COMET RIDGE LIMITED — Capital/Financing Update 2004

Mar 7, 2004

MARKET RELEASE

8 March 2004

Comet Ridge Limited

Comet Ridge Limited has applied for admission to the official list of Australian Stock Exchange Limited and for quotation of its securities. It has been given a provisional ASX code. Provision of an ASX code and publication of the following information does not mean that the entity will be admitted or that its securities will be quoted.

Pam Ross Manager Company Announcements Office

MANI NEMBRATA MAHINI Thistian Community
Comet Ridge Limited ACN 106 092 577
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. အောက်တိုင်းများရန် သောအားလာ ၂ (၁၉) နေ့ နဲ့ (၁၄) ကာ ၂ ရက် ၁၉) ရေးနှင့် ၁၄ ရက် ၁၉ ရက် ၂ ရက်များ ရေးနှင့် (၁၉) ရက အောက်တော် မော်လာတန် သောအားလာ ၂ ရက် ၂ ရက် ၁၉ ရက် ၂ ရက် ၂ ရက် ၂ ရက်နေ့ ပါဝင်များနိုင်သော အရာအားလားရေး ရေးကားသည	الفارد والمتعارف والمعارف والمتعارف والمتعارف والمتعارف والمتعارف والمنابي والمنابي
the control of the control of the	Lead Manager Patersons Securities Limited ABN 69 008 896 311	the company of the company of the company of the company of the company of the company of the company of the company
		This document is important and requires your immediate attention. It should be read in its entirety. If you do not understand its contents or are in doubt as to the course you should follow, you should consult your professional adviser. An investment in the Shares offered by this Prospectus should be considered as speculative.

INVESTMENT HIGHLIGHTS

Coal seam gas (CSG) has gained credibility in Australia:

• significant proven gas reserves and production
• long term gas supply contracts with major customers
• strong government support
• third party financed infrastructure

Carefully selected interests:

• exposure to two advanced exploration projects
• stringent selection process
• proximity to infrastructure and markets
• strong joint venture partners

Experienced management:

• Managing Director has built a substantial coal seam gas business in the USA
• the Managing Director specifically recruited to build a CSG business in Australia

Early commercialisation focus:

• two principal projects are at the advanced exploration/pre-feasibility stage
• presence of coal and gas is proven
• active program of 12 wells commenced
• in 2004 the Company plans to define gas in place and deliverability
• reserves certification planned for 2005

Gas sales planned for 2006:

• two Memoranda of Understanding for gas sales for the WCM Project
• expect to move to production and gas sales in 2006

COAL SEAM GAS (CSG)

Photo courtesy of Griffin Coal Company

CHAIRMAN'S LETTER

Dear Investor

Comet Ridge Limited (Comet Ridge) was formed in August 2003 by Strike Oil NL (Strike), a public unlisted Australian oil and gas exploration company, to further its coal seam gas business which had been built up over the previous three years. Strike developed an Eastern States gas strategy that anticipated the significant role that coal seam gas now plays in the energy markets in Queensland and New South Wales. To advance that strategy, Strike recruited Andy Lydyard, an Australian with a successful track record of building a large coal seam gas business in the USA with the privately held |.M. Huber Corporation.

The Comet Ridge portfolio has been specifically chosen over the three year period from many opportunities assessed. The criteria used in the selection process to build the portfolio of advanced coal seam gas interests are:

• the presence of extensive coal deposits where significant gas indications have already been recorded in coal and oil/gas exploration activities;
• potential gas resources are substantial;
• gas concentrations are likely to provide a basis for economic production; and
• potential development projects are close to infrastructure and/or markets.

Comet Ridge's core interests are the Comet Ridge Project in the Bowen Basin of central eastern Queensland and the Walloon Coal Measures Project (WCM Project) in south east Queensland. These projects exhibit all of the selection criteria and are at a stage where commercial feasibility is ready to be established. The presence of significant volumes of gas bearing coal has been proven by past coal and petroleum exploration in both areas.

In January 2004, Comet Ridge raised \$2,000,000 to enable it to significantly add to its interest in the WCM Project and to fund the initial drilling program for the Comet Ridge Project.

Through this Offer, Comet Ridge will progress the evaluation and pilot production activities on the Comet Ridge Project and WCM Projects. The Company will participate in 12 wells and at least two pilot production programs in 2004, with the aim of proving commerciality by the end of 2004 and achieving gas sales in 2006.

The Company's programs are taking place at a time when there is an increasing focus on gas as a fuel of choice in power generation and where coal seam gas has gained significant market share and is becoming an important source of indigenous energy in the growing energy markets of Queensland and New South Wales.

On behalf of the Board, I invite you to participate in this Offer. Your investment in the Company will enable it to evaluate the economic potential of its interests in an emerging and environmentally friendly industry. Comet Ridge aims to establish itself as a Company that can play a significant role in Australia's energy future.

Yours sincerely

leff Schneider

Chairman

Comet Ridge Limited

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IMPORTANT NOTICE

This Prospectus is dated 24 February 2004 and a copy of this Prospectus was lodged with the ASIC on that date. The ASIC takes no responsibility for the contents of this Prospectus. No securities will be allotted or issued on the basis of this Prospectus later than the expiry date of this Prospectus being the date which is 13 months after the date of this Prospectus. Securities allotted or issued pursuant to this Prospectus will be allotted or issued on the terms and conditions set out in this Prospectus.

Before deciding to invest in the Company, potential investors should read the entire Prospectus and, in particular, in considering the prospects for the Company, investors should consider the risk factors that could affect the financial performance of the Company. Investors should carefully consider these factors in light of personal circumstances (including financial and taxation issues). The Company is an exploration company and the risks are therefore significant. The Shares offered by this Prospectus should be considered speculative. Refer to Section 10 for details relating to risk factors. Investors should seek professional advice from an accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest.

No person is authorised to give any information or to make any representation in connection with the Offer described in this Prospectus which is not contained in this Prospectus. Any information or representation not so contained may not be relied upon as having been authorised by the Company in connection with the Offer.

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

No action has been taken to register or qualify the Shares or the Offer, or otherwise to permit a public offering of the Shares, in any jurisdiction outside Australia.

In accordance with Chapter 6D of the Corporations Act this Prospectus is subject to an Exposure Period of seven days from the date of lodgement with the ASIC. This period may be extended by the ASIC for a further period of up to seven days. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. If this Prospectus is found to be deficient, Applications received during the Exposure Period will be dealt with in accordance with section 724 of the Corporations Act. Applications received prior to the expiration of the Exposure Period will not be processed until after the expiry of the Exposure Period. No preference will be conferred on Applications received during the Exposure Period and all Applications received during the Exposure Period will be treated as if they were simultaneously received on the Opening Date.

This Prospectus will be issued in paper form and as an Electronic Prospectus, which may be viewed online at the Company's website or www.patersonssecurities.com.au. The Offer is available to persons receiving an electronic version of this Prospectus in Australia. The Corporations Act prohibits any person from passing onto another person the Application Form unless it is attached to or accompanied by a complete and unaltered version of this Prospectus. During the Offer period, any person may obtain a hard copy of this Prospectus by contacting the Company directly by telephone on 08 9225 7108 or by email all comet C) consimiles, for an or by telephoning the Leve Marager on 08 9263 1111 or 60 8208 3232.

Coal Seam Gas is the same as gas used in the home to power
stoves and water heaters.

CAPITAL STRUCTURE

After completion of the Offer the capital structure of the Company will be as follows:

NUMBER	SHARES	\$
13,000,000	Existing Shares	600
15,408,240	Seed Capital (@13 cents)	2,003,072
25,000,000	Shares to be issued pursuant to Offer	5,000,000
7,750,000	Vendor Shares *	1,550,000
61,158,240	Total Shares on issue	8,553,672
	OPTIONS
5,350,000	20 cent options
	New funds raised by the Offer	5,000,000
	Estimated cost of the Offer	500,000
	The rights attaching to Shares are described in Section 11.5 and the rights attaching to Options and Director's Options are described in Sections 11.6 and 11.7.
	: Shares are to be issued under the CSG Sale Agreements referred to in Section 9.3 and the Anzoil Sale Agreement referred to in Section 9.

Note:

* These

Section 9.7.

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CSG is also a direct source of energy for
industry, and as a fuel
for electricity generation.

CORPORATE DIRECTORY

COMET RIDGE LIMITED ACN 106 092 577

DIRECTORS leff Schneider Non Executive Chairman

Andy Lydyard Managing Director

Simon Ashton Non Executive Director

Gillian Swaby Non Executive Director

COMPANY SECRETARY Gillian Swaby

REGISTERED OFFICE

Level 10 International House 26 St Georges Terrace PERTH WA 6000 Ph: 08 9225 7108 Fax: 08 9225 4448 Email: comet@cometridge.com.au Website: www.cometridge.com.au

SOLICITORS TO THE COMPANY

Blakiston & Crabb 1202 Hay Street WEST PERTH WA 6005

AUDITORS

HLB Mann Judd 15 Rheola Street WEST PERTH WA 6005

INDEPENDENT ACCOUNTANTS

HLB Mann Judd 15 Rheola Street WEST PERTH WA 6005

INDEPENDENT PETROLEUM CONSULTANT

MBA Petroleum Consultants Level 2, 2 Park Road MILTON QLD 4064

INDEPENDENT ENERGY MARKET EXPERT

EnergyAdvice Pty Ltd Suite 4, Level 1 622 Ferntree Gully MULGRAVE VIC 3170

LEAD MANAGER

Patersons Securites Limited Level 23, 2 The Esplanade PERTH WA 6000 Ph: 08 9263 1111 Fax: 08 9325 5123

Patersons Securities Limited 264 George Street SYDNEY NSW 2000 Ph: 02 8238 6222 Fax: 02 8238 6266 Website: www.patersonssecurities.com.au

SHARE REGISTRY

Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace PERTH WA 6000 Ph: 1300 557 010 $Fax:$ 08 9323 2033

INVESTMENT SUMMART

1.1 Indicative Timetable

Date of Prospectus:	24 February 2004
Dispatch of Prospectus to Perilya Shareholders: *	3 March 2004
Opening Date:	3 March 2004
Perilya Shareholder Priority Offer Closing Date: *	26 March 2004
Public Offer Closing Date:	2 April 2004
Dispatch of Holding Statements:	19 April 2004
Quotation of Shares on ASX expected:	23 April 2004

These dates are indicative only and may vary. The Company reserves the right to vary the Opening Date, Priority Offer Closing Date and Public Offer Closing Date without prior notice subject to the requirements of the Listing Rules and Corporations Act. Applicants are encouraged to apply as soon as possible after the Offer opens as the Offer may close earlier than the date specified above. The Company also reserves the right not to continue with the Offer at any time before the allotment of Shares to successful Applicants.

The above are anticipated dates only. The date the Shares are expected to be issued and/or commence trading on the Official List may vary with any change to the Priority Offer Closing Date or Public Offer Closing Date.

Please refer to Section 4.3 for details of the Priority Offer.

1.2 Comet Ridge Limited

The Company was registered on 28 August 2003 to exploit the large volumes of natural gas trapped in coal deposits found in Queensland and New South Wales. The formation of Comet Ridge was part of a broader Eastern States gas strategy that Strike put into place three years ago. That strategy anticipated the significant role that coal seam gas is now playing in the growing eastern Australian energy market.

The Company has secured a portfolio of coal seam gas projects including two exceptional opportunities in Queensland. The Comet Ridge Project, in the Bowen Basin in central eastern Queensland, is on trend with Australia's largest coal seam gas field at Fairview/Durham Ranch in central eastern Oueensland.

The second is the WCM Project in the Surat Basin in south east Queensland. The WCM Project is already at the stage of drilling and commissioning a pilot production test and the Company is a party to two Memoranda of Understanding, providing for the development and sale of coal seam gas.

The Company's other project areas are the Galilee Project in the Galilee Basin in central Queensland and the Shallow Gas Project in the Surat/Gunnedah Basin in northern New South Wales.

Comet Ridge raised approximately \$2,000,000 in December 2003 and January 2004 to acquire additional assets, fund its farmin earning commitments and provide working capital leading up to its proposed listing on the ASX.

Comet Ridge is committed to the principles of sustainable development. The Board views the coal seam gas industry as an opportunity for economic growth and business success while acknowledging that all of the Company's activities must be balanced with the environment's protection.

1.3 Strategy

Comet Ridge's strategy is to locate, develop and produce natural gas from coal seams to supply energy markets in Queensland and New South Wales.

To meet its principal objective, the Company has assembled a prospective portfolio which includes exposure to two exceptional coal seam gas projects in Queensland.

Comet Ridge has aligned itself with cost effective and technically proficient operators where it can add its technical expertise. The Company may choose to become an operator in the future.

1.4 Corporate Governance

The Board currently comprises a Non Executive Chairman, a Managing Director and two Non Executive Directors. It is the intention of the Board to add a third Non Executive Director after listing of the Company on the ASX.

The Board is responsible for:

• corporate governance;
• selection, appointment and remuneration of the Company's Managing Director;
• setting strategic direction;
• monitoring performance of the Company and that of the Managing Director;
• overseeing the financial affairs of the Company including approval of expenditures;
• ensuring appropriate policies and procedures are in place to manage risk and internal control:
• ensuring compliance with laws and regulations that apply to the Company's business; and
• monitoring the business on behalf of all Shareholders.

1.5 Purpose of the Offer

The purpose of the Offer is to raise \$5,000,000 with a minimum subscription of \$4,000,000 by issuing up to 25,000,000 Shares at 20 cents per Share. Proceeds of the Offer will be used to:

• fund the exploration, appraisal drilling and development of the Company's coal seam gas projects in Queensland and New South Wales;
• provide funds for the administration of the Company;
• meet the expenses of the Offer of approximately \$500,000; and
• provide working capital for the first two years.

1.6 Public Offer

The Public Offer is open to public investors. The Public Offer is for a total of 25,000,000 Shares reduced by the number of Shares subscribed for under the Priority Offer.

Applications must be made on the Public Application Form enclosed with this Prospectus. Applications under the Public Offer must be for a minimum of 10,000 Shares and thereafter in multiples of 500 Shares.

Further details of the Public Offer are set out in Section 4.3.

INVESTMENT SUMMARY

Section 1

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THE REAL PROPERTY AND INTERNATIONAL PROPERTY

المُوَلِّينَ ﴾ [المسلم: 1/ 1987م ) والمحافظة المسلم المسلم المسلم المسلم المسلم المسلم المسلم المسلم L,

1.7 Priority Offer to Perilya Shareholders

By virtue of Perilya's shareholding in the Company and a prior arrangement with Strike, the Company has agreed to provide a Priority Offer to Perilya Shareholders on the Perilya register on 22 January 2004. Under the Priority Offer, 7,500,000 Shares offered under this Prospectus will be made available for application by Perilya Shareholders in priority to public investors.

Perilya Shareholders who wish to subscribe for Shares pursuant to the Priority Offer must make an Application on the blue Priority Application Form enclosed with this Prospectus. Applications under the Priority Offer must be for a minimum of 10,000 Shares and thereafter in multiples of 500 Shares.

Further details of the Priority Offer are set out in Section 4.3.

Perilya holds 34.9% of the Shares as at the date of this Prospectus and will hold 16.2% of the Shares on issue if the Offer is fully subscribed.

1.8 Permit Interests

Table 1

The Company has entered into two sale and purchase agreements:

• (a) interests acquired from Strike pursuant to the CSG Sale Agreements as described in Sections 9.3 to 9.6; and
• $(b)$ interests acquired from Anzoil pursuant to the Anzoil Sale Agreement as described in Section 9.7.

Under these agreements, Comet Ridge has agreed to acquire the interests shown in Table 1 and in Figure 1.

The remaining obligations associated with these agreements involve Comet Ridge issuing 1,500,000 Shares at 20 cents per Share to Anzoil (or alternatively, at Comet Ridge's sole election, \$300,000 in cash) and 6,250,000 Shares at 20 cents per Share to Strike on the Company being admitted to the Official List. All future expenditure commitments will be met by Comet Ridge.

1.9 Expenditure Plans

The Company raised approximately \$2,000,000 in December 2003 and January 2004 to:

• $(a)$ fund the acquisition of additional interests in the WCM Project;
• pay cash calls on the WCM Project for the Tipton West Pilot drilling; (b)
• pay cash calls on the current two core hole program on the Comet $\overline{c}$ Ridge Project;
• (d) fund corporate costs; and
• meet other costs associated with the preparation of this Prospectus. $(e)$

The Company is now seeking to raise up to \$5,000,000 to fund its ongoing earning expenditures, pilot and initial development drilling on the Comet Ridge Project and the WCM Projects, provide working capital for the next two years and cover the costs of the Offer as set out in Table 2.

If the Company raises less than the maximum subscription amount of \$5,000,000 but more than the minimum subscription amount of

Project	Permit	Farmout Block	Basin	State	Current Interest	Total Interest available
Comet Ridge	ATP 337P	Comet Ridge	Bowen	QLD	0	40%
WCM	ATP 683P	Dalby	Surat	QLD	20%	20%
WCM	PL 198A		Surat	QLD	20%	20%
WCM	ATP 683P	Dalby South	Surat	QLD	25%	$50\%$
WCM	ATP 683P	Millmerran	Surat	QLD	10%	50%
WCM	ATP 689P		Surat	QLD	i 0%	$50\%$
Galilee	ATP 743P	$\blacksquare$	Galilee	QLD	100%
Galilee	ATP 744P		Galilee	QLD	100%
Shallow Gas	PEL 427		Surat/Gunnedah	NSW	100%
Shallow Gas	PEL 428		Surat/Gunnedah	NSW	80%	$\blacksquare$
Shallow Gas	PSPA 9	$\blacksquare$	Surat	NSW	50%	$\blacksquare$

I. Award of the permit is pending.

1. Comet Ridge may choose not to earn the available interest in each permit or block.

INVESTMENT SUMMARY

Section 1

TOLES NO. HOURS EXPRESSED

тепис у "нас пі езикні Project	Permit	Farmout Block	Seed Capital	Year 1	Year 2	Total
				(5'000)	(5'000)	(5'000)
Comet Ridge	ATP 337P	Comet Ridge	600	750	500	1,850
WCM	ATP 683P	Dalby & PL 198A	850	200	200	1,250
WCM	ATP 683P	Dalby South	250	1,000		1,250
WCM	ATP 683P	Millmerran		50	50	100
WCM	ATP 689P			40	50	90
Galilee	ATP 743P			25	150	175
Galilee	ATP 744P			75	$+50$	#
Shallow Gas	PEL 427 2			150	50	200
Shallow Gas	PEL 428 2			120	50	170
Shallow Gas	PSPA 9			50		50
Administration			200	490	500	1,190
Cost of Offer			100	400		500
TOTAL			2,000	3,300	1,700	7,000

' Award of the permit is pending.

² Second year capital subject to permit renewal.

\$4,000,000 the planned expenditure commitments in Table 2 will be reduced by the Company in the following order of priority:

• Firstly, reviewing acceptance of ATP 743P and ATP 744P if offered $\bullet$ by the Queensland Government;
• Secondly, the Company will not seek to renew PEL 427 in New $\bullet$ South Wales:
• Thirdly, the Company will not seek to renew PEL 428 in New South Wales; and
• Lastly, reduce the post earn in capital budget of the Company in $\bullet$ the Comet Ridge Project.

1.10 Working Capital

On completion of the Offer, the Directors believe that the Company will have sufficient working capital to carry out its stated objectives.

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1.11 Risk Factors

Prospective investors in the Company should be aware that subscribing for Shares involves a number of risks. The key risk factors of which investors should be aware are described in Section 10, investors are urged to consider these risks carefully before deciding whether to invest in the Company.

COAL SEAM GAS

Comet Ridge Limited owns an interest in this well. Photo courtesy of Arrow Energy NL

2.1 What is Coal Seam Gas?

Coal seam gas is natural gas (mainly comprised of methane) that is trapped in coal deposits. It is also referred to as coal bed methane or when associated with coal mining, coal mine methane.

Coal is an organic, sedimentary rock formed from the deposition of plant material (wood, bark, leaves, spores and waxes) in peat bogs under anaerobic (oxygen poor) conditions.

Natural gas in coal is a result of biological processes (biogenic gas) or physiochemical changes created by elevated pressures and temperatures when the coal is buried (thermogenic gas). Secondary biogenic gas may occur when coal beds are uplifted and exposed to the influx of ground water bearing micro organisms that consume the organic matter within the coal and generate gas as part of their respiratory system.

As peat is buried under successive layers of sediments it undergoes a process known as coalification during which large quantities of gas are generated and trapped in the microscopic pore system of the coal. Coal has a large and complex internal surface area that is able to attract and hold (or adsorb) the methane molecules.

Figure 2: Typical well configuration for a vertical coal seam gas producing well

COAL SEAM GAS

Section 2

Figure 3: Typical Gas Desorption Curve for coals of the Walloon Coal Measures

The amount of gas a coal can adsorb or trap is dependent on the organic constituents of the coal, the hydrostatic pressure (as a result of the water column in the rock pore space below the ground surface) and temperature. When the hydrostatic pressure acting on the coal is reduced by pumping the water out of the coal (a process called dewatering), gas is liberated from the coal matrix. Dewatering is achieved in a coal seam gas producing well by installing a pump in the well bore at or below the coal bed. The water produced from the coal is pumped up an inner pipe (tubing) and sent to storage while the liberated gas is produced from the annulus between the tubing and the casing in the hole. A typical well schematic for a coal seam gas producing well is shown in Figure 2.

The rate at which coal will produce gas is dependent on connectivity within the complex internal pore system. (The degree of interconnection is known as permeability). When subjected to changes in stress or uplift, coals develop a network of micro fractures known as cleats. It is the cleat system that accesses the large volumes of gas trapped in the coal matrix and the pore system providing the flow path its gas is flow into the well bare.

2.2 Coal Seam Gas Exploration

Coal seam gas exploration is different to conventional oil and gas exploration in that it employs equipment and methodologies more akin to mineral or coal exploration. As coal seam gas wells are typically much shallower than conventional oil and gas wells, small, truck mounted mineral or coal exploration drilling rigs equipped with blow-out preventers, are used to doll the wells. The relatively shallow wells are generally quick to drill and less expensive than oil and gas wells.

The exploration phase of coal seam gas development is in many ways lower risk than conventional oil and gas exploration as the presence of coal has already been established from previous exploration for coal or of and gas. The emphasis during the exploration stage for coal seam gas is to gather samples of the coal to analyse for gas content and to test to determine whether the gas can be produced at economic rates.

A coal sample for evaluating the gas content is collected by cutting a cylindrical core in the well pore and bringing it to the surface as quickly as pessible for sealing in a canister. The volume of gas that a coal can ackerb and ratain is largely dependent on the hydrostatic pressure. With the indicatatic pressure in the coal reduced to atmospheric pressure at form the cry low-in leaser the give in more of party in as you

is released, or desorbed, and captured in the canister. The volume of gas is then measured in the laboratory.

Figure 3 is a typical gas desorption curve with time from collection of the sample on the x-axis and volume of liberated gas on the y-axis. This is a typical curve for a coal in the Walloon Coal Measures showing that 16 litres of gas was desorbed from the coal over 110 days. As the volume of coal in the core and the amount of desorbed gas are known. the volume of gas per unit volume of coal (typically quoted as standard cubic feet per short ton (scf/t) or cubic metres per tonne $(m^3/t)$ ) can be calculated. The gas content is a critical parameter for determining gas resource estimates.

The maximum volume of gas a particular coal can physically adsorb or hold at depth is determined in the laboratory through measuring how much methane (that is, natural gas) a coal sample will adsorb at varying pressures. These tests, known typically as adsorption isotherms (isotherm meaning temperature is kept constant), predict the volume of gas that a known sample size could hold. By comparing how much gas is adsorbed in the laboratory measurements versus how much gas was desorbed from the cores, an estimate of the gas saturation level for the in situ coal can be made. These analyses also establish the level of pressure reduction required to cause the trapped gas to desorb from the coal into the pore system and cleats.

The next step is to establish whether the coal has the capacity to produce the gas at economically viable rates. Gas flow is determined by the permeability of the coal which is a measure of how easily the gas can migrate from the pore surfaces, through the coal matrix into the cleats and finally into the well bore. A number of techniques have been developed to evaluate the coal permeability. Short term flow tests can help determine the ability of the coals to flow water (and sometimes gas) but it usually requires a number of wells, drilled in a relatively closely spaced pattern, known as a production pilot, to create a pressure draw down in the coal reservoir to cause the release of gas. Generally, a production pilot test lasts for several months to determine the gas flow rate and time needed to dewater the coals. Typically, coal seam gas producing wells exhibit a production curve where the water rate decreases with time while the gas rate increases, then reaches a plateau and eventually declines. This is different to a conventional depletion drive gas reservoir where the higher rates are typically recorded as soon as the well is put on production and the gas rate declines with time. The two curve types are compared in Figure 4. The early part of the coal seam gas production curve is typically called the dewatering period, that is, the time in which the water is pumped from the cleat system and the reservoir pressure is reduced.

Figure 4: Comparison between a typical conventional depletion drive gas reservoir production curve versus that of a typical coal seam gas reservoir

Comet Ridge is currently involved in a production pilot on its Tipton West prospect in the WCM Project. Another pilot is planned on the Meenawarra prospect in the same project and another single well pilot on the Comet Ridge Project. A large component of the forecast expenditure for the remainder of 2004 will be spent on production pilot drilling and testing. The aim of the pilots is to prove significant in place gas resources in both projects as well as demonstrating that gas can be produced at economic rates. Once this has been achieved Comet Ridge will be able to establish reserves and secure gas sales contracts.

Until recently most coal seam gas wells in the USA and Australia were drilled as vertical wells. However, the use of long, near horizontal, in (coal) seam wells has been pioneered at Moranbah in the northern part of the Bowen Basin in Queensland. At Moranbah a vertical well is drilled to penetrate the coal seam. Then a second, near horizontal well is drilled, from over a kilometre away, to intercept the vertical well. The water drains by gravity from the near horizontal in seam well into the vertical well where the water is pumped to the surface. The gas is liberated into the vertical well and collected at the surface from the annulus.

COAL SEAM GAS

Section 2

Photo courtesy of Arrow Energy NL.

This drilling technique is also being applied at Moura on the eastern side of the Bowen Basin in Queensland. This technique may have application on the Comet Ridge Project.

With vertical wells, most coals will need some form of stimulation to enhance the production rate. This may be in the form of hydraulic fracturing where sand and water are pumped at high pressure into the coal causing it to fracture. The sand is left in the fractures to hold them open. This treatment, known as fraccing, aims to access as many of the naturally occurring fractures that exist around the well bore as possible. Cavitation is another stimulation technique being used in the Bowen Basin at the prolific Fairview field some 150 kilometres south of the Comet Ridge Project. For cavitation, air is pumped at high pressure into the coal and then the pressure is allowed to surge back into the weil bore causing the coal to cave. The collapsed coal fragments are blown out of the hole with compressed air and the process repeated. After a number of cycles a sizeable cavity develops around the well bore. This process is aimed at joining up as many of the naturally occurring fractures as possible. Both fraccing and cavitating may have application for the Comet Ridge Project. and have been factored into production offor well costs.

Project Selection

Comet Ridge has evaluated a large number of potential opportunities and has chosen to participate in three coal seam gas projects in Queensland and one project in New South Wales. The Comet Ridge Project and the WCM Projects, exhibit excellent potential for economic development.

The principal selection criteria used to identify the projects are shown below:

• proven presence of coal either from surface geology or subsurface control from previously drilled holes;
• gas indications in petroleum wells, coal holes, water wells or coal mines;
• depth less than $1,000$ metres $(m)$ this is to minimize the cost of drilling, as the more expensive the wells the higher the required flow rate;
• existing well and seismic control;
• evidence of structuring suggesting hacture enhancement of the coals;
• proximity to infrastructure; and
• proximity to markets.

The Comet Ridge Project and the WCM Projects satisfy all of the above criterial. Comet Ridge is blanning some relatively incidensive programs $\label{eq:2} \begin{split} \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}{\text{c}}(\mathbf{r},\mathbf{r}) = \mathcal{L}_{\text{c}}(\mathbf{r$ ماما والمتعلوم والمتعلومات السائدوة والمنا

2.3 Coal Seam Gas Consumption in Australia

Coal seam gas exploration and development in Australia is predominantly focused in Queensland and New South Wales, the country's principal black coal mining States, where gas market development has been inhibited by the lack of conventional gas. The New South Wales and Queensland gas markets have the opportunity to grow with the availability of local gas supply afforded by coal seam gas.

Approximately 25 Petajoules (PJ), which equates to almost 25% of Queensland's current gas demand, was supplied from coal seam gas wells in 2003. This is a dramatic increase from around 2 PI per year $(PI/yr)$ in 1998 and about 11 PJ/yr in 2001. Production is currently sourced from the Tipperary Oil and Gas (Australia) Pty Ltd operated Fairview field north of Roma, the Origin Energy Peat and Dawson Valley fields in the Bowen Basin, the Santos Scotia field (same accumulation as the Origin Energy Peat field) and the Moura coal mine.

In New South Wales, Sydney Gas Limited sells gas from its Camden project located south of Sydney into The Australian Gas Light Company's (AGL) gas reticulation system.

A number of significant gas supply contracts sourced from coal seam gas projects have been announced in Queensland with the two most noteworthy being the CH4 Gas Limited contract to supply gas from its Moranbah project in the Bowen Basin to Enertrade's (a Queensland Government owned energy utility) Townsville power station and the 340 PJ Origin Energy contract to supply AGL from the Fairview/Durham Ranch fields.

2.4 Coal Seam Gas in the USA

In the more mature gas markets in the USA, industry sources report that coal seam gas now provides approximately 4.4 billion cubic feet or 8% of the gas consumed in the USA on a daily basis. This equates to approximately 1.6 trillion cubic feet (TCF) or 1,600 Pl/yr. As a comparison, the total gas consumption in Australia for 2001 was just under 1,000 PJ or 1 TCF. Coal seam gas is now produced from a number of regions including the Rocky Mountains, the mid continent and Appalachia. Encouraging results are also being reported in Alaska and Canada.

2.5 Gas Market

As previously discussed, coal seam gas has penetrated the Queensland energy market very quickly with production growing to around 25 PI/yr in 2003. A major impetus for the coal seam gas industry has been the Queensland Government's "Queensland Energy Policy: A Cleaner Energy Strategy" released in May 2000. The key objective of the policy is to:

• diversify the State's energy mix towards the greater use of gas and renewable energy sources;
• facilitate the supply of abundant and competitively priced gas in Oueensland:
• facilitate the development of gas fired power stations, particularly a base load power station in Townsville; and
• reduce the growth in greenhouse gas emissions.

This strategy is aimed at improving the environmental benefits to the State by increasing the use of gas as an energy source. The Queensland Government requires that 13% of electricity sold in Queensland be derived from gas fired sources by January 2005. Gas consumption in Queensland, driven by power generation requirements and industrial development, is forecast (by The Australian Gas Association) to rise at a compounded rate of 11.4% until 2014. This is more than double the growth rate forecast for the southern States.

Further in depth discussion of the energy markets in eastern Australia appears in the Independent Energy Market Consultant's Report in Section 7. The Report reveals that the gas market is expected to grow in the short, medium and long term with growth occurring across a broad base of consumers.

To illustrate this point, Comet Ridge is already a participant in two Memoranda of Understanding, for the supply of natural gas from the Tipton West area in the WCM Project. The total volume of gas to potentially be supplied under the two Memoranda of Understanding is 100 PJ over a 15 year period. First sales are anticipated in 2006. (Comet Ridge has a 20% equity interest in these sales).

Comet Ridge has four project areas shown on Figure 1. These projects were selected over a three year period based on the selection criteria outlined previously.

The projects cover a range of basins and coal types. Figure 5 provides a summary of the target coal seams in Queensland and New South Wales where Comet Ridge has interests.

The initial focus will be on the Permian Bandanna and Mantuan Formations at the Comet Ridge Project in the Bowen Basin of central eastern Queensland and on the Jurassic Walloon Coal Measures in the WCM Project in the Surat Basin (south east Queensland). Coal with high gas content has been encountered in coal or petroleum wells in both projects and both are located close to existing pipeline infrastructure and markets. Almost all of the current coal seam gas production in Australia comes from the regionally extensive Permian coal of the Bowen Basin. However, encouraging gas flow rates are being reported from a number of production pilots in the Walloon Coal Measures trend.

Coal seam gas potential is also recognized in the Permian coal of the Galilee Basin in Queensland and the Gunnedah Basin in New South Wales.

Further evaluation of potential shallow gas accumulation in the Surat/Gunnedah Basin within New South Wales is also planned. Gas has been reported in a number of water wells producing from the Mooga Sandstone and Purlawaugh Formations.

**************************************

18 COMET RIDGE LIMITED

Figure 5: Summary Stratigraphic Table

3.1 Comet Ridge Project, Northern ATP 337P, Denison Trough, Bowen Basin, Queensland

Comet Ridge has negotiated the purchase of Strike's interest in a drill to earn or farmin agreement with Santos and Origin Energy on part of the large ATP 337P in the northern Denison Trough of Queensland (Figure 6). The farmin area covers in excess of 1,000 square kilometres (km²) and constitutes the Company's Comet Ridge Project. Santos is the operator of the exploration permit. Origin Energy will operate the drilling of the holes.

Two coal intervals with high gas contents underlie the area. The shallowest, the Bandanna Formation, is between 250m and 500m deep. The second, the Mantuan Formation, is at depths of less than 600m over much of the area.

Comet Ridge has the right to earn a 40% interest in both coal objectives by funding 100% of the costs of drilling two 600m deep core holes and one test hole. Drilling of the first two holes is expected to commence in March 2004. The core holes are aimed at establishing the insitu gas content and productive capability of the target coal intervals.

After completing the second of the core holes, Comet Ridge has 120 days in which to commence drilling on the third hole which will be completed as a test hole to enable production testing in the third quarter of 2004.

Figure 6 shows the location of the Comet Ridge Project with respect to pipeline infrastructure, the conventional gas fields of the Denison Trough, and the north south trending anticlinal structure known as the Comet Ridge. The prolific Fairview/Durham Ranch coal seam gas fields lie on the Comet Ridge to the south of ATP 337P. The operator of the Fairview field Section 3

recently reported that the field is capable of producing in excess of 40 Terajoules per day of gas from 75 wells. These wells are producing from coals in the Bandanna Formation, the same formation that represents the shallower coal objective over the Comet Ridge Project.

(a) Key Aspects of the Cornet Ridge Project

Technical aspects of the project are discussed in detail in the Independent Petroleum Consultant's Beport in Section 6. The Comet Ridge Project is considered highly prospective for the following .
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Two objective coals. (P. . .

The shallower objective, the Bandanna Formation, is the same formation producing coal seam gas to the south of the Comet Ridge Project at Fairview/Durham Ranch. The coals of the deeper Mantuan Formation are best developed under the project area and have yet to be evaluated.

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(1). The presence of got in the rought coals.

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gas levels measured during drilling of a number of petroleum wells in the area. Sandstone reservoirs lying immediately above and below the coal seams produce gas in the conventional gas fields to the west and north west of the project area.

(iii) Relatively shallow drilling (<700m).

The shallower coals are at depths of 250m to 500m while the deeper coal is at depths of 500m to 600m.

• (iv) The project is on the same uplifted or anticlinal structure as the world class Fairview/Durham Ranch field.
• (v) Significant structuring of the coals, due to folding and faulting, is evident on seismic sections.

The Comet Ridge structure has undergone significant uplift since the coals were deposited. This may have enhanced the fracturing in the coals. This appears to have been the case at Fairview to the south where exceptional permeability (100 millidarcies) and gas flow rates (I to 7 millions of cubic feet per day) have been reported.

(vi) Extensive database from coal exploration core holes and petroleum wells with seismic control for the shallower Bandanna Formation objective.

Six petroleum wells, good quality seismic lines, and coal exploration core holes drilled on two kilometre spacing have provided excellent subsurface control. This has allowed the thickness and extent of the shallower seams to be mapped with a high degree of certainty and has provided some control for the distribution of the Mantuan coal objective.

• (vii) Proximity to pipeline infrastructure.
• (viii) Strong joint venture partners in Santos and Origin Energy. Origin Energy is Australia's most experienced coal seam gas operator.

(b) Planned Expenditure

After drilling the two core holes, the Company's remaining farmin commitment on the Comet Ridge Project will be met by the funding of the test hole with an estimated cost of \$500,000 including coring, analysis and testing. After completing this hole Comet Ridge will have a 40% interest in the project.

For planning purposes it has been assumed that production pilot or early development drilling will commence in the fourth quarter of 2004 with one well to be drilled in 2004 and two in 2005. Comet Ridge's 40% share of each fully equipped production pilot hole is budgeted at \$250,000.

Comet Ridge Project - Planned Expenditure (\$,000)

	Year I	Year 2	Total
ATP 337P	750	500	1,250

3.2 WCM Project ATP's 683P and 689P, Walloon Coal Measures, South East Queensland

The coals of the Walloon Coal Measures have been recognized as having high gas content for many years, with numerous water bores and oil exploration wells encountering gas. The potential for gas production from the coal seams had been largely overlooked until the development of shallow low rank coals of the Powder River Basin in Wyoming, USA. Previous coal seam gas exploration in Australia has been focused on the higher rank black coals of the Bowen and Sydney Basins based on the assumption that coals had to have been subjected to high temperatures and pressures before they could contain sufficient gas. It is now understood that low rank coals can be very prospective due to generation of biogenic gas by bacteria either soon after deposition or when introduced into the coals by water recharge.

The prospective area of the Walloon Coal Measures for coal seam gas is very large, covering as much as 14,000 km². The major focus for the industry is to confirm that the Walloon Coal Measures gas resource can be produced economically.

The initial strategy for Comet Ridge was a low risk staged farmin approach where the maximum amount of hard data was gathered at minimal cost during the early phase of exploration with significant interest to be earned through further investment. The results of preliminary gas content work, encouraging gas flow rates from individual wells and pilot developments reported by other operators have resulted in the Company's decision to secure a significant position in the Project. This will be achieved through the acquisition of the Strike and Anzoil interests in the Arrow operated Dalby, Dalby South and Millmerran farmout blocks of ATP 683P and ATP 689P, collectively the WCM Project.

Acquisition of the Anzoil interests has resulted in Comet Ridge participating in the drilling and commissioning of the Tipton West production pilot and exposure to two Memoranda of Understanding for conditional gas sales. The Company anticipates an active resource delineation drilling program followed by the commencement of development drilling within the first year of operations.

PROJECT SUMMARY

Section 3

(a) Project Summary

Comet Ridge currently has interests ranging from 20% to 30% in three farmout blocks in ATP 683P, a 20% interest in an application for PL 198A and a 20% interest in ATP 689P. It can earn further interests through funding the ongoing development of one or all of the farmout blocks up to a cap of \$3,000,000. The Company may elect not to increase its interest in all the areas in which it currently holds an interest.

(b) Key Aspects of the Project

Comet Ridge views the WCM Project as being particularly attractive for the following reasons:

• proven presence of permeable coals with high gas contents;
• significant coal intersections;
• relatively shallow drilling (<500m) with modest well costs;
• significant structuring of the coals due to faulting;
• reasonable core hole, petroleum well and seismic control;
• encouraging pilot project flow rates from other operators and projects;
• proximity to the Roma to Brisbane pipeline and the Brisbane market; and
• the joint venture partner, Arrow, is innovative, focused on cost control and has had success in pursuing gas markets.

A more detailed review of the WCM Project is presented in the Independent Petroleum Consultant's Report in Section 6.

(c) Planned Expenditure

Comet Ridge has the option of increasing its interests in one or all of the Dalby South and Millmerran farmout blocks of ATP 683P and ATP 689P by drifting, completing and equipping a five well production pilot (Comet Ridge's exposure capped at \$1,000,000 per production pilot) on each block. Alternatively, Comet Ridge can fund a \$3,000,000 production pilot drilling program on one block to earn its interests in all three blocks. The Company may elect not to increase its interest in any or all of the blocks. Comet Ridge is encouraged by the results to date and expects to develop at least one production pilot area in addition to the ongoing Tipton West development activities in the Dalby block and application for PL 198A in ATP 683P.

WIM Project - Planned Expenditure (5000)

Permit	Farmout Block	Year i	Year 2	Totai
ATP 683P	Dalby (Tipton West - PL 198A)	200	200	400
	Dalby South	1,000		1,000
	Millmerran	50	50	100
ATP 689P		40	50	90
Total		1,290	300	1,590

【1】 2010年10月11日12日,1月18日,1月18日,1月18日,1月18日,1月18日,1月1日,1月1

3.3 Other Projects

Comet Ridge has strategic interests in three large permits in New South Wales and two more in central Queensland. All five are prospective for gas in coals or shallow sandstone reservoirs.

• Shallow Gas Project, PEL's 427 & 428 and FSPA 9 -
• .
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Comet Ridge has interests in three permits in New South Wales. PEL's 427 and 428 where Comet Ridge operates with 100% and 80% respectively, and 50% in the recently awarded PSPA 9 with its partner Australian Coalbed.

Comet Ridge plans to conduct a water bore sampling program aimed at establishing water chemistry and gas trends along a number of traverses with some low cost seismic and shallow drilling planned as a follow up to wells showing elevated gas readings.

PEL 427 expires in May 2004 and PEL 428 expires in September 2004. Comet Ridge will seek to renew the permits or seek an extension of time within which to renew the permits.

PSPA 9 has a 12 month term and will expire in December 2004. Comet Ridge will have the opportunity to renew the two PEL's and turn the PSPA into a PEL assuming the work program is conducted as planned.

Shadow (Next First art) (Shankow (Espanhiburg (2012))

Permit	Year I	Year 2	Total
PEL 427	150	50	200
PEL 428	120	50	170
PSPA 9	50	۰	50
โว'ม่	320	ТCС	420

Subject to both permits being remewed in 2004

(b) Galilee Project, ATP's 743P & 744P (applications),

Galilee Basin, Central Queensland

The Queensland Department of Natural Resources has advised that the Company is the successful bidder for two large permits in the Galilee Basin in Central Queensland. The permits are currently in the approval process and will be subject to native title agreements.

Comet Ridge's proposed exploration program for the Galilee Basin will evaluate the potential for a large biogenic gas resource within the low rank, Late Permian aged coals of the Bett's Creek Beds on the shallow eastern flank of the Galilee Basin.

While the primary focus of the Company will be aimed at the shallow coal seam gas potential of the two blocks, Comet Ridge will investigate the significant oil and gas shows encountered in the older Permian sequence in the Lake Galilee-1 and Koburra-1 wells. These shows clearly indicate an active petroleum system exists. Studies will be undertaken to ascertain whether to pursue these deeper conventional objectives.

As the permits have yet to be offered and awarded, Comet Ridge does not have any expenditure commitments associated with these permits. The work program submitted includes \$25,000 per permit for the first year for desktop studies and one core hole in each totaling \$300,000 in the second year.

Galilee Project - Planned Expenditure (\$000)

Permit	Year l	Year 2	Total Andal / Alexandre de Liberto de Liberto
ATP 743P	25	150	175
ATP 744P	25	150	175
Total	50	300	350

Figure 7: Location of Comet Ridge WCM Project interest in south east Queensland

DETAILS OF THE AFRICA

4.1 Description of the Offer

By this Prospectus, the Company invites investors to subscribe for a total of 25,000,000 Shares at an issue price of 20 cents each to raise \$5,000,000. The rights attaching to the Shares are summarised in Section 11.5.

4.2 Oversubscriptions

The Company does not intend to accept oversubscriptions. The maximum amount which may be raised under this Prospectus is therefore \$5,000,000.

4.3 Applications for Shares

Public Offer

If you wish to participate in the Public Offer, you should complete the Public Application Form attached to this Prospectus.

The Public Offer is for a maximum total of 25,000,000 Shares, reduced by the number of Shares subscribed for under the Priority Offer.

Applicants may apply for a minimum parcel of 10,000 Shares representing a minimum investment of \$2,000. Applicants requiring additional Shares must apply for Shares in multiples of 500 Shares (equivalent to \$100) thereafter.

Applications for less than the minimum application of 10,000 Shares (equivalent to \$2,000) will not be accepted.

If you wish to apply for Shares in the Public Offer, you should complete the Public Application Form attached to this Prospectus.

Priority Offer - Perilya Shareholders

The Company has agreed to provide a Priority Offer to Perilya Shareholders on the Perilya register on 22 January 2004. 7,500,000 Shares offered under this Prospectus will be made available for application to Perilya Shareholders in priority to public investors.

The Priority Offer is not an entitlement.

The Company has agreed to provide a total of up to 7,500,000 Shares to Perilya Shareholders for which Applications are received by the Company in accordance with this Prospectus. In exercising its discretion, the Company will favour those subscribers making an early application for Shares. The Directors will retain the absolute discretion in the final allocation process.

A Perilya Shareholder who wishes to participate in the Priority Offer, should complete the personalised looseleaf blue Priority Application Form attached to this Prospectus. The Priority Application Form must be returned to Computershare Investor Services Pty Ltd at the addresses referred to in Section 4.4.

Applicants must apply for a minimum 10,000 Shares and thereafter in multiples of 500 Shares. Applications will be processed in the order received.

The Priority Offer will only apply to Applications received on or before the earlier of the Priority Offer Closing Date or the day upon which Applications for a total of 7,500,000 Shares are received from Perilya Shareholders and accepted by the Company subject always to the right of the Company to close the Priority Offer early. Applications received after this date but by the Public Offer Closing Date will be treated as Applications under the Public Offer.

All Applications received prior to the earlier of the Priority Offer Closing Date or the day upon which Applications for a total of 7,500,000 Shares are received from Perilya Shareholders and accepted by the Company will be met as to 10,000 Shares or 4.6 Shares for every 100 shares held by the Applicant in Perilya as at 22 January 2004, whichever is the greater (Minimum Allotment).

Shares applied for in excess of the Minimum Allotment and received prior to the Priority Offer Closing Date may be allotted at the absolute discretion of the Directors.

Perilya Shareholders may also apply for additional Shares under the Public Offer by completing the Application Form titled "Public Application Form" accompanying this Prospectus and sending the completed form to Patersons Securities Limited at the address referred to in Section 4.4.

Shares not taken up by Perilya Shareholders pursuant to the Priority Offer will be made available to the general public for subscription under the Public Offer.

Perilya holds 34.93% of the Shares in Comet Ridge as at the date of this Prospectus and will hold 16.22% of the Shares in Comet Ridge on a fully diluted basis assuming that the Offer is fully subscribed.

4.4 Lodgement of Application Forms

To apply for Shares offered pursuant to this Prospectus, the appropriate Application Form accompanying this Prospectus must be completed in accordance with the instructions accompanying it and lodged at the following addresses, on or before either the Public Offer Closing Date or Priority Offer Closing Date, as relevant:

Public Application Forms

Delivered to	Or by post to
Patersons Securities Limited Level 23 Exchange Plaza 2 The Esplanade PERTH WA 6000	Patersons Securities Limited GPO Box W2024 PERTH WA 6846
OR.	0R
Level 27 264 George Street SYDNEY NSW 2000 Priority Application Forms	PO Box R1773 Royal Exchange SYDNEY NSW 1255
Delivered to	Or by post to
Computershare Investor Services Pty Ltd Level 2	Computershare Investor Services Pty Ltd PO Box D182
Reserve Bank Building 45 St Georges Terrace PERTH WA 6000	PERTH WA 6840

Applications must be accompanied by payment in full in Australian currency of 20 cents for each Share applied for. Payment must be by way of cheque or bank draft drawn on and payable by an Australian bank and should be made payable to "Comet Ridge Limited -Float Account" and crossed 'Not Negotiable'.

No brokerage or stamp duty is payable by Applicants in respect of their Applications for Shares under this Prospectus. The amount payable on Application will not vary during the period of the Offer and no further amount is payable on allotment.

Section 4

A duly completed and lodged Public Application Form or Priority Application Form will constitute an offer by the Applicant to subscribe for the number of Shares applied for pursuant to the Public Application Form or Priority Application Form as the case may be.

Application Forms must not be circulated to prospective investors unless accompanied by a copy of this Prospectus.

4.5 Minimum Subscription

The minimum subscription to be raised pursuant to this Prospectus is \$4,000,000. No Shares will be issued or granted pursuant to this Prospectus until the minimum subscription is reached.

Should the minimum subscription not be reached within four months after the date of this Prospectus, the Company will either repay the Application monies to the Applicants or issue a supplementary or replacement prospectus and allow Applicants one month to withdraw their Application and be repaid their Application monies. Interest will not be paid on Application monies refunded.

4.6 Allotment of Shares

The allotment of Shares to Applicants will occur as soon as possible after the Offer is closed, following which statements of Share holdings will be dispatched. It is the responsibility of Applicants to determine their allocation prior to trading in Shares. Applicants who sell Shares before they receive their holding statements will do so at their own risk.

Pending issue of the Shares, or return of the Application monies, the Application monies will be held in trust for the Applicants.

The Company has the right to allocate Shares under the Offer. The Company may reject any Application or allocate fewer Shares than applied for under the Offer.

If an Application is not accepted, or is accepted in part only, the corresponding proportion of the Application monies will be refunded. Interest will not be paid on Application monies refunded

4.7 Lead manager

Patersons Securities Limited has agreed to be the Lead Manager for the Offer on the terms summarised in Section 11.4. Patersons Securities Limited will receive a Lead Manager fee of \$60,000, a management fee of 1.25% and a lodgement fee of 3.75% on the total amount raised under the Offer. The lodgement fee of 3.75% will be paid to any licenced securities dealer who lodges applications that are subsequently accepted by the Directors.

The Offer is not underwritten.

4.8 ASX Listing

The Company will make application for admission of the Shares offered by this Prospectus to quotation on the ASX.

If the Company is not admitted to the Official List and its Shares are not admitted to quotation within three months after the date of this Prospectus, the Company will not allot or issue any Shares, and will repay all Application monies without interest and within the time prescribed by the Corporations Act.

The ASX takes no responsibility for the contents of this Prospectus. The fact that ASX may grant quotation of the Shares is not to be taken in any way as an indication of the merits of the Company or the Shares offered pursuant to this Prospectus.

4.9 CHESS

The Company will participate in CHESS, operated by ASTC, a wholly owned subsidiary of ASX, in accordance with the Listing Rules and SCH Business Rules.

Under this system, the Company does not issue share certificates to Shareholders, Instead, Shareholders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send them a CHESS statement setting out the number of Shares allotted to them under the Prospectus and giving details of their holder identification number.

In the case of an Issuer Sponsored sub register, the statement will contain the number of Shares allotted under the Prospectus and the Shareholder's security holder reference number.

A CHESS statement or Issuer Sponsored statement will routinely be sent to Shareholders at the end of any calendar month during which the balance of their holding changes. A Shareholder may request a statement at any other time, however a charge may be incurred for additional statements.

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4.10 Overseas Investors

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

No action has been taken to register or qualify the Shares or the Offer, or otherwise to permit a public offering of the Shares, in any jurisdiction outside Australia.

4.1! Escrow Provisions

Securities issued to vendors, promoters, seed capital investors and others prior to the Offer may be subject to the restricted securities provisions of the Listing Rules. Accordingly, a proportion of such securities, to be determined by ASX, may be required to be held in escrow for a period of time.

4.12 Conditions Precedent to the Offer

The issue of Shares pursuant to this Prospectus is subject to settlement taking place under the Coal Seam Gas (Qld Permits) Sale Agreement and the Coal Seam Gas (Qld Applications) Sale Agreement as described in Sections 9.4. and 9.5. A list of the conditions precedent which must be satisfied to enable settlement to take place under the Coal Seam Gas (Qld Permits) Sale Agreement and the Coal Seam Gas (Qld Applications) Sale Agreement is set out in Sections 9.4 and 9.5.

4.13 Enquiries in Relation to the Offer

This Prospectus provides information for potential investors in the Company, and should be read in its entirety. If after reading this Prospectus, you have any questions about any aspect of an investment in the Company, please contact your stockbroker, accountant or independent financial adviser.

4.14 Privacy Act

The Company collects information about each Applicant from an Application Form for the purposes of processing the Application and, if the Application is successful, to administer the Applicant's security holding in the Company.

By submitting an Application Form, each Applicant agrees that the Company may use the information in the Application Form for the purposes set out in this privacy disclosure statement and may disclose it for those purposes to the share registry, the Company's related bodies corporate, agents, contractors and third party service providers (including mailing houses), the ASX, the ASIC and other regulatory authorities.

If an Applicant becomes a security holder of the Company, the Corporations Act requires the Company to include information about the security holder (name, address and details of the securities held) in its public register. This information must remain in the register even if that person ceases to be a security holder of the Company. Information contained in the Company's register is also used to facilitate distribution payments and corporate communications (including the Company's financial results, annual reports and other information that the Company may wish to communicate to its security holders) and compliance by the Company with legal and regulatory requirements.

If you do not provide the information required on the Application Form, the Company may not be able to accept or process your Application.

DIRECTORS AND MANAGEMENT

SECTION 5

5.1 Directors

Chairman of the Board

Jeffrey Schneider B.Com

Jeff Schneider has over 30 years experience in the resource industry in Australia having graduated from the University of Western Australia with a Bachelor of Commerce in 1972.

leff worked for Woodside Petroleum Limited (Woodside) in a number of roles from 1978 to 2002 culminating in the role of Director Australian Gas. He was responsible for the Sunrise gas project and Woodside's developing natural gas business in eastern Australia. Jeff was also involved in the Woodside response to the Shell takeover offer.

In November 2002 Jeff left Woodside to pursue other interests. This included appointment as an Executive Director of Strike. Jeff's responsibilities at Strike included commercialisation of the Casino gas discovery in the Otway Basin. Jeff was appointed Chairman of Strike in July 2003.

医静脉膜炎 医神经细胞

The Second Second

Managing Director Andrew Lydyard B.App Sc (Applied Geology)

The Company's Managing Director, Andy Lydyard, has 23 years technical and managerial experience in the oil and gas business with 13 years spent in North America. He has a broad range of technical and managerial experience in the oil and gas industry.

Andy has extensive experience in the development and production of coal seam gas operations in the San Juan and Powder River Basins in the USA where he was previously Vice President, Coal Seam Gas Business Unit for J.M. Huber Corporation. He was responsible for building a substantial coal seam gas business for J.M. Huber Corporation.

Andy was specifically recruited in early 2001 to build an Australian coal seam gas business for Strike.

Non Executive Director

Simon Ashton B.Sc (Hons), M.Sc. MBA

Simon Ashton has over 30 years experience in the Australian and international petroleum industry. Simon worked for WMC Limited (WMC) from 1974 where he held various positions in WMC's nickel, coal and petroleum businesses. From 1987 to 1991, Simon was responsible for establishing WMC's USA petroleum subsidiary, Greenhill Petroleum Corporate, where he served as Senior Vice President in Houston, Texas. In 1991 he returned with WMC to Australia and was Manager, International New Business-Petroleum Division, when he left the company in 1996.

In 1997 he co-founded Strike where he is currently employed as an Executive Director. Simon's responsibilities at Strike include strategy development, capital raising and general corporate management.

Non Executive Director Gillian Swaby B.Bus, FAICD, FCIS

Gill Swaby has been involved in the Australian mining and exploration industry for over 20 years. Gill is experienced in areas of corporate secretarial practice, corporate law, management accounting and corporate and financial management and is a Fellow of the Chartered Institute of Secretaries and a Fellow of the Institute of Company Directors. She is the principal of Strategic Consultants Pty Ltd, corporate advisers, and is a regular course presenter on corporate secretarial matters.

5.2 Corporate Governance Statement

The Board of Directors

The Company's constitution provides that the number of Directors shall not be less than three and not more than ten. There is no requirement for any shareholding qualification.

If the Company's activities increase in size, nature and scope, the size of the Board will be reviewed periodically and the optimum number of Directors required to adequately supervise the Company's activities will be determined within the limitations imposed by the constitution and as circumstances demand.

The membership of the Board, its activities and composition will be subject to periodic review. The criteria for determining the identification and application of suitable candidates for the Board shall include quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the Company's scope of activities, intellectual ability to contribute to Board duties and physical ability to undertake Board duties and responsibilities.

Directors are initially appointed by the full Board, subject to election by Shareholders at the next general meeting. Under the Company's constitution, the tenure of a Director (other than Managing Director, and only one Managing Director where the position is jointly held) is subject to reappointment by Shareholders not later than the third anniversary following his or her last appointment. Subject to the requirements of the Corporations Act, the Board does not subscribe to the principle of retirement age and there is no maximum period of service as a Director. A Managing Director may be appointed for the period and on any terms the Directors think fit and, subject to the terms of any agreement entered into, the appointment may be revoked on notice.

Appointments to Other Boards

Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other boards.

Independent Professional Advice

The Board has determined that individual Directors have the right in connection with their duties and responsibilities as Directors, to seek independent professional advice at the Company's expense. With the exception of expenses for legal advice in relation to a Director's rights and duties, the engagement of an outside adviser is subject to prior approval of the Chairman of the Board and this will not be withheld unreasonably.

薄

1. 电精神

Continuous Review of Corporate Governance

Directors will consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors. Such information must be sufficient to enable the Directors to determine appropriate operating and financial strategies from time to time in light of changing circumstances and economic conditions. The Directors recognise that mineral exploration is a business with inherent risks and that operational strategies adopted should, notwithstanding, be directed towards improving or maintaining the net worth of the Company.

As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of any formal corporate governance committees will be given further consideration.

The Company is presently considering the ASX Corporate Governance Council's "Principles of Good Corporate Governance and Best Practice Recommendations" to determine an appropriate system of control and accountability to best fit its business and operations commensurate with these guidelines.

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Photo courtesy of Arrow Energy NL.

Over 25% of the natural gas consumed in
Queensland is sourced
from CSG fields.

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Section 6

【1】 【1】 【1】 【1】 【1】 【1】 【1】 【1】 【1】 【1】

Technical and Management Advisors to the Petroleum Industry

30 January 2004

Dear Sirs.

I. Introduction

In correspondence dated 9 December 2003, Comet Ridge Limited (Comet Ridge) requested that MBA Petroleum Consultants (MBA) prepare an Independent Consulting Geologist's report for inclusion in a prospectus for an Initial Public Share Offering (IPO) in Comet Ridge.

Comet Ridge has, in that correspondence and in subsequent meetings, requested that MBA address the following issues:

• Confirm that Comet Ridge has title to the permits that make up the portfolio of interests claimed in this Prospectus. $a)$
• Examine the exploration strategy and the quality of the plays in the permits. $b)$
• Discuss the risks involved for exploration in the permits and comment on the adequacy of exploration program as a means of improving the chance c) of success.

2. Summary

As requested, MBA has reviewed the portfolio of coal seam gas interests that Comet Ridge has assembled and is satisfied that:

• The Company has title in, is earning interests in, or has applied for five Queensland and three New South Wales (NSW) petroleum exploration permits where the focus is largely on coal seam gas (CSG) exploration (Table 1). In addition, the Company is party to a Petroleum Lease Application (PLA) in Queensland over the Tipton West Pilot Project (TWP) in the Walloon Coal Measures (WCM) Project.
• b) Comet Ridge has two key focus areas for CSG. The first of these is the Permian Bandanna Formation and Mantuan Formation coals in the Bowen Basin, known as the Comet Ridge Project (CRP). The second is the Jurassic Walloon Coal Measures Project (WCMP) in the Surat Basin.
• c) The Permian coals within the Comet Ridge Project are on trend with the analogous equivalent gas producing coals at Fairview and Durham. The Fairview and Durham coals are acknowledged as being among the best CSG producers in the world. The thickness and depth to the coals in the two areas are broadly similar, and MBA expects that the gas contents in the CRP are likely to be similar to the high quality coals in the Fairview and Durham Ranch Fields at equivalent depths. The coal permeability (the main risk) is unknown at this stage, however Comet Ridge's planned exploration program will adequately evaluate this factor.
• d) The lurassic coals within the Walloon Coal Measures Project are undergoing extensive testing by several companies in a number of areas adjacent to and within the Comet Ridge interests and have achieved results that suggest there will be commercial success on some of these projects. These coals are similar in rank and permeability to the Powder River Basin coals in the United States. The Powder River Basin coals are noted economic producers of gas. The work program planned by Comet Ridge and its joint venturers is adequate to test the commercial potential.
• The Galilee Basin exploration permits, with Permian CSG targets, and the NSW permits, with both conventional gas reservoirs and biogenic gas targets, e) are at an early stage of exploration and therefore have a moderate to high risk for the discovery of commercial gas.
• f) The exploration programs planned by Comet Ridge and co-venturers should effectively address the potential and technical risks associated with the commercial exploitation of the Projects.
• The expenditures planned by Comet Ridge are considered reasonable for the work programs envisaged. Comet Ridge's committed and optional $g)$ spending programs are detailed in Table 2.

3. Comet Ridge Exploration Interests

3.1. Summary

Comet Ridge has been awarded or has agreed to earn interests in petroleum properties located in the Surat, Bowen, Galilee and Gunnedah Basins, onshore Queensland and NSW, which are listed in Table I and shown in Figure 1.

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Section 6

TABLE +

Comet Ridge Permit interests
Permit (block)	Operator	Gross Area (Sq km)	Interest	State	Basin	Play-Type
COMET RIDGE PROJECT
ATP337P 42) COMET RIDGE	SANTOS/ORIGIN	1053	$0\%$ , can earn $40\%$	Qld	Bowen	Permian Bandanna
WALLOON COAL MEASURES PROJECT
ATP683P 3 DALBY	ARROW ENERGY NL	886	20%	Qld	Surat	Jurassic Walloon
ATP683P (3) DALBY STH	ARROW	305	25%, can earn 50%	Qld	Surat	Jurassic Walloon
ATP683P (2) MILMERRAN	ARROW	2 6	$10\%$ , can earn $50\%$	Qld	Surat	Jurassic Walloon
ATP689P (2)	ARROW	4 4 1 2	10%, can earn 50%	Qld	Surat	Jurassic Walloon
PL198A (i) (2)	ARROW	260	20%	Qld	Surat	Jurassic Walloon
GALILEE BASIN PROJECT
ATPA743 30-3	COMET RIDGE	6482	100%	Qld	Galilee	Permian Coal
ATPA744 35-35	COMET RIDGE	6524	100%	Qld	Galilee	Permian Coal
SHALLOW GAS PROJECT
PEL427 $\omega$	COMET RIDGE	6 930	100%	NSW	Gunnedah	Cretaceous Mooga Sandstone
PEL428 (2)	COMET RIDGE	7 560	$80\%$	NSW	Gunnedah	Cretaceous Mooga Sandstone
PSP 9 12	AUSTRALIAN COALBED METHANE PTY LTD	25 524	50%	NSW	Gunnedah	Cretaceous Mooga Sandstone

⁴¹ Applications - Award pending

²¹ Acquired from Strike

⁽³⁾ Acquired from Anzoil

Table 2

Comet Ridge Commitments COMET RIDGE PROJECT

Phase 1	\$578,000
Phase 2 (optional)	\$500,000
WALLOON COAL MEASURES PROJECT
Anzoil Purchase	\$853,769 (Completed)
Arrow Swap for WA-261-P	\$250,000 (Completed)
First Optional Phase	\$250,000 (Committed)
Second Optional Phase	\$1 Million, up to \$3 Million
GALILEE BASIN PROJECT
ATPA743P	\$200,000 (first two years)
ATPA744P	\$200,000 (first two years)
SHALLOW GAS PROJECT (Gunnedah/Surat Basins)
PEL 427	\$150,000
PEL 428	\$160,000
PSP 9	\$50.000

3.1.1 Overview

Comet Ridge Limited was formed in mid-2003 as a wholly owned subsidiary of Strike Oil NL (Strike). The company has acquired Strike's coal seam gas interests in Queensland (Qld) and New South Wales for a consideration of 6.25 million Comet Ridge shares to Strike on the date of listing on the Australian Stock Exchange (ASX). As of 1 October 2003, Comet Ridge has assumed the expenditure commitments associated with the interests.

In a second transaction, Comet Ridge has acquired the coal seam gas interests of Anzoil NL (Anzoil) in ATP683P for a total consideration of \$1.1 million to be paid as a combination of work program reimbursement, cash and \$300,000 worth of stock in Comet Ridge to be assigned to Anzoil on the date of listing.

Comet Ridge's exploration activity is primarily focussed on two coal seam gas (CSG) plays in Queensland, these being the Permian Bandanna and Mantuan Formation in central Queensland (Comet Ridge Project) and the younger Jurassic Walloon Coal Measures in south-east Queensland (The Dalby, Dalby South and Milmerran Blocks and PL198A in ATP 683P and ATP 689P, collectively known as the WCM Project).

The Permian-aged coals of the Bandanna Formation are a proven coal

seam gas resource in Queensland with gas production from the Peat, Scotia, Fairview/Durham Ranch and Dawson Valley Fields and the Moura Coal Mine (Figure 2). These fields already contribute 25% of the total gas used in Queensland. The Bandanna Formation coals of the Fairview/Durham Ranch Field are considered by MBA and other experienced consultants and companies to be amongst the best in the world for the production of CSG. They are readily accessible by drilling and to pipeline and other infrastructure. These coals are often favourably compared to the San Juan Basin coals of the United States, generally regarded as the world-class benchmark. Both the Bandanna and San Juan Basin play fairways have in common high gas content, high permeability (tens to hundreds of millidarcies (mD)) and thick, continuous coals.

The coals of the WCM are not yet a commercially proven gas resource. They are clearly gas-bearing and have been shown in a number of places to be capable of producing gas, even early on in the dewatering process. The volume of water produced for a given volume of gas is usually greater from the WCM than from the Permian coals and this is the main challenge to their commercial success. The WCM are often compared to similar coals of the Powder River Basin, which have proven to be commercially successful in the US, albeit under a regime of higher gas prices when compared to Australia. The coals of the WCM fairway are at shallow depths, have low rank, high vitrinite component, high ash content, high permeabilities (hundreds of mD), relatively low gas content (compared to the Bandanna coals, though, relatively high when compared to the Powder River Basin) and multiple and less-continuous coal intervals than the Bandanna.

The Permian coals in the Galilee Basin are part of a very large coal depositional system, which includes the Bowen Basin to the east and the Gunnedah Basins to the south in NSW. Comet Ridge has been advised by the Queensland Department of Natural Resources and Mines (QDNRM) that its two permits in the Galilee Basin are being processed towards grant. These applications were lodged to explore for gas in the coals of the Betts Creek Group, equivalent in age to the Bandanna Formation (from which the Fairview/Durham wells produce gas). The Betts Creek Group coals have been intersected in a number of petroleum wells and coal exploration holes. Modern seismic is sparse over the area and is of variable quality.

Comet Ridge is also evaluating the potential for coal seam gas as well as a shallow biogenic gas concept in conventional sandstone reservoirs in the Surat and Gunnedah Basins in NSW (Shallow Gas Project). The Gunnedah Basin forms the central part of the Sydney-Gunnedah-Bowen Basin system, which extends along the eastern margin of Australia (Stewart and Alder, 1995). The Gunnedah Basin covers an area of just

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Section 6

over 15,000 square kilometres and comprises rocks of Permian and Triassic age. The basin is in part unconformably overlain by the Jurassic-Cretaceous strata of the Surat Basin. Until recently the Gunnedah Basin has been only lightly explored for petroleum with 19 petroleum wells drined, only three of which are considered valid parts. Two of these three wells flowed gas to the surface and the third an offsat test of the record

well, intersected igneous intrusives in the pay zone. A further 12 petroleum exploration wells have been drilled in recent years. While there is a lack of modern seismic coverage over most of the basin, 120 coal exploration wells have been drilled, many to basement, and these provide additional well control for the Corner Ridge gas plays.

3.1.2 Coal Seam Gas

Natural gas, such as CSG, is a fossil fuel that is usually derived from the breakdown of the remains of plants, animals and micro-organisms that lived millions of years ago. Gas is formed as a result of the increasing temperature and pressure produced by layer upon layer of younger sedimentary rocks being deposited on top of the dead organic matter. As the rocks are buried, the rank, or thermal maturity of the organic matter, increases and the rate of gas generation typically increases. Gas produced from this process is called thermogenic gas.

In low rank, thermally immature coals, bacterial processes can result in commercially viable volumes of gas being generated. The anerobic bacteria (requiring no oxygen to sustain life) consume organic matter and produce methane (CH₄) as a by-product. Gas produced from this mechanism is called biogenic gas. There is some evidence suggesting that biogenic gas may be present in some of the WCM sequences and possibly in the Permian Galilee and Gunnedah Basin coals.

Gas in coal seams, which can be thermogenic, biogenic or a combination of both, is stored in two main ways:

• $\mathbf{L}$ adsorbed, or bonded, to the coal surfaces of cleats and fractures and held by molecular attraction; and
• $2.$ trapped within pore spaces, such as found in cleats and fractures of the coal that would normally be occupied by water.

The first of these mechanisms is by far the most important in terms of the volume of gas that can be stored. The process of adsorption allows coal to hold large volumes of gas within its structure, perhaps as much as three times the amount of gas contained in the same gross rock volume (GRV) of a conventional sandstone reservoir (Arrow, 2003).

The generated gas can be trapped within the structure of a coal seam. At the molecular level gas is attached to the coal and is said to be adsorbed (bonded) to the coal's internal surfaces.

Pressure exerted by the natural water column in the pore space of rocks extending down from the water table is called hydrostatic pressure. The combination of adsorption and hydrostatic pressure can cause gas to be trapped on coal surfaces within the coal seams. The volume of gas that can potentially be stored by a coal of a given rank increases with depth of burial and increasing hydrostatic pressure.

In addition to the above, gas can also be trapped in pore spaces within the coal bed although the volume of gas in pore spaces is typically not large. However, it may have the effect of displacing water as is believed to be the case at the Scotia and Peat Gas Fields, where the fields are located in anticlinal traps. This can have beneficial effects, mainly the

potential for greatly reduced water production and handling, as well as some increase to the gas reserve.

Production of CSG requires drilling into the coal seam and installing pumps to remove water and reduce (draw down) the hydrostatic pressure in the coal seam. The adsorbed gas then desorbs and is released within the well bore as the water is pumped off. The length of the de-watering period and the rate at which gas will flow depends primarily on the permeability of the coal. Production wells in a CSG field are typically drilled in a pattern such that the areas of reduced hydrostatic pressure around each of the wells overlap and reinforce one another. This also reduces the ability of the water to re-charge the coal seams.

If permeability within the coal is too high then it is difficult to draw down the reservoir pressure in the coal seam, as water will re-charge as quickly as it is pumped out. Eventually, the pumping will get ahead of the water re-charge, however this can take years in some cases. A higher pump rate may overcome the water re-charge, but this requires higher operational costs and the environmental impact of a much larger volume of water that requires disposal. High permeability and water re-charge is a major operational challenge facing operators developing the WCM as has been the case in the development of the Powder River Basin in the USA.

Conversely, where permeability within the coal is too low, gas will not be able to flow at economic rates. Sometimes low permeability can be overcome by the application of technology. For example, at the Moranbah Gas Project, CH4 Pty Ltd (CH4) has employed mine drainage techniques, involving a pair of horizontal wells cutting across the main direction of permeability for hundreds of metres, and connected by a vertical well to overcome the relatively low permeability of the northeast Bowen Basin coals (CH4, 2004).

The depth of burial has a significant effect on coal permeability. As burial increases, the porosity and permeability of the coal decrease as a result of increased rock weight (geostatic pressure) closing fractures and cleats. Generally, the floor for adequate permeability is at about 1,000m and coal seams deeper than this are unlikely to flow gas at economic rates. However, in the Piceance Basin in the USA, there are examples of coals which produce gas at economic rates at depths greater than 1,000m.

Shallow coals have a low capacity to adsorb gas due to the low hydrostatic pressure. Most exploration is concentrated on coals that are deeper than 150m below the ground.

3.1.3 CSG in Oueensland

In Queensland the future for the coal seam gas industry is bright. The past few years have seen companies reducing drilling and production costs and implementing new extraction techniques. Reliability of supply

Section 6

has been proven, aggregation of production is now occurring and longterm contracts are being entered into.

The QDNRM (2003) reports that the total CSG production in 2002 was approximately 25 Petajoules (PJ), which equates to almost 25% of Queensland's gas demand. This represents a dramatic increase in production from about 11 Petajoules per annum (PJ/a) in 2001, and about 2 Pl/a in 1998.

Coal seam gas exploration is not a new industry in Queensland with exploration dating back to 1976. Early attempts were largely unsuccessful due to inappropriate drilling techniques. In 1994, the Tri-Star Petroleum Company, concentrating on drilling the coal seams between Roma and Blackwater in the Bowen Basin, established the Fairview CSG Field, which now supplies gas to markets in Brisbane and Gladstone.

There is still a relatively small group of companies involved in CSG in eastern Australia with Origin Energy CSG Limited (previously Oil Company of Australia Limited) being the largest and most active. The play fairways in the Permian and Jurassic coals have been identified with the focus today mostly on the commercialisation of the resources.

A proved plus probable (2P) CSG reserve for the Bowen Basin (Permian coals) has been estimated to exceed 1,000 PJ (White, 2002). However, Origin Energy Limited has suggested that the 2P CSG reserve for Queensland exceeds 1,300 PJ, with potentially more than 25,000 PJ of recoverable CSG (QDNRM, 2003).

To put the Australian CSG industry into context, the 2P CSG reserve in the US in 2001 was estimated at 20,000 PJ with a likely reserve of 52,000 PJ from seven producing basins (Origin Energy, 2003). Today, US CSG production is in excess of 1200PJ/a. By comparison with Australian conventional gas reserves, the estimated ultimate reserve from the Cooper Basin is 6,000 PJ, the Gippsland Basin 9,000 PJ and the Carnarvon Basin on the North West Shelf 96,000 PJ.

Coal seam production can span many decades. For example the recent review of Oil Company of Australia's (now Origin Energy) Fairview and Durham Ranch interests by Grant Samuel proposed that the Fairview Field production profile will eventually reach 60 PJ/a by the year 2020, will plateau for 8 years and then decline to at least 2040 (OCA, 2003).

While Permian coal measures of the Bowen Basin are currently the only CSG producing formations in Queensland, exploration has also been undertaken in the Permian coal measures of the Galilee and Gunnedah Basins, the Triassic units of the Ipswich Basin and the Jurassic WCM of the Surat Basin. Most recent Queensland exploration interest has centred on the WCM.

13 Centre Bidge Broices - ATOGETS Bruce Badin Queensland

3.2.3 General

The Comet Ridge Project comprises part of ATP337P which lies in the northern part of the Denison Trough (Bowen Basin). It covers 1053 sq km and comprises of 13 and a half graticular blocks in the northern part of the much larger permit. The Comet Ridge interest extends from the surface to the base of the Mantuan Formation coals only.

An area surrounding the Lowesby-1 well has been excluded by Santos Petroleum Operations Limited (Santos) and Origin Energy Limited (Origin) due to gas being discovered in a conventional sand reservoir immediately below the Mantuan coals in the well.

Santos is the official operator of the permit; however, Origin will operate the field work, such as seismic acquisition and drilling of wells. These two companies are among the most experienced CSG companies in Australia.

the errors

Comet Ridge has entered into a farmin agreement with Origin and Santos to earn up to a 40% interest in a portion of ATP337P down to the base of the Mantuan Formation Coal (Figure 3).

The earning period comprises two phases with the 40% interest being earned after fulfilling both phases. The first phase, which is currently underway, involves Comet Ridge funding 100% of the costs associated with the drilling of two core holes (cored over the Bandanna coal seams) drilled to about 600m in the block, at an estimated cost of \$578,000 to earn a 20% interest. Comet Ridge then has 120 days in which to exercise its option to enter the second earning phase, which requires Comet Ridge to fund 100% of the cost of a completed and equipped pilot test hole. There is no agreed cost for this work as yet, although Comet Ridge expects it to be about \$400,000.

The ATP337P permit is currently being renewed, with the first year of the new four-year term expected to officially commence on I October 2003. Santos and Origin have applied for the renewal with a four-year work program for the permit. It is understood that some of the work will take place in the Comet Ridge Block. The Joint Venture (JV) also expects that the ATP337P renewal, including all of the area of the Comet Ridge Block, will be approved by the QDNRM. MBA has seen the proposed renewal program and sees them as reasonable.

3.2.4 Geology

Four petroleum wells and numerous coal exploration holes have been drilled and sufficient seismic has been acquired to be able to map, with a reasonable level of confidence, the distribution of the Permian coal seam gas plays of the Bandanna Formation and the Mantuan Formation (Figures 4 and 5). The coals of the Bandanna Formation are an extension of the same sequence of coals that form the Fairview/Durham Ranch Fields, 130 km to the south, though individual seams are not believed continuous over such distances.

The Fairview/Durham Ranch Fields lie on the Comet Ridge Anticline, which is thought to be a focus for fracturing which has enhanced permeability of the coals in these fields. The Comet Ridge Anticline extends to the north into the Comet Ridge Block.

Gas is produced from the Tipperary-operated Fairview Field at an average rate of about 17 terra-joules per day (TJ/d) from the 70 wells drilled as at September 2003 (OCA, 2003; Tipperary, 2004a). MBA believes that, at about the same time, only 33 of the 70 wells were on production and connected to the Hutton/Wallumbilla pipeline. This would suggest an average production rate per well of 0.5 T| a day, which is likely to improve as the dewatering process continues. Once all seventy wells are connected, Tipperary claims that it will have the capacity to deliver 41 mmcf/d (approximately 41 TJ/d), an average of 0.6T] per well (Tipperary, 2004).

Bandanna and Mantuan coals are believed to be the main source for the gas pools in the Denison gas fields to the west (Figure 2). Thermogenic gas is expected given that the average level of thermal maturity (measured by vitrinite reflectance as 0.81) for the Bandanna coals is well within the window of thermal hydrocarbon generation.

3.2.4.! Bandanna Coals

The drilling of two core holes (cored over the Bandanna coal seams) in the Comet Ridge Project Area (as part of the earning phase for Comet Ridge) is expected to show similar properties to the Fairview Field coals. The Bandanna coal seams outcrop and subcrop young Tertiary sediments to the north of ATP337P and are as deep as 625m in the south and 775m in the west of the Block (measured from ground level). This is well within the low-risk window for economic CSG development of burial depth less than 1,000m. The Bandanna Formation structure is illustrated in Figure 4 and this shows structure contours (measured from sea level) on the top of the main seam, the Pollux seam. The ground level in the Comet Ridge Project Area averages about 225m above sea level. Additional potential in the Bandanna Formation exists in the Aries seams, which lie approximately 30m above the Pollux seams (Figure 6).

The gross thickness of the Aries and Pollux seams varies from about two to eight metres, while aggregate thicknesses range from about four to eight metres (Thornton, 1978). The coals appear to thin and split towards the southeast. However, the aggregate thickness at Humboldt Creek-1 on the southeast flank of the project area is as thick as the wells in its central part. Wireline logs have been acquired in the petroleum wells and some coal holes and these will be calibrated with the results of the two new core holes to be drilled by the current JV in 2004 to determine the net gas-producing coal.

Section 6

Figure 4

The coal thicknesses at the Fairview Field (average 650 m depth) and the Durham Ranch Field (average 800m depth) are reported to have individual seams of between one and ten metres with an average net gas-producing coal of between six and ten metres (OCA, 2003).

There is an extensive seismic grid of good quality data in the Comet Ridge Project Area. The high amplitude reflectors, indicating presence of the coal, have been confirmed by drilling and allow both the Bandanna and Mantuan coal seams to be mapped in the permit (Figures 7 and 8). The Mantuan Formation to the west of ATP337P probably has no coal as suggested in Figure 8 which shows the Mantuan seismic reflector dimming out on the western end of the line. The probable distribution of the main body of the coal is shown within the grey area on Figure 5.

Correlation of individual seams in the Mantuan can be made over many kilometres, although it is likely that seams are not continuous over greater distances.

In the northwest of the Comet Ridge Project Area, where it overlaps with the MDL, there has been significant drilling of coal wells by the Queensland Mines Department to assess the potential for the out-cropping and sub-cropping coals to be developed as coal mines. A number of these wells have been drilled within the Comet Ridge Project area as shown in Figure 4. Data have been gathered from the coal wells drilled to about 300m below ground level. The average values for the proximate data from a number of the coal wells in the MDL are provided in Table 3 (Thornton, 1978). This suggests that these coals will prove to be of fair and probably very sond quality for CSG in 179337P.

Figure 5

.
. . . . . . . . . . . .

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Section 6

TABLE 3

Average Parameter Values for the Bandanna Coal Seams within the MDL

Bandanna Formation Coals	Average Values ATP337P
Moisture	6%
Ash	13%
Volatile Matter	28%
Fixed Carbon	53%
Vitrinite Reflectance	0.81

Gas indications in a petroleum well are often measured (with a gas detector) in "units" where a unit of gas is equivalent to 200 parts per million (ppm) of methane (CH⁴). The drilling gas curve for each petroleum well within the Comet Ridge Project Area is included in the cross-sections of wells in Figures 6 and 9. Large gas peaks in coals may suggest that there is gas in the coal porosity as well as adsorbed onto the coal. Small gas peaks have little correlation with gas quantity within the coals. The gas peaks, or lack of them do not tell us much about the gas contents or deliverability, though large peaks do increase confidence that the coals will be found to have adequate gas content.

Though the coal gas content in the Comet Ridge Project Area is currently unknown, there are strong indications that the coals do contain gas.

Straun-1 was drilled in 1965 as a conventional sandstone gas play. It did not flow gas on test even though the Bandanna coals were included in the test interval. It was not designed as a test of coal seam potential. The well intersected the Bandanna Formation coals at 244m and the Mantuan coals at 567m. A very large, 80 unit gas peak was recorded while drilling through the Aries coal seam and peaks greater than 1,000 units (off scale) were recorded over the Pollux and Mantuan seams (Figures 6 and 9). The well lies within the MDL and is surrounded by coal bore holes.

Sunlight-1 was drilled in 1966 as a conventional test of the Permian sandstone reservoirs. The Aries coal seam was intersected at 405m, the main Pollux seam at 432m and the Mantuan coal at 738m. The Aries seams average less than one metre in thickness, the Pollux includes a well-developed three to four metre thick seam and the Mantuan is about three metres thick. Wireline logs are of insufficient resolution to be sure of coal thickness and quality. Up to 500 units of gas were recorded from the Aries, 100 units from the well-developed Pollux seam and about 60 units from the Mantuan coal seam.

Humboldt Creek-1 was drilled in 1970 in the south-eastern corner of the Block and was thought to be located on a faulted anticline at the time of drilling. The top Bandanna coal seam was intersected at 395m and is 1.8m thick. Up to five other thin seams were intersected down to a depth of 466m. Average seam thickness is about three metres. The well was air drilled to test conventional sandstone reservoirs. A small gas flow of up to 10,000 cf/d was recorded, apparently while drilling the Bandanna coals. The Mantuan Coal is absent at this location.

Luton-1 was drilled in 1991 as a test of a conventional gas trap to the north of the Comet Ridge Project Area, still within the MDL. Unlike the surrounding coal bores, the well was drilled deep enough to intersect a seven metre thick Mantuan Coal at 514m. Mud gas records include a 2500 unit gas peak, apparently emanating from the Mantuan coal seam. The Bandanna coals were intersected at 155m and the mudlog records a 230 unit gas peak.

In 1991, the Lowesby-1 well was drilled to test conventional sandstone reservoirs in a Permian anticlinal closure. The Bandanna Coals were intersected at 420m and the Mantuan at 735m. The gas detector was malfunctioning when these coals were intersected, so there is no gas record available.

In MBA's experience, Permian coals of the Bandanna Formation can contain average gas contents on a dry and ash-free basis (DAF) of about 8.3 to 16.7 cubic metres per tonne (m³/t) (300 to 600 cubic feet per ton $(scf/t)$ at a depth of 500 m (assuming that the water table is at ground level) and about 4.2 to 9.7 m³/t (150 to 350 scf/t) at a depth of 200 m. The Bandanna coals in the Fairview area are understood to be gas saturated; that is, they contain the maximum adsorbed gas possible, given the depth of burial and reservoir pressure. Coals that contain less gas than they have capacity for are termed under-saturated. The Permian coals in the Comet Ridge Project Area are interpreted as gas saturated.

Permeability, or the ability of the coals to flow gas at an economic rate, is regarded as the principal risk for this play. The first two holes to be drilled in the Comet Ridge Project Area will be fully cored across the Bandanna Formation, Pollux seam coals to evaluate the gas content at a depth of about 180 to 265m. Evidence of fracturing and cleats in the coal core together with drill stem tests will be used to evaluate the permeability of the coals and their ability to liberate gas at potentially economic rates. It is possible that the observed high permeability in the Fairview Field coals has been enhanced over the Comet Ridge Anticline by the structural warping of the brittle coals. Given that the Comet Ridge Anticline extends into the Comet Ridge Project Area, structural warping may enhance permeability.

INDEPENDENT PETROLEUM CONSULTANT'S REPORT

Section 6

Figure 9

initial water production, dependent on the permeability, could be very large and would require management. The water could be quite fresh (perhaps just hundreds of ppm salts in the northern areas), since the block is close to the outcrop/subcrop of the coal beds. Water of low salinity but typically high sodium absorption ratio (SAR) is produced at the Fairview Field and is able to be released into local creeks and mixed with some higher salinity waters. Possible water management strategies are discussed separately in section 4.0 below.

3.2.4.2 Upper Mantuan Coal

A thick coal is developed in the Mantuan Formation in the ATP337P area. The Mantuan is usually composed of marine sediments, so the coal sequence was probably deposited in a back-beach environment and is not nearly as extensive as that of the Bandanna Formation. Unlike the Bandanna coals, the Mantuan coals do not crop out along the Comet Ridge and fresh water is unlikely to have penetrated the coal.

Within the Comet Ridge Project Area, the coal seams vary from one to 3.6m in thickness, and aggregate thicknesses range from one to 6.4 m (Thornton, 1978). Comet Ridge's two proposed coreholes are expected to intersect the Mantuan coals between 507 and 585m.

Permeability and the ability of the Mantuan coals to flow gas at economic rates are regarded as the main risks for this play.

The Mantuan coal has not previously been sampled and tested in the manner usually required for CSG analysis. There is little data available the wells rings than limited withing logs and commut semple evaluation and gas detector indications as discussed below. Seismic and well control provides some indication of the extent of the play (Figure $5$ and $9$ ).

The area around the Lowesby-1 well, near the centre of the Comet Ridge Project Area, has been excluded from the farmin. Santos and Origin believe that a gas pool has been discovered in the well in the Mantuan Formation where a drillstem test flowed gas at a rate of 156 thousand standard cubic feet a day (MCFD). The test over a sandstone interval included the Upper Mantuan coal seam, which may have contributed to the gas flow. The gas contains $94.5\%$ methane (CH₄) and minimal carbon dioxide (CO₂).

The Struan-1 drilling gas curve, included in the cross-section of wells in Figure 9, shows recorded large gas peaks that were greater than 1,000 units (off scale) while drilling both the Pollux and Upper Mantuan Coal, indicating potential for good gas charge.

Any produced water is likely to have a relatively high salinity (perhaps 8,000-10,000 ppm salts, or higher) and typically high SAR and, therefore, will require treatment for salt. The potential water production may be low due to isolation of the coal, or high due to juxtaposition with the Mantuan sandstones containing water. Drill stem testing of the proposed new wells will help determine which of these will be the case.

The structure contours on the top of the Pollux Seam in the Bandanna Formation and displayed on Figure 4 indicate a four-way-dip closure at the Islaic Pirrorm are of the two prigated difficulting/one The

seismic line of Figure 7 shows the anticlinal feature at the Mahalo Prospect. It is possible that the coals within this closure could be saturated with adsorbed gas as well as having gas in the microfracture porosity rather than water. This would provide some additional, though small, gas reserve and, more importantly, CSG could be produced with minimal water production.

The proposed Somerby-1 well will be located approximately 5km south east of the Mahalo Prospect. There is no four-way-dip closure at this location. As with the Mahalo-1 location, the site lies within the MDL and is surrounded by core holes that provide good stratigraphic control.

It is likely that the Mahalo-I and Somerby-I wells will be drilled in 2004. The Upper Mantuan Coal will not be cored due to operational and safety reasons as the operator is concerned about coring a potentially gas-charged coal. The interval will be evaluated with wireline logs and drill stem tests.

The presence of coal, distribution of coal, apparent gassy nature of the coal and similarity to the Fairview and Durham Ranch Fields in the vicinity of the first two planned exploration holes has been adequately demonstrated by the available GSQ core holes, the petroleum wells and the seismic data and suggests that such exploration is warranted.

3.3 Walloon Coal Measures (WCM) Project, ATP683P, ATP689P and PL198A, Surat Basin, SE Queensland

Exploration of the Jurassic WCM in southern Queensland has greatly increased on the back of the success achieved with the Permian coal sequences. The fairway for potential Jurassic gas-bearing coals lies close to potential gas markets and the gas pipelines. The WCM are often compared to the Tertiary Powder River Basin coals in Wyoming, USA, where vast quantities of gas have been created by bacterial activity. Gas in the WCM may include both bacterial and thermogenic generation.

Permeability of these coals is often high (greater than 100md) because of the shallow depth of burial and strongly cleated nature of the coal. There are a number of pilots designed to determine the economic viability of the WCM (Figure 10 and 11). The Tipton West Pilot (TWP) and proposed Meenawarra pilot lie within the Comet Ridge acreage (ATP683P). The most advanced pilots are those at Berwyndale South, operated by Queensland Gas Company (QGC), and Kogan North, operated by Arrow. The pilots have been located in areas close to the Roma to Brisbane gas pipeline, where earlier petroleum wells and water bores have indicated the presence of thick, gassy and permeable coals.

Arrow reported in September 2003 that the Kogan North Pilot had

achieved a gas flow rate of 503,000 cf/d, accompanied by a steady flow of 4,000 barrels of water per day (BWPD) from the five wells in the pilot (Arrow, 2003 and Arrow, 2004). This is depicted in Figure 12, which shows that the gas rate is gradually increasing as de-watering proceeds. The central well within the pilot has the highest single gas flow (because of maximum draw down), while the average flow per well is about 100,000 cf/d.

In MBA's opinion, Comet Ridge has assembled a strategic position in the play through combining the interests and rights of Strike and Anzoil.

3.3.1 Earning Phase

Comet Ridge has entered into purchase agreements with Strike and Anzoil to earn and purchase interests in several areas in permits offering CSG

Section 6

potential in the WCM in the Surat Basin in southeast Queensland (Figures $1$ and $10$ ).

3.3.1.1 Strike Oil Interests

Comet Ridge acquired all of Strike's rights, titles, interests and obligations resulting from a farmin agreement with Arrow and Australian CBM Pty Ltd (ACBM) dated 20th November 2002.

The farmin deal with Arrow and ACBM comprises three earning phases (Table 4). The first phase involves an exchange of interests between the parties such that Arrow was assigned a 10% interest in WA-261-P in the Carnarvon Basin, Western Australia and Strike (now Comet Ridge) earned 5% in the Dalby South Block of ATP683P, 10% in the Millmerran Block of ATP683P and 10% in ATP689P. The first phase also required Strike Oil to fund the drilling of three core holes at a capped total cost of \$250,000. Being capped means that if the costs for the work exceed \$250,000 then the joint venture shares the excess in proportion to their percentage interests. The first earning phase is complete.

Comet Ridge has elected to exercise its option, phase two, to fund the drilling of three more core holes at a capped total cost of \$250,000. This work is currently in progress and, on completion, Comet Ridge will have earned an extra 5% in the Dalby South Block, 10% in the Millmerran Block and 10% in ATP689P. This will take the Comet Ridge interests in the blocks to 10%, 20% and 20% respectively (in addition to the interests acquired from Anzoil).

The final earning phase requires Comet Ridge to fund either the drilling of a fifteen well CSG pilot program, or up to three five-well pilot programs at a total capped cost of \$3 Million (\$1 million per five-well pilot). The pilots can be positioned in any part of any of the blocks and, regardless of their location, will earn interests in all of the blocks.

TABLE 4

On completion of this work, Comet Ridge will have earned an extra 20% in the Dalby South Block, 30% in the Millmerran Block and 30% in ATP689P. This work would take the Comet Ridge earned interests to 30% in the Dalby South Block and 50% in each of the other two blocks. Comet Ridge is raising money with this IPO to fund one of the pilots, and would probably need to raise further money to fund subsequent pilots. It is considered likely that Comet Ridge will fund a pilot on Dalby South in the first instance.

■ 東京 | | | | | | | | | | | | | | | | | |

"我们的话,我们的话,我们的话,我们的话,我们的话,我们的话,我们的话,我们的话,

When combined with the Anzoil purchase, Strike will have a cumulative interest of 20% in the Dalby Block (and PL198A), 50% in the Dalby South Block, 50% in the Millmerran Block and 50% in ATP689P.

3.3.1.2 Interests Obtained From Anzoil

Comet Ridge acquired Anzoil's 20% interest in the Dalby Block (including the application for a Petroleum Lease, PL198A, within the block) and the Dalby South Block, both in the western portion of ATP683P. Part of the consideration was for Comet Ridge to assume Anzoil's remaining spending obligations of \$753,789 (Table 4) under a farmout agreement between Anzoil and Arrow. This agreement was finalised on 31 December, 2003.

The interests obtained from Anzoil are considered to be of strategic value to Comet Ridge as they provide immediate exposure to a pilot production test within proximity to the Roma to Brisbane pipeline and include a negotiated Memorandum of Understanding for the sale of gas.

$3.3.2$ Permit Status

ATP683P is currently in the last year of a four-year term. The term expires on I March, 2004. It is the intention of the joint venture to reapply for the permit, relinquishing some areas in the eastern part. It is very likely that the joint venture will be able to negotiate a new work program for the permit.

Comet Ridge Earning interests - ATP683P, ATP689P, PULL 3A
	AFP683P DALBY	ATP683P DALBY SOUTH	ATP683P MILLMERRAN	PLI98AP	ATP689P	COMET RIDGE WORK COMMITMENTS
Anzoil Purchase	20%	20%		20%		\$753,789 (Completed)
Swap with Arrow for WA-261-P		$5\%$	10%		10%	THREE CORE HOLES \$250,000 (Completed)
First Optional Phase		5%	10%		10%	THREE CORE HOLES \$250,000 (In progress)
Second Optional Phase		20%	$30\%$		$30\%$	One CSG 15 Well Pilot, or Three CSG 5 Well Pilots S3 million
TOTAL the company of the company of the company of the	20%	50%	50%	20%	-50%	Upon completion of work

Section 6

ATP689P is also in the last year of a four-year term. The term expires on 1 December, 2004. It is expected that the joint venture will reapply for and retain the permit. A relinguishment of 25% of the area will be required at that time.

A 260 km² Petroleum Lease (PL198A) around the Tipton West Pilot has been applied for on the basis of the gas flows already achieved from the first two pilot wells.

3.3.3 Geology

Several petroleum wells have been drilled in the permits (Figure 10) and there are many water bores and coal holes from which information on coal distribution can be gained. There is also an extensive seismic grid, which, when combined with the well data provide coal distribution and subsurface structure maps. Figure 10 also shows the area regarded as having the best WCM CSG potential in western ATP683P. The approximately north-south trending area of thick, gassy and permeable coals is believed to extend into the northern part of ATP689P.

3.3.3.1 Tipton West Pilot

The Tipton West Pilot, when commissioned in early 2004, will be an important production test in that it will attempt to verify that commercial production rates can be achieved in the immediate area of the WCM project and open up a large area for development. The test will provide important information on coal continuity, permeability and produced water volumes and indications of the likely length of the dewatering period.

Arrow drilled Tipton West Pilot-1 (TWP-1) in 2003 as a CSG test hole in an area of known coal development in the Upper Iona, Macalister, and Wambo Coal Seams (Figure 11). The well was positioned close to the Tipton West-1 fully-cored hole where good gas shows were recorded while drilling. TWP-2 was drilled 3 km to the north of TWP-1 on a structural high, looking for gas charge in the coal porosity displacing some or most of the water.

Four wells have now been drilled in the pilot project. Tipton West-3 (TWP-3) , Tipton West-4 (TWP-4) and Tipton West-2 (TWP-2) have been drilled about 400m apart. Each well has been completed over the Upper lona, Macalister and Wambo Coal Seams. Within the TWP these seams lie at depths of about 150 to 300m. Other seams, such as the Taroom (which lie between depths of 400 to 500 metres) may be tested in the future.

In June 2003, Arrow reported that TWP-1 and TWP-2 had produced 1100 and 2200 BWPD respectively, on short term drawdown (pumping) with immediate gas flows at low rates (Arrow, 2003).

Coal quality has been tested extensively in Tipton West-1. CSG content would appear to be about 4.2 m³/t (150 cf/t) DAF at a depth of 200m and about 8.3 m3/t (300 scf/t) DAF at a depth of 500m in the lipion When Pilat. The enginesis (is pily improbable he socient canciConfidence that the pilot and further development will proceed has been displayed by at least one gas customer, with Wambo Power Ventures Pty Ltd (Wambo) entering into a Heads of Agreement, under conditional terms, for the joint venture $(|V|)$ to supply 3.9 $P/2$ for a minimum of 15 years, commencing in 2006, to Wambo's proposed 50 mega-Watt (MW) gas-fired electric generation plant.

If the TWP proves successful, then there is a large area that could be developed over time. Produced water disposal issues are discussed in a section 4.0 below.

3.3.3.2 Proposed Meenawarra Pilot

In addition to the TWP, the IV has drilled the Meenawarra-2 well approximately 2.4 km northeast of Meenawarra-1. The Meenawarra-1 well intersected an aggregate 8.3m of coal in the Taroom Coal Measures (Figure 11) and high gas readings (up to 1,000 units) were recorded while drilling. The Joint-Venture has commenced the drilling of the Meenawarra-3 well (currently suspended), 1.7 km northeast of the number one well. The intention is to follow these wells with a decision on the location of the development of a new pilot project, which will be approximately 15 km south of the TWP.

The Proposed Meenawarra Pilot will test the Taroom Coal Measures between 360 to 400m. CSG parameters have been measured from coals intersected in Meenawarra-1. These indicate similar results to those recorded from the Tipton West-1 coals.

3.4 Shallow Gas Project, PEL 427, PEL 428 and PSPA 9. Surat/Gunedah Basins, NSW

3.4.1 General

Comet Ridge holds interests in two permits in the Surat/Gunnedah Basin of Northern New South Wales (Figures 13 and 14). The interests are 100% of PEL427 and 80% of PEL428. Comet Ridge operates both permits. It also holds a 50% interest in Petroleum Special Prospecting Authority #9 (PSP #9), which is operated by Australian Coalbed Methane Pty Ltd. A PSP is typically granted for a twelve month period so that a joint venture group can undertake desk-top studies thus enabling them to decide whether to apply to for a PEL.

PEL427 covers an area of 6930 square kilometres, while PEL428 covers 7560 square kilometres.

3.4.2 Permit Status

3.4.2.1 PPL 427 Comet Ridge 100% and Operator

PEL 427 is currently in the final year of a six-year term, which ends on 19 May 2004. The nermit is in good standing with an outstanding

commitment of \$150,000 to be fulfilled by either drilling a well or acquiring seismic. It is expected that the permit will be reapplied for at the appropriate time and with an appropriate work program and some relinquishment.

3.4.2.2 PEL 428 Comet Ridge 80% and Operator

PEL 428 is currently in the final year of a six-year term, which ends on 17 September 2004. The permit is in good standing with an outstanding commitment of \$200,000 to be fulfilled by either drilling a well or acquiring seismic. It is expected that the permit will be reapplied for at the appropriate time and with an appropriate work program and some relinquishment.

0.4.2.3 FSF 9 Comet Ridge 50%

Petroleum Special Prospecting Authority #9 has been granted to the joint venture (Comet Ridge 50%, (ACBM) 50%) with twelve months tenure from 12th November 2003. The commitment is to undertake desk-top studies of the available data in that time with an expenditure of \$100,000. The purpose of this Special Prospecting Authority is to enable the joint venture to assess the prospectivity of the area, prior to a decision to apply for a PEL.

3.4.3 Geology

Within most of the area covered by the permits, the sediments are too shallow to have generated thermogenic gas from the coals and other sediments (Figures 13 and 14). However, biogenic gas has been found in the water produced from many of the water bores in the area. It is thought that this gas is generated by the action of microbes introduced to the system by fresh water influx at the outcrop of the aquifer formations. Once these microbes are introduced, the aerobic species consume all the oxygen and chemically reduce the iron in the rocks. The anaerobic species then chemically reduce the sulphate chemicals, creating conditions conducive to another bacteria, the methanogen species. The methanogens then consume organic matter in shales and coals and dissolved non-organic carbon in sands generating methane. The methane can be trapped in conventional reservoirs such as the Mooga Sandstone and the Pilliga Sandstone. This methane generation process has occurred in several basins in North America, such as the Powder River, Denver, Michigan, Illinois, Montana and the South West Alberta Basins (Schurr and Ridgley, 2002 and Van Voast, 2003). Biogenic gas is also produced from shallow conventional reservoirs in the Po Valley of Italy. It is possible to determine the origin of the gas by analysing the stable isotopes of the gas.

Section 6

PROVINC		PERIOD			STRATIGRAPHY	SCOVERY
		Quaternary
		Pliocene
		Miocene
	Tertiary	Oligocene			Recent & Tertiary Alluvium
		Eocene
		Paleocene
			ate
EROMANGA		Cretaceous	Ēarly	Rolling Downs Gp	Winton Formation Allaru Mudstone Toolebuc Formation Wallumbilla Formation
				Blythesdale Group	Cadna-owie Fm / Bungil Fm Mooga Formation Oralla Formation
SURAT			Late	Injune Creek Gp	Pilliga Sandstone
		Jurassic	Σ		Walloon CM / Purlawaugh Fm	주 Sas
			ш		Hutton Sandstone
					Garrawilla Volcanics
		Triassic	Σ		Wandoan Fm / Napperby Fm
			Early		Digby Formation	☆ Gas
GUNNEDAH			Late		Black Jack Gp Hoskissons Coal
					Watermark Formation
		Permian			Porcupine Formation
			Ěarly		Maules Creek Formation	☆Gas
					Leard / Goonbri Formation
桦		s k enga	Â		Boggabri Volcanics Metamorphic Basement
					Regional unconformity
		petroleum consultants

Millie-3 located about ten kilometres northwest of Bellata-1 was drilled as a water bore (Figure 13). The well was air-drilled and encountered a strong gas show while drilling the Mooga Sandstone at a depth of 340m to 350m (Figure 14). However, the well was abandoned in order to control the flow. A subdued gas show in a follow-up well, drilled with drilling mud rather than air, suggests the presence of gas at the location.

Gas shows were seen in Bellata-1 while drilling the Pilliga and Purlawaugh Formations as well as in the Triassic-aged sandstones. The shows were recorded over the interval 500 to 900m.

At these depths, the sandstone reservoirs are expected to be of very good quality, with relatively high porosity and permeability. The evidence for this in provided by the good water flows from these sands in the many water bores in the area. Shale seals over the top of these sands may be poorly developed as the section tends to be sandy. However, silts and shales have been seen in wells in the permits and these are likely to be of at least semi-regional extent.

The greatest difficulty in this play will be locating and defining structural traps in the area due to low structural relief. Therefore, a significant investment in new seismic data or other techniques to image the reservoirs is required as data coverage is sparse, and there is limited structural information on the horizons of interest.

3.4.4 Work Program

Comet Ridge is currently undertaking a program of water bore sampling in PEL 427 and 428. The sampling program will establish water chemistry and gas trends in the area where a number of bores have reported elevated gas readings. In addition, gas chemistry and stable isotope studies will be undertaken to support the current theory of a biogenic source for the gas. The distribution of the gas with respect to the artesian flowing conditions, structure and proximity to the water recharge area for each formation being sampled will be mapped. The sampling is being undertaken by Earth Resources Australia on behalf of Comet Ridge, and the water, gas and isotope analysis services are being provided by CSIRO in Sydney.

Once the results along these traverses have been analysed, either seismic data will be acquired or shallow drilling will be undertaken to follow up and further evaluate prospectivity. The work program is logical.

The work to be undertaken within PSP 9 includes literature research, data compilation and processing and water bore sampling. Its purpose is to assist in delineating areas within the PSP, which are likely to have generated and trapped methane. Once these areas have been found, application may be made for a PEL, so that a significant field effort can be made to explore for the gas.

3.5 Galilee Project ATPA743P and ATPA744P. Gaillee Basin. Central Queenstand

3.5.1 Permit Status

These permits have been applied for and the applications are currently being processed by the QDNRM (Figure 1 and 15). It is expected that the permits will be awarded early in 2004. Native Title potentially affects a large portion of the application areas and will need to be resolved prior to the commencement of exploration activities. Comet Ridge will hold 100% of each of the permits and will operate them.

The minimum work commitment in each permit is for a total of \$525,000 spread over the four years of the term (Table 5).

Figure 15

GALILEE BASIN WORK COMMITMENTS

ATPA743P ATPA744P Proposed Minimum Estimated Proposed Minimum Estimated Work Program Work Program Cost Cost YEAR I Data Compilation \$25,000 Data Compilation \$25,000 and Desk-top Studies and Desk-top Studies YEAR₂ \$150,000 One Core Hole One Core Hole \$150,000 YEAR₃ Two Core Holes \$300,000 Two Core Holes \$300,000 YEAR 4 Data Review \$50,000 Data Review \$50,000

3.5.2 Geology

The Galilee Basin permit application areas lie in the central part of North Queensland. They are about 100 km north of the town of Barcaldine, which has a gas-fired power station supplying electricity for the Queensland grid. The gas for the Barcaldine power station is currently supplied from the Gilmore Gas Field and the Cooper Basin.

The Galilee Basin has been sparsely explored for conventional oil and gas accumulations with only 33 petroleum wells and stratigraphic bores intersecting the Late Permian sequence (Scott and Hawkins, 1992). However, there are a large number of coal exploration holes along the Permian outcrop edge, particularly in the northern part of the basin. There are three wells within ATPA743P and five within ATPA744P. In addition, there are fifteen wells in the immediate vicinity of the permits. Seismic data is very sparse within and surrounding the permits.

Comet Ridge's concept for the permits is to evaluate the possibility of significant volumes of biogenic gas being trapped in the shallow late Permian Betts Creek coals, which are equivalent to the Bandanna formation on the east flank of the basin. These coals are the same age as those producing gas at Fairview and Durham Ranch and the Comet Ridge Project. Potential for conventional prospects exists in the deeper formations. Comet Ridge intends to evaluate these opportunities, also.

Section 6

4.0 Water Disposal

Production of large volumes of water can be a significant operational challenge for CSG producers, due to the volume itself, the water chemistry and restrictions on water use. A number of proven technologies are available and new methods are being explored.

Aside from volume, the main issues associated with the co-produced waters are salinity and chemistry, with high sodium content being one of the main concerns. The ratio of Sodium to magnesium and calcium is called the sodium adsorption ratio (SAR). When too high in water it can eventually damage soil profiles.

Coal Seam Gas waters in Queensland can range in salinity from fresh to brackish, usually <1,000ppm to 10,000ppm total dissolved salts. This means that some of the waters can be used for stock and some plants, such as Sorghum and Cotton, which are salt tolerant, but for the most part the water needs to be either treated, evaporated and/or re-injected into the ground.

The following is a list of methods of disposal that have been used successfully in the US and are being employed in Australia:

• Surface discharge without treatment (tight water quality requirements)
• Surface supply for stock watering
• Surface supply for irrigation
• Aquaculture
• Static evaporation
• Spray evaporation
• Reverse Osmosis/Ion Exchange treatment
• Re-injection
• Supply to utility
• Treat with gypsum, or other chemicals, to control SAR

Each of these has its own problems and limitations, or is hampered by high cost. Large evaporation ponds are currently favoured, although some companies are trialing reverse osmosis combined with evaporation ponds and other chemical treatments in order to produce water that may then be used for irrigation.

Water disposal remains a significant challenge for large-scale production of CSG, particularly from high permeability WCM.

5. Statements

5.1 Unitations

MBA has primarily relied on data supplied by Comet Ridge. This information consisted of seismic data, well completion reports, seismic processing reports, geological studies, interpreted technical studies and other technical reports and papers. These were compiled and written by various industry and government bodies as well as consultants to and staff members of Comet Ridge. The material was reviewed for its quality, accuracy and validity and was considered to be acceptable. In addition, farmin agreements and title documents were provided by Comet Ridge. It is believed that the information received from Comet Ridge is both reliable and complete and there is no reason to believe that any material facts have been withheld. However, no warranty can be given that this review has analysed all of the matters which an extensive examination might reveal.

This report or any reference thereto, may not be included in any other document or distributed for any other purpose without the prior written consent of MBA to the purpose of such distribution and to the form and context in which the report or reference appears.

The opinions and statements in this report are made in good faith and in the belief that such opinions and statements are not misleading.

5.2. Declaration

MBA Petroleum Consultants has not had and, at the date of this report, does not have any relationship with Comet Ridge, or its subsidiary companies. A fee will be received for the preparation of this report and this is not contingent on the outcome of the Prospectus. No other benefit will be received by MBA. Neither Wal Muir nor Doug Barrenger has any pecuniary or other interest which could be regarded as capable of affecting their ability to provide an unbiased opinion in relation to the Prospectus. Advance copies of this report were provided to the Directors of Comet Ridge and minor changes were made as a consequence. There have been no material changes made to the report.

5.3. Qualifications of the Authors

Dougias Barrenger

Doug Barrenger received a BSc degree (geology) from the Australian National University and a Graduate Diploma in Computing Science from the Queensland University of Technology. He has more than 20 years of experience in the petroleum industry and has undertaken all facets of geological work, from wellsite and operations geology to prospect evaluation, risk analysis, reserve assessment, basin analysis, portfolio valuation and project management for both operated permits and newventure roles and for development and exploration projects. He has

worked on all Australian petroleum basins, including coal seam gas, and has overseas experience in SE Asia and Italy. Doug is a founding partner of MBA Petroleum Consultants, a member of the Petroleum Exploration Society of Australia and a twenty-year, Active Member of the American Association of Petroleum Geologists.

Wal Muir

Wal Muir has a B.Sc. (Hons) degree from the University of New South Wales (1978) with a double major in Geology, a major in Pure Mathematics and Honours in Geophysics. He has a Master of Business Administration (1989) from the University of Queensland. Mr Muir has 25 years of experience in the petroleum exploration and production industry, both within Australia and overseas. His principal expertise is in geophysical interpretation, prospect and permit evaluation, reserves assessment and economic evaluations. He has worked for seven companies during his career, rising to Exploration Manager. Since setting up MBA Petroleum Consultants in 2001 he has undertaken projects for many clients in Australia and overseas. Wal is a member of the Australian Society of Exploration Geophysicists, Queensland Petroleum Exploration and is a Distinguished Member of the Petroleum Exploration Society of Australia (PESA). He has filled all the executive positions at PESA Queensland, and was Federal President of PESA from 1997 until 1999.

Doug Barrenger Partner

Wal Muir Partner

6.0. REFERENCES

Arrow, 2004: http://www.arrowenergy.com.au/announcements/ ASX Updates and

Drilling Reports/Kogan North Pilot Reaches Half Million CFD Gas Flow Rate

Milestone. Accessed 12 January, 2004

Arrow, 2003: http://www.arrowenergy.com.au/announcements/ Arrow Energy Annual Report 30 June, 2003. Arrow Energy Annual Report for the year ended 30 June 2003. Accessed 17 December, 2003

Arrow, 2002: http://www.arrowenergy.com.au/slide shows/Ron Prefontaine's presentation to the Mining 2002 Conference, November 31, 2002. The Commercialization of Arrow's Coal Seam Methane Gas Resources. Accessed 17 December, 2003

Carr, A.F., 1978: Galilee Basin Exploratory Coal Drilling - Longton Area. Geological Survey of Queensland Record 1978/15

CH4, 2004: http://www.ch4.com.au/ Moranbah Gas Project. Accessed 12 January, 2004

Comet Ridge, 2003: Comet Ridge Limited (ACN 106 092 577), Information Memorandum. Unpublished Report

Durie, R.A., Hawkins, P.J., and Kukla, G.T., 1992: The Galilee Basin Coal Measures: A Potential Methane Resource? - A Case for a Well Planned. Integrated Exploration and R&D Programme. Coalbed Methane Symposium Townsville, November, 1992

OCA, 2003: Target Statement. Unpublished Report by Blake Dawson Waldron Lawyers.

Origin Energy, 2003: http://www.originenergy.com.au/Investor Centre/ Presentations/ Coal Seam Gas - A reliable Energy Source for Queensland. Accessed 17 December, 2003. Accessed 17 December, 2003

QDNRM, 2003: http://www.nrm.qld.gov.au/NR&M/ Business. Accessed 17 December, 2003

Pemberton, R.L., 1965: Lake Galilee-1 Well Completion Report. Unpublished report for Exoil NL

Pemberton, R.L. and Le Gay Brereton, J., 1970 Koburra-1 Well Completion Report. Unpublished report for Flinders Petroleum NL

Schurr, G.W. and Ridgley, J.L., 2002: Unconventional Shallow Biogenic Gas Systems. AAPG Bulletin, v 86, No 11, pp 1939-1969

Scott, S.G. and Hawkins, P.J., 1992: Coal Geology of the Northern Galilee Basin and its Implications for Coalseam Methane Investigation. Coalbed Methane Symposium, Townsville, November, 1992

Scott, S.G., Crosdale, P., 2000: The Walloon Coal Measures - The next coal seam gas target. The APPEA Journal, 40(1), 86-94

Stewart, J.R. and Alder, J.D., eds, 1995: New South Wales Petroleum Potential. NSW Department of Mineral Resources, Sydney, Petroleum Bulletin 1, 188pp.

Tipperary, 2004a. http://www.tipperarycorp.com/news releases/ Tipperary Corporation Announces Third Quarter and Nine-Month Results. Accessed 12 January, 2004

Tipperary, 2004b. http://www.tipperarycorp.com/ Potential flow rate from Fairview. Accessed 12 January, 2004

Thornton, M.P., 1978: Departmental Drilling - Togara Area South Central. Department of Mines, Brisbane, Bowen Basin Record 1986/54

Van Voast, W.A., 2003: Geochemical Signature of Formation Waters Associated with Coalbed Methane. AAPG Bulletin, v 87, No 4, pp 667-676

White, B., 2002: Current and Future Gas Markets in Queensland. In Cowie., M. (Editor): Unlocking Reserves Using New Ideas. PESA (Qld) Petroleum Symposium, September, 2002, Brisbane, pp 15-16

INDEPENDENT ENERGY MARKET

courtesy of Arrow Energy NL

The Queensland Government's cleaner energy
strategy has added impetus
to the development of the
CSG industry in Queensland.

FIRE ETGI I PILITI I PILITI PARTITI I POLITIKELLIR

30 January 2004

Mr Andy Lydyard Managing Director Comet Ridge Limited Level 10, International House 26 St Georges Terrace Perth WA 6000

Dear Sir,

1. Introduction

EnergyAdvice has been appointed by Comet Ridge Limited to provide an Independent Energy Market Report to the Directors of Comet Ridge Limited for inclusion in a prospectus to be dated February 2004, offering for subscription 25,000,000 fully paid shares at an issue price of \$0.20 each payable in full on application.

The report is to include and to address:

• Background to the Queensland gas market;
• Gas Industry Regulatory Framework;
• Growth Outlook of Gas Supply and Demand;
• Market outlook for Coal Seam Gas (CSG); and $\bullet$
• Market opportunity for Comet Ridge.

2. Executive Summary

The Queensland Government activities in introducing its new cleaner energy policy and the move to providing the Mineral Resources and Other Legislation Amendment Bill 2003 are seen as adding impetus to the development of the CSG industry.

Queensland's gas consumption is expected to increase significantly in the short, medium and long term.

The key Primary markets for the supply of CSG by Comet Ridge are:

• Large end users in South East Queensland (including Brisbane) and Gladstone;
• $\bullet$ Existing Queensland gas retailers in Queensland including Energex Retail and Origin Energy,
• Existing gas fired electricity generators; $\bullet$
• Potential generators of electricity such as contemplated in the Memorandum of Understanding (MOU) with Wambo Power Ventures Pty Ltd $\bullet$
• $\bullet$ Interstate markets via proposed pipeline connections between Moomba and Ballera.

Potential Secondary markets include electricity distribution augmentation using localised gas fired generation which has significant potential given the enormous challenges facing distributors as a consequence of the huge distances involved in electricity distribution in Queensland.

Comet Ridge's acreage is situated close to pipeline infrastructure potentially providing access to Brisbane, Gladstone and the Southern States. Gas Pricing to the Roma Brisbane Pipeline is expected to be in the range of \$2.00 \$2.50 per GJ.

Section 7

3. Background to Queensland Gas Markets

In November 1997, the Council of Australian Governments (COAG) established a national regulatory framework for third party access to natural gas transmission and distribution pipelines. By committing to the national access regime each of the jurisdictions committed to implementing the necessary reforms to promote gas market competition.

As part of the Natural Gas Pipelines Access Agreement's reform agenda, the Queensland Government has reviewed the Gas Act 1965 and has now replaced this act with the new Gas Supply Act 2003.

The States, in agreeing to the COAG regulatory framework, also committed to implementing timetables for introducing gas retail competition. The timetables were to be staged to progress 'contestability' commencing with large users of gas, through various tranches, until the entire gas retail market was open to competition ("full retail contestability"). A contestable customer is able to choose its gas retailer, while noncontestable customers are obliged to buy their gas from the holder of the franchise in the area in which the customer resides. In Queensland, network customers consuming at least 100 Terajoules (TJ) per annum (pa) became contestable on 1 January 2003.

A recent independent study undertaken on behalf of the Queensland Government concluded that the costs of Gas Full Retail Competition would significantly outweigh the benefits. The study has been released for consultation.

Customers eligible for contestability on 1 January 2003 were the first contestable network consumers however they were not necessarily the first Queensland gas consumers open to gas supplier competition. Larger (mainly industrial) consumers supplied by dedicated pipelines were already deemed not to be franchise customers under the Gas Act 1965, and have always been contestable in Queensland.

Gas distributors operate some 4,364 km of reticulation main in Queensland, providing gas to 145,000 retail customers.

A table of Queensland gas demand - showing usage by sector - was published by AGA in its Gas Statistics Australia 2002, quoting ABARE unpublished data. Annual demand for gas in Queensland totalled 78.6 Pl. The graph below shows demand by sector.

Oriconstand tipe flomand little

Sector	Gas Demand (PI)
Industrial & Manufacturing	45.61
Electricity & Generation	22.85
Mining	5.64
Commercial / Other	3.08
Residential	1.48
Total	78.66

The key gas usage sectors are the industrial and electricity sector. The electricity sector is forecast to undergo the largest growth, which is discussed below.

From a transactional perspective the wholesale level is characterised by longer-term contracts typically greater than 5 years. These long-term contracts in the wholesale market as well as the smaller retail contracts are characterised by confidentiality provisions. As a consequence pricing transparency is limited in the Queensland market.

4. Gas Industry Regulatory Framework

A number of key pieces of legislation establish the legislative framework for gas in Queensland and have essentially redefined the CSG playing field. The key legislative and policy items, their ramifications and implications are discussed below.

4.1. Queensland Energy Policy - A Cleaner Energy Strategy In May 2000, the Queensland Government released its 'Queensland Energy Policy - A Cleaner Energy Strategy.' Some key initiatives of the Cleaner Energy Strategy are:

• A license scheme requiring electricity retailers that operate in Queensland to source 15 per cent of their electricity sold from gasfired and renewable generation from | January 2005. The strategy requires the increased use of gas, including CSG, as an energy source. The Government is committed to 13 per cent of electricity sold in Queensland by 2005 being generated from gas and 2 per cent from renewable energy.
• To reduce the growth in Greenhouse gas.
• To facilitate the supply of abundant and competitively priced gas in Queensland.
• The Queensland Government will also spend over \$50 million over the next five years on programs targeting renewable and innovative

energy technologies. This includes \$1.5 million in funding to assist the coal industry to capture and use waste mine gas.

This policy initiative was followed by the Queensland Government's decision in 2002 to build the Townsville Power Station, a gas-fired base load power station that will be supplied with CSG from the Bowen Basin. This project is now under development with CH4, a leading CSG producer and explorer, chosen as the gas supplier using gas sourced from CSG fields in central Queensland.

4.2. Mineral Resources and Other Legislation Amendment Bill 2003

The Queensland Government recently released a consultation draft of the Mineral Resources and Other Legislation Amendment Bill 2003. The draft legislation includes the proposed regulatory regime that will govern the extraction of CSG. The initiatives are aimed at increasing the certainty of the CSG industry thus encouraging greater economic returns on projects and greater investor confidence.

The key features of the regime are:

• Rights to commercially produce CSG will be available only by way of petroleum leases.
• A petroleum lease will be able to be granted only over an existing coal or oil shale mining lease with the consent of the holder of the existing mining lease. Where overlapping tenures exist, parties will be encouraged to enter into commercial co-operative agreements.
• A mining or petroleum lease (i.e. a 'production' lease) can be granted over an area of land that is already the subject of an exploration tenement for the alternate commodity without obtaining the prior consent of the holder of the exploration title.

The underlying objective of the new legislation seems to be to maximise the recovery of the state's CSG, coal and oil shale resources. The legislation does not give any resource preference over the other, but rather affords the Minister wide discretions as to which production leases he may choose to grant (and the conditions he may impose on such leases if they are granted) effectively enabling the Minister to determine the best use of resources in a particular area. Viewed in conjunction with the Queensland Government's Energy Policy, the foundations for CSG are falling into place and the implications for the industry are very encouraging.

The legislation developments referred to above support and facilitate the potential for the CSG industry in Queensland, which is rapidly gaining momentum with considerable additional focus coming from key gas and related industry players.

4.3. Gas Pipelines Access (Queensland) Act 1998

Access to pipelines is of considerable importance in the delivery of CSG to end-users. Under the Gas Pipelines Access (Queensland) Act 1998, the Minister with responsibility for Energy is responsible for decisions on the 'coverage' of natural gas distribution pipelines in Queensland.

If a pipeline is 'covered', its owner is required to have an access arrangement, setting out terms and conditions for third party access to the pipeline services, approved by the relevant regulator. The Queensland Competition Authority Act 1997 together with the Gas Pipelines Access (Queensland) Act 1998 (including the National Third Party Access Code for Natural Gas Pipeline Systems) provides the legislative framework for third party access to pipelines and associated facilities.

For pipelines transporting processed natural gas suitable for consumption by users, the Gas Pipelines Access (Queensland) Act 1998, provides that the Australian Competition and Consumer Commission is the regulator for access to transmission pipelines, and the Queensland Competition Authority is the regulator for access to distribution pipelines. For all other pipelines, access matters are regulated by the Queensland Competition Authority under the Queensland Competition Authority Act 1997.

5. Growth Outlook of Supply and Demand

The Australian Bureau of Agriculture and Resource Economics (ABARE) produces statistics and demand projections on the Australian gas market via their publication "Gas supply and demand balance to 2019-20" (published in August 2002). In this study, ABARE lists two scenarios namely a 'Reference case' and a 'High gas demand scenario' for the projected demand for gas in Australia. According to the report, the principle difference between the two scenarios is that the 'High gas demand scenario' gas consumption in electricity generation is assumed to grow over the study period by 4.8 per cent a year (rather than 3.8 per cent a year in the reference case), adding almost 100 Petajoules per annum to gas consumption by the end of the forecast period. ABARE assumes a considerable proportion of this growth to be concentrated in Queensland and is underpinned by initiatives such as the State Government's Clean Energy Policy.

Excerpts from two of the tables included in the latest ABARE report are included below. A percentage column has been added to show the relative percentage increase in expected demand from the base consumption reported in 1999-2000.

INDEPENDENT ENERGY MARKET CONSULTANT'S REPORT

Section 7

				Gas consumption by electricity generation; reference cuse and high demand scenario
			Reference case			High demand growth
1999-00	2009-10	% change	2019-20	$%$ change	2009-10	$\%$ change	2019-20	% change
		from 99-00		from 99-00		from 99-00		from 99-00
	269		452		345	61	546	158

The table below shows the significant increase in forecast gas demand in the electricity generation sector throughout Australia. In 1999-2000, gas used in electricity generation comprised 24.6% of the total gas demand of 861 PJ. The forecast highlights the significant growth in gas demand required for electricity generation which is a potentially a key market for CSG.

		Gas consumption for Queensland: reference case and high demand scenario
			Reference case			High demand growth
1999-00	2009-10	$%$ change	2019-20	% change	2009-10	% change	2019-20	% change
PI	PI	from 99-00	PI	from 99-00	PI	from 99-00		from 99-00
69	i 16	68	184	167	178	158	281	307

The above table shows the significant increase in forecast gas demand in Queensland even under the reference case. In 2001/02, Queensland consumed 21,579 IJ of gas via gas fired electricity plant generation, or approximately 4.6% of Queensland's electricity generation (by fuel) (Source: ESAA - "Electricity Australia 2003"). A significant gas supply increase will be required to meet the mandatory 13% target by January 2005.

The graph below shows historical gas usage and demand projections for Queensland gas. The actual gas usage figures are sourced from AGA data, whilst the demand projections are based on ABARE's forecast reference and high demand scenarios.

58 COMET RIDGE LIMITED

6. Potential Coal Seam Gas Markets

6.1. Established Oueensland Markets

CSG has established a foothold in the Queensland gas market in the last five years. From an estimated 2 PJ supplied in 1998 and the 11 PJ supplied in 2001, the Department of Natural Resources and Mines (Queensland) advised EnergyAdvice that preliminary CSG production figures for 2002/03 was 31 PJ. CSG production by field is set out in the table below:

Queensland CSG Production 2002/03

and the state of the state

Dawson Valley Moura Mungi Peat Fairview Durham Total	Producing Field	۲ļ
		3.0
		2.3
		3.7
		6.0
		11.0
		5.0
		31.0

Source: Department of Natural Resources and Mines (Queensland) - preliminary data $-19$ January 2003

The Queensland gas market is typically divided into wholesale and retail segments. At the wholesale level, transactions take place between gas producers and large gas consumers and between producers and gas retailers. The retail segment includes supply to large users as well as small industrial, commercial and domestic consumers. The retailers in the Brisbane area include Energex Retail and Origin Energy. Both of these retailers are reliant on gas supplies from a combination of conventional natural gas and CSG. Natural gas is sourced from the Cooper Basin and CSG is sourced from a number of established CSG operators including companies such as the Oil Company of Australia (OCA) and Tipperary Oil and Gas. With the introduction of contestability to

the greater than 100 TJ pa end-users, there exists an opportunity for Comet Ridge to supply gas to either an existing retailer or to a potential aggregator for delivery to the Brisbane retail market and or as part of a portfolio supply to augment wholesale supply to larger end users.

In recent years, there have been a number of CSG sales contracts to end users, generators and retailers. These have included:

The announcement of these CSG sales contracts has been a significant factor in delaying the commitment of the proposed PNG Pipeline Project - initially targeting supply of gas from PNG into the Townsville, Gladstone and Brisbane market, but now struggling to secure sufficient contract gas load to underwrite the development of the project.

Given the proximity of the Comet Ridge acreage to the pipeline infrastructure including the Wallumbilla to Gladstone pipeline and the Roma to Brisbane pipeline, supply to the Brisbane market remains an attractive and viable option.

6.2. Potential Supply to Southern States

The Australian Pipeline Trust recently outlined plans to link the Queensland and NSW trunk gas pipelines at Jacksons Corner, where NSW, Queensland and South Australia meet. The proposed pipeline will link the transmission pipelines at Moomba (in SA) and Ballera (in South West Queensland). This will enable gas from South East Queensland to be backhauled from Wallumbilla to Ballera then to Moomba utilising gas sourced from CSG fields for supply to NSW via the Moomba to Sydney Pipeline or to SA via the Moomba to Adelaide Pipeline.

A Queensland pipeline schematic has been included for reference below.

The contract for the supply of CSG by OCA to AGL (announced in December 2002) is for delivery at Moomba, with the gas to be used by AGL to meet its long-term portfolio requirements into the NSW and SA markets.

This development opens up further opportunities for CSG to supply the southern States' gas market.

Producer	Customer	Contract Quantity	Duration
CH4	Enertrade (Townsville Power Station)	290 PJ	15 years
OCA	BP Bulwer Island Refinery	Up to 6.1 PJ pa	20 years
Santos	CS Energy (Swanbank Power Station)	120P	$10-15$ years
OCA	AGL	340 PI	15 years
Origin Energy	Queensland Alumina Limited	180 PJ (11-13 PJ pa)	15 years
Sydney Gas Company	AGL	$14.5$ PJ pa	10 years

Section 7

6.3. Cas for Pawer Generation

The AGA has highlighted electricity generation as a key driver of demand for gas in Queensland. In their Gas Industry Development Strategy report 2000-2005, AGA projects that 28% of Queensland's power generation will be derived from gas by 2015. Conventional steam plant in both open cycle and combined cycle gas turbines, cogeneration and fuel cells are all potential energy conversion processes which utilise gas as an input fuel to produce electricity. Whilst the 28% figure is highly ambitious, the Queensland Government's 13% gas scheme and various recent CSG supply contract announcements provide strong evidence of the market opportunity and confidence to support Comet Ridge plans to capture part of that market opportunity through its proposed exploration and development activities.

Supporting this view, EnergyAdvice has been advised by Comet Ridge that Arrow Energy and Comet Ridge (the JV partners) and Wambo Power Ventures Pty Ltd have entered into a Gas Supply Head of Agreement giving the JV partners the exclusive right to sell gas sourced from their CSG resource to the new 50 MW combined cycle power generating facility which

Wambo Power plans to construct. The project site land is owned by Wambo adjacent to the Braemar electricity substation 38 km west of Dalby.

2. Partinger (Man Burian Infrastructure Augmentation

Ergon Energy have indicated an appetite to utilise CSG as a potential fuel source for their remotely located generator sets used to augment their electricity distribution network. Ergon owns and manages the most geographically dispersed distribution system in the National Electricity Market and have over 100 generator sets in service to augment their network. A number of these generator sets are potentially capable of being supplied from CSG sourced from the Walloon Coal Measures Play. By augmenting the network using natural gas, Ergon Energy would be eligible to produce Greenhouse Energy Certificates (GEC's) and may also to benefit by delaying capital expenditure on the distribution system itself. Electricity from these generator sets could well be used in lieu of some of the grid-supplied electricity which would be particularly beneficial when electricity pool prices are high.

Supply to this type of market would be significantly beneficial to Comet

Ridge as the nature of smaller supply points would lend itself to facilitating the phasing in of gas production potentially reducing the initial capital and operational expenditure requirements.

7. Pipeline infrastructure Capacity and Tariffs

The tariff on the Roma to Brisbane pipeline for gas delivered to the Brisbane city gate (ie at the point of entry into the gas distribution networks) ranges between \$0.81-0.92/GJ depending on the shipper's load factor. The capacity on this pipeline is 137 TJ per day increasing to 145 TJ per day as the result of a current pipeline looping project.

The tariff on the Queensland Pipeline (Wallumbilla to Gladstone) is capped at \$0.795/GJ of maximum day quantity (MDQ) for an annual contract quantity (ACQ) up to 25 PJ, and similarly \$0.71 per GJ of MDQ for an ACQ of greater than 25 PJ per year. The tariff is based on a combination of a distance reservation rate (currently \$0.000943 per G| per kilometre) and a capacity reservation charge (currently \$0.54 per GJ of MDQ) with increases of up to \$0.04/GJ allowable at designated periods in time, the next being 2006.

According to Duke Energy International, the pipeline owner and operator. the capacity currently available for firm forward delivery is 17 TJ per day.

8. Prices into the Roma to Brisbane Pipeline

Gas pricing information is not readily available for gas supplied to Brisbane, Gladstone and Rockhampton. Anecdotal information gathered through EnergyAdvice's activities in the Queensland gas market suggest current market prices into the Roma to Brisbane pipeline between \$2.00-2.50/GJ are achievable. In certain instances these prices may be higher based on the particular characteristics of a particular buyer. Factors that influence gas pricing are:

• Load factor, whereby customers with demand load factors less than 80% would be expected to pay more for gas supply to compensate for the less than optimal use of production and pipeline capacity.
• Firm vs. Interruptible, whereby customers who are prepared to accept interruptible supply would expect to pay less for gas depending on the degree of interruption accepted.
• Alternative Fuel Sources, whereby a customer with the ability to switch fuel supply (for example from gas to LNG) would expect to pay less for gas supply.
• Risk Appetite, the commercial terms of the gas supply arrangement can fundamentally change either the seller's or buyer's level of risk, including but not limited to operational, supply, market, credit, pricing, CPI and contract risk.

The CSG field pricing spread referred to above is essentially an ex-field price and is thus only one of the components of a Brisbane City Gate price or a city or regional tariff. This should not be confused with delivered tariffs that in the case of Queensland residential consumers can be in excess of \$18 per GJ of delivered gas, though substantially lower for larger gas consumers.

Supply contracts in Australia are usually long term providing price stability. The majority of gas supply contracts have pricing indexed to the Consumer Price Index.

9. The Market Opportunity for Comet Ridge

The following summarises the gas market opportunity for Comet Ridge having regard to the current market status and outlook:

• The Queensland Government activities in introducing its new cleaner energy policy and the move to providing the Mineral Resources and Other Legislation Amendment Bill 2003 are seen as adding impetus to the development of the CSG industry.
• Changes to the regulatory regime in Queensland have opened up the gas market to downstream competition which could likely lead to new entrants including potential aggregators or end use customers in the wholesale market. This is particularly true for supply of gas into the Brisbane market, with Gladstone or the southern States representing a potential secondary market.
• Existing gas pipelines operating under third party access regulatory arrangements are located in close proximity to Comet Ridge's acreage.
• Demand forecasts for gas in Queensland show significant growth in the short, medium and longer term. In particular, demand for electricity produced from gas is a high priority in Queensland and this has resulted in a number of recent CSG supply contracts being signed.
• This ongoing need for gas for electricity generation provides a significant opportunity for the sale of CSG by Comet Ridge. Opportunities for the sale of CSG exist with a number of player participants, including Ergon Energy, Energex and CS Energy.
• Ergon Energy is keen to explore further generation development opportunities to augment its electricity network distribution area.
• Current market prices into the Roma to Brisbane pipeline between \$2.00-2.50/GJ are achievable by Comet Ridge from its proposed CSG developments.

10. About the Authors

EnergyAdvice provides a range of energy management and advisory services to participants in the Australian energy industry. Our clients include producers, generators, retailers, investors and major energy users, with our activities across each of the various State markets in both gas and electricity. Over the past seven years the company has been engaged to provide strategic advice on the management and utilisation of energy resources, including the related infrastructure involved in its production and distribution, and in the negotiation on energy supply contracts by a diverse range of companies.

Phil Randall has 17 years experience in the gas industry. Prior to establishing GasAdvice (now EnergyAdvice) in 1997, Phil held senior commercial positions with Woodside Petroleum and Gas and Fuel His experience includes contract development and Corporation. negotiation for major resource and utility gas contracts in various States, project development and strategic energy planning for clients.

Bill McLellan has over 10 years experience in the resources, engineering and energy industries. His experience includes contracts management, commodities marketing and trading as well as energy pricing and risk management. Prior to joining EnergyAdvice, Bill was Gas & Electricity Pricing Manager for Energex Retail in Queensland. Bill is responsible for pricing and risk assessment of client energy strategies, monitoring of market pricing and product offerings, and manages the analytical functions in relation to client procurement outcomes within the group.

11. Declaration

The statements and opinions contained in this report are given in good faith and in the belief that such statements are neither false nor misleading. In carrying out its tasks, EnergyAdvice has considered and relied upon information provided and available in the public domain and, where available, from the above-mentioned third parties. Whilst every effort has been made to verify data and resolve apparent inconsistencies, EnergyAdvice nor its servants accept any liability for its accuracy, nor do

REFERENCES

ABARE (ABARE Economics Consulting Services), 'Australian Gas Supply and Demand Balance to 2019-20', August 2002

AGA (The Australian Gas Association), 'Gas Statistics Australia 2002'. February 2003

AGA, 'Securing growth markets for natural gas - Gas Industry Development Strategy 2000-2005', November 1999

ESAA (Electricity Supply Association of Australia United) 'Electricity Australia 2003'

they warrant that their enquiries have revealed all of the matters, which an extensive examination may disclose or which may not have been disclosed or made available by third parties for commercial or confidential reasons.

The prediction of future supply and demand of natural gas is subject to uncertainty because it involves judgements on many variables that cannot be precisely assessed, including reserves, future oil and gas production rates, the costs associated with producing these volumes, access to product markets, price relativity to other energy sources, demographic growth rates, global competition for consumer products and the potential impact of fiscal/regulatory changes.

EnergyAdvice believes the review and conclusions are sound, but can offer no warranty of their accuracy or reliability.

A draft of our report was provided to Comet Ridge for comments as to any errors of fact or misinterpretation and any substantive disagreements as to the assumptions we have made, but expressly not in relation to opinions we have expressed. Minor corrections have been made in our final report as a result of comments received from Comet Ridge.

EnergyAdvice Pty Ltd, its affiliates, employees and the writers of this report are independent of Comet Ridge and have no pecuniary or other interest in Comet Ridge or in the Public Offer, other than that EnergyAdvice will receive a professional fee for preparation of this Report. EnergyAdvice authorises this Independent Energy Market Report to be included in the Comet Ridge prospectus dated February 2004.

Yours sincerely

Phil Randall Director

Bill McLellan Pricing and Risk Manager

Office of Energy Website - www.energy.qld.gov.au/gas.index.asp - 22 January 2004

Queensland Government - Department of Natural Resources and Mines, 'NRM Facts - Queensland Coal Seam Gas Developments', July 2003

Queensland Government, 'Queensland Energy Policy - A Cleaner Energy Strategy', Policy released by Premier Peter Beattie on 24th May 2000

Sydney Morning Herald Weekend Edition, 'Big stink, big questions after Moomba boom-bal lanuary 10-11, 2004

INDEPENDENT ACCOUNTANT'S REPORT

The Queensland Government has mandated that 13% of the electricity consumed in Queensland must come
from gas fired generation.

Photo courtesy of Arrow Energy NL

INDEPENDENT ACCOUNTANT'S REPORT

Section 8

Menn Judé

Chartered Accountants

23 February 2004

The Directors Comet Ridge Limited Level 10, International House 26 St Georges Terrace PERTH WA 6000

Dear Sirs

I.I INTRODUCTION

This report has been prepared at the request of the directors for inclusion in a prospectus ("the Prospectus") to be dated on or about 24 February 2004 relating to the issue by Comet Ridge Limited ("Comet Ridge" or "the Company") of 25,000,000 ordinary shares at an issue price of 20 cents per share to raise \$5,000,000 ("the Offer").

The primary purpose of the Offer is to:

• (a) fund the exploration, appraisal drilling and development of the Company's coal seam gas projects in Queensland and New South Wales;
• (b) provide funds for the administration of the Company;
• (c) meet the expenses of the Offer of approximately \$512,000; and
• (d) provide working capital for the first two years.

1.2 BACKGROUND INFORMATION

The Company was registered in Western Australia on 28 August 2003 by Strike Oil NL as a new energy company focused on exploiting large volumes of natural gas trapped in coal deposits found in Queensland and New South Wales.

We were appointed as auditors of the Company on 1 September 2003.

1.3 SCOPE OF THE REPORT

Historical Financial Information

We have performed a review of the historical financial information of Comet Ridge for the period from registration to 31 December 2003 as set out in Appendix 1. This financial information comprises the statement of financial position as at 31 December 2003 and the statement of financial performance, statement of cashflows and significant notes to the financial statements for the period then ended. The directors of Comet Ridge are responsible for the historical financial information.

We have reviewed the historical financial information in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the historical financial information is not presented fairly in accordance with the measurement requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

Our review has been conducted in accordance with Australian Auditing Standard AUS 902 "Review of Financial Reports" and was limited to enquiries of the directors and personnel of Comet Ridge, review of Directors' Minutes and relevant contracts, analytical review procedures applied to the financial data, the performance of limited verification procedures and comparison for consistency in application of Accounting Standards and policies.

These review procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and accordingly, we do not express an audit opinion on the historical financial information

Pro Forma Financial Information

We have also performed a review of the pro forma financial information of Comet Ridge as at 31 December 2003 as set out in Appendix 1. This financial information comprises the pro forma statement of financial position and significant notes thereto. The directors of Comet Ridge are responsible for the pro forma financial information.

The purpose of the pro forma statement of financial position is to show the financial effects on the Company as if the following significant transactions undertaken or proposed to be undertaken by the Company had taken place as at 31 December 2003:

• Issue of 25,000,000 ordinary shares at 20 cents per share to raise j) \$5,000,000 pursuant to the Prospectus, less estimated costs of the Offer (\$512,000) offset against the amount raised. Certain of the estimated costs of the Offer (\$31,638) set out in Section 11.10 of the Prospectus have been paid or accrued as at 31 December 2003;
• The receipt of further share subscription monies totalling \$207,175 ii) in January 2004;
• iii) The issue of 1,500,000 ordinary shares at 20 cents per share totalling \$300,000 to Anzoil NL on the earlier of 30 June 2004 or admission to the Official List of the ASX for acquisition of farm-in interests:
• The issue of 6,250,000 ordinary shares at 20 cents per share iv) totalling \$1,250,000 to Strike Oil NL upon admission to the Official List of the ASX and achieving certain conditions precedent for acquisition of farm-in interests; and
• Repayment of \$1,097,683 of monies paid by Strike Oil NL on behalf V) of Comet Ridge.

Our review was on the same basis as that adopted for the review of the historical financial information above.

1.4 STATEMENTS

Historical Financial Information

Based on the scope of our review, which is not an audit, nothing has come to our attention that would require any modification to the historical financial information of Comet Ridge, as set out in Appendix 1 in order for it to present fairly in accordance with the measurement requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of Comet Ridge as at 31 December 2003 and its financial performance and cashflows for the period then ended.

Pro Forma Financial Information

Based on the scope of our review, which is not an audit, nothing has come to our attention that would require any modification to the pro forma financial information of Comet Ridge, as set out in Appendix 1 in order for it to present fairly in accordance with the measurement requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of Comet Ridge as at 31 December 2003, as if the material transactions in Appendix 1 (Note 1) had taken place as at 31 December 2003.

1.5 SUBSEQUENT EVENTS

To the best of our knowledge and belief, and based on the work we have performed as described in the scope paragraphs above, there have been no material transactions or events subsequent to 31 December 2003, other than those included in our report, which would require comment on, or adjustment to, the financial information referred to in our report or that would cause such information included in this report to be misleading.

1.6 DISCLOSURES

HLB Mann Judd does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to this matter. HLB Mann Judd is the ongoing auditor of the Company and will receive a professional fee for the preparation of this report.

The Partners of HLB Mann Judd do not hold nor have any interest in any ordinary shares of the Company.

Consent for the inclusion of the Independent Accountant's Report in the Prospectus in the form and context in which it appears has been given. At the date of this report consent has not been withdrawn.

Yours faithfully HLB MANN JUDD

challrundy.

L DI GIALLONARDO Partner

INDEPENDENT ACCORDINATION REPORT

APPENDIX 1

STATEMENT OF PHENCIAL PERFORMANCE

	Reviewed
	28 Aug 2003
	to 31 Dec 2003
	Ş
Revenue from ordinary activities	2,390
Employee expenses	46,233
Consultancy fees	12,300
Insurance	6, 613
Data purchase expenses	4,545
Advertising expenses	5,455
Administration expenses	19,475
Other expenses from ordinary activities	3,992
Loss from ordinary activities before related income tax expense	96,223
Income tax expense relating to ordinary activities
Net loss	96,223
Total changes in equity from non-owner related transactions	96,223

. . . . . . .

STATEMENTS OF FINANCIAL POSITION

	Notes	Reviewed	Pro forma
		31 Dec 2003	31 Dec 2003
		\$	\$
CURRENT ASSETS
Cash assets	$\mathbf{Z}$	1,798,767	5,427,897
Receivables		17,025	17,025
Other assets		26,093	26,093
Total current assets		1,841,885	5,471,015
NON-CURRENT ASSETS
Exploration and evaluation expenditure	3	962,964	2,512,964
Plant and equipment		3,746	3,746
Total non-current assets		966,710	2,516,710
Total assets		2,808,595	7,987,725
CURRENT LIABILITIES
Accounts payable and borrowings	4	1,138,689	41,006
Provisions		1,270	1,270
Total current liabilities		1,139,959	42,276
Total liabilities		1,139,959	42,276
NET ASSETS		1,668,636	7,945,449
EQUITY
Contributed equity	5	1,764,859	8,041,672
Current period loss		(96, 223)	(96, 223)
TOTAL EQUITY		1,668,636	7,945,449

INDEPENDENT ACCOUNTANT'S REPORT

Section 8

____________________

STATEMENT OF CASHILOWS

	Reviewed
	28 Aug 2003
	to 31 Dec 2003
	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations
Cash payments in the course of operations	(121, 352)
Net cash used in operating activities	(121,352)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for permit exploration expenditure	(962, 964)
Acquisition of property, plant and equipment	(3,746)
Net cash used in investing activities	(966, 710)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from issue of fully paid shares	1,796,497
Share issue costs paid	(7,350)
Proceeds from borrowings	1,097,682
Net cash provided by financing activities	2,886,829
Net increase in cash held	1,798,767
Cash at the beginning of the financial period
Cash at the end of the financial period	1,798,767

TERMINER

Wildelman

■ 静岡市 電話 中国博士

有用法

藍

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies which have been adopted in the preparation of the historical statements of financial position, financial performance and cashflows, and the pro forma statement of financial position are set out below:

Basis of Accounting

The financial statements have been prepared in accordance with the measurement requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia using the accrual basis of accounting including the historical cost convention.

The financial statements have also been prepared on a going concern basis.

Exploration, Evaluation and Development Expenditure

Costs incurred during the exploration, evaluation and development stages of specific areas of interest are accumulated. Such costs are written off unless the Directors consider that the costs are expected to be fully recouped through the successful development of the project, or where activities to date have not reached a stage to allow reasonable assessment regarding the existence of economically recoverable reserves. Costs are written off as soon as a project has been abandoned or is considered to be non-commercial.

Expenditure is not carried forward in respect of any area of interest unless the Company's rights of tenure to that area of interest are current. Once production commences, expenditure accumulated in respect of areas of interest will be amortised on a unit of production basis against the economically recoverable resources.

Farm-out Arrangements

Where part of an interest is farmed out in consideration of the farminee(s) undertaking to incur expenditure on behalf of the farminee(s) and the entity in the area of interest, exploration expenditure incurred and carried forward prior to farm-out continues to be carried forward without adjustment, unless the terms of the farm-out are excessive based on the diluted interest retained. Any cash received in consideration for farming out part of an interest is treated as a reduction in the carrying value of the exploration expenditure carried forward. Where the value of the consideration received exceeds the carrying value, the excess consideration is recognised as a gain.

Cash

Cash includes deposits, which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts.

Valuation of Non-Current Assets

The carrying amounts of non-current assets are reviewed to determine whether they are in excess of their recoverable amounts at balance date. If the carrying amount of a non-current asset exceeds the recoverable amount, the asset is written down to the lower amount. Unless otherwise stated, in assessing recoverable amounts, the relevant cash flows have not been discounted to their present value.

Employee Entitlements

Liabilities for wages and salaries and annual leave are recognised and are measured as the amounts expected to be paid when the liabilities are settled.

INDEPENDENT ACCOUNTANT'S REPORT

helmat b

$\frac{1}{2}$ and $\frac{1}{2}$ and $\frac{1}{2}$ and $\frac{1}{2}$

Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation, Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when the timing differences arise.

□□ 財団運事科科

Revenue Recognition

Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue is recognised on receipt in respect of interest and at the time of issue of invoice in relation to other revenue.

Receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days.

Collectibility of trade debtors is reviewed on an ongoing basis. Debts, which are known to be uncollectible, are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

Albert County Links

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

Depreciation is calculated on a straight line basis to write off the net costs or revalued amount of each item of property, plant and equipment over its useful economic life. The expected useful lives are as follows:

Computer equipment 3-4 years

CONTRACTOR

The are forms statement of financial position has been derived from the historical statement of financial position as at 3. December 1703 as admissed to give effect to the following significant transactions that have accurred or are proposed to occur after 31 December 2003:

• Issue of 25,000,000 ordinary shares at 20 cents per share to raise \$5,000.000 pursuant to the Prospectus, less estimated costs of the Offer (\$512,000) offset against the amount raised. Certain of the estimated costs of the Offer (\$31.638) set out in Section 11.10 of the Prospector have heen naid or accrued as at 31 December 2003:
• The receipt of further share subscription monies totalling S2C7 175 in January 2004; $\ddot{\rm H}$
• ag The sine of middicide ordinary shares at 20 cents per share totallity SDACCO to Antil NUD the expirer of 30 june 2014 on administration of the Chaulis, of the AIX for suggifficer of family interests.
• in The music 6,250,000 ordinary shares in 20 perts cas share cateling \$ 1,50,000 in Dirico in Concert editor of the Constitution of the and adjaceng certain conflicts preseded in adquisition of factors, therefore in f
• will Pedaymers of \$1,097.683 of momes paraloy brisks ON 31 on bonal or lomes Roogs.

The provisions assessed to dicadval parlian has been prepared in the basis oracin e.C. (e.g. oracines) a promoted

	Reviewed	Pro forma
	31 Dec 2003	31 Dec 2003
	\$	\$
NOTE 2 - CASH ASSETS
Cash at bank and on hand	1,798,767	5,427,897
Reconciliation of movement in cash:
Opening balance		1,798,767
Shares issued pursuant to the Prospectus		5,000,000
Share issue expenses		(480, 362)
Repayment of monies owing to Strike Oil NL		(1,097,683)
Outstanding subscription monies		207,175
Closing Balance		5,427,897
NOTE 3 - EXPLORATION AND EVALUATION EXPENDITURE
Exploration and evaluation expenditure	962,964	2,512,964
Reconciliation of movement in exploration and evaluation expenditure:
Opening balance		962,964
Acquisition of Anzoil NL farm-in interests		300,000
Acquisition of Strike Oil NL farm-in interests		1,250,000
Closing Balance		2,512,964
NOTE 4 - ACCOUNTS PAYABLE AND BORROWINGS
Accounts payable	41,006	41,006
Amounts owing to Strike Oil NL	1,097,683
	1,138,689	41,006
Reconciliation of movement in accounts payable and borrowings:
Opening balance		1,138,689
Repayment of amounts owing to Strike Oil NL		(1,097,683)
Closing Balance		41,006

.
Primest (r

$\cdots$

INDEPENDENT ACCOUNTANT'S REPORT

Georian 8

		Reviewed	Pro forma
		31 Dec 2003	31 Dec 2003
		S	\$
NOTE 5 - CONTRIBUTED EQUITY
Issued and paid up capital		1,796,497	8,553,672
Less: Share issue expenses		(31, 638) 1,764,859	(512,000) 8,041,672
	i) Reconciliation of movement in contributed equity:
Opening balance			t,764,859
Shares issued pursuant to the prospectus			5,000,000
Shares issued to Anzoil NL			300,000
Shares issued to Strike Oil NL			1,250,000
Receipt of outstanding subscription monies			207,175 (480, 362)
Share issue expenses			8,041,672
ii) Movement in issued ordinary share capital:		Number	\$
Date	Details
28 Aug 2003	Shares issued to Strike Oil NL	100	100
19 Oct 2003	Share reconstruction in ratio of 1:125,000 and	12,500,000	100
	transfer to existing Strike Oil NL
	shareholders		500
18 Dec 2003	Shares issued to Managing Director	500,000
29 Dec 2003	Seed capital issue	13,814,589	1,795,897 (31, 638)
31 Dec 2003 Balance at 31 December 2003	Share issue expenses	26,814,589	1,764,859
Pro Forma adjustments:
	Receipt of outstanding subscription monies	1,593,651	207,175
	Shares issued pursuant to the Prospectus	25,000,000	5,000,000
	Share issue to Strike Oil NL (farm-in interest)	6,250,000	1,250,000
	Share issue to Anzoi! NL (farm-in interest)	1,500,000	300,000
	Share issue expenses		(480, 362)
Balance per report		$6^{\circ}$ , $158,240$	8,041,672

● 「第2番者」「第2番者」「「第2番」「第2番」「「第2番」「第2番」「第2番」「第2番」「第2番」「第

NOTE 6 - RELATED PARTY TRANSACTIONS

Details regarding directors' shareholdings , remuneration and transactions with the Company are set out in Section 11 of the Prospectus.

PERMIT INFORMATION AND RELATED AGREEMENTS

SECTION 9

9.1 Schedule of Permit Interests

Queensland Project

Tenement No	Holder/	% Held	Status	Grant Date	Term		Encumbrances/
and Type	Applicant				From	To	Notes
ATP 683P	Arrow	100	Live	3/2/2000	1/3/2000	29/2/2004	$\vert$ to 4, 7, 10, 11 & 12.
ATP 689P	ACBM	100	Live	11/11/2000	1/12/2000	30/11/2004	2, 5, 7, 8, 10 & 814.
ATP 743P	Strike	100	Pending	Application lodged 18/3/2003			6 & 9.
ATP 744P	Strike	100	Pending	Application lodged 18/3/2003			6 & 13.
PL 198A	Arrow	100	Pending	Application lodged 29/1/2003			6, 11 & 8 & 12.
AIP 337P	Santos	50	Live	$\frac{1}{1001983}$	1/10/1983	30/9/2003	1.
	OCA	50

New South Wales Project

Tenement No	Holder/		Status	Grant Date	Term		Encumbrances/
and Type	Applicant				From	To	Notes
PSPA 9		Australian Coalbed &	Live	21/11/2003	21/11/2003	20/11/2004	15 to 39, 45 & 46.
	Strike
PEL 427	Strike	Live	21/5/1998	21/5/1998	20/5/2004		16 to 19, 23, 27, 32,
							35, 36 & 40 to 44.
PEL 428	Strike	Live		15/9/1889	14/9/2004		16 to 19, 23, 27, 32,
							35, 36, 39, 41, 42 & 44.

KEY

Parties

$OCA = Oil$ Company of Australia Limited (now Origin Energy)

All other parties are defined in Section 13.

Notes

• 1. Application for renewal for a further four years lodged. Permit remains in force whilst the application is being processed.
• 1. This permit is granted only in respect to areas of current or past private freehold land, validly dedicated road reserves up to a maximum width of 120.7m that are surrounded by private freehold land or exclusive possession tenures, roads and an area to a maximum distance of 60.35m from the centre line of the road, railway reserves containing constructed railways and exclusive possession tenures as defined in Schedule 1 part 3 of the Native Title Act.
• 1. The area of this permit does not include the land subject of mining lease for coal 50151.
• 1. An \$18,000 environmental security and \$5215.20 rental security have been paid in respect to this permit.
• 1. An \$13,200 environmental security and \$4660.80 rental security have been paid in respect to this permit.
• Permit granted environmental authority for ERA 21C. 6.
• Permit granted environmental authority for ERA 20. Note that ERA 20 is for "Mineral explorations or mining exploring for or mining minerals $7.$ under a mining authority". There appears to be a typographical error on the environmental authority of referring to 'ERA 20' rather than 'ERA 21'. At the time of approval, the Environmental Protection Regulation 1998 referred to ERA 20 as "Extracting rock or other material - extracting

$r_{\rm p}$ and an $\phi$

rock.' ERA 21 was referred to as "Mineral explorations or mining - exploring for mining minerals under a mining authority." Therefore, the correct ERA should have been ERA 21.

• 1. This permit's environmental authority for ERA 20 was issued to SEQ on 25 September 2000. The permit's environmental authority does not appear to have been transferred to ACBM (the current holder of ATP 689P) either by agreement between the parties or application for transfer of the environmental authority (which would be recorded on the register). If a transfer of the environmental authority did not occur then there is no current environmental authority for the area of ATP 689P.
• 1. This permit contains an area marked as a proposed national park.
• 1. This permit is subject to the Bigambul People native title claim (QC01/006, Q6005/01).
• 1. This permit is subject to the Western Wakka Wakka People native title claim (QC99/004, QG6004/99).
• 1. This permit is subject to the Barunggam People native title claim (QC005, QG6005/99).
• 1. This permit is subject to the Jangga People native title claim (QC98/010, QG6230/98).
• 1. Rent payment of \$699.15 is overdue.
• 1. This permit excludes the surface of lands within or overlying the external boundaries of colliery holdings as recorded pursuant to section 163 of the Mining Act 1992 (NSW).
• 1. This permit excludes land that is, as at the date of grant of this permit, a national park, regional park, historic site, nature reserve, karst conservation reserve or Aboriginal area.
• 1. This permit excludes land that is, as at the date of grant of this permit, a State forest or flora reserve excluded from the operations of the Petroleum (Onshore) Act 1991 (NSW) (NSW Petroleum Act) under the provisions of the Forestry Act 1916 (NSW).
• 1. This permit excludes land that is vested in the Commonwealth of Australia.
• 1. This permit is granted subject to detailed environmental conditions requiring the holder to seek the approval of various Government departments and agencies prior to carrying out any activities on the permit. The degree of ground disturbance and the area on which the activity is to be carried out determines the approvals that All be required and the environmental assessments that may need to be carried out in order to obtain such approvals.

• The permit holder is not permitted to carry out activities that may pollute any catchment area or any water within a catchment area. ,在这里的人的时候,我们的人们的人们的人们的人们的人们的人们的人们的人们,我们的人们的人们的人们,但是我们的人们的人们的人们的人们的人们,我们的人们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们的人们,我们的人们,我们的人们,我们的人们,我们的人们

• 1. The operations on this permit must not affect any existing road or track, and use of any roads or tracks should be kept to a minimum, in particular, during wet wether.
• 1. Any access tracks constructed must be made so as to cause minimum damage to the environment and must be rehabilitated after use.
• 1. Operations on this permit must not interfere with or impair the stability or efficiency of any transmission line, communication line, pipeline or any other utility on the area without the prior written approval of the Director General.
• 1. The titleholder must observe any instructions given by the Director General in connection with minimising or preventing public inconvenience or damage to public or private property.
• 1. The titleholder must permit the free and uninterrupted passage of stock through the subject area and must conduct operations in a manner as not to cause any danger to travelling stock.
• 1. The titleholder must not interfere with or prevent the access of stock to any watering places or approaches to such watering places without the approval of the owner and occupier or the Director General.
• 1. The titleholder must not knowingly destroy, deface or damage any Aboriginal object or Aboriginal place or relic within the authority area except in accordance with an authority issued under the National Parks and Wildlife Act 1974 (NSW) and must take precaution in drilling, excavating or disturbing the land against any such destruction, defacement or damage.
• 1. The titleholder, prior to commencement of prospecting activities, must nominate a suitably qualified person as the Exploration Manager responsible for all activities and persons on site and for the performance of obligations subject of this authority including conformity with the Code of Environmental Practice as specified in Clause 25 of the Regulations. The titleholder must advise an Inspector of the nominated Exploration Manager and where he or she may be contacted including the telephone number and facsimile, if available.
• 1. All exploration activities must be carried out in accordance with the Schedule of Onshore Exploration & Production Safety Repulsements.
• 1. Operations must be carried out in a manner that ensures the safety of persons and stock in the vicinity of the operations. All drill holes and excavations must be appropriately protected, to the satisfaction of an Inspector, to ensure that access to them by persons and stock is restricted. Abandoned drill holes and excavations opened up or used by the titleholder must be filled in or otherwise rendered safe to a standard acceptable to the Inspector.
• 1. If the titleholder drills exploratory drill holes he must satisfy the Director General that:
• (a) all cored holes are accurately surveyed and permanently marked so that their locations can be easily established;
• (b) all holes cored or otherwise are provided with surface casing to prevent the collapse of the surrounding surface;
• (c) all drill holes are provided with an apparatus to control the escape of natural or noxious gases;
• (d) once any drill hole ceases to be used the land and its immediate vicinity is left in a clean, tidy and stable condition;
• (e) unless instructed otherwise by an Inspector once a drill hole ceases to be used the hole must be completely filled with cement grout during drill rod withdrawal and plugged so that it:
• prevents leakage and cross contamination of aquifers; $\mathbf{u}$
• (ii) prevents the escape of natural or noxious gases;
• (iii) prevents the surface discharge of ground water;
• (iv) prevents any collapse of the surrounding surface; and
• does not constitute a danger to persons and stock. $(v)$
• 1. The permit holder must comply with detailed conditions regarding the carrying out of seismic surveys including conditions relating to the disturbance of vegetation, the slope of seismic lines, the rehabilitation of seismic lines, and general environmental requirements.
• 1. The permit holder must complete the following work program in the first year of the grant of the permit for an indicated expenditure of \$100,000:
• (a) evaluate all available relevant literature:
• (b) access the extent and nature of carbonaceous source rock material within the authority area;
• (c) reassess structure and stratigraphy from water bore records;

• (d) detailed study of hydrodynamics of the Mesozoic aquifers;

• (e) regional water and gas sampling program;

• access environmental implication of possible gas bore fields within the region (regional water budget); and
• (g) identification of areas for further exploration under the PEL.
• 1. The permit holder must lodge reports as required by section 131 of the NSW Petroleum Act as specified by a fixed agenda.
• 1. All land disturbed by operations on this permit must be rehabilitated to a level acceptable to the Director General, Department of Mineral Resources.
• 1. No prospecting is permitted on this permit on any native title land or waters without the consent of the Minister.
• 1. Special environmental approvals are required for exploration within the Narran Lake and Macquarie Marshes Nature Reserves.
• 1. This permit overlies the Lightning Ridge Mining Reserve 3209E.
• 1. Permit subject to security bond in the sum of \$15,000.
• 1. This permit excludes those parts of Blocks 499, 569, 570, 572, 573. 574, 641, 710, 711 and 782 that are within the Macintyre River and the lands beyond the right bank thereof within Queensland.
• 1. The operator must not excavate within 15m of the boundaries of any public road without the prior written approval of the Minister.
• 1. In respect to private property within the permit area, the operator must not interfere with or impede the use of any road or track, must not interfere with any fences, must leave gates as found, and must not interfere with stock and the movements of stock, and must not take water from the property without the consent of the owner.
• 1. Security bond in the sum of \$45,000 in place.
• 1. Permit holder must supply a report containing a defined minimum data upon completion of the activities on the permit.
• 1. This permit is subject to the Nyoongah Ghurradong Murri (Granny Ethel) Euaylay-i People (NC96/26, NG6043/98); the Hall Murray Clan of the Euahlayi People (NC97/11, NG6064/98), and the Nyoongah Biblah Bibbil Gubbie Clan of the Euahlay-i People (NC97/6, N6059/98) registered native title claims.
• 1. This permit is subject to the Kooma People #3 (QC02/16, Q6013/02), and the Nyoongar Ghurree-Bhurrah (Gubboothar) Far Western Gumilaroi Aboriginal People (NCO1/4, N6O17/O1) unregistered native title claims.

Santing f

9.2 Material Contracts in relation to the Permit Interests

Comet Ridge's interest in the permits arises from two sources:

• (a) interests acquired from Strike pursuant to the CSG Sale Agreements as described in Sections 9.3 to 9.6: and
• (b) interests acquired from Anzoil pursuant to the Anzoil Sale Agreement as described in Section 9.7.

9.3 CSG Sale Agreements

Strike and Comet Ridge have negotiated the terms of three sale agreements, known as the Coal Seam Gas (Qld Applications) Sale Agreement, the Coal Seam Gas (Qld Permits) Sale Agreement, and the Coal Seam Gas (NSW Permits) Sale Agreement (collectively, the CSG Sale Agreements).

The CSG Sale Agreements provide for the purchase by Comet Ridge of the following:

• (a) Strike's earned interest in ATP 689P and the Millmerran and Dalby South blocks of ATP 683P defined in the agreement titled 'Exchange of Interests, WA-261-P for ATP 683P and ATP 689P and Farmin Agreement' between Strike, Arrow and ACBM dated 20 November 2002 (as varied) (Exchange Farmin Agreement);
• (b) Strike's rights under the Exchange Farmin Agreement to earn a further interest in ATP 689P and the Millmerran and Dalby South blocks of ATP 683P;
• (c) Strike's right under the ATP 337P Farmin Agreement between Santos, Origin Energy (formerly the Oil Company of Australia Limited) and Strike dated 11 September 2003 (Permit Farmin Agreement) to earn an interest in ATP 337P;
• (d) Strike's applications for ATP 743P, ATP 744P;
• (e) PEL 427 held by Strike;
• Strike's 80% interest in PEL 428; and $(i)$
• Strike's 50% interest in PSPA 9. $\sigma$

The purchase of the interests described in (a), (b) and (c) above is set out in the Coal Seam Gas (Qld Permits) Sale Agreement. The purchase of the applications described in (d) above is set out in the Coal Seam Gas (Qld Applications) Sale Agreement. The purchase of the interests described in (e). (f) and (g) above is described in the Coal seam Gas (NSW Permits) Sale Agreement.

9.4 Coal Scam Gas (Qld Permits) Safe

Agreement

The Coal Seam Gas (Qld Permits) Sale Agreement provides for Comet Ridge to acquire all of Strike's interest in, and rights to earn a further interest in, the granted permits located in Queensland. Strike's interests are set out in both the Exchange Farmin Agreement (ATP 683P and ATP 689P) and the Permit Farmin Agreement (ATP 337P).

→ State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State State St

The Coal Seam Gas (Qld Permits) Sale Agreement is conditional upon the assignment of Strike's interest in the agreements referred to in Section 9.4(a) and (b) to Comet Ridge and the Company being granted conditional approval to be admitted to the Official List.

a) Exchange Farmin Agreement

At the commencement of the Exchange Farmin Agreement, Arrow was the holder of the Millmerran and Dalby South blocks of ATP 683P and ACBM was the holder of ATP 689P. The Millmerran and Dalby South blocks of ATP 683P and ATP 689P are referred to collectively as the 'Farmout Blocks'.

The Exchange farmin Agreement provided for Arrow to assign a 10% interest in the Millmerran block of ATP 683P and a 5% interest in the Dalby South block of ATP 683P to Strike, and ACBM assigning a 10% interest in ATP 689P to Strike. Following this assignment, Strike may earn further interests in the Farmout Blocks by funding certain drilling.

The initial drilling, consisting of the drilling of three core holes on ATP 689P, was completed on 9 February 2003 giving Strike the option to elect to proceed to earn a further 10% interest in the Millmerran block, a 5% interest in the Dalby South block, and a 10% interest in ATP 689P (First Option Interest).

On 21 May 2003, Strike elected to proceed to earn the First Option Interest by agreeing to fund (to a maximum of \$250,000) the drilling of three core holes in the Farmout Blocks by 30 July 2003. (Second Drilling). By Deed of Variation, the parties agreed to vary the Second Drilling program and direct exploration towards the Tipton area of ATP 683P.

Following completion of the Second Drilling, Strike may earn a further interest of 30% in the Millmerran block, 20% in the Daiby South block, and 30% in ATP 689P (Second Optional Interest) by making an election within 90 days of completing the Second Drilling. to sole fund (to a maximum of \$3,000,000) certain defined work programs (CSM Pilot Program). Work must commence by liew 2004. The interests may be earned in three stages, bach smap atomas itori in mino restrabra loparing S. (200 florid man when the member of a country

The following table sets out the interests of the parties at each earning stage.

Earn in Stage	Parties		Percentage Interest
		ATP 683P Millmerran Block	ATP 683P Dalby South Block	ATP 689P
Commencement	Strike	Nil	Nil	Nil
	ACBM	Nil	Nil	100
	Arrow	100	100	Nil
Post Assignment Interests	Strike	10	5	$ 0\rangle$
	ACBM	Nil	Nil	90
	Arrow	90	95	Nil
Second Drilling	Strike	20	10	20
(First Optional Interest)	ACBM	Nil	Nil	80
	Arrow	80	90	Nil
CSM Pilot Program	Strike	50	30	50
(Second Optional Interest)	ACBM	Nit	Nil	50
	Arrow	50	70	Nil

All work is to be conducted by Arrow as operator.

If Strike elects not to proceed to earn an interest at any stage, the parties will contribute to all exploration in accordance with their interests.

The Exchange Farmin Agreement provides that the parties must endeavour to agree on the terms of a joint operating agreement over the Farmout Blocks prior to 15 December 2002. Agreements are in an advanced draft form but have not as yet been finalised.

The Exchange Farmin Agreement is subject to certain royalties that attach to ATP 689P.

In May 2000, ATP 689P was held by SEQ and Falcon Resources Pty Ltd (Falcon). On 20 May 2000, SEQ and Falcon entered into the Royalty Agreement - ATP 689P (granting to SEQ a royalty) (SEQ Royalty Agreement) and the Royalty Agreement - ATP 689P (granting to Falcon a royalty) (Falcon Royalty Agreement) whereby the parties granted to each other a royalty of 2.5% (total royalty of 5%) of the wellhead value of all petroleum produced and sold from ATP 689P.

By Transfer Agreement - ATP 689P (Application Area) between SEQ, Falcon and ACBM (formerly Queensland Milk Pty Ltd), SEQ and Falcon sold their interests in ATP 689P to ACBM and ACBM recognised and confirmed that they would comply with the obligations to pay the royalties to SEQ and Falcon.

On 22 March 2001, SEQ, Falcon and ACBM entered into the ATP 689P Royalty Covenant Deed whereby ACBM covenanted to be bound by the terms of the SEQ Royalty Agreement and the Falcon Royalty Agreement in terms required by those agreements.

(b) Permit Farmin Agreement

The Permit Farmin Agreement provides for Strike to earn an interest in part of ATP 337P from Santos and Origin Energy, the current holders of ATP 337P.

Prior to the establishment of the Permit Farmin Agreement, Santos and Origin Energy's interests in ATP 337P were governed by the Denison Trough Exploration and Production Joint Operating Agreement between CSR Limited (CSR), Origin Energy (formerly Oil Company of Australia NL) and Central Queensland Natural Gas Pty Ltd (CQNG) dated 26 May 1989 (Denison Trough JOA).

The Denison Trough JOA established a joint venture over ATP 337P and any other area agreed between the parties. Participating interests of the parties were CSR 50% and Origin Energy 50%, with CSR being the operator of all exploration operations, and CQNG the operator of all production operations. The Denison Trough |OA contains detailed but essentially standard joint venture terms including budgets and programs, management, sole risk, default, withdrawal and force majeure and will Section 9

continue, with the Permit Farmin Agreement, to govern the joint venture.

By the Denison Trough Deed of Assignment and Assumption between CSR, Origin Energy, Associated Petroleum Pty Ltd (formerly Associated Petroleum Ltd) (APL), Santos (formerly AGL Petroleum Operations Pty Limited) and CQNG dated 26 May 1989 (Deed of Assignment), CSR assigned all of its interest in ATP 337P, and all of its interest in the Denison Trough IOA to Santos.

The Deed of Assignment further provided for the resignation of CSR as operator of exploration operations under the Denison Trough JOA and the appointment of APL into that role.

On 29 October 1992, Origin Energy, CQNG, Santos and APL entered into a Deed (Amendment Deed) whereby the parties agreed that Origin Energy will become the operator of production operations in substitution for CQNG, and that Santos will become the operator of exploration operations in substitution for APL.

The parties also agreed to amend the Denison Trough JOA and the Deed of Assignment to make the rights of the production operator more generally consistent with the rights of the exploration operator.

ATP 337P forms part of the Denison Trough JOA of which, consequent to the Deed of Assignment and Amendment Deed, Origin Energy and Santos each hold a 50% interest. Origin Energy and Santos agreed, pursuant to the Permit Farmin Agreement, to allow Strike to earn an interest in a defined portion of ATP 337P known as the 'Farmin Area'. Strike's interest may be earned in two phases as follows:

• Phase 1. Strike to earn a 20% interest following the completion fi) of a specified work program that must include the drilling of two coal seam gas core holes and completing a minimum defined evaluation program for each core hole. Phase I work to commence by 31 December 2003 and to be completed within 6 months of commencement of the work. Due to rig availability, land access and weather, Santos and Origin Energy have extended this date. Strike will forfeit its interest in the Farmin Area if it does not elect to proceed with, or complete, the Phase 2 work.
• (ii) Phase 2. Strike may, following the completion of the Phase I work, elect to earn a further 20% interest by drilling, equipping and testing a coal seam gas test hole to an agreed depth. Phase 2 work must commence by 30 June 2004 or within 60 days of Strike electing to proceed with the Phase 2 work, whichever is the later, and be completed within 6 months of commencement of the work.

The Phase I and Phase 2 work is to be carried out by Santos at the expense of Strike. At the completion of the Phase 2 work the interests of the parties will be Strike 40%, Santos 30% and Origin Energy 30%.

At the completion of the Phase 2 work, the parties will form a joint venture governed by the terms of the Denison Trough JOA, unless the terms of that agreement are inconsistent with the terms of the Permit Farmin Agreement, in which case the Permit Farmin Agreement will apply.

9.5 Coal Seam Gas (Qld Applications) Sale Agreement

The Coal Seam Gas (Qld Applications) Sale Agreement provides for Comet Ridge to purchase Strike's interest in applications ATP 743P and ATP 744P. Strike must hold the applications on trust for Comet Ridge until their grant, at which time applications to transfer the permits to Comet Ridge will be made.

The Coal Seam Gas (Qid Applications) Sale Agreement is conditional upon the Company being granted conditional approval to be admitted to the Official List.

9.6 Coal Seam Gas (NSW Permits) Sale Agreement

The Coal Seam Gas (NSW Permits) Sale Agreement provides for Comet Ridge to purchase Strike's interest in the whole of PEL 427, Strike's 80% interest in PEL 428, and Strike's 50% interest in PSPA 9.

The Coal Seam Gas (NSW Permits) Sale Agreement is conditional upon the assignment of Strike's interest in the agreements referred to in this Section 9, Ministerial consent and the Company being granted conditional approval to be admitted to the Official List.

Davidson Prospecting Pty Ltd (Davidson) holds a 20% beneficial interest in PEL 428. Strike and Davidson's interests are described in the Joint Operating Agreement - Exploration Licence PEL 428 (Davidson JOA).

Strike is the operator of the Davidson JOA. As operator, Strike must prepare programs and budgets and conduct all exploration on the permit. The Davidson JOA sets out the standard joint venture protocols such as operating committees, programs and budgets, sole risk and default.

PSPA 9 is held jointly by Australian Coalbed and Strike. There is no agreement governing the relationship of Strike and Australian Coalbed in relation to this permit.

9.7 Anzoil Sale Agreement

Anzoil and Comet Ridge have entered into Sale Agreement ATP 683P (Anzoil Sale Agreement), which confirms the acquisition by Comet Ridge of all of the interest of Anzoil in ATP 683P.

Anzoil's interest in ATP 683P is defined in the Farmin Agreement between Anzoil and Arrow dated 9 May 2002 (Anzoil Farmin Agreement), as amended, whereby Anzoil, by funding certain programs, could earn a 20% interest in parts of ATP 683P.

By Letter Agreement dated 21 November 2002 between Comet Ridge and Anzoil, Comet Ridge made a conditional offer to assume all of Anzoil's rights and obligations under the Anzoil Farmin Agreement.

By a Deed between Arrow, Anzoil and Comet Ridge dated 5 December 2003, Comet Ridge became a party to the Anzoil Farmin Agreement in the place of Anzoil and the Anzoil Farmin Agreement was varied to provide that Comet Ridge would earn its 20% share by meeting certain payments by 31 December 2003. These payments have been met.

The Anzoil Farmin Agreement now operates as a joint venture agreement setting out the obligations of Comet Ridge and Arrow with respect to operating committees, budgets and other standard conditions. Arrow remains the operator and the parties contribute according to their interests.

9.8 Gas Supply Agreements

Braemar CCGT Gas Fired Power Station Gas Supply Heads of $(a)$ Agreement

Wambo Power Ventures Pty Ltd (Wambo) and Arrow are parties to the Braemar CCGT Gas Fired Power Station Gas Supply Heads of Agreement dated 8 December 2003 (Braemar HOA).

The Braemar HOA describes the development of a 50 megawatt gas fired power station and the framework by which the parties will work together to ensure the economic viability of the power station. To achieve this, Arrow and Comet Ridge (by virtue of the Anzoil Sale Agreement) will sell to Wambo 3.97 P|/yr of coal seam gas for 15 years at a discounted price and the parties will share equally in the upside created through the project.

(b) Ergon Memorandum of Understanding

Arrow, Comet Ridge and Ergon Energy Pty Ltd (Ergon) are parties to the Memorandum of Understanding dated 4 February 2004 (Ergon MOU) whereby the parties set out the principles by which Arrow and Comet Ridge propose to supply a total of 2.7 PJ/yr to Ergon for a period of 15 years.

The Ergon MOU sets out a staged approach to the development of two projects, the Well Head Generation Project, and the Oakey Generation Project. The parties are to work together through a prefeasibility stage, feasibility stage, design stage and final construction stage to commissioning of the projects. Each stage carries obligations to be fulfilled by both parties and further documentation of aspects of the agreement is required at defined milestones.

Certain fees may apply if Arrow or Comet Ridge wish to terminate the Ergon MOU.

9.9 Legal Regime in Queensland -Petroleum Act

The Petroleum Act 1923 (Qid) (Queensland Act) governs the exploration for and production of petroleum, including coal seam gas, in Oueensland.

Authority to Prosbect : ATP)

Section 18 of the Queensland Act provides that any person may apply to the Minister for an ATP on any land and that the Minister may grant an ATP. An ATP allows the holder to undertake exploration, prospecting, geological and geophysical testing and to do all things in respect of the search for and discovery of petroleum during the term of the ATP.

The Minister, on granting an ATP, will determine the area to be held, the terms, rent and the conditions, provisions and stipulations on which the ATP is granted. Failure to pay any rental or other moneys payable, or to comply with conditions, provisions and stipulations fixed by the Minister, renders the ATP liable to be cancelled by the Minister.

While the Queensland Act does not specify a term for which an ATP may be granted, ATPs are commonly granted for periods of four years. Section 20 enables the Minister to renew the ATP upon application by the holder. Multiple subsequent renewals of an ATP are common.

Section 23 provides that a holder of an ATP may apply for the Minister's approval to extend the whole of the ATP to another person or persons, or to the holder and another person or persons. The particulars of such a dealing are entered into the register and on the ATP.

The holder of an ATP or PL must provide written notice of entry to the landholder prior to entry onto such land.

Compensation is payable by the holder of an ATP on any private or improved land before the holder enters on the land. Before commencing drilling on an ATP the holder must apply to the Land and Resources Tribunal (LRT) (authority transferred from the Warden's Court) to determine the amount of compensation payable by the holder in respect of operations during the first year of the ATP. At the end of that year, the LRT is to determine if any further compensation should be paid for that year and any compensation for the remainder of the period of the ATP.

Section 9

Periclean Lease (Pu)

A PL confers upon the lessee the exclusive right to prospect for, mine, extract, recover, remove, and dispose of all petroleum in or under the land within the PL. The lessee has the right to construct and maintain on the land under the PL all works, buildings, plant, waterways, roads, pipelines, reservoirs, tanks, pumping stations and other structures that are necessary for the full enjoyment thereof.

Section 40 provides that the holder of an ATP may apply to the Minister for the grant to the applicant, or to the applicant and other qualified persons, of a lease or leases of such area of land as is reasonably required to develop and produce payable deposits of petroleum within the land the subject of the ATP.

If the applicant, and any other nominated persons, are qualified persons and the applicant:

• declares that deposits of petroleum that the applicant reasonably $(a)$ believes are payable have been discovered within the area of the application; and
• (b) lodges with the Minister a proposed program for developing and producing petroleum from any field within the land,

then the applicant is entitled to have a lease granted.

Section 40 also provides conditions as to marking boundaries and the size of PLs. Prior to the grant of a PL, the applicant must deposit with the Minister an amount fixed by the Minister for security for compliance by the lessee with the provisions of the Queensland Act. A lessee who has substantially complied with the Queensland Act and the terms and conditions of the PL, subject to declaring the items in (a) and (b) above that were declared in the PL application is entitled at the expiration of the PL to a renewal of the PL. The term of the PL is determined in accordance with the time period that the lessee applies for as an appropriate term for producing in an economically viable way the betroleum from the fields within the lease.

Section 42 also provides for an application and grant of a PL over land that is not in the area of an ATP and the relevant conditions imposed. The Queensland Act prescribes the remcal amounts experiditure requirements, reservations, covenants and conditions to be included in each PL. The Queensland Act also provides for compensation to land holders, royalty on production to the State, assignment and various other radia in relation to a PE.

9.10 Legal Regine in Queensland -Envirentental Protection Act

The Environmental Protection Act 1994 (Queensland EP Act) regulates activities which are likely to have environmental impacts. Such activities are referred to in the Queensland EP Act as "environmentally relevant activities" or "ERAs".

THE DIRECT OF A REAL PROPERTY.

In respect of petroleum activities, ordinarily an environmental authority is required to be obtained for activities such as:

• (a) carrying out petroleum exploration and/or production (ERA 21C);
• disposing of production water (as regulated waste) (ERA 75(b)); and $(b)$
• (c) storage of chemicals and operating fuel burning equipment (such as power generators) (ERA18(a)).

The specific activities (or ERAs) for which an environmental authority is required for any particular project are naturally dependant on the nature and extent of that project. Application for environmental authorities must be made to the Environmental Protection Agency (EPA) with relevant supporting information.

Currently the EPA has devolved responsibility for assessment and administration of ERA applications concerning petroleum activities to the Department of Natural Resources and Mines (DNRM) and so, once an application for an ERA is lodged, all further assessment and administration of an application and any resultant environmental authority is currently handled by the DNRM. Application fees and annual licensing fees are payable in respect of environmental authorities and conditions are imposed such as conditions requiring specific monitoring and/or reporting.

9.11 Legal Regime in Queensland - Nathe Title Native title in Queensiano is governed by the Native litle Act 993 (Cth) (NTA) and by complementary State legislation (Native Title (Queensland) Act 1993). The MTA prescribes a regime by which persons claiming to hold hative title may lodge a claim to that effect for dependination: by which any future acclaifecting hadive tide in chilad the grant of mining tenements' may be vaildly underfaken and by which registered claimants may be afforded ce-tain procedural rights including the "right to regotiate".

Under the NTA native title is extinguioned by grants of orivers (rechold title and exclusive possession senures such as freeholding and urban leaved. Natioly grunted packdewn tenemed to that are to be granted spilely die von Schenkung er und eine die Stadt der Hermannstellung unter Abstraction und Anti-

فالقاطعة والمسالم المستعاق فالمراجع والمستعين والمراقع والمساحية للمستعقر

leases such as pastoral leases, pastoral development holdings, special leases and term leases for grazing or pastoral purposes, occupation licences, permits to occupy, road licences, etc.

The NTA will affect the permits in different ways, depending on the nature of the permit, the date of its grant or proposed grant and the nature of the underlying land tenures.

The Queensland Government has adopted a policy whereby petroleum tenures are only granted over land where native title is considered to be extinguished. This is given effect by the granting of tenements over an area of land which only includes land that is within the boundaries of that tenement that falls within the following categories:

• (a) current or past private freehold land and "exclusive possession" land as defined in Schedule 1, part 3 of the NTA. Land previously held under tenure of this type which is now held or currently set aside for the benefit of Aboriginals and Torres Strait Islanders or unallocated State land, and is occupied by Aboriginal people or Torres Strait Islanders is not included;
• (b) validly dedicated road reserves up to a maximum width of 120.7m that are surrounded by private freehold land or exclusive possession tenures as defined in (a) above;
• (c) those parts of the area of the road (other than roads defined in (b) above, and either dedicated or otherwise legally available for public use) that contain a constructed road, to a maximum distance of 60.35m either side of the centre line of the constructed road; and
• (d) railway reserves containing constructed railways and/or associated infrastructure.

As a result, all mining tenements granted after 23 December 1996 are only granted over land within the tenure boundaries that fall within (a) to (d) above (Extinguished Land).

Any PL which is applied for from an ATP granted after 23 December 1996 can only be granted over Extinguished Land. If a PL holder wishes to apply for a PL over areas other than Extinguished Land, they are required to voluntarily relinquish the tenement and re-apply for a PL over all land. For the DNRM to grant such a PL, the petroleum tenure holder must undertake the "right to negotiate" process as detailed in the NTA with the registered title claimants or be a party to any indigenous land use agreement over the area.

9.12 Legal Regime in Queensland -Aboriginal Heritage

The current legislation preserving cultural heritage in Queensland is the Cultural Record (Landscapes Queensland and Queensland Estate) Act 1987 (Cultural Record Act). The Cultural Record Act provides that a person must not take, destroy, damage, deface, excavate, expose, conceal or interfere with an item of the 'Queensland Estate' unless the activity is undertaken under permit granted by the Minister.

The 'Queensland Estate' is defined as evidence of human occupation of areas comprising Queensland at any time that is at least prior to 30 years in the past and is of historic or prehistoric significance.

In order to obtain a permit to undertake an activity that might interfere with cultural heritage, a cultural heritage survey must first be conducted. A permit to conduct the cultural heritage survey is required and, before an application for such a permit is submitted for the consideration of the Minister for Environment, the consent of the owner and the occupier of the private land, and the occupier of State land, must be obtained to the issue of the permit. For the purposes of this Section, private land means land that is not State land, and State land means all land that is not freehold land, or land contracted to be granted in fee simple by the State.

It is expected that in the near future the Cultural Record Act will be replaced by the Aboriginal Cultural Heritage Act 2003 (Qld) and the Torres Strait Islander Cultural Heritage Act 2003 (Qld) (Proposed Acts). The Proposed Acts are expected to commence operation in April 2004. Commencement of the Proposed Acts was delayed to allow regulations and guidelines to be drafted.

The Proposed Acts aim to protect Aboriginal and Torres Strait Islander areas and objects of cultural significance, irrespective of the underlying tenure of the land. It is not necessary for an area to contain markings or other physical evidence for it to be considered culturally significant.

While under the Proposed Acts a permit holder is not required to conduct cultural heritage surveys, a duty of care is prescribed that requires land users to take all reasonable and practicable measures to ensure that their activities in relation to the land do not harm any culturally significant objects or areas.

A cultural heritage register accessible by members of the general public will also be established. Transitional provisions under the Proposed Acts will ensure the continued operation of agreements or arrangements that already address cultural heritage matters.

Section 9

Buchen in harmann han ha th' will be Petroleum Act

Section 29 of the Petroleum (Onshore) Act 1991 (NSW) (NSW Act) provides that the holder of a PEL has the exclusive right to prospect for petroleum on the land comprised in the licence, in accordance with the conditions of the licence.

A PEL may be granted for any period not exceeding six years and may be renewed for further periods not exceeding six years. The holder of a PEL has the right to apply for a production lease. No other person is able to obtain another petroleum title over land already subject to a PEL.

A PSPA is a prospecting authority of a slightly lower level than a PEL. A PSPA constitutes an exclusive right to conduct speculative geological, geographical or geochemical surveys or scientific investigations on and in respect of the land comprised in a PEL.

PSPAs are granted over areas considered appropriate by the Minister. The initial term is not to exceed 12 months but is renewable. There are usually minimal work program requirements for PSPAs. The holder of a PSPA does not have an automatic right to apply for a production lease. The holder of a PSPA has priority over the land specified under the permit. No other person can obtain a petroleum title over areas already

subject to a PSPA.

9.14 Leoal Regime in New South Wales -Environmental Protection Act

Exploration activities conducted on the Permits must be carried out in accordance with numerous environmental laws and regulations relating to the impact of the activities on native flora and fauna, the production and transport of waste, the use and transport of dangerous goods, noise and air emission and the use of water. The Section does not outline the requirements of each of these laws. Comet Ridge will assess the environmental requirements of each drilling or ground disturbance activity in the planning stage and will seek all appropriate environmental approvals at that time. The major environmental regulations are contained within the following two Atts.

The Environmental Planning and Assessment Act provides a process for assessing the environmental impact of activities before approval is granted for those activities to be undertaken. Depending on the level of assessment required, this may involve the preparation of environmental reports, plans and consultation with the relevant authorities and the public.

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The Protection of the Environment Operations Act (PEO Act) is the principal Act through which the government controls sources of pollution and monitors the production of wastes and their impact on the environment. The PEO Act does this through the establishment of a licensing regime and the creation of environmental offences.

9.15 Legal Regime in New South Wales --Native Title

Native title in New South Wales is governed by the NTA. Native title in much of New South Wales has been extinguished by the grant of a freehold interest in land, or the grant of a perpetual lease under the Western Lands Act 1901. Much of the land in the region of the permits has been the subject of leases under the Western Lands Act.

In areas where native title applications exist, it is necessary to comply with the right to negotiate procedure of the NTA in order to be granted access to the area of the native title claim.

The grant or renewal of exploration titles by the Department of Mineral Resources are dealt with in one of two ways;

Low impact exploration licences $-$ these are excluded from the right to negotiate process and only allow limited activities. They will be granted following notification of registered native title bodies and the New South Wales Aboriginal Land Council at least four months before the grant.

Subject to Minister's Consent - an exploration licence may be issued prior to the right to negotiate process being complied with but subject to the Minister's consent. This means that no prospecting activities can be carried out on native title claimable land within the licence until the Minister's consent is obtained. Consent will not be given until the right to negotiate process has been carried out.

9.16 Legal Regime in New South Wales -

Heritage

Heritage items are protected in New South Wales at two levels: one at a State level and the other at a local government level. State significant heritage items are statutorily protected under the Heritage Act 1977 (NSW) (Heritage Act) through listing in the State Heritage Register and interim heritage orders made by the Heritage Council. Locally significant heritage items are protected through listing in the heritage schedules to Local Environmental Plans or Regional Environmental Plans in accordance with the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act).

On a State level, the New South Wales Heritage Office administers an online State Heritage Inventory database which contains all listed heritage items (both State and local) in New South Wales, but does not include items subject to interim heritage orders. Where places and items of local significance are listed in the heritage schedule of the Regional Environmental Plans or Local Environmental Plans prepared by local councils and shires, they are protected under the EP&A Act. Development consent must be obtained from the local council for work that may impact on the heritage significance of items listed.

It is an offence to conduct work on areas listed on the heritage schedules without the approval of the relevant authority. Comet Ridge will conduct searches of all areas where ground disturbance work is required and will seek the necessary approvals prior to carrying out such work.

SECTION 10

10.1 Introduction

Investors should be aware that an investment in the Company involves many risks, which may be higher than the risks associated with an investment in other companies. Intending investors should read the whole of this Prospectus in order to fully appreciate such matters and the manner in which the Company intends to operate before any decision is made to apply for Shares.

There are numerous widespread risks associated with investing in any form of business and with investing in the share market generally. There is also a range of specific risks associated with the Company's business and its involvement in exploration in the coal seam gas industry. These risk factors are largely beyond the control of the Company and its Directors because of the nature of the proposed business of the Company.

This Section identifies the areas the Directors regard as the major risks associated with an investment in the Company. The following summary, which is not exhaustive, outlines some of the major risk factors which potential investors need to be aware of.

10.2 Exploration Risk

The coal seam gas industry involves significant risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. There is no assurance that either the Comet Ridge Project or the WCM Project which are currently undergoing evaluation to determine if they are commercial or not, will be developed. There is no assurance that commercial quantities of gas can be recovered from the Company's permit interests. No assurances can be given that, if commercial reserves are discovered, the Company will be able to realise such reserves as intended. There is no assurance that gas will be discovered in any exploration project that the Company enters into or even if gas is discovered, that commercial quantities of gas can be recovered.

10.3 Drilling and Operating Nisks

Gas drilling activities are subject to numerous risks, many of which are beyond the Company's control. The Company's operations may be curtailed, delayed or cancelled as a result of weather conditions, mechanical difficulties, shortage or delays in the delivery of rigs and/or other equipment and compliance with governmental requirements. Drilling may involve unprofitable efforts, not only with respect to dry 48-5, 09, 830 A.D. especi to web, which though violong some gas and

not sufficiently productive to justify commercial development or cover operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. Hazards incidental to the exploration and development of gas properties such as unusual or unexpected formations, pressures, or other factors are inherent in drilling and operating wells and may be encountered by the Company.

Industry operating risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as accidental spills or leakage of petroleum liquids, gas leaks, ruptures or discharges of toxic gasses, the occurrence of any of which could result. in substantial losses to the Company due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. Damage occurring as a result of such risks may give rise to claims against the Company. Although the Company believes that it or the operator will carry adequate insurance with respect to its operations in accordance with industry practice, in certain circumstances the Company's or the operator's insurance may not cover or be adequate to cover all of the consequences of such events.

In addition, the Company may be subject to liability for pollution, blowouts or other hazards against which the Company or the operator is not able to insure or which it may elect not to insure because of high premium costs or other reasons. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of operations of the Company. Moreover, there can be no assurance that the Company will be able to maintain adequate insurance in the future at rates that it considers reasonable

10.4 Land Access and Native Title

The effect of the Native Title Acc is that new permit applications and existing licences in Australia may be affected by native title claims or procedures. This may preclude or delay granting of exploration and production permits and considerable expense may be incurred in negotiating and resolving issues.

The possibility that native title may affect the Company's permits must be recognised. The Company has not undertaker the legal, historical and antaropological research and investigations at the date of this Prospectus. that would be necessary to enable it to form an opinion as to whether angi kui lehe mila liidhja ee gibta gibtaan aan laaman ah domogi ja the chasts problems of

The applications ATPA 743P and ATPA 744P in the Galilee Basin cover areas that could be subject to native title. Under the Native Title Act, an applicant has the option to have the permit granted:

• (a) without going through the processes of native title but including a condition requiring the Minister's consent before any prospecting operations are carried out on native title land; or
• (b) after the "right to negotiate" provisions of the Native Title Act have been complied with by the Queensland Department of Natural Resources and Mines. The "right to negotiate" process and ensuing indigenous land use agreements can take some time to complete with resultant delay in the granting of applications. It would be a condition of the grant of such licences that agreements be entered inte with relevant native title parties which may involve a monetary consideration or payment in kind.

10.5 Personnel

The success of the Company and its ability to continue operations is dependent upon its ability to retain the services of Andy Lydyard, other key employees, consultants and members of the Board. The continued involvement of key employees, consultants and Directors is not assured, and the loss of their services to the Company may have a material adverse effect on the performance of the Company.

10.6 Reliance on Third Parties

Various aspects of the Company's future performance and profitability are dependent on the outcome of future negotiations with third parties. These include negotiations on land access arrangements and any native title issues referred to elsewhere in this Prospectus in addition to transportation of the gas and/or electricity produced from the production site to the customer.

Comet Ridge's interests in most cases are held in a joint venture and in some cases, a joint venture partner is the operator. In these situations the joint venture decision may not accord with Comet Ridge's stated plan.

10.7 Ability to Exploit Successful Discoveries

It may not always be possible for the Company to exploit successful discoveries which may be made in areas in which the Company has an interest. Such exploitation would involve obtaining the necessary licences or clearances from the relevant authorities, which may require conditions to be satisfied and/or the exercise of discretions by such authorities. It may or may not be possible for such conditions to be satisfied. Further, the decision to proceed to further exploitation may require the

participation of other companies whose interests and objectives may not be the same as the Company's. As described above, such further work may require the Company to meet or commit to financing obligations for which it may not have planned.

Exploitation will require the Company to obtain sale agreements with third parties, with the risk to both supply volume and pricing.

10.8 Energy Market Risk

The marketability of any gas discovered will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations in the price of gas, proximity and capacity of gas pipelines and processing equipment, ability to procure supply contracts for the available gas and government regulations including regulations relating to taxation, royalties, allowable production, importing and exporting of gas and environmental protection.

The availability or otherwise of alternative large scale supplies of gas. whether from within or outside of Queensland and New South Wales, will be a significant determinant of demand and supply of gas in Queensland and New South Wales markets in future. Demand and supply fluctuations are likely to affect gas prices which will impact on the Company's future revenue streams if and when the Company produces and markets gas.

10.9 Payment Obligations

Under the exploration licences and certain other contractual agreements to which the Company is or may in the future become a party, the Company is or may become subject to payment and other obligations. If such obligations are not complied with when due, in addition to any other remedies which may be available to the other parties, this could result in dilution or forfeiture of interests held by the Company. The Company may not have, or be able to obtain, financing for all such obligations as they arise.

10.10 Disposal of Water

The production of large amounts of water is a significant by-product of producing coal seam gas. A number of technologies are available to dispose of the water although there are limitations and costs involved with each technology. The development of large scale production of coal seam gas is therefore dependent on a cost effective and environmentally acceptable water management strategy.

Sertion 10

10.11 Environmental Regulations

The Company is subject to environmental laws and regulations in connection with all its operations. Although the Company believes that it is in compliance in all material respects with all applicable environmental laws and regulations, there are certain risks inherent in its activities, such as accidental spills, leakages or other unforeseen circumstances, that could subject the Company to extensive liability. Further, the Company may require approval from the relevant authorities before it can undertake activities which are likely to impact on the environment, particularly in relation to the disposal of water. Failure to obtain such approvals will prevent the Company from undertaking the desired activities. The Company is unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would materially increase the Company's cost of doing business or affect its operations in any area. However, there can be no assurances that new environmental laws, regulations or stricter enforcement policies, once implemented, will not oblige the Company to incur significant expenses and undertake significant investments in this respect which could have a material adverse effect on the Company's business, financial condition and results of operations.

10.12 Additional Funding Requirements

The Company's capital requirements depend on numerous factors. The Company will require further financing in addition to the amounts raised in the Offer if it elects to increase its interests in the blocks comprising the WCM Project to the maximum extent possible. Any additional equity financing may be dilutive to Shareholders, and debt financing, if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion.

10.13 Regulatory

In the jurisdictions in which the Company operates, both the conduct of petroleum operations and the steps involved in the Company acquiring its current interests involve or have involved the need to comply with numerous procedures and formalities.

The Company's exploration and development programs will, in general, be subject to approval by governmental authorities. Exploration in and development of any of the Company's properties will be dependent on meeting planning and environmental laws and guidelines and approval by governmental authorities.

10.14 fitle lughts

The Company has submitted applications for ATP 743P and ATP 744P (but at this stage the licences have not been granted). ATP 337P and ATP 683P are subject to renewal at the discretion of the Queensland Minister for Mines. PEL's 427 and 428 are subject to renewal at the discretion of the New South Wales Minister for Mineral Resources. Licences are granted for specific time periods and are subject to specific obligations to be undertaken by the licence holders.

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If the licences are not granted or renewed, as appropriate, the Company's business plans and exploration programs may require modification. The Directors are not aware of any reason (with the exception of PL 427 in New South Wales) why the granting or renewal of the term of any of these licences would be denied. In the case of PEL 427 significant expenditure will be required prior to its expiry in May 2004. The Company will seek an extension of time within which to have the current term of the permit extended to facilitate these obligations being met.

D. 15 Ölber Rivis

The future viability and profitability of the Company is also dependent on a number of other factors that affect the performance of businesses in all industries and not just the exploration and gas industries, including, but not limited to, the following:

• gas price fluctuations;
• ability to sell gas and/or electricity on contracts that enable expenditure on development and connection to transmission facilities;
• the strength of the equity and share markets in Australia and throughout the world;
• competition for future business opportunities from other companies, including existing gas producers;
• general economic conditions in Australia and its major trading partners and, in particular, inflation rates, interest rates, commodity supply and demand factors and industrial disruptions;
• financial failure or default by a participant in any of the joint ventures or other contractual relationships to which the Company is, or may become, a party;
• insolvency or other managerial failure by any of the contractors used by the Company in its activities; and
• acts of terrorism causing market instability.

10.16 Share Investment

Applicants should be aware that there are risks associated with any share investment. The prices at which Shares trade after listing on the ASX may be above or below the issue price for the Shares under this Prospectus. The trading price of the Shares is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as the results of exploration activity, actual or anticipated variations in the Company's operating result, additions or departures of key personnel, litigation or any press or other media reports issued by the Company or its competitors.

The Shares allotted under this Prospectus carry no guarantee in respect of profitability, dividends, return of capital or the price at which they may trade on the ASX.

Certain statements in this Prospectus constitute forward looking statements that are subject to risks and uncertainties which may cause the actual income and expenditure of the Company to be different from expectations both expressed and implied.

10.17 Investment Therefore Speculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the Shares offered under this Prospectus.

Therefore, the Shares to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those Shares.

Potential investors should consider the investment in the Company to be speculative and should consult their professional advisers before deciding whether to apply for Shares.

SECTION II

III Registration

The Company was registered on 78 August 2003

11.2 Company Tax Status and Financial Year The Directors expect the Company will be taxed in Australia as a public company.

The financial year of the Company ends on 30 June annually.

11.3 Legal Proceedings

The Directors are not aware of any litigation of a material nature pending or threatened which may significantly affect the Company.

17.4 Minesial Contract

Set out below is a brief summary of certain contracts which have been entered into by the Company and which have been identified as material and relevant to potential investors. To fully understand all the rights and obligations of a material contract it would be necessary to review each contract in full and these summaries should be read in that light.

>> Employment Agreement -- Andy Lydyard

The Company entered into an Employment Agreement with Andy Lydyard on 6 February 2004 (Employment Agreement). In accordance with the terms of the Employment Agreement, Andy Lydyard will undertake all functions, duties, roles and authorities which the Company would require of a person engaged as Managing Director of the Company on a full time basis for a period of two years from 31 March 2004. Andy Lydyard commenced acting as Managing Director on 1 October 2005. Andy Lydyard's role as Managing Director of the Company extends to acting as such for any related bodies of the Company.

機械設定 医甲状腺 医甲状腺杆菌 医甲状腺 医中枢性 医中枢性 医中枢性 医中枢性 医中枢性 医中枢性 医中枢性 医中枢性

The Company must pay Andy Eydyard a gross salary of \$165,000 per annum plus statutory minimum superannuation contributions. Andy Lydyard's salary will be increased to \$185,000 plus minimum statutory superannuation contributions from the first to occur of the date the Company is admitted to the Official List or 31 March 2004.

The Company must also reimburse Andy Lydyard for all reasonable expenses incurred in carrying out his role as Managing Director of the Company.

In consideration for Andy Lydyard entering into the Employment Agreement he was granted the Director's Options.

The Emproyment Agreement may only be terminated by niurbal agreement in writing other than due to Andy Lydyard's bankruptcy, death, a resolution of the Company's shareholders, misconduct or breach of the Employment Agreement.

If the Employment Agreement is terminated by the Company for any reason other than Andy Lydyard's bankruptcy, death, misconduct or breach of the Employment Agreement, Andy Lydyard is entitled to be paid his salary and entitlements for the balance of the term of the Employment Agreement. This entitlement only applies if the Company is admitted to the Official List.

During the term of the Employment Agreement and subject to the Corporations Act and the Listing Rules, the Company has also agreed to issue Andy Lydyard or nominee with Shares on achievement of the milestones in accordance with the schedule set out below:

Milestone		Bonus	Borus pricing basis
	The Shares trade at 40 cents or more	Snares to the value	Average Share price for previous
	for 28 consecutive Business Days	of $$200,000$	28 Business Days
	2. Successful subsequent enalty capital maising or raisings in excess of \$5,006,000 ofter the Offer has posse	Sharat to the voice of \$200.000	New Share subscription price
	3 The Shares trade at 50 cents or more	Shares to the saive	Average Share price for previous
	The 28 consecutive Transport David	HASTERIO	DE Brainer Da ta

(b) Patersons Securides Limited Mandate

Pursuant to a letter from Patersons Securities Limited (Patersons) accepted by the Company on 18 December 2003 (Mandate), Patersons has been engaged to act as the Lead Manager to the Offer.

The Lead Manager's obligations are conditional on Patersons reviewing and being satisfied with the due diligence program undertaken by the Company, the Company finalising this Prospectus to the Lead Manager's reasonable satisfaction, and various other conditions.

Under the terms of the Mandate the Company has agreed to indemnify and keep indemnified the Lead Manager its directors, agents and staff against any:

• material non compliance by the Company, its officers, or employees of any applicable law, regulations or rules;
• $(ii)$ breach or failure by the Company to preserve any of the terms and conditions of the Mandate:
• (iii) any review or investigation undertaken by the ASIC, the ASX or any other regulatory body as a result of an actual or alleged failure to comply with the conditions and requirements of any law or regulation other than by the Lead Manager; and
• (iv) losses, claims, damages or liabilities to which it may become subject in connection with any matter referred to in the Mandate, including any legal costs, except to the extent of any such loss, claim, damage or liability is judicially determined, where all appeals have been exhausted, to have resulted from the Lead Manager's proven gross negligence or wilful misconduct in performing the services the subject of the Mandate.
• The Lead Manager is entitled to receive from the Company:
• a Lead Manager fee of \$60,000; $(v)$
• (vi) a management fee of 1.25% of the total funds raised under the Offer;
• (vii) a lodgement fee of 3.75% on all applications lodged with a broker's stamp. Patersons will provide the lodgement fee to any licensed securities dealer that lodges stamped applications that are subsequently accepted by the Directors; and
• (viii) reimbursement for all reasonable out of pocket expenses incurred in carrying out its engagement.

11.5 Rights Attaching to Shares

There is only one class of share on issue in the Company being fully paid ordinary shares. The rights attaching to Shares are:

• (a) set out in the constitution of the Company; and
• (b) in certain circumstances, regulated by the Corporations Act, the Listing Rules, the SCH Business Rules and the general law.

The following is a broad summary of the rights, privileges and restrictions attaching to all Shares. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders.

All Shares issued pursuant to this Prospectus will from the time they are issued, rank pari passu with all of the Company's existing Shares.

Voting

Subject to any restriction on voting imposed due to a breach of the Listing Rules relating to restricted shares or any escrow agreement entered into by the Company and a member, every holder of Shares present in person or by proxy, attorney or representative at a meeting of Shareholders has one vote on a vote taken by a show of hands, and, on a poll every holder of Shares who is present in person or by proxy, attorney or representative has one vote for every Share held by him or her, but, in respect of partly paid shares, shall have a fraction of a vote for each partly paid share.

A poll may be demanded before a vote is taken, or before or immediately after the declaration of the result of the show of hands by the chairperson of the meeting, by at least five Shareholders present in person or by proxy, attorney or representative, or by any one or more Shareholders who are together entitled to not less than 5% of the total voting rights of all those Shareholders having the right to vote on the resolution.

Dividends

Dividends are payable out of the Company's profits and are declared by the Directors. Dividends declared will (subject to the rights of any preference Shareholders and to the right of the holders of any shares created or raised under any special arrangement as to dividend) be payable on the Shares in accordance with the Corporations Act.

Section 11

transter of Stidnes

A Shareholder may transfer Shares by a market transfer in accordance with any computerised or electronic system established or recognised by ASX or the Corporations Act for the purpose of facilitating transfers in shares or by an instrument in writing in a form approved by ASX or in any other usual form or in any form approved by the Directors.

The Directors may refuse to register any transfer of Shares, other than a market transfer, where permitted by the Listing Rules or the SCH Business Rules. The Company must comply with such obligations as may be imposed on it by the Listing Rules and where appropriate the SCH Business Rules in connection with any market transfer and may not prevent, delay or in any way interfere with the registration of a market transfer where to do so would be contrary to the provisions of any of the Listing Rules or the SCH Business Rules.

.
Head point force

Each Shareholder is entitled to receive notice of and to attend general meetings of the Company and to receive all notices, accounts and other documents required to be sent to Shareholders under the constitution of the Company, the Corporations Act or the Listing Rules.

Winding Ub

The Company has only issued one class of shares, which all rank equally in the event of liquidation. A liquidator may, with the authority of a special resolution of Shareholders divide among the Shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to carried out as between the Shareholders. The liquidator can with the sanction of a special resolution of the Company's Shareholders vest the whole or any part of the assets in trust for the benefit of Shareholders as the liquidator thinks fit, but no Shareholder of the Company can be compelled to accept any Shares or other shares in respect of which there it any liability.

$\epsilon_{\rm eff} = \frac{1}{2} \epsilon_{\rm eff} = 0.$

As the Shares under the Prospectus are fully baid shares, they are not subject to any calls for money by the Directors and will therefore not become habie for forfeiture.

$\mathcal{L}(\mathcal{U})$ .

The conditionion can only be amended by a lowed resolution passe. By at least three miarrers of Shareholders present and voting at the general שוואר האיזור האלייני האיזור האמינו איזור איזור איזור איזור איזור איזור איזור איזור איזור איזור איזור איזור איז .
אינו אין זיין בין לאור וויין אין די הקופולי, וחיין בין קול

ASX Labre nules

If the Company is admitted to the Official List, noivethstanding anything in the constitution of the Company, if the Listing Rules prohibit an act being done, the act must not be done Nothing in the constitution prevents an act being done that the Listing Rules require to be done. If the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be). If the Listing Rules require the constitution to contain a provision or not to contain a provision, the constitution is deemed to contain that provision or not to contain that provision (as the case may be). If a provision of the constitution is or becomes inconsistent with the Listing Rules, the constitution is deemed not to contain that provision to the extent of the inconsistency.

精神の神社 神社 神社 神社 のまま

11.5 Rights Attaching to Options

• The rerms and conditions of the Options are:
• (a) Each Option shall be issued for no consideration.
• (b) Each Option entitles the holder to subscribe for one ordinary share in the Company upon the payment of 20 cents.
• (c) The Options will lapse at 5.00 pm, WST on 1 December 2006 (Expiry Date).
• (d) The Options are transferable and will not be listed for official quotation on the ASX.
• (e) There are no participating rights or entitlements inherent in the Options and holders of the Options will not be entitled to participate in new issues of capital that may be offered to Shareholders during the currency of the Option.
• Optionholders have the right to exercise their Options prior to the 侄 date of determining enfittenients to any capital issues to the then existing Shareholders made during the currency of the Options, and will be granted a period of at least 10 Business Days before the closing date to exercise the Options.
• In the event of any re-organisation (including reconstruction, consolidation, subdivision, reduction or return of capital) of the issued capital of the Company, the Options will be re-organised as required by the Usting Rules, but in all other respects the terms of exercise will remain unchanged.
• The Darions shall be examisable at any time before the Expiry Date Exercise Periodi by the delivery to the registered office of is the sexual and the level of $\frac{1}{2}$ . Notified at the point of the second second .
  The arcord being operator in the complete profile of Softers.

held by them accompanied by the option certificate and a cheque made payable to the Company for the subscription monies for the Shares. The Notice and cheque must be received by the Company during the Exercise Period. An exercise of only some Options shall not affect the rights of the optionholder to the balance of the Options held by him.

• (i) The Company shall allot the resultant Shares and deliver a statement of shareholding with a holders' identification number within five Business Days of exercise of the Options.
• The Shares allotted shall rank, from the date of allotment, equally with the existing ordinary shares of the Company in all respects.

7 Rights åttarhing en Birgeresc Geriepe

The terms and conditions of the Director's Options are:

• (a) Each Director's Option shall be issued for no consideration to the Managing Director of the Company.
• (b) Subject to the vesting of each Director's Option in accordance with paragraph (d) below, each Director's Option entitles the Managing Director to subscribe for one ordinary share in Comet Ridge upon the payment of 20 cents.
• (c) The Director's Options will lapse at 5.00 pm, WST on the third anniversary of the receipt by the Company of the letter from ASX confirming the unconditional approval of the Company to admission to the Official List (Expiry Date).
• (d) The Director's Options will vest in the Managing Director in four separate equal tranches to a total of 5% of the total amount of Shares on issue on the date the Company's Shares are first traded on ASX (Vested Options). The Director's Options will vest on each six month anniversary of the date that the Company received unconditional approval for the Company to be admitted to the Official List (Vesting Date). Prior to each Vesting Date, the Managing Director is only entitled to the portion of the Vested Options and he is not permitted to exercise, transfer or otherwise deal with that portion of the Director's Options that have not vested in him.
• (e) The Director's Options are not transferable (unless approved by the Board at its absolute discretion) and will not be listed for official quotation on the ASX.

• There are no participating rights or entitlements inherent in these $(f)$ Vested Options and the Managing Director will not be entitled to participate in new issues of capital that may be offered to Shareholders during the currency of the Vested Options.

• (g) The Managing Director has the right to exercise his Vested Options prior to the date of determining entitlements to any capital issues to the then existing Shareholders made during the currency of the Director's Options, and will be granted a period of at least five Business Days before the closing date to exercise the Director's Options.

• (h) In the event of any re-organisation (including reconstruction, consolidation, subdivision, reduction or return of capital) of the issued capital of the Company, the Director's Options will be reorganised as required by the Listing Rules, but in all other respects the terms of exercise will remain unchanged.
• That portion of the Vested Options (or all of the Vested Options after $(i)$ the last tranche of Director's Options has vested in the holder) shall be exercisable at any time before the Expiry Date (Director's Exercise Period) by the delivery to the registered office of the Company of a notice in writing (Director's Notice) stating the intention of the Managing Director to exercise all or a specified number of the Vested Options held by him accompanied by an option certificate and a cheque made payable to the Company for the subscription monies for the Shares. The Director's Notice and cheque must be received by the Company during the Director's Exercise Period. An exercise of only some of the Vested Options shall not affect the rights of the Managing Director to the balance of the Director's Options held by him.
• The Company shall allot the resultant Shares and deliver a statement of shareholdings with a holders' identification number within five Business Days of exercise of the Vested Options.
• (k) The Shares allotted shall rank, from the date of allotment, equally with the existing ordinary shares of the Company in all respects.
• $(1)$ Notwithstanding any other terms and conditions, all Director's Options may be exercised:
• during a Bid Period; $(i)$
• at any time after a Change in Control Event has occurred; $(ii)$ $or$
• (iii) on an application under section 411 of the Corporations Act if a court orders a meeting to be held concerning a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company.
• (m) If the Managing Director's employment with the Company is terminated for any reason prior to the end of the Managing

Sartinn 11

Director's employment term (being two years from the date the Company received unconditional approval for the Company to be admitted to the Official List) the Director's Options may be exercised by the Managing Director (or his personal representative(s)) within 90 days of the termination of the holder's employment with the Company provided that:

• the Director's Options have vested in the Managing Director in $(i)$ accordance with paragraph 11.7(d); and
• (ii) the Director's Options are entitled to be exercised pursuant to paragraph 11.7(i).
• (n) If the Director's Options are not exercised within the 90 day period provided in this condition, they will lapse.
• (o) If in the reasonable opinion of the Board the Managing Director acts fraudulently or dishonestly or is in breach of his obligations to the Company or a subsidiary then the Board may in its absolute discretion deem any unexercised Director's Options of the Managing Director to have lapsed. The Board's decision will be final and binding.
• (p) In these terms and conditions:

"Bid Period" in relation to a takeover bid in respect of shares in the Company, means the period referred to in the definition of that expression in section 9 of the Corporations Act provided that where a takeover bid is publicly announced prior to the service of a bidder's statement on the Company in relation to that takeover bid, the Bid Period shall be deemed to have commenced at the time of that announcement; and

"Change of Control Event" means a Shareholder, or a group of associated Shareholders, becoming entitled to sufficient Shares to give it or them the ability and that ability is successfully exercised, in general meeting, to replace all or a majority of the Board.

TER Employee House Olym

The Company proposes adopting an employee share plan for the purpose of recognising the efforts of, and providing incentive to, employees of the Company once the Company is admitted to the Official List.

【【注册】 Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photography Photograph

11.9 Directors' Interests

Except as disclosed in this Prospectus, no Director holds, or during the last two years has held, any interest in:

• (a) the formation or promotion of the Company;
• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or
• (c) the Offer,

and no amounts of any kind (whether in cash, Shares or otherwise) have been paid or agreed to be paid to any Director to induce him or her to become, or to qualify as, a Director, or otherwise for services rendered by him or her in connection with the formation or promotion of the Company or the Offer.

Gill Swaby is a director of Strategic Consultants Pty Ltd. Strategic Consultants Pty Ltd has been engaged by the Company to provide corporate advisory services to the Company at normal charge out rates and constitutes reasonable remuneration. The Company has paid \$14,500 to Strategic Consultants Pty Ltd since October 2003.

Shoreholding Qualifications

The Directors are not required to hold any Shares under the constitution of the Company.

Directors Holdings

The Directors may subscribe for Shares under this Prospectus.

Set out in the table below are details of Directors' relevant interests in the securities of the Company as at the date of this Prospectus:

Director	No. of Shares	No. of Shares	No. of	No. of
	Held Directly	Held Indirectly	Options Held Directly	Options Held Indirectly
A Lydyard	-Nil	900,000	3,000,000	Mil
S Ashton	Nil	2,000,000	Nil	200.000
J Schneider	419,563	Ni	200,000	Nil
G Swaby	Nil	矩	100, 000	Ni
TOTAL	419.563	2,900.000	3,300,000	200.000

These Shares are held by know indyard and hu wife as crutted for the indian. Bit Truck of Which Andy Igaward is a banaficiany

¹ These Shares and Options are hald to 38" lather Nomisees 8to 1st as mustas for the Simon Family Trust of which Simon Server is a beneficiate.

92 - COMET RIDGE LINITED

Remuneration of Directors

The constitution of the Company provides that the Directors may collectively be paid as remuneration for their services a fixed sum not exceeding the aggregate maximum sum per annum from time to time determined by the Company in general meeting (currently \$150,000).

For the current financial year ending 30 June 2004 it is expected that the non executive Directors' fees collectively will not exceed \$75,000.

A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties.

Currently, Andy Lydyard is employed by the Company on the basis described in the employment agreement referred to in Section 11.4. As at the date of this Prospectus, Andy Lydyard has received a total of \$45,000 from the Company since October 2003.

Other Interests

The Company has entered into Deeds of Indemnity and Access with each of the Directors under which the Company agrees to indemnify the Directors against certain liabilities incurred by the Directors while acting as a Director, to use its best endeavours to insure the Directors against certain risks to which the Directors are exposed as a Director and to grant to Directors a right of access to certain records of the Company for a period up to seven years after the Director ceases to be a Director.

11.10 Interests of Named Persons

Except as disclosed in this Prospectus, no promoter or other person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus holds, or during the last two years has held, any interest in:

• (a) the formation or promotion of the Company; or
• $(b)$ property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or
• (c) the Offer,

and no amounts of any kind (whether in cash, Shares or otherwise) have been paid or agreed to be paid to a promoter or any person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus for services rendered by that person in connection with the formation or promotion of the Company or the Offer.

Blakiston & Crabb have acted as solicitors to the Offer. The Company will pay approximately \$50,000 to Blakiston & Crabb for these services. Blakiston & Crabb have provided other professional services to the Company during the last two years and have received \$15,000 for these services.

EnergyAdvice Pty Ltd has prepared the Independent Energy Market Consultant's Report included in Section 7. In respect of this work the Company will pay approximately \$12,000.

HLB Mann Judd has prepared the Independent Accountant's Report included in Section 8. In respect of this work the Company will pay approximately \$5,000.

MBA Petroleum Consultants have prepared the Independent Petroleum Consultant's Report included in Section 6. In respect of this work the Company has agreed to pay approximately \$40,000.

Patersons Securities Limited has acted as Lead Manager in relation to the Offer. For these services, the Company will pay a fee of \$60,000 and a management fee of 1.25% of the total amount raised under this Offer and a lodgement fee of 3.75%. Further details are set out in Section 11.4.

The amounts disclosed above are exclusive of any amount of GST payable by the Company in respect of those amounts.

II.II Consents

Each of the parties referred to in this Section 11.11:

• (a) does not make, or purport to make, any statement in this Prospectus or on which a statement made in the Prospectus is based other than as specified in this Section;
• (b) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this Section; and
• (c) has not authorised or caused the issue of this Prospectus.

EnergyAdvice Pty Ltd has given its written consent to the inclusion in this Prospectus of its Independent Energy Market Consultant's Report and all statements referring to the report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with the ASIC.

HLB Mann Judd has given its written consent to the inclusion in this Prospectus of its Independent Accountant's Report and all statements referring to that report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with the ASIC.

MBA Petroleum Consultants has given its written consent to the inclusion in this Prospectus of its Independent Petroleum Consultant's Report and all statements referring to the report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with the ASIC.

Each of the following has consented to being named in the Prospectus in the capacity as noted below and have not withdrawn such consent prior to the lodgement of this Prospectus with the ASIC:

• Blakiston & Crabb as solicitors to the Company; $(i)$
• Computershare Investor Services Pty Ltd as share registry for $(ii)$ the Company;
• EnergyAdvice Pty Ltd as the Independent Energy Market $(iii)$ Consultant;
• HLB Mann Judd as auditor to the Company and Independent $(iv)$ Accountant;
• MBA Petroleum Consultants as Independent Petroleum $(v)$ Consultant, and
• Patersons Securities Limited as Lead Manager. $(vi)$

There are a number of persons referred to elsewhere in this Prospectus who are not experts and who have not made statements included in this Prospectus. There are no statements made in this Prospectus on the basis These persons did not of any statements made by those persons. consent to being named in the Prospectus and did not authorise or cause the issue of the Prospectus.

it il fantant the issue

The total estimated costs of the Offer, including legal fees incurred, registration fees, brokerage and commission, fees for other advisers, Prospectus design, printing and advertising expenses and other miscellaneous expenses, will be approximately \$500,000 (exclusive of any GST which may be payable on that amount) comprising the following:

đ

	د
Lead Manager's fee	60,000
Lodgement and management fee	250,000
Legal fees	50,000
Independent Expert's fees	57,000
ASX listing fee and ASIC lodgement fee	33,000
Printing and ancillary costs	50,000
TOTAL	500,000

II IS Photrash rentmeres

Pursuant to Class Order 00/44 the ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an Electronic Prospectus on the basis of a paper prospectus lodged with the ASIC and the issue of Shares in response to an electronic Application Form, subject to compliance with certain provisions.

If you have received this Prospectus as an Electronic Prospectus please ensure that you have received the entire Prospectus accompanied by the Application Form. If you have not, please contact the Company at email: comet@cometridge.com.au or telephone 08 9225 7108 and the Company will send to you free, either a hard copy or a further electronic copy of the Prospectus or both.

The Company reserves the right not to accept an Application Form from a person if it has reason to believe that when that person was given access to the electronic Application Form, it was not provided together with the Electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered. In such a case, the Application monies received will be dealt with in accordance with section 722 of the Corporations Act.

DIRECTORS' RESPONSIBILITY STATEMENT AND CONSENT

SECTION 12

The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds to believe that no statements made by the Directors in this Prospectus are misleading or deceptive and that in respect of any other statements made in this Prospectus by persons other than Directors, the Directors have made reasonable enquiries and on that basis have reasonable grounds to believe that the persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with the ASIC.

Jeff Schneider Chairman

Gillian Swaby

Director

The Prospectus is prepared on the basis that certain matters may be reasonably expected to be known to likely investors or their professional advisers.

Each Director has consented to the lodgement of this Prospectus with the ASIC and has not withdrawn that consent.

Dated: 24 February 2004

$, \hat{\alpha}$

Andy Lydyard Managing Director

Simon Ashton

Director

SECTION 13

13.1 Defined Terms

The following definitions apply throughout this document unless the context requires otherwise.

ACBN	Australian CBM Pty Ltd ACN 067 312 029.
Anzoil	Anzoil NL ACN 009 171 046.
Applicant(s)	Person(s) who submit a valid Application Form pursuant to this Prospectus.
Application	A valid application made to subscribe for a specified number of Shares pursuant to this Prospectus.
Application Form	Either a Public Application Form or a Priority Application Form.
Arrow	Arrow Energy NL ACN 078 521 936.
ASIC	Australian Securities and Investments Commission.
ASTC	ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532.
ASX	Australian Stock Exchange Limited ACN 008 624 691.
ATP	Authority to Prospect issued by the Queensland Government.
Australian Coalbed	Australian Coalbed Methane Pty Limited ACN 002 606 238.
Board	The board of Directors.
Business Day	A day on which the ASX is open for trading in securities.
CHEZZ	Clearing House Electronic Subregister System.
Comet Ridge Project	The project described in Section 3.1.
Company or Comet Ridge	Comet Ridge Limited ACN 106 092 577.
Corporations Act	Corporations Act 2001 (Cth).
Directors	The directors of the Company.
Director's Options	The options described in Section 11.7.
Electronic Prospectus	An electronic version of this Prospectus.
ERA	Environmentally relevant activities as referred to in Queensland's Environmental Protection Act 1994.
Exposure Period	Means the period of seven days after lodgement of this Prospectus which may be extended by the ASIC by not more than seven days pursuant to section 727(3) of the Corporations Act
Galilee Project	The project described in Section 3.3.
GST	Goods and services tax.
Independent Accountant	HLB Mann Judd.
Independent Accountant's Report	The independent Accountant's Report in Section 8.
Independent Energy Market Consultant's Report	The Independent Energy Market Consultant's Report in Section 7.
Independent Energy Market Consultant	EnergyAdvice Pty Ltd ACN 094 657 539.
Independent Petroleum Consultant	MBA Petroleum Consultants.
Independent Petroleum Consultant's Report	The independent Petroleum Donscitant's Report in Section X.

医腹膜膜炎 医血管膜炎 计分类数据 医心理学 医心理学 医心理学 医心理学 医心理学 医心理学

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Issuer Sponsored	The shares issued by an issuer that are held in uncertificated form without the holder entering into a sponsorship agreement with a broker or without the holder being admitted as an institutional participant in CHESS.
Lead Manager	Patersons Securities Limited ACN 008 896 311.
Listing Rules	The official listing rules of ASX.
Memoranda of Understanding	The Memorandum of Understanding and Heads of Agreement summarised in Section 9.8.
MBA Petroleum Consultants	The Muir Family Trust and Barrenger & Associates Pty Ltd as trustee for the Barrenger Family Trust trading as MBA Petroleum Consultants.
Native Title Act	Native Title Act 1993 (Commonwealth).
Offer	The Public Offer and the Priority Offer the subject of this Prospectus.
Official List	The official list of ASX.
Opening Date	9.00am WST on 3 March 2004.
Options	The options described in Section 11.6.
Origin Energy	Origin Energy CSG Limited ACN 001 646 331.
PEL	Petroleum Exploration Licence issued by the New South Wales Government.
Perilya	Perilya Limited ACN 009 193 695.
Perilya Shareholder	A shareholder on the register of members of Perilya as at 5.00 pm WSI on 22 January 2004 and entitled to receive the Offer with a registered address in Australia.
PL.	Petroleum Lease issued by the Queensland Government.
Priority Application Form	The blue loose leaf form so described, which accompanies this Prospectus.
Priority Offer	A priority entitlement offer under this Prospectus to Perilya Shareholders, as described in Section 4.3.
Priority Offer Closing Date	5.00pm WST on 26 March 2004.
Prospectus	This Prospectus.
PSPA	Petroleum Special Prospecting Authority issued by the New South Wales Government.
Public Application Form	The form so described which is attached to or accompanies this Prospectus.
Public Offer	An offer to the public as described in Section 4.3.
Public Offer Closing Date	5.00pm WST on 2 April 2004.
Santos	Santos Petroleum Operations Pty Ltd ACN 010 829 017.
SCH Business Rules	The same meaning as in the Corporations Act.
SEQ	Seqoil Pty Ltd ACN 065 683 641.
Section	A section of this Prospectus.
Shallow Gas Project	The project described in Section 3.3.
Share(s)	Fully paid ordinary share(s) in the Company.
Shareholder	A holder of Shares.
Strike	Strike Oil NL ACN 078 012 745.
USA	United States of America.
Walloon Coal Measures	Coal bearing late Middle Jurassic Formation of the Surat Basin south east Queensland and north east New South Wales.
WCM Project	Walloon Coal Measures Project as described in Section 3.2.
WST	Western Standard Time.

COMET RIDGE LIMITED
PUBLIC APPLICATION FORM

Please read all instructions on reverse of this form

				Share Registrars use only
Comet Ridge ACN 106 092 577					Broker reference - stamp only
Number of Shares applied for (minimum 10,000 and then multiples of 500 Shares).		Total amount payable cheque(s) to equal this amount
			Broker Code		Adviser Code
You may be allocated all of the Shares above or a lesser number.
C Full name details title, given name(s) (no initials) and surname or company name Name of Applicant 1			Ð	Tax file number(s) Or exemption category Applicant 1/company
Name of Joint Applicant 2 or				oint applicant 2/ trust and the contract of the second service of the service of the service of the service of
Name of foint Applicant 3 or				Joint applicant 3/exemption
. Full postal address Number/street		and the company of commentary through such a support of the world of a special section of the			F. Contact details and contact the property Contact name of the construction of the contact model
密转接法的行业		/대중 사이 2012년 1월 12일 2012년 대학생 소설 10월 12일 12일 12일 12일 12일 12일 12일 12일 12일 12일			Contact daytime telephone number
Suburb/town		.State/postcode	. . displayed de la calculación de la final		Contact email address
CHESS HIN (if applicable) G
H Cheque payment details please fill out your cheque details and make your cheque payable to "Cornet Ridge Limited - Float Account"
Drawer	Cheque number	BSB number	Account number		Total amount of cheque
Return of the Application Form with your cheque for the Application monies will constitute your offer to subscribe for Shares in the Company. I/We declare that:

(b) I/we have received personally a copy of this Prospectus accompanied by or attached to the Application Form or a copy of the Application Form or a direct derivative of the Application Form, before applying for Shares.

No signature is required.

NUI

You should read the Prospectus dated 24 February 2004 carefully before completing this Application Form. The Corporations Act prohibits any person from passing on this Application Form (whether in paper or electronic form) unless it is attached to or accompanies a complete and unaltered copy of the Prospectus and any relevant supplementary prospectus (whether in paper or electronic form).

GUIDE TO THE COMET RIDGE LIMITED PIBLIC APPLICATION FORM

This Fublic Application Form relates to the Offer of 25,000,000 Shares in Comet Ridge Limited at 20 cents per Share pursuant to the Prospectus dated 24 February 2004. The expiry date of the Prospectus is the date which is 13 months after the date of the Prospectus. The Prospectus contains information about investing in the Shares of the Company and it is advisable to read all of this document carefully before applying for Shares. A person who gives another person access to this Public Application Form must at the same time and by the same means give the other person access to the Prospectus. and any supplementary prospectus (if applicable). While the Prospectus is current, the Company will send paper copies of the Prospectus, and any supplementary prospectus (if applicable), and a Public Application form, on request and without charge.

Please complete all relevant sections of this Public Application Form using BLOCK LETTERS. These instructions are cross referenced to each section of this Public Application Form. Further particulars and the correct forms of registrable titles to use on this Public Application Form are contained below.

• Insert the number of Shares you wish to apply for. The Application must be for a minimum of 10,000 Shares and thereafter in multiples of 500 Shares. Å
• Insert the relevant amount of Application monies. To calculate your Application monies, multiply the number of Shares applied for by the sum of \$0.20 $\mathsf{R}$
• Write the full name you wish to appear on the statement of shareholdings. This must be either your own name or the name of a company. Up to three joint Applicants $\mathsf{f}$ may register. You should refer to the table below for the correct forms of registrable title. Applicants using the wrong form of title may be rejected. Clearing House Electronic Sub-Register System (CHESS) participants should complete their name and address in the same format as that are presently registered in the CHESS system.
• Enter your Tax File Number (TFN) or exemption category. Where applicable, please enter the TFN for each joint Applicant. Collection of TFN(s) is authorised by taxation $\mathbf{D}$ laws. Quotation of your TFN is not compulsory and will not affect your Application.
• Please enter your postal address for all correspondence. All communications to you from the share registry will be mailed to the person(s) and address as shown. For F. joint Applicants, only one address can be entered.
• Please enter your telephone number(s), area code, email address and contact name in case we need to contact you in relation to your Application.
• The Company will apply to ASX to participate in CHESS, operated by ASTC, a wholly owned subsidiary of ASX. In CHESS, the Company will operate an electronic CHESS $\mathsf{G}$ subregister of securities holdings and an electronic Issuer Sponsored subregister of securities holdings. Together the two subregisters will make up the Company's principal register of securities. The Company will not be issuing share certificates to Applicants in respect of securities allotted.

If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold securities allotted to you under this Application in uncertified form on the CHESS subregister, complete Section G or forward your Public Application Form to your sponsoring participant for completion of this section prior to lodgement. Otherwise, leave Section G blank and on allotment, you will be sponsored by the Company and an SRN will be allocated to you. For further information refer to the relevant section of the Prospectus.

Please complete cheque details as requested: $\mu$

Make your cheque payable to "Comet Ridge Limited - Float Account" in Australian currency and cross it "Not Negotiable". Your cheque must be drawn on an Australian bank. The amount should equal the amount shown in Section B. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected.

Before completing this Public Application Form the Applicant(s) should read the Prospectus to which the Application relates. By lodging this Public Application Form, the Applicant(s) agrees that this Application is for Shares upon and subject to the terms of this Prospectus, agrees to take any number of Shares equal to or less than the number of Shares indicated in Section A that may be allotted to the Applicant(s) pursuant to the Prospectus and declares that all details and statements inserted in the Public Application Form are complete and accurate. It is not necessary to sign this Public Application Form.

Correct form of Registrable Title

Note that only legal entities are allowed to hold Shares. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to the Company. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non registrable title may be included by way of an account designation if completed exactly as described in the example of correct forms of registrable title below:

Type of investor	Correct form of Registrable Title	Incorrect form of Registrable Title IA Smith
Individual	Mr John Alfred Smith
Use names in full, no initials
Minor (a person under the age of 18)	John Alfred Smith
Hse the name of a responsible adult do not use the name of a minor		Peter Smith
Company	and the ABC Pty Ltd	ABC P/L
Use company name, not abbreviations		ABC Co
Irust.	Mrs Sue Smith	Sue Smith Family Trust
Use name of trustee(s), do not use the name of the trust
Deceased Estate	Ms lane Smith	Estate of late John Smith
Use name of executoris), do not use the name of the deceased	$\leq$ Est John Smith A/C $\geq$
Partnership	Mr. John Smith and Mr Michael Smith.	The Stitle and Spr
Use partners personal names, do not use the name of the partnership

Lodgement of Applications

Forward your completed Public Application Form with cheque(s, attached to:

Patersons Securities Limited	-98	Patersons Securities Limiter
"Level 23" Exchange Placa		- GPO Box 150024
2 The Esplanade		17ERTH 1514 6846
i de la colonia della