COMET RIDGE LIMITED — Interim / Quarterly Report 2007

Oct 23, 2007

ABOUT COMET RIDGE

Highlights

• Multiple drilling locations developed at Florence (Colorado, CO)

• Seismic permitting nearing completion on Grays Harbor (Washington,WA)

• Acreage position strengthened at Grays Harbor, Florence & Chehalis (WA)

• Sidetrack operations on the Tow Creek (CO) well suspended temporarily

• Native title negotiations proceeding on Galilee Basin permits (QLD)

Introduction

This last quarter has seen a shift in emphasis from one of assembling prospects and leases to one of preparing for field activities and positioning the Company to access North American capital (via industry partners or equity capital). Considerable time and energy has been invested recently in providing oil and gas companies and prospective capital providers with detailed technical reviews of the Company’s projects. At the same time, recent developments in the Eastern Australian gas market have caused the Company to re-focus efforts to advance its Australian projects, principally Mahalo and the two large permits it has in the Galilee Basin in Queensland.

The selection of drilling locations at Florence is well advanced. The 3D seismic survey shot earlier this year has provided an excellent insight into factors controlling production in the old field. It has also facilitated identification of potential well locations on prospects in the proven, shallow reservoirs as well as a number of deeper objectives. Drilling permits will be lodged in the coming weeks. Drilling is possible over the winter months in this area and the Company is working with another operator in the area to source drilling equipment and services.

Drilling on the Tow Creek anticline resumed in late August with the drilling of the CVU 314 sidetrack hole. Repeated rig equipment failures resulted in the drill string becoming irretrievably stuck. The drilling again confirmed the presence of hydrocarbons at this location. The Company will seek partners to fund further drilling on this still highly attractive prospect.

At Grays Harbor, the Company has permitted an 11 square mile 3D seismic survey over one of its higher priority prospects and a further 60 miles of 2D seismic over a complex of three identified structures. Research into appropriate drilling and completion techniques for the wells is well advanced. The Company has engaged Halliburton to review the available reservoir data and to recommend state of the art drilling and completion techniques.

Comet Ridge is an Australian-listed oil and gas explorer transitioning to producer with projects in Australia & USA

The Company’s strategy is to control large acreage positions covering oil and gas opportunities in mature fields and in proven, but overlooked, basins. As much as possible, it operates these projects in order to directly control desired outcomes.

Comet Ridge draws on considerable prior experience in the USA to develop its Pacific Northwest & Rocky Mountain projects

Comet Ridge is also advancing a number of key projects in Australia

USA

Pacific Northwest

• Grays Harbor (100%)

• Chehalis Basin (40%)

Rocky Mountains

• Florence (39%)

• Tow Creek (37.5%)

• Bear River (33.75%)

AUSTRALIA

Queensland

• Mahalo (40%)

• Galilee Basin (100%)

New South Wales

• Gunnedah Basin (60 – 70 %)

ASX CODE: COI

ASX Listed: ……………….19 April 04 Shares on issue: ………..104 million Unlisted options: ……… 9.9 million Top 20: ……………………… 44% Directors: ……………………12%

PACIFIC NORTHWEST, USA

Grays Harbor, Washington (Operator: Comet Ridge via St Helens LLC, 100%)

During the last quarter, the Company modified its plans to acquire only 2D seismic data to one of pursuing both 3D and 2D surveys. It is now recognized that 3D (which provides a much more complete subsurface view) can be acquired over one of the primary prospects for the same cost as shooting 2D by using the available forest roads. Permitting of the surveys with surface owners is virtually complete, and preparation of an exhaustive environmental report for submission to the State is well advanced. Acquisition of data will commence in the early Northern spring. A number of logical well locations have been also selected and will be permitted so that drilling can commence soon after the locations have been confirmed by the seismic.

St. Helens continues to build its acreage position in the project area. Lease acquisition costs and terms have proven very favorable. The Company now controls approximately 450,000 acres. Last quarter, shareholders were advised that a map showing the Company’s land position would be published this quarter; due to competitive reasons, that information will be delayed until the next quarter.

Comet Ridge has commenced marketing the project to US companies and significant interest is being shown. This interest stems from (a) the magnitude of the potential gas resource identified by the Company’s work (between 500 BCF and 6.6 TCF of un-risked gas), (b) from the strong oil and gas shows recorded in the past, (c) from the presence of a regional gas pipeline infrastructure, and (d) from the area offering strong gas prices relative to many other geographies.

Vader/Cedar Creek (Chehalis Basin, Washington - Comet Ridge via St Helens 40%)

Drilling has been delayed on this coal seam gas play in southern Washington while a possible expansion of the joint venture is being explored.

ROCKIES, USA

Florence, Colorado (Operator: Comet Ridge, 39%)

Interpretation of the 10 sq miles of 3D seismic data the company has over the historic Florence oil field is well advanced and drillable locations are being generated and readied for permitting. The data that was acquired earlier this year is of excellent quality and provides an extraordinary insight into the controls on production in the Pierre Formation (the main field pay) and has identified numerous Niobrara structural targets as well as some intriguing possibilities in the deeper Codell Formation. At this point in time a sizeable inventory of potential drillable locations, some of which have multiple potential well designs (vertical vs. directional for example) has been identified. The task now is to prioritize and permit a number of the locations for a planned multi-well drilling program that is scheduled, subject to permits and rig availability, for late in the fourth quarter of 2007 and into 2008.

The relatively flat terrain, excellent access and generally less severe winters mean that operations can continue throughout the winter months. Comet Ridge is working with two other exploration companies active in the Florence area to share access to and costs of securing drilling equipment and services.

The Florence oil field was the second oil field discovered in the United States with the discovery well drilled in 1862. The field is located approximately 87 miles (140 km) south of Denver (Figure 1). The oil field has produced approximately 15 MMBO in its 144 year history from an area of approximately 25 square miles. Comet Ridge controls approximately 7,500 acres (almost 12 sq miles) over the most prolific part of the field. As is typical of many fractured reservoir oil fields, there are a number of excellent producers with per well recoveries ranging from 100,000 barrels to in excess of 550,000 barrels of oil and a large number of lower recovery wells and dry holes where few or no fractures were penetrated.

The correlation between the mapped seismic anomalies and the better producing wells is very marked, and what is more, it has revealed a number of targets that do not appear to have been tapped by previously drilled wells.

Recent success in this basin attests to the area still offering significant opportunity. Comet Ridge’s US partners drilled the Royal Gorge 1 well in an area surrounded by Comet’s leasehold position (Figure 2). This well was drilled on a seismic anomaly similar to those mapped under Comet’s leases, and encountered oil pay in a number of intervals in the Pierre Formation. The well has produced in excess of 75,000 barrels of oil over the past two years and is still producing in excess of 80 BOPD.

Another well was recently drilled to the west of Comet’s lease position by a US operator, Mountain Petroleum, for a JV that includes a number of Australian explorers. This well, shown on Figure 2 as the Mountain Petroleum well, is reported to have tested oil from a number of intervals including the Niobrara and the Codell and is now on production. Additional drilling is planned to evaluate a fractured zone and oil shows encountered in the Pierre Formation. Clearly this old field still has a lot of life in it. Comet Ridge controls a large percentage of the most prolific part of the old field.

Tow Creek (Routt County, Colorado – Comet Ridge Operator with 37.5%)

The second attempt to establish production on the southeastern part of the Tow Creek anticline was again frustrated by repeated rig problems. Following a significant time period during which the drill-string was left hanging in the open hole due to rig repairs, the string became irretrievably stuck. Rather than risk significantly more of our shareholder‘s capital by attempting another sidetrack with the same rig, the decision was made to release it and move off location.

This result is particularly frustrating as measured gas shows in the first of three drilling objectives were superior to those detected in the original hole. Up until the point that that rig equipment failed, the operation was proceeding very well.

After having already invested significant capital into this project, Comet Ridge will now seek additional partners to share the risk of further drilling.

Bear River (Routt County, Colorado – Comet Ridge Operator with 33.75%)

The Peltier 11-12 well is shut in. Despite encountering fractures and a significant fault, the well performance suggests the well has encountered a tight (low permeability) reservoir formation.

The Company is designing a small 3D seismic program to assist with the mapping of the fault/fracture trends ahead of further drilling.

The drilling of the Peltier well fulfilled the earning requirements on the Bear River prospect and the Company’s share of future costs has reduced to 33.75%.

AUSTRALIAN ACTIVITIES

Over the past few months, events in Queensland have led to a re-assessment of the potential value to shareholders of the Company’s Australian coal seam gas assets. Two other Australian coal seam gas developers have announced plans for the development of two LNG facilities at Gladstone. Gas prices in Queensland are also improving relative to where they have been. The company retains its interests in the Mahalo project, in two large permits in the Galilee Basin, and in two permits in the Gunnedah Basin in northern New South Wales. Over the past quarter, the Company has increased its focus on these projects and is intent on advancing them in the coming quarter.

Mahalo, Northern ATP 337P (QLD - Comet Ridge 40%, Non Operator)

A third party technical review of the Mahalo project incorporating the results of the five holes that Comet Ridge funded is nearing completion. This study has already confirmed the presence of a significant volume of gas in place. Further drilling is warranted and Comet Ridge is working with its partners to achieve that.

ATP’s 743 and 744P (Galilee Basin, QLD - Comet Ridge 100%)

Comet Ridge has re-assumed control of these two large permits and is advancing them through the Native Title process. Meetings have been held with claimants and negotiations are ongoing. Coals here are of a similar age to those at the major coal seam gas producing fields in Queensland: Moranbah, Fairview, Spring Gully and Scotia. In addition, good gas shows have been observed in previous oil and gas drilling nearby. The Company is keen to have these permits awarded so that work can begin on delineating a significant potential gas resource.

PEL 427 & PEL 428 (Gunnedah Basin, NSW – Comet Ridge 70% & 60%)

Eastern Star Gas, our farm-in partner, has advised that it has acquired 120 km of 2D seismic in PEL’s 427 and 428. The seismic is aimed at developing both conventional and coal seam gas targets. Eastern Star has now earned its initial interests in the two permits.

FUTURE PROGRAM

The Company is planning for a high level of operational activity in the next twelve months. The activity as currently outlined represents a capital program of between US$7.2 to $11.5 million over the next 12 months.

The Company has engaged a Denver- based financial advisor to assist with raising capital at the project level and at the same time is expending significant efforts towards securing industry partners for the various projects.

NEW BUSINESS

The Company continues to evaluate new opportunities, including producing properties, as well as new exploration concepts and prospects.

FINANCE

As of September 30, the Company had cash on hand of US$3.8 million (AUD$4.5 million) after receiving AUD$3 million proceeds from the sale of the Tipton West royalty in early July.

At the end of the report period, the Company had issued capital of 104.9 million ordinary, fullypaid shares and 9.9 million unlisted options having varying exercise prices and dates.

CORPORATE

The Company’s Denver office has relocated to a new suite number in the same building.

The address for the new office is:

600 17[th] Street, Ste 800-S Denver, Colorado 80202 USA Ph: +1 303 226 1300 Fx: +1 303 226 1301

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Figure 1. Location of Florence Project

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Figure 2. Summary Map of the Florence Project showing Comet Ridge’s lease position, the outlines of the 3D seismic surveys and the wells referenced in the text