, the group's statement of financial position can be affected by movements in exchange rates. The group also has transactional currency exposures. Such exposures arise from transactions denominated in currencies other than the functional currency of the group. The group's exposure to foreign currency risk primarily arises from the group's operations overseas, namely in the USA and New Zealand.

The group currently does not engage in any hedging or derivative transactions to manage foreign currency risk. The group’s policy is to generally convert its local currency to US or NZ dollars at the time of transaction. The group, has on rare occasions, taken the opportunity to move Australian dollars into foreign currency (ahead of a planned requirement for those foreign funds) when exchange rate movements have moved significantly in favour of the Australian dollar, and management considers that the currency movement is extremely likely to move back in subsequent weeks or months. Therefore, the opportunity has been taken to lock in currency at a favourable rate to the group. This practice is expected to be the exception, rather than the normal practice. The group’s exposure to foreign currency risk at the reporting date, expressed in Australian dollars, was as follows:

	2013	2013	2012	2012
	USD	NZD	USD	NZD
	$	$	$	$
Financial assets
Cash and cash equivalents	-	868,558	-	887,028
Trade and other receivables	-	3,060	-	347
Available-for-sale financial assets	3,255,779	-	4,362,692	-
Financial liabilities
Trade and other payables	-	(8,727)	(302)	(2,892)

Foreign currency rate sensitivity

Based on financial instruments held at 30 June 2013, had the Australian dollar increased/decreased by 10% the group’s profit or loss and equity would be impacted as follows:

	Profit or Loss	Profit or Loss		Equity
	10%	10%		10%	10%
	Increase	Decrease		Increase	Decrease
	$	$		$	$
2013
US Dollar	-		-	(325,578)	325,578
NZ Dollar	(86,289)	86,289		(86,289)	86,289
2012
US Dollar	30		(30)	(436,239)	436,239
NZ Dollar	(88,448)	88,448		(88,448)	88,448

80

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 20. Financial Risk Management (continued)

(d) Credit risk

Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This arises principally from cash and cash equivalents, restricted cash, and trade and other receivables. The group exposure and the credit ratings of its counterparties are continuously monitored by the Board of Directors.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in the table above.

Credit Risk Exposures

Trade and other receivables

Trade and other receivables comprise primarily of advances to joint ventures and GST refunds due. Where possible the group trades with recognised, creditworthy third parties. The receivable balances are monitored on an ongoing basis. The group’s exposure to bad debts is not significant. At 30 June 2013 $Nil, (2012: $nil) of the group's receivables were past due. The group has no other significant concentration of credit risk.

Cash and cash equivalents, restricted cash and term deposits.

The group has a significant concentration of credit risk with respect to cash deposits with banks. However, significant cash deposits are invested across two to three banks to mitigate credit risk exposure to a particular bank. AAA rated banks are mostly used and non-AAA banks are utilised where commercially attractive returns are available.

(e) Price risk

Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

The group is exposed to commodity price risk. Commodity prices can be volatile and are influenced by factors beyond the group's control. As the group is currently engaged in exploration, no sales of commodities are forecast for the next 12 months, and accordingly, no hedging or derivative transactions have been used to manage commodity price risk.

(f) Fair value measurement

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and for disclosure purposes.

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level as determined by the following fair value measurement hierarchy:

• a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• b) Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

• c) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table shows the 'fair value measurement hierarchy' classification of the group's assets and liabilities measured and recognised at fair value at 30 June 2013 (refer note 1(ab):

Level 3 Available-for-sale financial asset - Investment in Comet Ridge Resources LLC	Consolidated 2013 2012 $ $ 3,255,779 4,362,692

The fair value measurement of the investment in Comet Ridge Resources LLC (CRR) is based on the group's proportionate interest in the net assets of CRR discounted for minority interest and liquidity considerations. As the valuation technique is based on significant unobservable inputs, the asset is classified as a level 3 financial instrument.

Refer to note 10 for details of the movements in the fair value of the investment in CRR and note 1(ab) for details of the valuation technique.

The Directors consider that the carrying amount of trade receivables and payables recorded in the financial statements approximates their fair values due to their short term nature.

81

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 21. Key Management Personnel Key Management Personnel compensation Short-term employee benefits Post‑employment benefits Long-term employment benefits Share -based payments	Consolidated 2013 2012 $ $ 705,865 513,808 43,860 34,675 8,802 8,839 269,250 38,062
	1,027,777 595,384

Key Management Personnel shareholdings

The number of ordinary shares in the Company held by each of the Key Management Personnel of the group during the financial year is as follows:

follows:
30 June 2013 J McKay T McCaul J Schneider G Swaby C Pieters A Gilby 30 June 2012 Directors J McKay T McCaul J Schneider G Swaby C Pieters A Gilby	Balance at beginning of year Granted as remuneration during the year Other changes during the year Balance at end of year 31,124,551 - 2,765,000 33,889,551 2,125,000 1,175,000 593,750 3,893,750 3,398,732 - 849,684 4,248,416 - - - - 1,000,000 - 50,000 1,050,000 19,372,678 - 4,843,170 24,215,848
	57,020,961 1,175,000 9,101,604 67,297,565
	Balance at beginning of year Granted as remuneration during the year Other changes during the year Balance at end of year 29,424,551 - 1,700,000 31,124,551 - - 2,125,000 2,125,000 3,398,732 - - 3,398,732 2,908,000 - (2,908,000) - 1,000,000 - - 1,000,000 29,579,083 - (10,206,405) 19,372,678
	66,310,366 - (9,289,405) 57,020,961

Option holdings

There were no options over ordinary shares held by Key Management Personnel during the 2013 year. The number of options over ordinary shares held by each of the Key Management Personnel of the group during the 2012 financial year is as follows:

30 June 2012 Directors J Schneider T McCaul J McKay G Swaby C Pieters A Gilby Total	Balance at beginning of year Granted as remuneration Options (expired) Balance at end of year 2,000,000 - (2,000,000) - 5,150,000 - (5,150,000) - 5,150,000 - (5,150,000) - - - - - 1,287,500 - (1,287,500) - 5,150,000 - (5,150,000) -
	18,737,500 - (18,737,500) -

82

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 21. Key Management Personnel (continued)

Performance Rights Holdings

The number of performance rights granted to each of the Key Management Personnel of the group during the financial year is as follows:

30 June 2013 Directors T McCaul 30 June 2012 Directors T McCaul	Balance at beginning of year Granted as remuneration Vested Balance at end of year Unvested 350,000 1,800,000 (1,175,000) 975,000 975,000
	Balance at beginning of year Granted as remuneration Vested Balance at end of year Unvested - 350,000 - 350,000 350,000

Other transactions with Key Management Personnel

Related party transactions

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. There were no transactions with Key Management Personnel and their related parties in the current or prior year.

Note 22. Auditor’s Remuneration

During the year the following fees were paid or payable for services provided by Pitcher Partners, the auditor of the group:

Audit services Auditing or reviewing the financial statements Non-audit services Tax consulting and compliance services	Consolidated 2013 2012 $ $ 136,000 154,000
	136,000 154,000
	14,300 13,410
	14,300 13,410

Note 23. Contingent Liabilities

The Directors are not aware of any contingent liabilities other than additional success based consulting fees which may be payable to the two advisors engaged to assist with negotiating the sale of the interest in the Mahalo Joint Venture. The payment of any future success fees is contingent upon:

(a) Stanwell continuing to fund some or all of the upcoming Mahalo JV exploration programme up to a limit $8 million;

(b) Stanwell Corporation Limited exercising either of the options available to it to acquire an additional interest in the Mahalo JV; and

• (c) The amount ultimately received by Comet Ridge from the sale.

With respect to one of the advisors, the additional success fees will only be payable if the total proceeds from the sale of the interest in the Mahalo JV exceed $24 million. For this advisor, any future success fees are payable at the rate of 1.25% on any proceeds received from $24 million up to $40 million and 1.5% on any amounts received over $40 million.

For the second advisor, success fees are based on 1% of the proceeds received. Future success fees will be payable on any proceeds received over the $7 million received on the initial sale.

83

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 24. Related Party Transactions

• (a) Parent entity

The legal parent entity is Comet Ridge Limited.

• (b) Subsidiaries

Interests in subsidiaries are set out in note 27.

• (c) Key Management Personnel

Disclosures relating to Key Management Personnel are set out in note 21.

• (d) Transactions with related parties

Transactions with subsidiaries

Transactions between Comet Ridge Limited and its subsidiaries during the year included:

• loans advanced to/repayments from subsidiaries; and

• investments in subsidiaries.

The loans and investments have been impaired as noted in note 1(ab). The loans to subsidiaries are interest free, repayable in cash at call and are unsecured.

Note 25. Cash Flow Information

• (a) Reconciliation of cash flow from operations

(Loss)/profit for the year Depreciation Share-based payments Profit on sale of part interest in Mahalo Impairment available for sale financial assets Impairment - exploration and evaluation expenditure Exploration and evaluation expenditure written off Exploration permit restoration and rehabilitation Net exchange differences Increase in inventories (Increase)/decrease in trade and other receivables Decrease in trade payables and accruals Decrease/(increase) in prepayments and deposits paid Increase in provisions (Increase)/decrease in deferred tax liability

Consolidated 2013 2012 $ $ (6,986,546) 3,682,762 31,101 43,688 593,414 229,217 - (6,251,818) 397,329 - 3,575,370 - 1,691,978 - (25,000) - 105,964 22,875 (7,507) - (668,734) 96,018 1,650,741 22,668 54,974 (94,667) 144,465 22,432 (1,755,913) 1,095,729

(1,198,364) (1,131,096)

• (b) Non-cash financing and investing activities

There were no investing and financing transactions undertaken during the current year that did not require the use of cash or cash equivalents other than shares issued with respect to performance rights vesting during the year amounting to $523,315 (2012: $nil).

84

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 26. Segment Information

Identification of reportable segments

The principal operating activities of the group are the exploration and evaluation of its tenements for oil and gas reserves. The group has identified its operating segments based on the geographic location of its respective areas of interest (tenements). The internal reports used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources are prepared on the same basis.

Reportable segments disclosed are based on aggregating operating activities where those activities are considered to have similar economic characteristics and meet the other aggregation criteria of AASB 8 Operating Segments. Other than exploration and evaluation costs written off and impairment losses and stand-by costs in relation to exploration and evaluation expenditure, income and expenditure as per the statement of comprehensive income consist of incidental revenue including interest and corporate overhead expenditure which are not allocated to the group's operating segments.

In addition, only exploration and evaluation expenditure assets are allocated to the group's operation segments. All other assets and liabilities relate to corporate activities and are not allocated to operating segments.

Unless otherwise stated, all amounts reported to the Board of Directors as the chief decision makers with respect to operating segments are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the group.

Activity by segment

At 30 June 2013, the group had the following interests in coal seam gas assets:

Comet Ridge Permits	Location	State/Country	CSG Interest	Area(km2)
ATP 743P	Galilee Basin	QLD	100%	4,214
ATP 744P	Galilee Basin	QLD	100%	6,615
ATP 1015	Galilee Basin	QLD	20%	825
ATP 337P Mahalo	Bowen Basin	QLD	35%	989
PMP 50100	West Coast	NZ South Island	100%	170
PEP 50279	West Coast	NZ South Island	100%	4,802
PEL 427	Gunnedah Basin	NSW	50%	7,010
PEL 428	Gunnedah Basin	NSW	60%	6,018
PEL 6	Gunnedah Basin	NSW	22.5%	5,162

85

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 26. Segment Information

(a) Segment performance

The following table tables show the revenue and profit information regarding the group's operating segments.

30 June 2013 Segment revenue Total segment revenue Impairment - exploration expenditure Exploration and evaluation costs written off Exploration permit restoration and rehabilitation Total segment expense Segment result before tax Reconciliation of segment result to group loss before tax Interest received Research & development tax offset grant Sundry income Total group revenue Employee benefits expense Contractors and consultants costs Depreciation and amortisation expense Impairment - available-for-sale Professional fees Corporate expenses Occupancy costs Other expenses Loss before tax	Queensland New Zealand New South Wales Total Galilee Bowen South Island Gunnedah $ $ $ $ $ - - - - -	Queensland New Zealand New South Wales Total Galilee Bowen South Island Gunnedah $ $ $ $ $ - - - - -
	(2,410,279) - (1,165,091) - - (325,000) (1,366,978) - - - (94,994) -	(3,575,370) (1,691,978) (94,994)
	(2,410,279) (325,000) (2,627,063) -	(5,362,342)
	(2,410,279) (325,000) (2,627,063) -	(5,362,342)
		304,641 182,045 19,703
		506,389
		(1,457,658) (454,815) (31,101) (397,329) (248,297) (347,238) (209,476) (535,716)
		(8,537,583)

86

Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 26. Segment Information (continued)

(a) Segment performance (continued)

(a) Segment performance (continued)
30 June 2012 Segment revenue Proceeds from sale of interest in Mahalo JV Carrying amount of exploration and evaluation assets sold Expenses incurred on sale of interest in Mahalo JV Total segment expense Segment result before tax Reconciliation of segment result to group loss before tax Interest received Research & development tax offset grant Sundry income Total group revenue Employee benefits expense Contractors and consultants costs Depreciation and amortisation expense Professional fees Corporate expenses Occupancy costs Other expenses Profit before tax	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $ $ $ $ - 7,000,000 - -	Total $ 7,000,000
	- (153,394) - - - (594,788) - -	(153,394) (594,788)
	- (748,182) - -	(748,182)
	- 6,251,818 - -	6,251,818
		329,008 424,454 3,589
		757,051
		(903,680) (244,257) (43,688) (405,539) (210,493) (153,072) (272,181)
		4,775,959

(b) Segment assets and liabilities

The following table shows segment assets of the group's operating segments

30 June 2013 Segment Assets Reconciliation of segment assets to group assets Unallocated assets Cash and cash equivalents Trade and other receivables Inventories Other assets Available-for-sale financial assets Property, plant and equipment Total group assets	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $ $ $ $ 29,343,972 3,752,702 8,443,378 2,748,563	Total $ 44,288,615
		4,464,130 818,937 108,389 473,760 3,255,779 103,847
		53,513,457

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 26. Segment Information (continued)

(b) Segment assets and liabilities (continued) Segment asset movement for the year 30 June 2013 Exploration and evaluation expenditure Exploration and evaluation costs written off Impairment - exploration expenditure Foreign exchange movement 30 June 2012 Segment Assets Reconciliation of segment assets to group assets Unallocated assets Cash and cash equivalents Trade and other receivables Inventories Other assets Available-for-sale financial assets Property, plant and equipment Total group assets Segment asset movement for the year Exploration and evaluation expenditure Disposals Foreign exchange movement	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $ $ $ $ 7,668,371 2,552,392 269,341 1,657,578 - - (1,461,972) - (2,410,279) - (1,165,091) - - - 646,008 -	Total $ 12,147,682 (1,461,972) (3,575,370) 646,008
	5,258,092 2,552,392 (1,711,714) 1,657,578	7,756,348
	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $ $ $ $ 24,085,880 1,200,310 10,155,092 1,090,985	Total $ 36,532,267
	3,613,054 181,151 730,699 456,462 - (153,394) - - - - 135,726 -	6,081,148 150,203 100,882 328,734 4,362,692 73,816
		47,629,742
		4,981,366 (153,394) 135,726
	3,613,054 27,757 866,425 456,462	4,963,698

Note 27. Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(c):

policy described in note 1(c):
	Country of			Equity holding
Name of entity	incorporation	Class of shares		%
			2013		2012
Chartwell Energy Limited (accounting parent)	Australia	Ordinary	100		100
Comet Ridge Limited (legal parent)	Australia	Ordinary	100		100
Comet Ridge NZ Pty Ltd	Australia	Ordinary	100		100
Comet Ridge USA Inc.	USA	Ordinary	100		100
Davidson Prospecting Pty Ltd	Australia	Ordinary	100		100
Comet Ridge Mahalo Pty Ltd	Australia	Ordinary	100		100
Comet Ridge Gunnedah Pty Ltd	Australia	Ordinary	100		100

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 28. Interests in Jointly Controlled Assets

The group has entered into a number of joint operating arrangements for oil and gas exploration. The group's interests in the joint venture assets are included in the statement of financial position under the following classifications (refer accounting policies note 1(c)(ii)):

	ATP1015P	ATP1015P	ATP337P	PEL427 *	PEL428 *	PEL6 *		Total
30 June 2013		20%	35%	50%	60%	22.5%
Current assets		$	$	$	$	$		$
Cash and cash equivalents		-	71,071	248	10,931	26,306		108,556
Trade and other receivables		-	417,405	75,020	55,340	32,133		579,898
Total current assets		-	488,476	75,268	66,271	58,439		688,454
Non-current assets
Exploration and evaluation expenditure	3,734,393		3,752,702	1,208,072	549,089	989,334		10,233,590
Total non-current assets	3,734,393		3,752,702	1,208,072	549,089	989,334		10,233,590
Total assets	3,734,393		4,241,178	1,283,340	615,360	1,047,773		10,922,044
Current liabilities
Trade and other payables		-	2,656,708	293,381	248,949	178,541		3,377,579
Total current liabilities		-	2,656,708	293,381	248,949	178,541		3,377,579
Share of joint venture net assets	3,734,393		1,584,470	989,959	366,411	869,232		7,544,465
* During the year, the group finalised the acquisition of the Petrel Energy Ltd interests in the Gunnedah Basin. The acquisition increased the
group’s CSG interests to a 50% interest in PEL 427, a 60% interest in PEL 428 and a 22.5% interest in PEL 6. These blocks are located in the
north of the state in the Gunnedah Basin.	The group now also holds 100% of the conventional oil and gas interests in PELs						427 and 428 and a
97.5% interest in PEL 6.
				ATP337P	PEL427	PEL428		Total
30 June 2012				35%	25%	40%
Current assets				$	$	$		$
Cash and cash equivalents				-	73		-	73
Trade and other receivables				6,716	-	3,612		10,328
Total current assets				6,716	73	3,612		10,401
Non-current assets
Exploration and evaluation expenditure				1,200,309	405,179	685,806		2,291,294
Total non-current assets				1,200,309	405,179	685,806		2,291,294
Total assets				1,207,025	405,252	689,418		2,301,695
Current liabilities
Trade and other payables				-	13,988	8,596		22,584
Total current liabilities				-	13,988	8,596		22,584
Share of joint venture net assets				1,207,025	391,264	680,822		2,279,111

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 28. Interests in Jointly Controlled Assets (continued)

In order for the joint ventures to maintain their interests in the exploration tenements in which they are involved, the joint ventures are required to meet certain conditions imposed by the various statutory authorities granting the exploration permits or that are imposed by the joint venture agreements entered into by the group. These conditions include minimum expenditure commitments. The timing and amount of minimum exploration expenditure obligations of the group may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant area of interest. The group's minimum expenditure obligations from its interests in joint ventures, which are not provided for in the financial statements are as follows:

Minimum expenditure requirements • not later than 12 months • between 12 months and 5 years	Consolidated 2013 2012 $ $ 3,006,781 1,536,602 8,923,850 1,970,502
	11,930,631 3,507,104

Note 29. Subsequent Events

No 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 other than on 30 July 2013, the Company completed a placement to institutional investors and sophisticated investors. The placement raised a total $9 million through the issue of 50 million shares at 18 cents per share. The costs incurred with respect to the issue amounted to $540,000.

Note 30. Parent Entity Disclosures Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Option reserve Accumulated losses Total equity Loss for the period Other comprehensive income Total comprehensive income	2013 2012 $ $ 4,148,423 5,715,072 31,581,972 25,691,203
	35,730,395 31,406,275
	1,964,630 5,057,397 4,896,808 2,352,360
	6,861,438 7,409,757
	28,869,957 23,996,518
	89,299,329 79,875,236 5,342,147 5,272,048 (65,772,519) (61,150,766)
	28,868,957 23,996,518
	(4,621,753) 2,426,664 - -
	(4,621,753) 2,426,664

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Comet Ridge Limited - Annual Report 30 June 2013

Notes to the financial statements

Note 30. Parent Entity Disclosures (continued)

Bank guarantees

Bank guarantees are disclosed in note 19(b).

Contingent Liabilities

The Directors are not aware of any contingent liabilities other than as disclosed in note 23.

(a) Operating lease commitments

Operating lease commitments
Commitments for minimum lease payments for non-cancellable operating leases for offices and equipment contracted for but not recognised in the financial statements. Payable - minimum lease payments • not later than 12 months • between 12 months and 5 years	2013 2012 $ $ 198,101 210,783 411,858 112,404
	609,959 323,187

(b) Exploration expenditure

In order to maintain an interest in the exploration tenements in which the parent is involved, the parent is committed to meet the conditions under the agreements. The timing and amount of exploration expenditure and obligations of the parent are subject to the minimum work or expenditure requirements of the permit conditions or farm-in agreements (where applicable) and may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant area of interest. The obligations are not provided for in the financial statements.

Minimum expenditure requirements • not later than 12 months • between 12 months and 5 years	2013 2012 $ $ 1,431,100 3,796,602 4,263,100 2,833,602
	5,694,200 6,630,204

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Comet Ridge Limited - Annual Report 30 June 2013

Directors’ Declaration

In the Directors’ opinion:

1. the attached financial statements and notes are in accordance with the Corporations Act 2001, including:

2. (a) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

3. (b) giving a true and fair view of the financial position as at 30 June 2013 and of the performance for the year ended on that date of the consolidated entity.

4. As stated in note 1, the financial statements also comply with International Financial Reporting Standards.

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

The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001.

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

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Tor McCaul Managing Director

Brisbane, Queensland, 19 September 2013

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Independent Auditor’s Report to the Members of Comet Ridge Limited

Report on the Financial Report

We have audited the accompanying financial report of Comet Ridge Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of Significant Accounting Policies and other explanatory information, and the Directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the Directors also state, in accordance with Accounting Standard AASB101 Presentation of Financial Statements , that the financial statements comply 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. Those 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 control relevant to the Company’s preparation of the financial report that gives a true and fair view 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 Company’s internal control. 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.

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

Independence

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

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Opinion

In our opinion:

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

i)m giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and

• ii)m complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and

b)mthe consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1(b)(iii) in the financial report which states that the consolidated entity’s ability to execute its planned exploration and evaluation activity and meet other necessary corporate expenditure is dependent on the consolidated entity’s ability to raise additional funds. The matters set forth in Note1 (b)(iii) indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge 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 in pages 40 to 43 of the Directors’ report for the year ended 30 June 2013. 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.

Opinion

In our opinion the Remuneration Report of Comet Ridge Limited for the year ended 30 June 2013 complies with Section 300A of the Corporations Act 2001 .

PITCHER PARTNERS

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J.J Evans Partner

Brisbane, Queensland, 19 September 2013

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ADDITIONAL INFORMATION

The additional information set out below was applicable at 3 September 2013:

1. Number of Equity Holders

Ordinary Share Capital

458,068,746 fully paid ordinary shares are held by 2,138 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

on of Shareholdings
Holdings 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - maximum	No. of Holders Units Percentage of Issued Capital* 90 2,609 0.001% 273 899,411 0.196% 257 2,104,794 0.460% 1,060 44,309,693 9.673% 458 410,752,239 89.670%
	2,138 458,068,746 100.000%

• Percentages have been rounded to the nearest 1/1000 decimal place.

The numbers of shareholders holding less than a marketable parcel (being 2,703 units or less) were 199 Holders (220,731 Shares)

4. Substantial shareholders

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

	Number of	Percentage
Name	Shares Held	of Issued Capital
FITEL Nominees Limited	51,930,000	11.34%
Waterford Atlantic Pty Ltd & McKay Super Pty Ltd	33,889,551	7.398%
Gilby Resources Pty Ltd & Anthony Rechka Gilby	24,215,848	5.286%

The above shareholdings are disclosed pursuant to section 671B (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 the parties concerned.

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5. The 20 Largest Holders of Ordinary Shares

1. Fitel Nominees Limited 2. McKay Super Pty Ltd 3. HSBC Custody Nominees (Australia) Limited 4. Gilby Resources Pty Ltd 5. JP Morgan Nominees Australia Limited 6. Waterford Atlantic Pty Ltd 7. Power Industries Pty Ltd 8. Citicorp Nominees Pty Limited 9. Kabila Investments Pty Ltd 10. Sixth Erra Pty Ltd 11. Christopher John Blamey & Ann Margaret Blamey 12. JP Morgan Nominees Australia Ltd (Cash Income A/C) 13. Invia Custodian Pty Ltd 14. BNP Paribas Noms Pty Ltd (Master Cust DRP) 15. Gilby Resources Pty Ltd 16. Dynamic Supplies Investments Pty Ltd 17. UBD Nominees Pty Ltd 18. Jane Louise Gilby 19. Jeffrey Warrington Schneider 20. Tor Raymond McCaul TOTAL

Number of Ordinary Fully Paid Shares Held Percentage of Issued Capital 51,930,000 11.34% 19,341,571 4.22% 19,096,963 4.17% 18,813,945 4.11% 17,188,054 3.75% 14,472,980 3.16% 13,425,000 2.93% 12,019,014 2.62% 9,935,075 2.17% 8,838,582 1.93% 7,325,000 1.60% 7,310,646 1.60% 6,329,010 1.38% 6,150,000 1.34% 5,015,653 1.09% 5,000,000 1.09% 4,600,411 1.00% 4,395,087 0.96% 4,248,416 0.93% 4,053,750 0.88%

239,489,157 52.27%

6. Restricted Securities

There were no restricted securities issued or held during the reporting period.

7. Interest in Petroleum Tenements

Tenement	Location	*Interest%		Operator
		Conventional	CSG
ATP337 Mahalo Farmin	Bowen Basin		35%	Santos
Area
**PEL427	Gunnedah Basin	100%		Comet Ridge Limited)
			50%	Santos NSW (Betel)
**PEL428	Gunnedah Basin	100%	100	Comet Ridge Limited)
			60%	Santos NSW (Betel)
**PEL 6	Gunnedah Basin	100%	100	Comet Ridge Limited
			22.5%	Santos NSW (Betel)
ATP743	Galilee Basin		100%	Comet Ridge Limited
ATP744	Galilee Basin		100%	Comet Ridge Limited
ATP1015 Farmin Area	Galilee Basin		20%	Comet Ridge Limited
PMP50100	South Island, New		100%	Chartwell NZ Pty Ltd
	Zealand
PEP50279	South Island, New		100%	Chartwell NZ Pty Ltd
	Zealand

• The interest is held either by Comet Ridge Limited or one of its wholly owned subsidiaries.

** The Petroleum Exploration Permits located in the Gunnedah Basin are divided into CSG and Conventional Joint Ventures. The percentages recorded show the interests that Comet Ridge (or a wholly owned subsidiary) holds in these in these respective joint ventures.

ATP Authority to Prospect PEL Petroleum Exploration Licence PEP Petroleum Exploration Permit PMP Petroleum Mining Permit

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CORPORATE DIRECTORY

Comet Ridge Limited

ABN 47 106 092 577

Directors

James McKay Non-executive Chairman Tor McCaul Managing Director Chris Pieters Commercial Director Gillian Swaby Non-executive Director Jeff Schneider Non-executive Director Anthony Gilby Non-executive Director

Company Secretary

Stephen Rodgers

ASX Code: COI

Registered Office

Level 3 283 Elizabeth Street Brisbane Queensland 4000 Telephone: +61 7 3221 3661 Facsimile: +61 7 3221 3668 Email: info@cometridge.com.au

Share Registry

Computershare Registry Services Pty Ltd 117 Victoria Street West End Queensland 4101 Telephone: +61 7 3237 2100 Facsimile: +61 7 3229 9860

Auditors

Pitcher Partners 345 Queen Street BRISBANE, QLD 4000 Telephone: +61 7 3222 8444

Media Relations

www.cometridge.com.au

Barton Green Executive Director, Three Plus Pty Ltd 15 Cordelia Street South Brisbane Queensland 4101 Telephone: +61 7 3503 5700 Facsimile: +61 7 3503 5799 Email: barton@threeplus.com.au

Securities Exchange Listing

Australian Securities Exchange Ltd Home Exchange: Brisbane ASX Code: COI

Lawyers

Porter Davies Lawyers Level 5 46 Edward Street Brisbane Queensland 4000 Telephone: +61 7 3001 2100 Facsimile: +61 7 3105 7360 Website: www.porterdavies.com

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Comet Ridge Limited
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Brisbane Office: Level 3, 283 Elizabeth Street Brisbane QLD 4000 Telephone: +61 7 3221 3661 Facsimile: +61 7 3221 3668 www.cometridge.com.au