COMET RIDGE LIMITED — Annual Report 2017

Oct 18, 2017

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Comet Ridge Limited

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Contents

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|Overview of Activities|1|
|2017 Annual Reserves Statement|5|
|Corporate Governance Overview Statement|7|
|Directors’ Report|8|
|Remuneration Report - Audited|12|
|Auditor’s Independence Declaration|19|
|Statement of Profit or Loss & Other Comprehensive Income|20|
|Statement of Financial Position|21|
|Statement of Changes in Equity|22|
|Statement of Cash Flows|23|
|Notes to the Financial Statements|24|
|Directors’ Declaration|58|
|Independent Auditor’s Report|59|
|Additional Information|63|
|Corporate Directory|65|

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Overview of Activities

Highlights

During the 2017 financial year, Comet Ridge continued to maintain its focus on the exploration and appraisal for gas resources in eastern Australia. The continuing east coast gas tightness and rising electricity prices have resulted in demand for an industry-led solution. Comet Ridge firmly believes that its Queensland gas reserves and resources will feature prominently in the short to mid-term supply solutions for a market clearly short of gas.

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Much of the Company’s focus during the year has been on the Mahalo block located in ATP 1191 of which it holds the majority interest of 40%. The Mahalo pilot scheme continued its strong gas production performance with low to negligible water rates. Significant development analysis work was undertaken to examine the most efficient and cost-effective way to move the northern block pilot schemes into production utilising existing export pipeline capacity and field infrastructure.

In April 2017, the terms of an Agency Agreement with Santos QNT Pty Ltd (the Exploration Operator for the Mahalo Permit) were concluded, resulting in Comet Ridge assuming responsibility to manage the Mahalo field subsurface work through the work programme until 31 December 2018. This was a significant achievement as it illustrated the confidence held in Comet Ridge by its joint venture partners.

In February 2017, the transfer of interest in ATP 1015 from QER Limited to Comet Ridge was approved and registered by the Department of Natural Resources and Mines. Comet Ridge is now the 100% equity holder of ATP 1015, a highly prospective permit in the Galilee Basin with significant potential.

Work in the Galilee Basin continued during the year with discussions held with gas purchasers, gas transporters and the Queensland Government about the supply of gas (both sandstone gas and CSG) and the construction of associated infrastructure. These talks established that a range of connection points and supply options are available. These options are being evaluated by the Company with the view to progressing the development of its resources in the Galilee Basin.

Permit Interests

Comet Ridge has interests in four permits in the Bowen and Galilee Basins in Queensland, and three in the Gunnedah Basin in New South Wales. During 2016, Comet Ridge submitted an application to surrender its 100% interest in PMP50100 in New Zealand. This is currently being processed by New Zealand Petroleum and Minerals.

Comet Ridge Permits	Basin	State	CSG Interest	Conventional Interest	Area (km2)
ATP 743	Galilee	QLD	100%	100%	3,195
ATP 744	Galilee	QLD	100%	100%	4,296
ATP 1015	Galilee	QLD	100%	100%	2,194
ATP 1191 Mahalo	Bowen	QLD	40%*	n/a*	911
PEL 6	Gunnedah	NSW	29.55%	97.5%	5,162
PEL 427	Gunnedah	NSW	59.09%	100%	5,764
PEL 428	Gunnedah	NSW	68.42%	100%	6,018

• Comet Ridge has farm-in rights for conventional targets down to the level of the lower Mantuan coals.

Comet Ridge Limited I Annual Report 2017 1

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Overview of Activities (continued)

ATP 1191 Mahalo Project

Comet Ridge’s ATP 1191 Mahalo asset is located in the Denison Trough, approximately 240km west of Gladstone in the southern Bowen Basin and covers an area of 911 km[2] . The project is located just 14 kilometres from an infrastructure connection to the Gladstone LNG market with significant gas supply requirements. Comet Ridge has a 40% interest in Mahalo with both Santos QNT Pty Ltd (Santos) and APLNG Pty Ltd (APLNG) holding 30% each.

In April 2017, the Company announced that it had concluded an Agency Agreement with Santos, which saw Comet Ridge assume responsibility to manage the field subsurface work in respect of the Mahalo 2017 joint venture exploration work programme and budget (in its capacity as agent for Santos the exploration operator for the permit area) until 31 December 2018. The agreement between Santos and Comet Ridge is a significant step forward for the Company as it will allow the joint venture to prioritise moving 3P Reserves into the 2P Reserves category.

The Company has already independently certified 30 PJ of 2P Reserves, 219 PJ of 3P Reserves and 112 PJ of 1C Contingent Resources for its 40% interest at Mahalo. Comet Ridge expects the work programme to add significant economic reserves to each of the joint venture participant’s portfolios. The operational activities for the work programme will be directed across the northern part of the block where the Mahalo joint venture already has two operating pilot projects. The joint venture has decided to include a horizontal well within the Mira field pilot as part of the work programme. This is due to the positive production performance from the horizontal well drilled in 2014 in the Mahalo field pilot, that ultimately led to a reserves upgrade for Comet Ridge in December 2015.

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This positive progress for the Mahalo block is particularly well timed given the significant amount of media commentary regarding the gas shortages being experienced in the east coast market. Comet Ridge plans to maximise the growth of 2P Reserves from this work programme to add supply to this growing demand.

The Mahalo field work for 2017, as approved by the joint venture, has several components and includes:

• Initial stimulation (under-reaming) of three Mira vertical pilot wells to improve both water and gas offtake rates;

• Drilling of a single step-out corehole to the northeast of Mira for reserves confirmation purposes (Humboldt South 1);

• Drilling of a horizontal well at Mira (Mira 6) which will intercept Mira 2; and

• Studies work as required.

In the June quarter, the Company announced that the drilling services contract for the Humboldt South 1 well had been awarded to TDC Drilling Pty Limited (TDC). TDC are headquartered in Western Australia with an operating base in Roma, Queensland. The joint venture and TDC will be using a two-rig plan for this work to maximise efficiency and reduce overall costs.

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Overview of Activities (continued)

ATP 1191 Mahalo Project (continued)

During the latter part of the 2016 financial year, Comet Ridge commenced some analysis to examine the most efficient and cost-effective way to move the northern pilot schemes in the Mahalo block into production via available export pipeline capacity and field infrastructure. These studies focussed on utilising existing infrastructure wherever possible, to minimise capital spend and optimise the time required to initially bring the northern part of the Mahalo block into production.

The Company also examined a southerly gas export option for Mahalo, as this would be required for gas production that exceeded 25 TJ/d due to the pipeline infrastructure constraints to the west.

These studies indicated that the cost of production from the initial phase should be low given:

• Strong gas flow rate from a very short horizontal well section;

• Shallow reservoir;

• Gas with only trace CO2 (requires only dehydration to meet sales gas specification);

• Low water production rates; and

• Proximity to existing infrastructure to transport Mahalo gas to the Gladstone LNG market.

As Mahalo has demonstrated its productive capacity with low corresponding water rates, the Company believes that the asset will produce a significant volume of gas at low cost, which can be fed into the LNG schemes or into the substantial domestic demand. The 2017 exploration work programme is designed to significantly increase 2P reserves volumes and provide the joint venture with additional confidence to proceed with development. The east coast gas shortage and resulting government focus places Mahalo in a strong position to assist with meeting these demand requirements.

Galilee Basin Permits

During 2016, Comet Ridge entered into an agreement with Queensland Energy Resources (QER) to acquire all of its interest in ATP 1015. The transfer to Comet Ridge Galilee Pty Ltd was approved and registered by the Department of Natural Resources and Mines on 27 February 2017, resulting in Comet Ridge becoming the 100% equity holder for the permit.

Subsequently the Company has a very large acreage position of 9,685 km[2] in the eastern part of the Galilee Basin, holding 100% interests in ATP 743, ATP 744 and ATP 1015. The area remains lightly explored but has significant 3C contingent resources independently certified for both sandstone gas and CSG. Given the significant potential of these permits, particularly the Albany sandstone structure (ATP 744), discussions are being held with third parties for the potential funding of drilling operations.

During the 2017 year, Comet Ridge held discussions with gas purchasers, gas transporters and the Queensland Government about the future supply of gas (both sandstone gas and CSG) and the construction of associated infrastructure. These talks established that a range of connection points and supply options are available. These options are being evaluated by the Company with the view to progressing the development of its significant gas resource base in the Galilee Basin. The Galilee Basin could make a very material contribution to the current east coast gas market.

LNG supply, industrial, domestic, and power generation sectors each have short and long term requirements for gas. The volume of gas resources already certified in the Galilee Basin is significant and as such, multiple market requirements could be met concurrently.

New South Wales Permits

Comet Ridge’s three contiguous licences (PEL 427, PEL 428 and PEL 6) cover a total area of approximately 17,000 km[2 ] and are located in the northern Gunnedah Basin, immediately north and west of Santos’ Narrabri CSG Project in the Bohena Trough. Comet Ridge currently holds between 29.55% and 68.42% CSG interest across these licences and between 97.5% and 100% conventional oil and gas equity. Comet Ridge is the conventional operator whilst Santos operates the CSG interest. The permits are strategically located as this area has the potential to mature into a major producing province, with gas to flow south to Newcastle and Sydney to meet an important part of NSW’s gas requirements.

Operationally, little has happened with these permits during the year. The Company continues to await approval of the renewals for PEL 6, PEL 427 and PEL 428. It is unclear when these approvals will be granted although we understand they are continuing to be progressed

Comet Ridge Limited I Annual Report 2017 3

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Overview of Activities (continued)

International Activities

During the 2016 financial year, Comet Ridge submitted an application to surrender its interest in PMP50100 in New Zealand. This is currently being processed by New Zealand Petroleum and Minerals.

Denver based Comet Ridge Resources LLC (CRR) did not undertake any operational activity during the year. The primary focus continues to be on the recovery of bonds held with various agencies and winding up the operational subsidiaries with the view to ultimately wind up CRR.

Health Safety and Environment

There were no Injuries, Health or Environmental incidents reported for the period 1 July 2016 through to 30 June 2017. Total Recordable Injury Frequency Rate (TRIFR) and Lost Time Injury Frequency Rate (LTIFR) remain at ZERO.

The past financial year has seen minimal field operations, however Comet Ridge continues to focus on improving its Health Safety and Environment Management System (HSES). During the year, the Company reviewed and amended some of its key processes relating to field activities to ensure ongoing safe and reliable operations. These updated processes were employed for the Mahalo subsurface work that commenced after the end of the reporting period. These Mahalo activities are being managed by Comet Ridge on behalf of its joint venture partners.

Community

Comet Ridge has a deep commitment, at all levels of the Company, to working with community stakeholders in the regions where we operate. This commitment has ensured our external and stakeholder relationships have been, at all times, excellent.

Community engagement and respect for the communities within which we operate is a core value for Comet Ridge and is supported by Legislation and Regulation. The Queensland ‘Land Access Code’, which has been developed in compliance with the relevant legislation and enshrined in Regulation, is the main formal reference when it comes to landowner and community relations and interaction between landowners and the Oil and Gas Industry. Comet Ridge has always acted consistent with the principals and guidelines set out in this Code of Practice. Further, Comet Ridge has gone beyond what is required pursuant to the ‘Queensland Land Access Code’ in all aspects of our engagement with landowners and stakeholders.

The Company believes that co-existence and mutual respect are the cornerstones of community relations. The Company has built on the strong relationships developed over previous years and continues to enjoy excellent relationships with landowners, Local Government, the wider community and all relevant stakeholders.

As with previous years, this past year has been no different in terms of contact with key landowners. Indeed, with the increased role as Agent for the Exploration Operator at Mahalo (since April 2017) our focus has now increased from being around the eastern Galilee Basin, to also include the area north of Rolleston and south of Comet in the southern Bowen Basin. Our landowner contact has, in the main, been in the form of personal visitations, which strengthens and reinforces our relationship with these landowners and maintains an active point of contact should any concerns or issues arise.

In terms of Local Government engagement, the Company continues to maintain contact with relevant officials and elected representatives, in the relevant Regional Council area. Contact with Local Government, whilst not a regulatory imperative, affords an excellent opportunity to communicate with local communities at a broad level, permitting the Company to articulate forward plans and hear local concerns and issues.

Through membership of the Australian Petroleum Production and Exploration Association (APPEA), the Company interacts with other regional explorers through the Explorers Leadership Group (ELG) and, more widely with Government representatives and other agencies such as the Queensland Gasfields Commission. Comet Ridge maintains excellent relationships with the relevant Queensland Government Departments, including the Department of Natural Resources and Mines (DNRM) and the Department of Environment and Heritage Protection (DEHP).

Cultural Heritage

Comet Ridge is legislatively required to protect and secure indigenous cultural heritage when conducting in-field activities and takes responsibilities in these matters with the utmost seriousness. Protecting, preserving and respecting Indigenous culture, Aboriginal peoples’ deep connection to the land and ensuring artefacts and items of cultural significance are secured, are very important to the Company.

Protocols with Indigenous Claimant Groups are well established. The Company has a ‘duty-of-care’ responsibility with respect to Cultural Heritage matters and, as a minimum, engages with specialist archaeological consultants before any field work involving minor land clearing is undertaken.

This high-level commitment has been the Company’s standard practice.

The Company has had a long term co-operative relationship with RAPAD (the Central West Remote Area Planning and Development Board), MITEZ (Mt Isa to Townsville Economic Zone) and AgForce.

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

2017 Annual Reserves Statement

Comet Ridge Limited is pleased to present its Annual Reserves Statement for the period ending 30 June 2017. As detailed in the Overview of Activities, the Company’s current operations and focus is designed to convert Mahalo 3P Reserves into 2P Reserves. The last increase in the Company’s 2P and 3P reserves at Mahalo were announced on 2 December 2015 subsequent to the successful drilling of the Mahalo 7 Horizontal well, which the Company hopes will be replicated with the Mahalo 2017 exploration work programme, focussed around Mira and in the northeastern portion of the block.

The only adjustment to the net Gas Reserves and Resources of the Company as at 30 June 2016 has been the removal of the Contingent Resources recorded for the Company’s interest in the New Zealand PMP 50100 which has been surrendered.

Having conducted a review of its gas reserves and resources position during the reporting period and satisfying itself that there was no new data that might increase the reserves or resources estimates reported as at 30 June 2016, the Company presents in the table below the net Gas Reserves and Resources on a combined basis as well as for each of its individual tenements as at 30 June 2017:

			Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	Comet Ridge Limited – Net Recoverable Reserves	and Resources	and Resources	and Resources	and Resources
					Reserves (PJ)1					Contingent Resources (PJ)1
			1P3	1P3	2P	*2P	3P	3P	1C	1C	2C	**2C	3C	3C
			30-6-16	30-6-17	30-6-16	30-6-17	30-6-16	30-6-17	30-6-16	30-6-17	30-6-16	30-6-17	30-6-16	30-6-17
	Mahalo Gas
Bowen Basin,	Project	40%	-	-	30	*30	219	219	112	112	232	**232	372	372
QLD	(ATP 1191)
Galilee Basin, QLD	Gunn Project Area (ATP 744)	100%	-	-	-	-	-	-	-	-	67	**67	1,870	1,870
Galilee Basin	Albany Structure
, QLD	(ATP 744)	100%	-	-	-	-	-	-	56	56	153	**153	417	417
Gunnedah	PEL 6	29.55%
Basin, NSW4	PEL 427	59.09%	-	-	-	-	-	-	-	-	-	-	562	562
	PEL 428	68.42%
West Coast, NZ5	PMP 50100	100%	-	-	-	-	-	-	45	-	89	-	169	-
Total2			-	-	30	*30	219	219	213	168	541	**452	3,390	3,221

ASX Listing Rules Annual Report Requirements

*Listing Rule 5.39.1:

• All 2P petroleum reserves recorded in the table are undeveloped and are attributable to unconventional gas.

• 100% of 2P petroleum reserves are located in the Bowen Basin.

• *Listing Rule 5.39.2:

• The proportion of total 2P petroleum reserves that are unconventional is 100%. There are no 1P reserves recorded for the Company in any of its tenements.

Listing Rule 5.39.3:

• The table records a reconciliation of the 2P and 3P petroleum reserves as at 30 June 2017 as against the previous year and discloses that there were no changes to the 2P and 3P petroleum reserves from those recorded as at 30 June 2016.

Governance Arrangements and Internal Controls Listing Rule 5.39.5:

• Comet Ridge has obtained all of its gas reserves and resources reported as at 30 June 2017 from external independent consultants who are qualified petroleum reserves and resources evaluators as prescribed by the ASX Listing Rules.

• Comet Ridge estimates and reports its petroleum reserves and resources in accordance with the definitions and guidelines of the Petroleum Resources Management System 2007, published by the Society of Petroleum Engineers (SPE PRMS).

• To ensure the integrity and reliability of data used in the reserves estimation process, the raw data is reviewed by senior reservoir and geological staff at Comet Ridge before being provided to the independent reserve certifiers. Comet Ridge has not and does not currently intend to conduct internal reviews of petroleum reserves preferring to appoint independent external experts prior to reporting any updated estimates of reserves or resources so as to ensure an independent and rigorous review of its data.

• Comet Ridge reviews and updates its gas reserves and resources position on an annual basis to ensure that if there is any new data that might affect the reserves or resources estimates of the Company, steps can be taken to ensure that the estimates are adjusted accordingly.

Comet Ridge Limited I Annual Report 2017 5

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

2017 Annual Reserves Statement (continued)

** Listing Rule 5.40.1:

• All 2C contingent resources at 30 June 2017 are undeveloped. 66% of the reported 2C contingent resource is attributable to unconventional gas with the remainder attributable to a sandstone reservoir.

• The geographical areas where the 2C contingent resources are located appear in the far left column of the table.

Listing Rule 5.40.2:

• The table records a reconciliation of the 2C and 3C contingent resources as at 30 June 2017 as against the previous year and discloses that the net 2C and 3C contingent resources decreased during the period by 16.45% and 5.0% respectively due to the surrender of the Company’s New Zealand acreage known as PMP 50100. Apart from the surrender of PMP 50100, there were no other changes to the 2C and 3C contingent resources from those recorded as at 30 June 2016.

Listing Rule 5.44:

• The estimates of Reserves and Contingent Resources appearing in the 2017 Annual Reserves Statement for Comet Ridge Limited and its subsidiaries are based on, and fairly represent, information and supporting documentation determined by the various qualified petroleum reserves and resource evaluators listed below.

• The Contingent Resource for the Albany Structure ATP 744 are taken from an independent report by Dr Bruce McConachie of SRK Consulting (Australasia) Pty Ltd, an independent petroleum reserve and resource evaluation company. The Contingent Resources information has been issued with the prior written consent of Dr McConachie in the form and context in which they appear in this Annual Reserves Statement for 2017. His qualifications and experience meet the requirements to act as a qualified petroleum reserves and resource evaluator as defined under the ASX Listing Rule 5.42 to report petroleum reserves in accordance with the Society of Petroleum Engineers (“SPE”) 2007 Petroleum Resource Management System (“PRMS”) Guidelines as well as the 2011 Guidelines for Application.

• The unconventional Contingent Resource estimates for ATP 744 in the 2017 Annual Reserves Statement were determined by Mr John Hattner of Netherland, Sewell and Associates Inc. in accordance with Petroleum Resource Management System guidelines. Mr Hattner is a full-time employee of NSAI, and is considered to be a qualified person as defined under the ASX Listing Rule 5.42 and has given his consent to the use of the resource figures in the form and context in which they appear in the Annual Reserves Statement.

• The estimate of Reserves and Contingent Resources for Mahalo, as part of ATP 1191 provided in the Reserves Statement was determined by and under the supervision of Mr Timothy L. Hower of MHA Petroleum Consultants LLC in accordance with Petroleum Resource Management System guidelines. Mr Hower is a full-time employee of MHA, and is a qualified petroleum reserves and resource evaluator as defined under the ASX Listing Rule 5.42. Mr Hower is a Licensed Professional Engineer in the States of Colorado and Wyoming as well as being a member of The Society of Petroleum Engineers. Mr Hower has consented to the publication of the Reserve and Contingent Resource estimates for Mahalo in the form and context in which they appear in this Annual Reserves Statement for 2017.

• The Contingent Resource estimates for PEL 6, PEL 427 and PEL 428 were also determined by Mr Timothy L. Hower of MHA Petroleum Consultants LLC. Mr Hower consented to the publication of the resource figures which appeared in the announcement of 7 March 2011 made by Eastern Star Gas Limited (ASX:ESG) and any reference and reliance on the resource figures for PEL 6, PEL 427 & PEL 428 in the table is only a restatement of the information contained in the ESG announcement.

Notes to Net Recoverable Reserves and Resources Table:

• 1) Gas Reserve and Resource numbers have been rounded to the nearest whole number.

• 2) COI’s net reserves have not been adjusted for fuel or shrinkage (estimated at approximately 3%) and have been calculated at the wellhead (which is the reference point for the purposes of Listing Rule 5.26.5).

• 3) 1P Reserves have not been attributed to the Mahalo Gas Project under SPE 2007 PRM Guidelines as the field is not yet at development stage with an approved development plan.

• 4) The percentage interests recorded in the CSG Joint Ventures for the Gunnedah Basin permits listed include the percentage increase that has occurred as a result of Energy Australia’s notice to withdraw from these Joint Ventures in December 2015. The transfers of these interests remain subject to regulatory approval formalisation under the Joint Venture agreements.

• 5) As detailed in the September 2016 Quarterly Activities Report, Comet Ridge has lodged an application to surrender PMP 50100.

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Corporate Governance Overview Statement

The Directors and management of Comet Ridge Limited (“Comet Ridge” or the “Company”) are committed to the creation of shareholder value and recognise the need for high standards of corporate governance as integral to that objective.

The Board is pleased to report that during the year ending 30 June 2017 the Company’s corporate governance practices and policies have substantially accorded with those outlined in the ASX Corporate Governance Council’s Principles and Recommendations (3[rd] Edition) (“ASX Recommendations” or “ASX Guidelines”), except as outlined in the Company’s annual Corporate Governance Statement. 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 recommended practices are appropriate due to either the size of the Board or the management team or due to the current activities and operations being carried on by and within the Company.

A copy of Comet Ridge’s 2017 Corporate Governance Statement, which provides detailed information about governance and a copy of Comet Ridge’s Appendix 4G which sets outs the Company’s compliance with the recommendations in the 3[rd] Edition of the ASX Recommendations is available on the corporate governance section of the Company’s website at: : http://www.cometridge.com.au/About_Us_Governance.htm

Comet Ridge Limited I Annual Report 2017 7

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

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 2017. The Company was incorporated on 23 August 2003 and listed on the Australian Securities Exchange on 19 April 2004.

1. Information on Directors

The following persons were the Directors of Comet Ridge Limited who held office for the whole of 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 the Audit Committee Member of the Remuneration Committee

Experience

James McKay is Executive Chairman and co-founder of Walcot Capital, a venture capital business specialising in early stage commodity investments. Walcot Capital has established a number of large and successful resource projects including Tlou Energy Limited, an ASX and AIM listed southern Africa focused coal seam gas company, and ERPM a South African based gold company that has purchased the historic East Rand Proprietary Mine with a 51M oz reserve.

James is the former Chairman of successful coal seam gas company Sunshine Gas Limited, having overseen that company’s growth to join the ranks of Australia’s Top 150 and a top ten Queensland company with a market capitalisation over $1 billion, prior to its merger with Queensland Gas Company.

Mr McKay is also Chairman of Birimian Limited, an ASX listed lithium exploration company, and a director and shareholder of Centenary Memorial Gardens Pty Ltd, a major Brisbane cemetery and crematorium. He is a past president of the Australasian Cemeteries and Crematoria Association, having served on its board for over 8 years.

James McKay has a strong commercial background, with sound finance, investment markets, business management and legal expertise. He holds degrees in commerce and law.

Interest in Shares and Options

37,273,130 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Birimian Limited (appointed 22 March 2017)

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

Special Responsibilities

Managing Director Chairperson of the Risk Committee

Experience

Tor McCaul was appointed Managing Director of Comet Ridge in April 2009 when the Company merged with Chartwell Energy Limited (Chartwell). He previously held the position of Chief Executive Officer of Chartwell having commenced with the Company in 2008. Tor has 30 years’ experience in the oil and gas industry. He graduated in Petroleum Engineering from UNSW in 1987 and spent the next 9 years based in Brisbane working with operating companies in technical roles on projects in Queensland, New Zealand and PNG, which included a secondment to Chevron Nuigini.

He spent the following 11 years in Asia (Karachi, Jakarta, Chennai and Delhi) in technical, finance, commercial and management roles. At VICO Indonesia (a BP-ENI JV) he was their LNG Contract Manager on the 23 million-tonne-per-annum Bontang LNG project. In India, he was Cairn plc’s Head of Commercial for the Indian business. Mr McCaul has previously been the Chairman for the Queensland Section of the Society of Petroleum Engineers and was the 2013 Queensland Petroleum Exploration Association (QUPEX) President.

Interest in Shares and Options

5,283,585 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Nil.

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

1. Information on Directors (continued)

Chris Pieters B.Sc (Hons) B.Bus, Executive Director (Director since April 2009)

Appointed Executive Director 17 June 2015. Previously acted as Commercial Director from June 2013 to February 2014 for a short-term project.

Special Responsibilities

Member of the Audit Committee (resigned 14 October 2016) Member of the Risk Committee

Member of the Remuneration Committee (resigned 2 February 2017)

Experience

Chris Pieters is the Managing Director and co-founder of Walcot Capital, a private venture capital business specialising in early stage commodity investments, and the former Managing Director of Tlou Energy Limited, when it was a private unlisted public company with CSG exploration interests in Southern Africa.

Previously he was Chief Commercial Officer at Sunshine Gas Limited prior to its merger with the Queensland Gas Company in 2008. Mr Pieters 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

1,092,000 ordinary shares

Directorships Held in Other Listed Entities in Last 3 Years

Tlou Energy Limited (appointed 23 July 2009 and resigned 11 March 2015)

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

Special Responsibilities

Chairperson of the Audit Committee Chairperson of the Remuneration Committee

Experience

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

Gillian 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 Energy Ltd Board for a period of 10 years. In August 2015, she stepped down from her role at Paladin as Company Secretary and EGM-Corporate Services. She also serves on the boards of ASX listed Deep Yellow Limited, and Birimian Limited, an ASX listed lithium exploration company. Gillian is also a member of the West Australian Division Council of the Australian Institute of Company Directors.

Interest in Shares and Options

Nil.

Directorships Held in Other Listed Entities in Last 3 Years

Non-executive Director Deep Yellow Limited Executive Director Birimian Limited (appointed 27 April 2017)

Comet Ridge Limited I Annual Report 2017 9

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

1. Information on Directors (continued)

Michael Dart B.Com., FINSIA, Non-executive Director (Director since 14 October 2016)

Special Responsibilities

Member of the Remuneration Committee Member of the Audit Committee Member of the Risk Committee

Experience

Mike Dart is a director of Dart Capital Partners, a private venture capital investment fund, which is active in various sectors including oil and gas, additive and advanced manufacturing (3D printing) and other disruptive innovative businesses across the manufacturing, science and technology fields. Mike holds the role of Finance Director and CEO with two portfolio companies and was previously the Managing Director of a leading gas and infrastructure services contracting business that provided a suite of pipeline and underground tunnelling solutions. Prior to that, Mr Dart worked for Ernst & Young, focussing exclusively on M&A with particular oil and gas expertise.

Mike holds a Bachelor of Commerce and a Graduate Diploma of Applied Finance and Investment and brings to Comet Ridge over 20 years’ commercial experience working in M&A and finance, innovation, commercialisation and venture capital across the business cycle.

Interest in Shares and Options

Nil.

Directorships Held in Other Listed Entities in Last 3 Years

Nil.

2. 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 eastern Australia.

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

3. Review of Operations and Financial Position

The loss after tax of the Group for the financial year ended 30 June 2017 amounted to $3.6 million (2016: loss of $3.7 million). Further information on the operations of the Group and likely developments are set out in the Overview of Activities.

4. Significant Affairs

The following significant changes in the state of affairs of the Group occurred during the financial year ended 30 June 2017:

(a) Galilee permits

In March 2016, Comet Ridge entered into an agreement with Queensland Energy Resources (QER) to acquire all of its interest in ATP 1015. The transfer to Comet Ridge Galilee Pty Ltd was approved and registered by the Queensland Department of Natural Resources and Mines on 27 February 2017, resulting in Comet Ridge becoming the 100% equity holder of the permit. The transfer was at no cost to Comet Ridge and in addition, QER paid $249,000 as a contribution towards future rehabilitation and restoration obligations.

(b) Agency agreement

In April 2017, Comet Ridge concluded an Agency Agreement with Santos QNT Pty Ltd, which saw Comet Ridge assume responsibility to manage the field subsurface work in respect of the Mahalo 2017 Joint Venture exploration work program and budget (in its capacity as agent for Santos the exploration operator for the permit area) until 31 December 2018.

(c) Capital raisings

During the year, the Company undertook three equity raisings comprising two placements and one rights issue combined with a placement. Comet Ridge raised a total of $7.754 million to fund its ongoing activities including the Mahalo subsurface programme that commenced after the end of the reporting period.

10

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

5. 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.

6. After Balance Date 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.

7. Future Developments and Expected Results

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

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

8. Environmental Regulations

The Group's operations are subject to environmental regulation under the laws of Australia and New Zealand, 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.

9. Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2017 has been received and is attached to this report as required under section 307c of the Corporations Act 2001.

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 2017 and the number of meetings attended by each Director were:

	Board		Audit Committee	Audit Committee	Remuneration	Committee	Risk Committee	Risk Committee
	Number eligible to attend	Number attended	Number eligible to attend	Number attended	Number eligible to attend	Number attended	Number eligible to attend	Number attended
J McKay	10	10	4	4	2	2	*	*
T McCaul	10	10	*	*	*	*	3	3
G Swaby	10	10	4	4	2	2	*	*
C Pieters**	10	10	4	4	2	2	3	2
M Dart ***	5	5	1	1	1	1	2	2

• Not a member of the relevant committee

** Resigned from the Remuneration Committee on 2 February 2017

*** Appointed 14 October 2016

Comet Ridge Limited I Annual Report 2017 11

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

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 2017 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.

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:
Director fees	2017	2016
	$	$
Base Fees
Chair	96,000	96,000
Other Non-executive Directors	60,000	60,000
Additional Fees
Chair of Audit Committee	10,000	10,000
Chairs of Remuneration and Risk Committees	5,000	5,000
Members of committees	3,000	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.

12

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

11. Remuneration Report – Audited (continued)

Executive Remuneration Policy (continued)

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. For the year ended 30 June 2017 the rate was 9.5% up to a maximum contribution of $19,616. Executive and Nonexecutive Directors and other employed executives do not receive any other retirement benefits, however, some individuals 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.

James McKay	Non-executive Chairman
James McKay	Non-executive Chairman
Tor McCaul	Managing Director
Gillian Swaby	Non-executive Director
Christopher Pieters	Executive Director
Michael Dart	Non-executive Director

There are no other Key Management Personnel of the Group.

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 Year Ended 30 June 2017 Directors J McKay T McCaul G Swaby C Pieters M Dart Total Key Management Personnel Benefits and Payments Year Ended 30 June 2016 Directors J McKay T McCaul G Swaby C Pieters Total Key Management Personnel	Short-term Benefits & Fees Post Employment Long-term Benefits Share-based Payments Salary & Fees Cash Bonus Super- annuation LSL Total Cash Remuneration Performance Rights Total $ $ $ $ $ $ $ 94,693 - 8,996 - 103,689 - 103,689 360,384 - 19,616 10,121 390,121 (9,968) 380,153 70,359 - 2,639 - 72,998 - 72,998 107,597 - 5,875 - 113,472 (7,500) 105,972 44,587 - 4,236 - 48,823 - 48,823
	677,620 - 41,362 10,121 729,103 (17,468) 711,635
	Short-term Benefits & Fees Post Employment Long-term Benefits Share-based Payments Salary & Fees Cash Bonus Super- annuation LSL Total Cash Remuneration Performance Rights Total $ $ $ $ $ $ $ 90,411 - 8,589 - 99,000 - 99,000 361,217 - 19,065 10,170 390,452 19,861 410,313 66,667 - 6,333 - 73,000 - 73,000 105,024 - 5,774 - 110,798 9,972 120,770
	623,319 - 39,761 10,170 673,250 29,833 703,083

Comet Ridge Limited I Annual Report 2017 13

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

11. Remuneration Report – Audited (continued)

Details of Remuneration (continued)

The Remuneration Report for the 2016 financial year was passed with 94% 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.

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

				At Risk		At Risk
	Fixed	Remuneration	Short	Term Incentives	Long	Term Incentives
Executive Director	2017	2016	2017	2016	2017	2016
T McCaul	100%	95.16%	0.0%	0.0%	(2.62%)	4.84%
C Pieters	100%	91.74%	0.0%	0.0%	(7.08%)	8.26%

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.

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 four years.

Relation to performance	2017	2016	2015	2014	2013
Total remuneration ($)	711,635	703,083	742,225	885,369	1,027,777
EPS (loss) cents	(0.64)	(0.70)	(3.68)	(3.00)	(1.78)
Dividends paid	-	-	-	-	-
Share price at year end (cents)	13.00	6.00	6.00	15.00	22.00

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 Managing Director (Appointed 16 April 2009)

Term of Agreement: No fixed term Base Salary: $380,000 per annum (inclusive of superannuation)

Termination Benefit: Three (3) months base salary is to be paid in lieu of notice of termination. Twelve (12) months is payable if services are terminated due to change of control event. Subject to Board discretion, a further six (6) months can be paid in addition.

Termination Notice: 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.

Chris Pieters

Executive Director (appointed Commercial Director 17 June 2015)

Term of Agreement: Four months with options for parties to extend as needed Remuneration: Services provided as a consultant at $1,500 per day

Termination Benefit: No termination benefits payable Termination Notice: Either party may terminate the Agreement with a minimum of fourteen days’ notice

14

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

11. Remuneration Report – Audited (continued)

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 Annual General Meeting) and the Comet Ridge Limited Employee Performance Share Rights Plan as approved by shareholders for the purposes of ASX Listing Rule 7.2 Exception 9 most recently at the 2016 Annual General Meeting.

Options

No options over shares in Comet Ridge Limited have been granted under the Comet Ridge Share Incentive Option Plan in the current year to Key Management Personnel. There are currently no options on issue.

Performance Rights

The terms and conditions of each grant of performance rights during the year affecting remuneration in the current or a future period with respect to Key Management Personnel are shown in the table below. In addition to the performance condition, Key Management Personnel must satisfy a service condition of continuous employment with the Company up to and including the date when the performance conditions are achieved. Performance rights are issued for no consideration and no amount is payable on vesting.

Grant Date T McCaul 1-Dec-16 1-Dec-16 1-Dec-16 1-Dec-16 C Pieters 1-Dec-16 1-Dec-16 1-Dec-16 1-Dec-16

No. of Rights Expiry Date Fair Value (Cents) Performance Condition Vested % 500,000 31-Dec-19 7.0 75 PJ 2P Reserves hurdle 0% 500,000 31-Dec-19 7.0 150 PJ 2P Reserves hurdle 0% 500,000 31-Dec-19 7.0 225 PJ 2P Reserves hurdle 0% 500,000 31-Dec-19 7.0 300 PJ 2P Reserves Hurdle 0% 2,000,000 125,000 31-Dec-19 7.0 75 PJ 2P Reserves hurdle 0% 125,000 31-Dec-19 7.0 150 PJ 2P Reserves hurdle 0% 125,000 31-Dec-19 7.0 225 PJ 2P Reserves hurdle 0% 125,000 31-Dec-19 7.0 300 PJ 2P Reserves Hurdle 0% 500,000 2,500,000

The movements in the current year of the number of performance rights granted to Key Management Personnel are as follows:

Grant Date Expiry Date T McCaul 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19 C Pieters 10-Jul-15 31-Dec-16 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19 1-Dec-16 31-Dec-19	Number at Beginning of Year Granted as Remuneration During the Year Number of Rights Vested Number of Rights Lapsed Number at End of Year 167,000 - - (167,000) - 167,000 - - (167,000) - 166,000 - - (166,000) - 500,000 - - (500,000) - - 500,000 - - 500,000 - 500,000 - - 500,000 - 500,000 - - 500,000 - 500,000 - - 500,000
	1,000,000 2,000,000 - (1,000,000) 2,000,000
	500,000 - - (500,000) - - 125,000 - - 125,000 - 125,000 - - 125,000 - 125,000 - - 125,000 - 125,000 - - 125,000
	500,000 500,000 - (500,000) 500,000
	1,500,000 2,500,000 - (1,500,000) 2,500,000

Comet Ridge Limited I Annual Report 2017 15

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

11. Remuneration Report – Audited (continued)

Performance Rights (continued)

The terms and conditions of performance rights granted in prior years are as follows:

Grant Date T McCaul 10-Jul-15 10-Jul-15 10-Jul-15 10-Jul-15 C Pieters 10-Jul-15	No. of Rights Expiry Date Fair Value (Cents) Performance Condition Vested % 167,000 31-Dec-16 6.0 75 PJ 2P Reserves hurdle 0% 167,000 31-Dec-16 6.0 100 PJ 2P Reserves hurdle 0% 166,000 31-Dec-16 6.0 125 PJ 2P Reserves hurdle 0% 500,000 31-Dec-16 6.0 Gas flow rate 500 mfcd 0% 1,000,000 500,000 31-Dec-16 6.0 Gas flow rate 500 mfcd 0% 1,500,000

The movements in the prior year of the number of performance rights granted to Key Management Personnel are as follows:

Grant Date Expiry Date T McCaul 27-Nov-14 1-Jul-15 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 C Pieters 10-Jul-15 31-Dec-16	Number at Beginning of Year Granted as Remuneration During the Year Number of Rights Vested Number of Rights Lapsed Number at End of Year 500,000 - - (500,000) - - 167,000 - - 167,000 - 167,000 - - 167,000 - 166,000 - - 166,000 - 500,000 - - 500,000
	500,000 1,000,000 - (500,000) 1,000,000
	- 500,000 - - 500,000
	500,000 1,500,000 - (500,000) 1,500,000

Key Management Personnel Shareholdings

The number of ordinary shares in the Company held by each of the Key Management Personnel of the Group is as follows:

30 June 2017 J McKay T McCaul G Swaby C Pieters M Dart Total Directors 30 June 2016 J McKay T McCaul G Swaby C Pieters Total Directors

Balance at beginning of the year Shares purchased Other Movements# Balance at end of the year 35,926,583 1,346,547 - 37,273,130 5,080,369 203,216 - 5,283,585 - - - - 1,050,000 42,000 - 1,092,000 - - - - 42,056,952 1,591,763 - 43,648,715 Balance at beginning of the year Shares purchased Other Movements# Balance at end of the year 35,926,583 - - 35,926,583 5,130,287 - (49,918) 5,080,369 - - - - 1,050,000 - - 1,050,000 42,106,870 - (49,918) 42,056,952

Shares excluded from balance because the holders are no longer classified as associates.

END OF AUDITED REMUNERATION REPORT

16

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

12. Options and Performance Rights

Options

There were no options for ordinary shares in Comet Ridge Limited on issue at 30 June 2017.

Performance Rights

Movements in the number of performance rights on issue and the number of ordinary shares issued during the year ended 30 June 2017 as a result of performance rights vesting during the year are as follows:

Grant Date Expiry Date 10-Jul-15 31-Dec-16 10-Jul-15 31-Dec-16 18-Jan-16 31-Dec-17 18-Jan-16 31-Dec-17 1-Dec-16 31-Dec-19	Number of Rights 30 June 2016 Granted during the year Vested During the year Expired During the year Number of Rights 30 June 2017 500,000 - - (500,000) - 1,000,000 - - (1,000,000) - 1,260,000 - - - 1,260,000 1,260,000 - - - 1,260,000 - 2,500,000 - - 2,500,000
	4,020,000 2,500,000 - (1,500,000) 5,020,000

Since the end of the financial year, up to the date of this report no performance rights have been issued.

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 nearly 30 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 in-house 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 instrumental member of the team which led the takeover negotiations and implementation of QGC’s friendly acquisition of that Company.

Since the merger of Comet Ridge with Chartwell Energy Limited in April 2009, Mr Rodgers has been the Company Secretary of Comet Ridge Limited a position which he continues to hold. He also holds the position of Company Secretary of Galilee Energy Limited, an ASX listed CSG Exploration Company operating in Australia and the USA. Mr Rodgers brings to Comet Ridge strong legal and commercial experience with a particular emphasis on the coal seam gas industry.

16. Rounding of Amounts to Nearest Thousand Dollars

Pursuant to Legislative Instrument 2016/191 issued by the Australian Securities & Investments Commission, amounts in the Directors’ Report and the Financial Report have been rounded off to the nearest thousand dollars unless otherwise indicated.

Comet Ridge Limited I Annual Report 2017 17

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Report (continued)

17. 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 Group, its related practices and non-related audit firms:

During the year the following fees were paid or payable for non-audit services provided by the auditor audit firms:	of the Group, its related practices and non-related
Audit services - Audit and review of financial statements Non-audit services	Consolidated June 2017 June 2016 $ $ 95,000 92,769
	- -

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

==> picture [92 x 52] intentionally omitted <==

Tor McCaul Managing Director Brisbane, Queensland, 21 September 2017

18

==> picture [307 x 187] intentionally omitted <==

PRIVATE AND CONFIDENTIAL

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 2017, 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 APES 110 Code of Ethics for Professional Accountants.

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

PITCHER PARTNERS

==> picture [87 x 37] intentionally omitted <==

N BATTERS Partner

Brisbane, Queensland

21 September 2017

==> picture [494 x 49] intentionally omitted <==

Comet Ridge Limited I Annual Report 2017 19

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Statement of Profit or Loss and Other Comprehensive Income

for the year ended 30 June 2017

Note Revenue and other income Interest received Other income 4 Expenses Employee benefit's expense 4 Contractors' & consultancy costs 4 Exploration and evaluation expenditure written off Professional fees Corporate expenses Fair value movement of financial liability at fair value 3, 4 Occupancy costs 4 Finance costs Other expenses 4 Depreciation Impairment - exploration and evaluation expenditure 3 LOSS BEFORE INCOME TAX Income tax credit 5 LOSS FOR THE YEAR Other Comprehensive Loss, Net of Income Tax Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations TOTAL OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX TOTAL COMPREHENSIVE LOSS Loss attributable to: Owners of the parent Non-controlling interests Total comprehensive loss attributable to: Owners of the parent Non-controlling interests LOSS PER SHARE Basic loss per share Diluted loss per share	Consolidated June 2017 June 2016 $000's $000's 25 40 - 36 (641) (632) (219) (388) (17) - (159) (128) (93) (116) (1,957) (1,706) (118) (203) (12) (43) (207) (231) (15) (22) (205) (315)
	(3,618) (3,708) - -
	(3,618) (3,708)
	(1) (37)
	(1) (37)
	(3,619) (3,745)
	(3,618) (3,708) - -
	(3,618) (3,708)
	(3,619) (3,745) - -
	(3,619) (3,745)
	Cents Cents (0.64) (0.70)
	(0.64) (0.70)

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

20

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Statement of Financial Position

as at 30 June 2017

Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 6 Inventories 7 Other assets 7 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 7 Exploration and evaluation expenditure 3 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 6 Provisions 7 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Financial liability at fair value 3 Provisions 7 Deferred tax liabilities 5 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 8 Reserves 8 Accumulated losses TOTAL EQUITY	Consolidated June 2017 June 2016 $000's $000's 6,0391,625 723147 7676 394457
	7,2322,305
	5362 43,49141,243
	43,54441,305
	50,776 43,610
	1,510412 **679 ** 659
	2,189 1,071
	15,22713,270 572241 --
	15,799 13,511
	17,988 14,582
	32,78829,028
	99,37792,022 1,4401,417 **(68,029) ** (64,411)
	32,78829,028

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

Comet Ridge Limited I Annual Report 2017 21

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Statement of Changes in Equity

for the year ended 30 June 2017

Consolidated Balance at 1 July 2015 Loss for the period Other comprehensive loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners Shares issued on vesting of performance rights Share-based payments Transfers Balance at 30 June 2016 Balance at 1 July 2016 Loss for the period Other comprehensive loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners Contributions of equity net of transaction costs Share-based payments Balance at 30 June 2017	Contributed Equity $000's 92,099 - -	Foreign Currency Translation Reserve Share-Based Payments Reserve Accumulated Losses Total $000's $000's $000's $000's 1,398 1,246 (62,026) 32,717 - - (3,708) (3,708) (37) - - (37)
	-	(37) - (3,708) (3,745)
	36 - (113)	- (36) - - - 56 - 56 - (1,210) 1,323 -
	(77)	- (1,190) 1,323 56
	92,022	1,361 56 (64,411) 29,028
	92,022 - -	1,361 56 (64,411) 29,028 - - (3,618) (3,618) (1) - - (1)
	-	(1) - (3,618) (3,619)
	7,355 -	- - - 7,355 - 24 - 24
	7,355	- 24 - 7,379
	99,377	1,360 80 (68,029) 32,788

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

22

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Statement of Cash Flows

for the year ended 30 June 2017

Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received Payments to suppliers and employees NET CASH USED IN OPERATING ACTIVITIES 6 CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration and evaluation assets Movements in restricted cash Payment for property, plant and equipment NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Share issue costs NET CASH FROM FINANCING ACTIVITIES Net increase /(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 June 2017 June 2016 $000's $000's 24 58 (1,296) (1,705)
	(1,272) (1,647)
	(1,683) (2,552) 20 - (6) (6)
	(1,669) (2,558)
	7,754 - (399) -
	7,355 -
	4,414 (4,205) 1,625 5,827 - 3
	6,039 1,625

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

Comet Ridge Limited I Annual Report 2017 23

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements

Note 1 General information

These financial statements include the consolidated financial statements and notes of Comet Ridge Limited (“the Company”) and its controlled entities (“Comet Ridge” or “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 14. The financial statements were approved for issue by the Directors on 20 September 2017, subject to minor amendments.

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

Note 2 Basis of preparation

a. Compliance with Accounting Standards

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

b. 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.

c. 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.

The ability of the Group to execute its currently planned exploration and evaluation activities requires the Group to raise additional capital within the next 12 months or to sell or sell down its interest in an existing asset or pre-sell gas from one of its assets. Because of the nature of its operations, the Directors recognise that there is a need on an ongoing basis for the Group to regularly raise additional cash funds to fund future exploration activity and meet other necessary corporate expenditure. Accordingly, when necessary, the Group investigates various options for raising additional funds.

At the date of this financial report, the Directors have a reasonable expectation that the Group and the Company will be successful with its future fund raising initiatives and, as a result, 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.

d. Rounding of amounts

The Group is of a kind referred to in Legislative Instrument 2016/191 issued by the Australian Securities & Investments Commission, relating to the “rounding” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with the Legislative Instrument to the nearest one thousand dollars, or in certain cases, to the nearest dollar.

Note 3 Material balances - critical accounting estimates and judgements

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 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.

The critical estimates and judgements applied in the preparation of the financial statements are as follows:

.

24

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Exploration and evaluation assets

Cost

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.

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. The balance of and movements in exploration and evaluation expenditure during the year are as follows:

Exploration and evaluation expenditure Exploration and evaluation expenditure Less provision for impairment Movements in exploration and evaluation phase Balance at the beginning of year Exploration and evaluation expenditure during the year Impairment expense Exploration and evaluation expenditure written off Balance at the end of year	Consolidated June 2017 June 2016 $000's $000's 61,130 72,169 (17,639) (30,926)
	43,491 41,243
	Consolidated June 2017 June 2016 $000's $000's 41,243 39,551 2,470 2,007 (205) (315) (17) -
	43,491 41,243

During the 2016 financial year, Comet Ridge submitted an application to surrender its interest in PMP50100 in New Zealand. This is currently being processed by New Zealand Petroleum and Minerals. The provision for impairment totalling $13.5 million has been written back against the carrying value of the exploration and evaluation assets as no further exploration activity will be conducted on this permit.

Further information regarding the activity in each area of interest is shown in Note 10 - Segment Information.

Recognition

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

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

• ii. 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.

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.

The timing and amount of restoration costs that are expected to be incurred are estimated, and the net present value is included as part of the cost of the exploration and evaluation activity that gives rise to the need for restoration. A corresponding provision for restoration and rehabilitation is also recognised. Finance charges arising from the unwinding of the liability are recognised as an expense in the profit or loss.

Comet Ridge Limited I Annual Report 2017 25

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Exploration and evaluation assets (continued)

Exploration expenditure commitments

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	June 2017 June 2016 $000's $000's 1,720 273 5,692 5,470
	7,412 5,743

Recoverability of exploration and evaluation expenditure

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.

The Group assesses the recoverability of the carrying value of capitalised exploration and evaluation assets 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.

The oil price and its relationship to the gas price are seen as a significant impairment trigger. Although the international oil price at balance date is similar to the prior year price, it is still at a level that could indicate that the carrying value of the exploration and evaluation assets may not be fully recovered through development or sale. As a result, in order to assess the fair value of these assets for impairment, the assumptions underlying the prior year “value in use” valuations for both the Mahalo Gas Project (ATP 1191) and ATP 744 were reviewed to determine whether it is reasonable to continue to use the valuations as estimates of the assets’ fair values at balance date.

The review of both valuations concluded that there were no material changes required to the assumptions, and that the valuations are reasonable estimates of the fair values of each of the assets with no impairments required.

The “value–in-use” method calculates a net present value (NPV) based on management’s estimated cash flows for each individual permit. The assumptions underlying the cash flows include management’s estimates of the following:

	recoverable reserves		additional exploration costs
	field development plans		field operating costs
	pipeline tariff		short and long term gas prices
	production life		discount rate

The future cash-flows are adjusted for risks specific to the asset and discounted using a pre-tax discount rate of 14.25% (2016: 14.25%). The calculation of value in use is sensitive to changes in the short and long term gas price and the estimate of recoverable reserves. It is estimated that while changes in the gas price would impact the value in use calculations; an analysis using a range of prices from $6.00/GJ to $8.00/GJ did not alter the impairment decision. Also, with respect to the Mahalo Gas Project, a 40% reduction in the rate of recovery of the amount of recoverable reserves did not change the impairment decision.

26

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Exploration and evaluation assets (continued)

Recoverability of exploration and evaluation expenditure (continued)

No value-in-use calculations were conducted for ATP743 and ATP1015 as these permits are still under evaluation and have not yet reached a stage to allow a reasonable assessment to be made regarding the existence of economically recoverable reserves.

No value-in-use calculation was undertaken for the Gunnedah Basin permits as these assets have been fully impaired because of the current uncertainty around the CSG industry in NSW which has created significant limitations on the Company’s ability to undertake any exploration or development activity. During the 2017 financial year an impairment expense was recognised with respect to exploration and evaluation assets for the Gunnedah Basin permits (PEL427, PEL428 and PEL6) amounting to $205,000 (2016: $315,000).

No value-in-use calculations were conducted for New Zealand permit PMP50100 as it has been surrendered and the carrying value of its exploration and evaluation assets is nil.

Permit PEL 427 PEL 428 PEL6 PMP 50100 Total	Consolidated June 2017 June 2016 $000’s $000’s 78 100 98 73 29 31 - 111
	205 315

Interest in joint operations

The Group’s exploration activities are often conducted through joint arrangements. Joint arrangements are classified as joint operations or joint ventures depending on the contractual rights and obligations that each investor has, rather than the legal structure of the joint arrangement.

In accordance with AASB 11 Joint Arrangements, all of the Groups’ interests in joint arrangements are classified as joint operations. A joint operation involves joint control of the assets contributed or acquired for the purpose of the joint operation. Each party may take their share of the output of the joint operation and each bears its share of the expenses incurred. The interests of the Group in joint operations are brought to account by recognising the Group’s share of jointly controlled assets, liabilities, revenue and expenses.

The carrying amount of exploration and evaluation expenditure includes the Group's interest in the exploration and evaluation expenditure of a number of joint operations. The amount of exploration and evaluation expenditure employed in the joint operations is as follows:

30 June 2017 Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Share of joint venture net assets	ATP1191 PEL427 PEL428 PEL6 Total 40.0% 59.1% 68.4% 29.6% $000's $000's $000's $000's $000's 100 - - - 100 330 10 14 3 357
	430 10 14 3 457
	17,437 575 529 340 18,881
	17,437 575 529 340 18,881
	17,867 585 543 343 19,338
	209 11 16 7 243
	209 11 16 7 243
	17,658 574 527 336 19,095

Comet Ridge Limited I Annual Report 2017 27

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued) Interest in joint operations (continued)

Interest in joint operations (continued)
30 June 2016 Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Share of joint venture net assets	ATP1015 ATP1191 20% 40% $000's $000's - 155 - -	PEL427 PEL428 PEL6 Total 59.1% 68.4% 29.6% $000's $000's $000's $000's - - 1 156 - - - -
	- 155	- - 1 156
	6,257 17,194	518 464 311 24,744
	6,257 17,194	518 464 311 24,744
	6,257 17,349	518 464 312 24,900
	- 108	(1) (14) (1) 92
	- 108	(1) (14) (1) 92
	6,257 17,241	519 478 313 24,808

During the 2017 year, Comet Ridge increased its ownership interest in ATP1015 from 20% to 100%.

For all joint operations, the principal place of business is c/- Santos Limited, Level 5, 60 Flinders Street, Adelaide SA 5000.

The Group's minimum expenditure obligations with respect to its interests in joint operations are as follows:

Minimum expenditure requirements ●not later than 12 months ●between 12 months and 5 years	Consolidated June 2017 June 2016 $000's $000's 1,628 224 - 832 1,628 1,056

Financial liability at fair value

On 18 March 2014, the Group signed an agreement to repurchase the 5% interest in the Mahalo Gas Project which was originally sold to Stanwell Corporation Limited (SCL) under the September 2011 Sale and Purchase Option Agreement. The effective date of this transaction was 20 October 2014. The liability to SCL arising from the renegotiated agreement is recognised as a “financial liability at fair value through profit or loss”.

Non-current Financial liability at fair value - Stanwell Corporation Limited Balance at the beginning of the year Movement in fair value of financial liability at fair value Balance at the end of the year	Consolidated June 2017 June 2016 $000's $000's 15,227 13,270
	Consolidated June 2017 June 2016 $000's $000's 13,270 11,564 1,957 1,706
	15,227 13,270

28

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Financial liability at fair value (continued)

In accordance with the Renegotiated Mahalo Option Agreement, the nature of the consideration payable by Comet Ridge is at the option of SCL and is either by way of:

1. A discount under the Gas Supply Agreement (Option A) (GSA). Under this option, the consideration is paid by Comet Ridge foregoing a portion of its future revenue from the Mahalo Gas Project over the life of the Gas Supply Agreement. The revenue foregone by Comet Ridge is the $15 million discount indexed by CPI up to the date the Gas Supply Agreement is signed; or

2. A cash payment of $20 million indexed by CPI up to the date of payment. This amount is payable if SCL decides not to exercise Option A, or an acceptable gas supply agreement cannot be agreed.

Fair value measurement

At 18 March 2014, the fair value of the SCL liability was estimated for recognition and measurement and for disclosure purposes. Refer to Note 11 for further details of the process undertaken to value the financial liability.

Of the two options available, it was originally considered reasonable to assume that SCL will choose the option that provides the greatest benefit. If the Mahalo field proves up with significant reserves, SCL would be expected to proceed with Option A. If the field proves up with low gas volumes then SCL would be expected to opt for Option B. Obviously, there is a midway point where SCL will be ambivalent as to whether it chooses Option A or Option B. As a result, at 30 June 2017 it is necessary to consider whether there has been any technical or economic changes since the last reporting date that would now cause SCL to choose Option B rather than Option A. If necessary, the liability to SCL will be amended so that at the anticipated date of the GSA the full liability for the consideration payable to SCL will be recognised.

The initial accounting treatment was based on the expectation that SCL was interested in securing future gas supplies and, provided the Mahalo/Mira field was able to supply the agreed gas quantities, it would proceed with Option A. This conclusion was based on the exploration results from the Mahalo and Mira pilot operations which, while not conclusive, indicated that the Mahalo/Mira field had the potential for a significant gas resource.

The two critical assumptions that could potentially change the initial conclusion are:

1. The potential of the Mahalo/Mira Gas Project to supply the agreed quantities of gas; and

2. Gas price under the Gas Pricing Mechanism compared to the current market gas price.

The results of exploration and development activity undertaken during the year have not changed the initial opinion on the potential of the field. The Mahalo Pilot Scheme maintained strong gas production capacity and low corresponding water rates from one relatively short 360 metre horizontal well and two vertical wells on line. On the basis of these promising results, further studies have been undertaken to examine the most efficient way to production.

These studies are showing that the initial cost of production should be very low given the:

• Strong gas flow from a very short horizontal section;

• Shallow reservoir;

• Gas with only trace CO2 (requires only dehydration to meet sales gas specification);

• Low water production rates; and

• Proximity to existing infrastructure to transport Mahalo gas to the Gladstone LNG market.

With respect to the Gas Pricing Mechanism, the gas price under the GSA is calculated on an ex-field basis using a formula which reflects the Oil Linked Gas Price (OLP) with specified floor and ceiling levels, and the field cost to produce plus a rate of return referred to as the Field Cost Plus Return (FCR).

Comet Ridge Limited I Annual Report 2017 29

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Financial liability at fair value (continued)

Fair value measurement (continued)

The pricing mechanism will operate as follows:

1. If the oil price is low (i.e. below the OLP Floor of USD60.02/bbl), the gas price will be based on the field cost to produce plus 14.5% after tax rate of return (FCR);

2. If the oil price is high (i.e. above the OLP Ceiling of USD112.53/bbl) then the gas price will be based 50% on FCR and 50% on OLP Ceiling;

3. If the oil price lies between the OLP Floor and Ceiling levels mentioned in (1) and (2) above, the gas price will be based 50% on FCR and 50% on OLP; and

4. A discount, calculated at the date of the Gas Supply Agreement, will apply and will reduce the gas price calculated on a $/GJ basis over the life of the GSA.

The oil price at 30 June 2017 was consistent with the prior year price but was still below the OLP Floor level. As a result, if the gas price for the GSA was determined at balance date it would be based on FCR. The conservative estimate of FCR determined by the development studies (“value in use” calculations) conducted at September 2015 and August 2016 is in the range $3.05/GJ to $4.26/GJ. This is below the current market price of approximately $6.00/GJ to $6.50/GJ. The FCR price would also be reduced by the SCL discount, hence it is reasonable to assume that Option A would still be attractive to Stanwell.

As a result, at 30 June 2017, it was determined that the initial assumptions used to recognise the SCL liability were still appropriate. Based on these inputs, the increase in the fair value of the SCL liability during the financial year was $1.957 million (2016: $1.706 million) and a corresponding amount was recognised as an expense in the profit or loss.

Valuation techniques and process used to determine fair values

The fair value of the SCL liability is based on the anticipated discounted cash flows arising from the renegotiated Mahalo Option Agreement. The SCL liability is classified as level 3 in the fair value hierarchy due to the use of unobservable inputs. The inputs used in the calculation of the fair value of the Financial Liability at Fair Value are as follows:

1. The most likely outcome under the Mahalo Option Agreement is SCL will opt for the Gas Sale Agreement. As a result the $15 million discount will be the basis for determining the liability calculations.

2. The agreement term for the initial calculations will be the maximum four years.

3. The CPI rate used to index the $15 million gas supply discount is 3% pa based on upper level of RBA target for inflation.

4. The fair value of the 5% Mahalo Gas Project interest re-acquired will be the net present value (NPV) of the SCL liability discounted at a pre-tax rate based on Comet Ridge’s cost of capital.

5. Comet Ridge’s cost of capital is 14.75%. The pre-tax discount rate is also 14.75% as the cost of debt is nil.

The relationships between the unobservable inputs and the fair value of the financial liability at fair value are as follows:

Unobservable input Relationship to fair value

Likely outcome If SCL opts for Option B the financial liability at fair value at 30 June 2017 will increase by approximately $5.2 million. Agreement term If the Final Investment Decision (FID) is reached earlier than the 4 year limit (i.e earlier than 20 October 2018) the carrying amount of the financial liability at fair value will increase while the estimated total fair value movements over the new term will reduce.

CPI rate If the 3% pa CPI rate reduces/increases to a low of 2% pa or a high of 4% pa the indexed liability will reduce/ increase by approximately 3.9% or $650,000.

Pre-tax discount rate If the 14.75% pre-tax discount rate reduces/increases by 2.25% i.e. to a low of 12.5% and or a high of 17.0% the NPV of the indexed liability will increase/reduce by approximately 8.0% or $750,000 with a resulting reduction/increase in the total fair value movement to be expensed over the term of the agreement.

30

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 3 Material balances - critical accounting estimates and judgements (continued)

Financial guarantee contract

One of the terms of the renegotiated Mahalo Option Agreement is that the parent entity (Comet Ridge Limited) guarantees the indexed $20 million consideration payable by Comet Ridge Mahalo Pty Ltd (CRM) under Option B. In accordance with AASB 139 Financial Instruments, Recognition and Measurement, at each balance date to the extent that a liability/asset exists, Comet Ridge Limited will need to recognise a Financial Guarantee Contract liability and CRM will record a Financial Guarantee Contract asset.

Comet Ridge Limited’s exposure to a financial guarantee liability arises from the risk that at any point in time the fair value of CRM's interest in the Mahalo Gas Project is less than the indexed $20 million liability. In order to determine the fair value of CRM’s interest in the Mahalo Gas Project, CRM has developed a “value in use” methodology that takes into account the estimated cash flows from the development and operation of the Mahalo Gas Project. Using a range of gas prices from $6.00/GJ to $8.00/GJ, the valuation provides a range of NPVs for Comet Ridge’s 40% interest in the Mahalo Gas Project that are significantly above the value of the indexed $20 million financial guarantee. Accordingly, at 30 June 2017 CRM’s Financial Guarantee Contract asset and Comet Ridge Limited’s Financial Guarantee Contract liability would both be valued at nil.

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.

Note 4 Revenue and expenditure

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 Operation.

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.

Government grants that compensate the Group for expenses incurred e.g. Research and Development are recognised as revenue when received.

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

All revenue is stated net of the amount of goods and services tax (GST).
Other income Other income includes the following specific items: Sale of inventory Total other income	Consolidated June 2017 June 2016 $000's $000's - 36
	- 36

Comet Ridge Limited I Annual Report 2017 31

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 4 Revenue and expenditure (continued)

Notes to the Financial Statements (continued) Note 4 Revenue and expenditure (continued)
Expenses Loss before income tax includes the following specific expenses: (a) Employee benefits' expense Other employee benefits' expense Share-based payments' expense Defined contribution superannuation expense (b) Contractors’ and consultants’ costs Contractors' fees (c) Movement in fair value of financial liability at fair value Fair value movement of financial liability at fair value through profit or loss (d) Occupancy costs Rental expense relating to operating leases Other occupancy costs (e) Other expenses include the following specific items: Other administration and office costs Foreign exchange losses (net) Note 5 Income tax Tax expense (a) Recognised in the Statement of Profit or Loss and Other Comprehensive Income Current tax Deferred tax expense relating to the origination and reversal of temporary differences Income tax expense Deferred income tax movements included in income tax expense comprises: Decrease in deferred tax asset Decrease in deferred tax liability (b) Numerical reconciliation of income tax expense to prima facie tax on accounting profit Loss before income tax Tax benefit at the Australian tax rate of 30% (2016: 30%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Share options expensed Other non-deductible items Capital & tax losses not recognised in deferred tax assets Income tax expense	Consolidated June 2017 June 2016 $000's $000's (531) (488) (24) (56) (86) (88)
	(641) (632)
	(219) (388)
	(219) (388)
	(1,957) (1,706)
	(102) (182) (16) (21)
	(118) (203)
	(206) (229) (1) (2)
	(207) (231)
	Consolidated June 2017 June 2016 $000's $000's - - - -
	- -
	- - - -
	- -
	(3,618) (3,708) 1,085 1,112 (7) (17) (1) (4) (1,077) (1,091)
	- -

32

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 5 Income tax (continued)

Tax expense (continued)

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.

(c) Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 30%)	Consolidated June 2017 June 2016 $000's $000's - -

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.

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 taxes Deferred tax liability The balance of deferred tax liability comprises: Deferred tax assets Tax losses Capital costs deductible over 5 years Provisions Deferred tax liabilities Exploration and evaluation expenditure Accrued interest Net deferred tax asset Deferred tax asset not recognised Deferred tax asset recognised in accounts Movements in deferred tax liability Opening balance Deferred tax (credited) to profit or loss Closing balance	Consolidated June 2017 June 2016 $000's $000's - -
	23,368 21,889 202 211 1,852 1,257
	25,422 23,357
	(7,845) (6,977) (1) (1)
	(7,846) (6,978)
	17,576 16,379 (17,576) (16,379)
	- -
	- - - -
	- -

Comet Ridge Limited I Annual Report 2017 33

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 5 Income tax (continued)

Deferred taxes (continued)

Deferred income tax is provided in full, using the balance sheet 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 nor 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.

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 assets have not been recognised with respect to the following items:

Australian temporary differences and tax losses (at 30%) Off-shore temporary differences and tax losses (at 30%)	Consolidated June 2017 June 2016 $000's $000's 9,785 8,608 7,791 7,771
	17,576 16,379

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.

Note 6 Other financial assets and liabilities

Cash and cash equivalents Cash at bank and on hand	Consolidated June 2017 June 2016 $000's $000's 6,039 1,625

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.

34

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 6 Other financial assets and liabilities (continued)

Cash and cash equivalents (continued) (a) Reconciliation of cash flow from operations Loss for the year Depreciation Impairment - exploration and evaluation expenditure Exploration and evaluation expenditure written off Provision for rehabilitation capitalised Share-based payments Net exchange differences Changes in operating assets and liabilities (Increase)/Decrease in trade and other receivables Decrease/(Increase) in prepayments Increase /(Decrease) in trade payables and accruals Increase in financial liability at fair value Increase in provisions

Consolidated June 2017 June 2016 $000's $000's (3,618) (3,708) 15 22 205 315 17 - - (88) 24 56 (1) (1) (50) 64 42 (41) 83 (107) 1,957 1,706 54 135

(1,272) (1,647)

Non-cash financing and investing activities

(b) 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 $nil (2016: $36,000).

Trade and other receivables Current Trade debtors Other receivables	Consolidated June 2017 June 2016 $000's $000's 288 86 435 61
	723 147

Other receivables mainly comprise joint venture receivables - 82% (2016: 25%) and GST refunds - 17% (2016: 68%). The carrying amount of trade debtors and other receivables is assumed to approximate their fair values due to their short term nature.

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.

Comet Ridge Limited I Annual Report 2017 35

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Notes to	the Financial Statements (continued)
Note 6	Other financial assets and liabilities (continued)
		Consolidated
Trade and	other payables	June 2017	June 2016
Current		$000's	$000's
Trade payables		1,510	412
Trade payables includes $243,000 (2016: $92,000) for the Group’s share of joint operation liabilities (refer Note 3).

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.

Note 7 Other non-financial assets and liabilities

	Consolidated	Consolidated
Inventories	June 2017	June 2016
	$000's	$000's
Consumables - at cost	76	76
Inventories are measured at the lower of cost and net realisable value. Costs are assigned on the specific identification basis.
	Consolidated
Other assets	June 2017	June 2016
	$000's	$000's
Prepayments	11	54
Restricted cash	383	403
	394	457

Restricted cash

Restricted cash represents funds held on term deposit which support guarantees provided by the Group's bankers to the States of Queensland and New South Wales in respect of the Group's exploration permits and environmental guarantees and to the landlord of the Brisbane office to support the Group's obligations under the lease. Refer Note 13.

Property, plant and equipment Plant and equipment at cost Accumulated depreciation Movements in carrying amounts of property, plant and equipment Balance at the beginning of year Additions Depreciation Balance at the end of year	Consolidated June 2017 June 2016 $000's $000's 115 159 (62) (97)
	53 62
	62 78 6 6 (15) (22)
	53 62

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

36

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 7 Other non-financial assets and liabilities (continued)

Property, plant and equipment (continued)

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 Profit or Loss and Other Comprehensive Income.

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.

Current Employee benefits Restoration & rehabilitation Non-current Employee benefits Restoration & rehabilitation Movements in carrying amounts of restoration and rehabilitation Balance at the beginning of the year Additions capitalised to exploration and evaluation expenditure Additions charged to profit or loss - finance charges Foreign exchange movements Balance at the end of the year	Consolidated June 2017 June 2016 $000's $000's 111 91 568 568
	679 659
	97 75 475 166
	572 241
	1,251 900
	Consolidated June 2017 June 2016 $000's $000's 734 566 297 91 12 43 - 34
	1,043 734

Note 8 Equity

Contributed equity Ordinary shares - fully paid Movements in ordinary shares Balance at the beginning of the year Placement 28,041,301 shares @ 5 cents Rights Issue 21,050,306 shares @ 5 cents Placement 42,400,000 shares @ 12.5 cents Performance rights movements during the year Share issue costs Balance at the end of the year	June 2017 June 2016 Number of Shares 526,250,547 526,200,547 28,041,301 - 21,050,306 - 42,400,000 - - 50,000 - -	Consolidated June 2017 June 2016 $000's $000's 99,377 92,022
		June 2017 June 2016 $000's $000's 92,022 92,099 1,402 - 1,052 - 5,300 - - (77) (399) -
	617,742,154 526,250,547	99,377 92,022

Comet Ridge Limited I Annual Report 2017 37

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 8 Equity (continued)

Contributed equity (continued)

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.

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.

Reserves Foreign currency translation Share-based payments The movements in the share-based payments' reserve during the year are as follows: Balance at the beginning of the year Shares issued on vesting of performance rights Share-based payments during the year Transfer to accumulated loss Balance at the end of the year	Consolidated June 2017 June 2016 $000's $000's 1,360 1,361 80 56
	1,440 1,417
	Consolidated June 2017 June 2016 $000's $000's 56 1,246 - (36) 24 56 - (1,210)
	80 56

Foreign Currency Translation Reserve

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

Share-based Payments Reserve

The share-based payments reserve is used to record the expense associated with options and performance rights granted to employees under equitysettled 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.

Note 9 Share-based payments

Share-based payments

The share-based payments’ expense included in the financial statements with respect to performance rights issued during the year and already issued in prior years is as follows:

Statement of Profit or Loss and Other Comprehensive Income Share-based payments expense included in employee benefits' expense	June 2017 June 2016 $000's $000's 24 56

The types of share-based payment plans are described below.

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 usually 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.

38

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 9 Share-based payments (continued)

Employee share options (continued)

The amount assessed as fair value at the grant date is allocated equally over the period from grant date to vesting date. Fair values at grant date are determined using the Black-Scholes option pricing method that takes into account the exercise price, the terms of the option, the vesting and market related criteria, the impact of dilution, the non-tradable 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 on issue at the beginning of the year and none were granted during the year ended 30 June 2017.

Employee performance share rights

Employee 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 is determined at grant date. The value of performance rights that are issued subject only to a service condition or subject to a service condition and a performance condition e.g. reserves certification 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. Total Shareholder Return performance 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.

Performance rights may only be issued if the number of shares underlying the performance rights, when aggregated with the number of performance rights on issue and the number of shares issued during the previous five years under the plan or any other employee incentive scheme, do not exceed 5% of the total number of shares on issue.

The following table shows the number and movements of performance rights during the 2017 year:

Grant Date Expiry Date Share Price at Grant Date (Cents) 10-Jul-15 31-Dec-16 6.0 10-Jul-15 31-Dec-16 6.0 18-Jan-16 31-Dec-17 9.0 18-Jan-16 31-Dec-17 9.0 1-Dec-16 31-Dec-19 7.0	No. of Rights 30 June 2016 Granted Vested Expired No. of Rights 30 June 2017 500,000 - - (500,000) - 1,000,000 - - (1,000,000) - 1,260,000 - - - 1,260,000 1,260,000 - - - 1,260,000 - 2,500,000 - - 2,500,000
	4,020,000 2,500,000 - (1,500,000) 5,020,000

The following table shows the number and movements of performance rights during the 2016 year. Ordinary shares were issued for all performance rights that vested during the 2016 financial year.

Grant Date Expiry Date Share Price at Grant Date (Cents) 1-Jul-13 7-Jul-15 19.0 1-Oct-14 1-Jul-15 14.0 27-Nov-14 1-Jul-15 12.0 10-Jul-15 31-Dec-16 6.0 10-Jul-15 31-Dec-16 6.0 18-Jan-16 31-Dec-17 9.0 18-Jan-16 31-Dec-17 9.0	No. of Rights 30 June 2015 Granted Vested Expired No. of Rights 30 June 2016 50,000 - (50,000) - - 1,910,000 - - (1,910,000) - 500,000 - - (500,000) - - 500,000 - - 500,000 - 1,000,000 - - 1,000,000 - 1,260,000 - - 1,260,000 - 1,260,000 - - 1,260,000
	2,460,000 4,020,000 (50,000) (2,410,000) 4,020,000

Comet Ridge Limited I Annual Report 2017 39

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 9 Share-based payments (continued)

Employee performance share rights (continued)

All performance rights granted during the 2017 year vest subject to the achievement by the Company of the performance conditions shown in the table below and the employee/contractor satisfying a service condition of continuous employment with the Company up to and including the date when the performance conditions are achieved.

Grant Date 1-Dec-16 1-Dec-16 1-Dec-16 1-Dec-16	No. of Rights Expiry Date Fair Value (Cents) Performance Condition 625,000 31-Dec-19 7.0 75pj 2p Reserves hurdle 625,000 31-Dec-19 7.0 150pj 2p Reserves hurdle 625,000 31-Dec-19 7.0 225pj 2p Reserves hurdle 625,000 31-Dec-19 7.0 300pj 2p Reserves hurdle 2,500,000

Note 10 Segment information

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

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 allocations 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 Profit or Loss and Other 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 2017, the Group had the following interests in gas assets:

Comet Ridge Permits	Location	State/Country	CSG Interest	Conventional Interest	**Area (km2) **
ATP 743	Galilee Basin	QLD	100%	100%	3,195
ATP 744	Galilee Basin	QLD	100%	100%	4,296
ATP 1015	Galilee Basin	QLD	100%	100%	2,194
ATP 1191 Mahalo	Bowen Basin	QLD	40% *	n/a*	911
PEL 6	Gunnedah	NSW	29.55%	97.5%	5,162
PEL 427	Gunnedah	NSW	59.09%	100%	5,764
PEL 428	Gunnedah	NSW	68.42%	100%	6,018

• Comet Ridge has farm-in rights for conventional targets down to the level of the lower Mantuan coals.

40

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 10 Segment information (continued)

Segment performance

The following tables show the revenue and profit information regarding the Group’s operating segments.

30 June 2017 Segment revenue Exploration and evaluation expenditure impaired Exploration and evaluation expenditure written off Segment result before tax Reconciliation of segment result to Group loss before tax Interest revenue Other income Employee benefits’ expense Contractors’ and consultants’ costs Professional fees Corporate expenses Occupancy costs Fair value movement of financial liability at fair value Finance charges Other expenses Depreciation and amortisation expense Loss before tax 30 June 2016 Total segment revenue Exploration and evaluation expenditure impaired Segment result before tax Reconciliation of segment result to Group loss before tax Interest revenue Other income Employee benefits' expense Contractors' and consultants' costs Professional fees Corporate expenses Occupancy costs Fair value movement of financial liability at fair value Finance charges Other expenses Depreciation and amortisation expense Loss before tax	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $000's $000's $000's $000's - - - - - - - (205) - - (17) -	Total $000's - (205) (17)
	- - (17) (205)	(222)
	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $000's $000's $000's $000's - - - - - - (111) (204)	25 - (641) (219) (159) (93) (118) (1,957) (12) (207) (15)
		(3,618)
		Total $000's - (315)
	- - (111) (204)	(315)
		40 36 (632) (388) (128) (116) (203) (1,706) (43) (231) (22) (3,708)

Comet Ridge Limited I Annual Report 2017 41

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 10 Segment information (continued)

Segment assets and liabilities

The following tables show the segment assets and liabilities of the Group’s operating segments.

30 June 2017 Segment assets Segment liabilities Reconciliation of segment assets to Group assets Unallocated assets Current assets Non-current assets Current liabilities Non-current liabilities Total Group net assets Segment asset movement for the year Balance at 1 July 2016 Exploration and evaluation expenditure Impairment expense Exploration and evaluation expenditure written off Balance at 30 June 2017 30 June 2016 Segment assets Segment liabilities Reconciliation of segment assets to Group assets Unallocated assets Current assets Non-current assets Current liabilities Non-current liabilities Total Group net assets Segment asset movement for the year Balance at 1 July 2015 Exploration and evaluation expenditure Impairment - exploration expenditure Balance at 30 June 2016	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $000's $000's $000's $000's 22,089 21,402 - - - (15,227) - -	Total $000's 43,491 (15,227)
	22,089 6,175 - -	28,264
	21,246 19,997 - - 843 1,405 17 205 - - - (205) - - (17) -	7,232 53 (2,189) (572)
		32,788
		41,243 2,470 (205) (17)
	843 1,405 - -	2,248
	22,089 21,402 - -	43,491
	Queensland New Zealand New South Wales Galilee Bowen South Island Gunnedah $000's $000's $000's $000's 21,246 19,997 - - - (13,270) - -	Total $000's 41,243 (13,270)
	21,246 6,727 - -	27,973
	20,425 19,126 - - 821 871 111 204 - - (111) (204)	2,305 62 (1,071) (241)
		29,028
		39,551 2,007 (315)
	821 871 - -	1,692
	21,246 19,997 - -	41,243

42

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 11 Risk management

Overview

The Group's principal financial instruments comprise receivables, payables, available for sale financial assets, cash, term deposits and financial liabilities at fair value. The main risks arising from the Group's financial assets and liabilities are interest rate risk, price 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.

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 which are carried at amortised cost unless otherwise stated:

Financial Assets Cash and cash equivalents Trade and other receivables Restricted cash Financial Liabilities Trade and other payables Financial liability at fair value - Stanwell Corporation Limited	Consolidated June 2017 June 2016 $000's $000's 6,039 1,625 723 147 383 403
	7,145 2,175
	1,510 412 15,227 13,270
	16,737 13,682

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 2016.

		Profit or Loss	Profit or Loss		Equity
		1% increase	1% decrease	1% increase		1% decrease
2017	- Consolidated	$000's	$000's	$000's		$000's
Cash	and cash equivalents and restricted cash	64	(64)	64		(64)
2016	- Consolidated
Cash	and cash equivalents and restricted cash	20	(20)	20		(20)

Comet Ridge Limited I Annual Report 2017 43

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 11 Risk management (continued)

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 resources 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. With respect to the liability to Stanwell Corporation Limited (SCL) arising from the Renegotiated Mahalo Option Agreement, the Group will manage this liquidity risk by entering into a Gas Supply Agreement (GSA) with SCL and foregoing a portion of its future revenue from the Mahalo Gas Project over the term of the GSA. The revenue foregone by Comet Ridge is the $15 million discount indexed by CPI up to the date the GSA is signed.

The following table details the remaining contractual maturity for non-derivative financial liabilities.

Consolidated - 30 June 2017 Trade and other payables Financial liability at fair value - Stanwell Corporation Limited Consolidated - 30 June 2016 Trade and other payables Financial liability at fair value - Stanwell Corporation Limited	<1 year 1 to 3 years $000's $000's 1,510 - - 16,883	Total Contractual Carrying Cash Flows Amount $000's $000's 1,510 1,510 16,883 15,227
	1,510 16,883	18,393 16,737
	412 - - 16,883	412 412 16,883 13,270
	412 16,883	17,295 13,682

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:

	2017	2017	2016	2016
	USD	NZD	USD	NZD
Financial Assets	$000's	$000's	$000's	$000's
Cash and cash equivalents	-	8	-	25
Trade and other receivables	-	-	-	1
Financial Liabilities
Trade and other payables	-	(13)	-	(30)

Based on financial instruments held at 30 June 2017 and 30 June 2016, had the Australian dollar strengthened/weakened by 10% there would be nil impact on the Group’s profit or loss and equity.

44

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 11 Risk management (continued)

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 charges to joint operations. 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 2017 $nil, (2016: $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 three to four 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.

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.

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 evaluation 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.

Comet Ridge Limited I Annual Report 2017 45

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 11 Risk management (continued)

Fair value measurement

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

Fair value hierarchy

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 2017 (refer Note 3).

Financial Assets - Level 3 Available-for-sale financial asset - Investment in Comet Ridge Resources LLC Financial Liabilities - Level 3 Financial liability at fair value - Stanwell Corporation Limited Balance at the beginning of the year Movement in financial liability at fair value Balance at the end of the year	Consolidated June 2017 June 2016 $000's $000's - -
	15,227 13,270
	Consolidated June 2017 June 2016 $000's $000's 13,270 11,564 1,957 1,706
	15,227 13,270

Available-for-sale financial assets

Comet Ridge USA Inc., a wholly owned subsidiary of Comet Ridge Limited, owns a 10.04% (2016: 10.04%) 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. Pine Brook, a private equity firm based in New York City, USA holds the majority interest at approximately 89.5% (2016: 89.5%).

CRR is not a controlled entity of Comet Ridge Limited because, even though it is exposed to, or has the rights to, variable returns from its involvement with the entity; Comet Ridge Limited does not have the ability to affect those returns through its power to direct the activities of the entity so as to obtain benefits from it. The Group may retain its minority 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 7.2% under the arrangements with the private equity fund.

Fair value of available-for-sale financial assets

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-for-sale' 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.

46

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 11 Risk management (continued)

Fair value of available-for-sale financial assets (continued)

Given that Comet Ridge holds a minority interest in CRR that is now around the 10% level, and also given that the CRR investment is not material to Comet Ridge and Comet Ridge plans to not pay further cash calls (given Comet Ridge’s eastern Australia gas focus) it was considered prudent to fully impair the investment in CRR at 30 June 2014.

There have been no movements or changes between fair value hierarchy levels during the year.

Valuation techniques and process used to determine fair values

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.

Other fair value disclosures

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.

Note 12 Group structure

Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 15 (b):

described in Note 15 (b):
	Country of	Class of	Equity	Holding
Name of entity	Incorporation	Shares		%
			2017	2016
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
Comet Ridge Galilee Pty Ltd	Australia	Ordinary	100	100

Joint arrangements

The Group has interests in the following Joint Arrangements:

ATP 1191 Mahalo	–	40.00%
PEL427 Gunnedah	–	59.09%
PEL428 Gunnedah	–	68.42%
PEL6 Gunnedah	–	29.55%

In accordance with AASB 11 Joint Arrangements , the accounting treatment adopted for these joint arrangements depends upon an assessment of the rights and obligations of the parties to the arrangement that are established in each of the joint operating agreements (JOAs) or the farm-in agreement as the case may be. The JOA or farm-in agreement sets out the voting rights of the parties to the agreement. The voting rights determine who has control i.e. the power to direct the operating activities of the joint arrangement.

Based on the analysis of each JOA and farm-in agreement, the Group has classified each of its joint arrangements as a “joint operation” in accordance with the requirements of AASB 11 in that:

1. there is joint control because all decisions about the operating activities requires unanimous consent of all parties, or a Group of parties considered collectively; and

2. each party to the joint operation has rights to its respective interest in the assets and revenue of the arrangement, and obligations for its share of the liabilities and expenditure.

As a result, the Group recognises in its financial statements its share of the revenue, expenses, assets and liabilities of each of the joint operations in which it has an interest.

Comet Ridge Limited I Annual Report 2017 47

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 13 Items not recognised in the financial statements

Contingent liabilities

The Directors are not aware of any contingent liabilities other than the Financial Guarantee Contract which is one of the terms of the renegotiated Mahalo Option Agreement. Under the renegotiated agreement Comet Ridge Limited guarantees the indexed $20 million consideration payable by Comet Ridge Mahalo Pty Ltd (CRM) under Option B. Option B is exercisable by Stanwell Corporation Limited (SCL) upon the earlier of FID for any development of the Mahalo Gas Project permit area or on the 4th anniversary date of the execution of the new agreement.

If SCL elects to exercise Option B, it will receive a cash payment of $20 million at 1 July 2014 dollar terms which is to be escalated in accordance with CPI on and from 1 July 2014 and annually thereafter (or part thereof) up to the date the Pay Agreement is signed (refer to Note 3 for a more detailed explanation of the renegotiated Mahalo Option Agreement).

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	June 2017 June 2016 $000's $000's 94 83 107 201
	201 284

Bank guarantees

Westpac Banking Corporation have provided bank guarantees totalling $383,000 (2016: $403,000) as follows:

• $150,000 (2016: $150,000) to the State of Queensland in respect of the Group's exploration permits and environmental guarantees;

• $200,000 (2016 $200,000) to the State of NSW to support the Group’s exploration permits and environmental guarantees; and

• $33,000 (2016: $53,000) 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.

Post balance date 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.

Note 14 Other information

Related party transactions

Parent entity and subsidiaries

The legal parent entity is Comet Ridge Limited. Details of controlled entities are set out in Note 12.

Key Management Personnel

There were no transactions with Key Management Personnel during the year, other than those disclosed in the remuneration section of the Directors’ Report.

Transactions with controlled entities

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 shown in the Parent Entity disclosures section of this note. The loans to subsidiaries are interest free, repayable in cash at call and are unsecured.

48

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 14 Other information (continued)

Auditors' 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 Earnings per share (a) Reconciliation of earnings used in calculating basic and diluted earnings per share: Loss for the year Loss used in the calculation of the basic and dilutive earnings per share (b) Weighted average number of ordinary shares used as the denominator Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for the calculation of diluted earnings per share: Options/performance rights Weighted average number of ordinary shares used in calculating diluted earnings per share	Consolidated June 2017 June 2016 $ $ 95,000 92,769 - -
	Consolidated June 2017 June 2016 $000's $000's 3,618 3,708
	3,618 3,708
	Number Number 561,286,810 526,250,547 - -
	561,286,810 526,250,547

(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 9.

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.

Key Management Personnel

Details of Key Management Personnel

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

James McKay	Non-executive Chairman
Tor McCaul	Managing Director
Gillian Swaby	Non-executive Director
Christopher Pieters	Executive Director
Michael Dart	Non-executive Director

Key Management Personnel compensation Short-term employee benefits Post-employment benefits Long-term employment benefits Share-based payments	Consolidated June 2017 June 2016 $ $ 677,620 623,319 41,362 39,761 10,121 10,170 (17,468) 29,833
	711,635 703,083

Comet Ridge Limited I Annual Report 2017 49

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 14 Other information (continued)

Parent entity disclosures Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Share-based payments reserve Accumulated losses Total equity Loss for the period Other comprehensive income Total comprehensive income	June 2017 June 2016 $000's $000's 6,768 2,108 31,754 29,335
	38,522 31,443
	1,355 359 1,969 1,638
	3,324 1,997
	35,198 29,446
	113,988 106,633 3,844 3,820 (82,634) (81,007)
	35,198 29,446
	1,628 1,883 - -
	1,628 1,883

Bank guarantees

Bank guarantees are disclosed in Note 13.

Contingent liabilities

The Directors are not aware of any contingent liabilities.

Loans to subsidiaries and investments in subsidiaries

The parent entity has recorded investments in subsidiaries at cost of $48.29 million (2016: $48.29 million) less provisions for impairment $48.12 million (2016: $48.12 million). The parent entity has also loaned funds to its subsidiaries of net $26.31 million (2016: $24.48 million) primarily to undertake exploration expenditure. The parent entity has impaired the carrying amount of the loans by $18.26 million (2016: $18.0 million). 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.

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	June 2017 June 2016 $000's $000's 94 83 107 201
	201 284

50

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 14 Other information (continued)

Parent entity disclosures (continued)

Commitments (continued)

(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	June 2017 June 2016 $000's $000's 92 38 5,692 5,455
	5,784 5,493

Note 15 Summary of other 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) Income taxes

Tax consolidation

Comet Ridge Limited and its wholly owned Australian subsidiaries (Chartwell Energy Limited, 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:

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

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

• iii. 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.

(b) Principles of consolidation

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the 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.

Comet Ridge Limited I Annual Report 2017 51

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

(c) Principles of consolidation (continued)

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 non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling 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.

(d) Foreign currency translation

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.

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 Profit or Loss and Other 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 nonmonetary 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 available-for-sale financial assets are included in the fair value reserve in equity.

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 Profit or Loss and Other 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 Profit or Loss and Other 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) Investments and other financial assets and liabilities

Classification and measurement

The Group classifies its financial assets and liabilities in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available for sale financial assets and financial liabilities at fair value. 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 or liability is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately.

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Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

(e) Investments and other financial assets and liabilities (continued)

Classification and measurement (continued)

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.

Amortised cost is calculated as:

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

• iii. 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.

• (a) 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 short-term 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.

• (b) 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.

• (c) 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.

• (d) 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’s financial liabilities comprise the liability owed to Stanwell Corporation Limited arising from the renegotiated Mahalo Option Agreement which is designated as a financial liability at fair value. The fair value of this liability is based on the anticipated discounted cash flows arising from the renegotiated Mahalo Option Agreement. Future movements in the fair value of financial liability at fair value will be recognised in profit or loss.

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.

Comet Ridge Limited I Annual Report 2017 53

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

(e) Investments and other financial assets and liabilities (continued)

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.

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 6.

• (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.

(f) 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 impairment are reviewed for possible reversal of impairment at each reporting date.

54

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

(g) Employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled wholly 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.

Other long-term employee benefit obligations

The liability for long service leave and annual leave which is not expected to be settled wholly 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 corporate 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.

Superannuation

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

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 nonmarket 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.

(h) 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.

(i) 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.

Comet Ridge Limited I Annual Report 2017 55

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

(j) 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 lessor) are charged to profit or loss on a straight line basis over the period of the lease.

(k) Comparatives

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

(l) 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 2017 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 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (applicable to annual reporting periods beginning on or after 1 January 2018 as deferred by AASB 2015-10: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128)

This Standard amends AASB 10: Consolidated Financial Statements and clarifies the accounting treatment where a parent loses control over a subsidiary that is not a “business” as defined by AASB 3 to an associate or joint venture and requires that:

• a gain or loss (including any amounts in other comprehensive income) be recognised only to the extent of the unrelated investor’s interest in that associate or joint venture;

• the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint venture; and

• any gain or loss arising from remeasuring the remaining investment in the former subsidiary at fair value also be recognised only to the extent of the unrelated investor’s interest in the associate or joint venture. The remaining gain or loss should be eliminated against the carrying amount of the remaining investment.

The application of AASB 2014-10 will result in a change of accounting policies for transactions between an investor and its associate or joint venture where the sale or contribution of assets results in a loss of control of a subsidiary that is a business in accordance with AASB 3. Previously, in these circumstances, any gains or losses were only recognised to the extent of the unrelated investor’s interest. The accounting will now depend on whether the sold/contributed assets constitute a business or an asset. If the activities and assets acquired/sold constitute a business, the acquisition/sale will then be accounted for in accordance with AASB 3.

56

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Notes to the Financial Statements (continued)

Note 15 Summary of other significant accounting policies (continued)

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

AASB 9 Financial Instruments and associated Amending Standards (applicable to annual reporting periods beginning on or after 1 January 2018)

This standard provides guidance on the classification and measurement of financial assets and financial liabilities. The standard is not applicable until 1 January 2018 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. 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 relate to equity investments. The repurchase of the 5% interest in the Mahalo Joint Arrangement is taken up in exploration and evaluation expenditure which is considered to be a trading asset. As a result, movements in the fair value of the associated Financial Liability at Fair Value – Stanwell Corporation Limited will continue to be designated at fair value through profit or loss.

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 adoption of this standard from 1 January 2018 is not expected to have a material impact on the Group. The Group has not yet decided when to adopt AASB 9.

AASB 15 Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after 1 January 2018 as deferred by AASB 2015-8: Amendments to Australian Accounting Standards – Effective Date of AASB 15)

This standard establishes a comprehensive framework for determining whether, how much and when revenue is recognised. With some exceptions e.g. leases and insurance contracts, AASB 15 applies to all contracts with customers. The core principle is that an entity should recognise revenue when the various performance obligations included in the contract are satisfied. This means that revenue will be recognised when control of the goods or services is transferred rather than on the transfer of risks and rewards as is currently the case under IAS 18 Revenue. It is not expected that there will be any impact on the Group.

Other than as noted above, the adoption of the various Australian Accounting Standards and Interpretations and IFRSs on issue but not yet effective will not impact the Group’s accounting policies. However, the pronouncements may result in changes to information currently disclosed in the financial statements. The Group does not intend to adopt any of these pronouncements before their effective dates.

AASB 16 Leases (applicable to annual reporting period, beginning on or after 1 January 2019)

AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its statement of financial position in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its statement of financial position for most leases.

There are some optional exemptions for leases with a period of 12 months or less, low value leases and leases of exploration and mineral tenements. The full impact of this standard is yet to be fully assessed, but adoption of this standard from 1 January 2019 is not expected to have a material impact on the Group.

Comet Ridge Limited I Annual Report 2017 57

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Directors’ Declaration

In the Directors’ opinion:

• 1) the attached financial statements and Notes are in accordance with the Corporations Act 2001, including:

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

• (b) giving a true and fair view of the financial position as at 30 June 2017 and of the performance for the year ended on that date of the consolidated entity.

• 2) As stated in Note 2, the financial statements also comply with International Financial Reporting Standards.

• 3) 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, 21 September 2017

58

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

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Comet Ridge Limited “the Company” and its controlled entities “the Group”, which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and

• (b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2(c) 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 Note2 (c) 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.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Comet Ridge Limited I Annual Report 2017 59

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Key audit matter

How our audit addressed the matter

Going Concern – Basis of preparation of Consolidated Financial Statements Refer to Note 2(c): Basis of preparation – Going concern

Management have prepared the consolidated financial statements on a going concern basis which indicates that the Group will continue to meet its commitments and can therefore continue normal business activities and settlement of liabilities in the ordinary course of business.

The ability of the Group to execute its current planned exploration and evaluation activities requires the Group to regularly raise additional capital or to sell down its interest in existing assets or pre-sell gas from its assets due to the nature of its operations being in exploration and evaluation phase.

Our procedures included, amongst others:

• Agreeing that the cash flow forecasts prepared by management were consistent with those approved by the Board of Directors;

• � Evaluating management’s projected cash flows based on exploration and evaluation work commitments;

• Evaluating management’s judgements and their basis of key assumptions in the cash flow forecast;

• Performing sensitivity analysis of management’s cash flow forecast to determine the extent of the Group not having sufficient resources to meet its forecast commitments as they fall due.

Management’s assessment of the Group’s going concern ability is based on the Group’s cash flow forecast that includes key assumptions and judgements on minimum exploration and corporate expenditure.

Exploration and evaluation expenditure – Impairment

Refer to Note 3: Material balances – critical accounting estimates and judgements

The Group is involved in exploration and evaluation activities with a focus on Coal Seam Gas exploration and appraisal. The Group has tenement interest and a suite of prospective projects in Queensland and New South Wales.

Exploration and evaluation expenditure totalling $43.49 million as disclosed in Note 3 represent a significant balance recorded in the consolidated statement of financial position.

AASB 6 Exploration for and Evaluation of Mineral Resources require the

Exploration and evaluation assets to be assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount.

Management performed an impairment assessments at 30 June 2017 that required significant assumptions in determining whether impairment indicators exist.

Our procedures included, amongst others:

• Evaluating management’s methodologies and their documented basis for key assumptions utilised in the impairment valuation models: � forecast gas prices; � forecast gas exploration reserves; � project commencement and commencement of gas delivery;

• � anticipated cost of rehabilitation; � capital expenditure estimates; and � discount rate;

• � Verified a sample of additions to the group’s exploration and evaluation assets for the year ending 30 June 2017;

• � Verified each permit remains valid in respect of each tenement through the review of official government documentation; and

• � Confirmed the results of additional or revised reserve certifications.

Financial Liability at fair value

Refer to Note 3: Material balances – critical accounting estimates and judgements

The Group repurchased the 5% interest in the Mahalo Gas Project from Stanwell Corporation Limited on 18 March 2014. The liability to Stanwell Corporation Limited is recognised as a financial liability at fair value through profit and loss.

The nature of the consideration payable by the Group is at the option of Stanwell Corporation Limited and is either in the way of:

• Option #1: Gas supply agreement with an embedded $15m discount against the market price of gas at the time of the Final Investment Decision which can occur at any time up to 18 October 2018; or

• Option #2: $20m cash payment, indexed by CPI.

The financial liability recognised at 30 June 2017 was $15.23m.

Significant judgements are made by management to determine the most probable option that will be exercised by Stanwell Corporation Limited and management’s key assumption to determine the fair value of the liability.

Our procedures included, amongst others:

• Evaluating management’s methodologies and their judgement used to determine which is the most probable option to be exercised by Stanwell Corporation Limited by assessing:

• The potential of Mahalo/Mira Gas Project to supply the agreed quantities of gas; and

• Gas price under the gas pricing mechanism compared to the current market gas price.

• � Evaluating management’s key assumptions in determining the fair value of the liability, including:

• Index rate used;

• Discount rate used; and

• Final Investment Decision date.

• Verifying management’s calculation in determining the fair value at balance date.

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60

Other Information

The directors are responsible for the other information. The other information comprises the information included in the Group’s Annual Report for the year ended 30 June 2017, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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Comet Ridge Limited I Annual Report 2017 61

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From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 12 to 16 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Comet Ridge Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001.

Responsibilities

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.

PITCHER PARTNERS

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N BATTERS

Partner Brisbane, Queensland 21 September 2017

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62

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Additional Information

The additional information set out below was applicable at 4 September 2017:

1. Number of Equity Holders

Ordinary Share Capital

617,742,154 fully paid ordinary shares are held by 1,781 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

ibution 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* 122 5,141 0.000% 201 671,754 0.110% 191 1,542,850 0.250% 746 30,786,255 4.980% 521 584,736,154 94.660%
	1,781 617,742,154 100.000%

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

The numbers of shareholders holding less than a marketable parcel (being 3,572 units or less) were:

236 Holders (273,617 Shares)

4.

Substantial Shareholders

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

Name	Number of	Percentage
	Shares Held	of Issued Capital
HSBC Custody Nominees (Australia) Limited	51,500,000	8.34%
McKay Super Pty Ltd & Waterford Atlantic Pty Ltd & Affiliates	37,273,130	6.03%

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.

5. Unquoted Securities

Unlisted Share Rights: The Company has 5,020,000 share rights on issue, issued in accordance with the Share Rights Plan last approved by shareholders at the Company’s AGM on 21 November 2016. The number of beneficial holders of share rights totals 9.

Comet Ridge Limited I Annual Report 2017 63

Comet Ridge Limited – Annual Report for the Year Ended 30 June 2017

Additional Information (continued)

6. The 20 Largest Holders of Ordinary Shares

1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2. J P MORGAN NOMINEES AUSTRALIA LIMITED 3. BRIXIA INVESTMENTS LTD 4. MCKAY SUPER PTY LTD 5. VILLIERS QUEENSLAND PTY LTD 6. GILBY RESOURCES PTY LTD 7. NORFOLK ENCHANTS PTY LTD 8. SIXTH ERRA PTY LTD 9. KABILA INVESTMENTS PTY LTD 10. WATERFORD ATLANTIC PTY LTD 11. PG CONSOLIDATED PTY LTD 12. BNP PARIBAS NOMS PTY LTD 13. MR CHRISTOPHER JOHN BLAMEY + MRS ANNE MARGARET BLAMEY SUPER FUND A/C> 14. CITICORP NOMINEES PTY LIMITED 15. CITICORP NOMINEES PTY LIMITED 16. MISS SARA ELIZABETH HEATH 17. NAUGHTON SUPER PTY LTD 18. MICHAEL JOYCE PTY LTD 19. GILBY SUPER PTY LTD 20. MR TOR RAYMOND MCCAUL TOTAL

Number of Ordinary Fully Paid Shares Held Percentage of Issued Capital % 56,148,520 9.09% 44,038,986 7.13% 25,407,407 4.11% 20,230,789 3.27% 18,987,782 3.07% 18,500,000 2.99% 16,000,000 2.59% 13,988,268 2.26% 13,761,643 2.23% 13,697,082 2.22% 13,425,000 2.17% 11,562,905 1.87% 10,400,000 1.68% 9,184,032 1.49% 7,571,282 1.23% 6,804,067 1.10% 6,000,000 0.97% 5,550,000 0.90% 5,126,764 0.83% 5,101,826 0.83%

321,486,353 52.04%

7. Restricted Securities

There were no restricted securities issued or held during the reporting period.

8. Interest in Petroleum Tenements

Authority to Prospect (ATP), Petroleum Exploration Lease (PEL), Petroleum Mining Permit (PMP) Interests

ATP / PEL / PMP	Location	*Interest	Operator
***ATP1191 Mahalo	Bowen Basin	40%	Santos QNT Pty Ltd
**PEL427	Gunnedah Basin	100% Conventional 59.09% CSG	Comet Ridge Limited (Conventional) Santos NSW (Betel) Pty Ltd (CSG)
**PEL428	Gunnedah Basin	100% Conventional 68.42% CSG	Comet Ridge Limited (Conventional) Santos NSW (Betel) Pty Ltd (CSG)
**PEL 6	Gunnedah Basin	97.5% Conventional 29.55% CSG	Comet Ridge Limited (Conventional) Santos NSW (Betel) Pty Ltd (CSG)
ATP743	Galilee Basin	100%	Comet Ridge Limited
ATP744	Galilee Basin	100%	Comet Ridge Limited
ATP1015	Galilee Basin	100%	Comet Ridge Limited
PMP50100	South Island, New Zealand	100%	Comet Ridge NZ Pty Ltd

• 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 Conventional oil and gas equity and CSG Joint Ventures. The percentages recorded show the interests that Comet Ridge (or a wholly owned subsidiary) holds in these respective permits.

• *** Comet Ridge Limited was appointed agent by Santos to manage Mahalo Block subsurface work in respect of the Mahalo 2017 Joint Venture Exploration Work Program and Budget.

64

Corporate Directory

Comet Ridge Limited

Directors

James McKay Non-executive Chairman Tor McCaul Managing Director Gillian Swaby Non-executive Director

Chris Pieters Executive Director Michel Dart Non-executive Director

Stephen Rodgers Company Secretary

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 Chartered Accountants Level 38, Central Plaza One 345 Queen Street BRISBANE, QLD 4000 Telephone: +61 7 3222 8444

Securities Exchange Listing

Australian Securities Exchange Ltd Home Exchange: Brisbane

ASX Code: COI

www.cometridge.com.au

Comet Ridge Limited I Annual Report 2017 65

Front cover: Mira 5, arial shot looking west - 2017 Back cover: Mira 5, arial shot looking north - 2017

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Comet Ridge Limited

Level 3 283 Elizabeth Street Brisbane QLD 4000 Telephone: +61 7 3221 3661 Facsimile: +61 7 3221 3668

www.cometridge.com.au