COMET RIDGE LIMITED — Interim / Quarterly Report 2009

Mar 12, 2009

Comet Ridge Limited ABN 47 106 092 577

HALF-YEAR FINANCIAL REPORT 31 December 2008

Comet Ridge Limited

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CONTENTS	PAGE
DIRECTORS’ REPORT	3
AUDITOR’S INDEPENDENCE DECLARATION	5
CONDENSED INCOME STATEMENT	6
CONDENSED BALANCE SHEET	7
CONDENSED STATEMENT OF CHANGES IN EQUITY	8
CONDENSED CASH FLOW STATEMENT	9
NOTES TO THE FINANCIAL STATEMENTS	10
DIRECTORS’ DECLARATION	15
INDEPENDENT AUDITOR’S REVIEW REPORT	16

Comet Ridge Limited

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DIRECTORS’ REPORT

Your Directors submit the financial report of the consolidated entity for the half-year ended 31 December 2008. In order to comply with the provisions of the Corporations Act of 2001, the Directors’ report as follows:

Directors

The names of Directors who held office during or since the end of the half-year and until the date of this report are noted below. Directors were in office for this entire period unless otherwise stated:

J W Schneider Executive Chairman A J Lydyard Non-Executive Director G Swaby Non-Executive Director G W Drobnack Non-Executive Director D L Bradshaw Non-Executive Director Resigned 14 November 2008

Review of Operations

Proposed Merger with Chartwell Energy

On 9 February 2009 the Company announced a proposed merger of Comet Ridge Limited and Chartwell Energy Limited to create a well funded coal seam gas company with a diverse portfolio of exploration assets in Australia and New Zealand. The merged entity will have approximately A$7 million in cash at the time of completion. On the 17[th] of February 2009, the Company drew down on a Convertible Note Deed in favour of Chartwell Energy Limited pursuant to the Merger Implementation Agreement. As a consequence the Company issued 1,000,000 convertible notes for A$1 each to raise $1,000,000. The convertible notes will mature on 9 February 2010 if not converted beforehand.

Directors believe the proposed merger is in the best interests of shareholders and are strongly recommending its acceptance. Directors intend to vote their shares in favour of the proposed merger.

The Directors believe the proposed transaction will provide shareholders with the resources to evaluate and exploit its prospects and encourage shareholders to participate in the General Meeting to be held in April 2009.

General:

Subject to the successful completion of the proposed merger with Chartwell Energy the exploration activity level in the company is expected to increase significantly in 2009. Shareholders will be exposed to an active program in the United States and drilling in each of the Company’s NSW permits (2 wells). This program is fully funded. In addition a three well program is possible in the Mahalo Project area and field activity could be expected to commence in the Galilee Basin.

Australian Projects:

PEL427 and PEL428; NSW - Gunnedah Basin; Comet Ridge 25-20%: The drilling of a core hole in each of PEL427 and PEL428 commenced on 8 March 2009. The two core holes will be operated and paid for by Eastern Star Gas (ASX Code: ESG) as part of their earning obligation when they farmed-in to these permits. After the completion of these farm-in wells, Comet Ridge will have a 25% interest in PEL427 and a 20% interest in PEL428.

Comet Ridge Limited

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ATP743P and ATP744P ; Queensland - Galilee Basin; Comet Ridge 100%: Comet Ridge has rights to two very extensive permits (ATP743P and ATP744P) in the Galilee Basin south west of Townsville which have a total area of 13,000 sq km. Both permits are considered prospective for coal seam gas with extensive coals known to be present throughout the permit, with coals at depths conducive to CSG production and with gas shows in the coals evident from past conventional oil and gas exploration.

Both permits are subject to Native Title. These processes have been completed for ATP743 and formal award by the Queensland Government is expected shortly. Discussions with Native Title claimant groups in ATP744 have been progressed and finalisation is anticipated in the near future.

ATP337P; Queensland – Bowen Basin; Comet Ridge 40%: Santos (ASX Code: STO) as exploration Operator in the Mahalo Project area (ATP337P) is proposing a three well exploration/appraisal program in the permit for later in 2009. The details and timing of the program is expected to be resolved by the Joint Venture in Q1/2009.

- Comet Ridge Resources USA; Comet Ridge approx. 23% (as at the date of this Report:

Florence Oil Field Redevelopment; Colorado: Production testing of three wells drilled on the Florence project in the second half of 2008 continues. An average daily production rate of 140 BOPD is being maintained from the three wells.

The operator, Comet Ridge Resources, continues to expand its acreage position at Florence and is planning additional drilling in the second quarter to take advantage of anticipated lower rig and services costs.

Grays Harbor Basin; Washington State: Processing of the 2D and 3D seismic surveys shot in the fourth quarter of 2008 over prospective areas at Grays Harbor is nearing completion. Mapping and prospect generation has commenced with drilling anticipated in the summer months subject to seismic interpretation.

Auditor’s Independence Declaration

Section 307C of the Corporations Act of 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 5 and forms part of this Directors’ report for the half-year ended 31 December 2008.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act of 2001.

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J W Schneider

Executive Chairman

Dated this 13th day of March 2009

Comet Ridge Limited

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Auditor’s Independence Declaration

As lead auditor for the review of the financial report of Comet Ridge Limited for the half-year ended 31 December 2008, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b) any applicable code of professional conduct in relation to the review.

This declaration is in respect of Comet Ridge Limited.

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Perth, Western Australia 13 March 2009

L DI GIALLONARDO Partner, HLB Mann Judd

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

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Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

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

Comet Ridge Limited

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CONDENSED INCOME STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

		Consolidated	Consolidated
	Notes	31 Dec 08	31-Dec-07
		A$	A$
Revenue	2	12,809	112,611
Cost of sales		-	(51,790)
Share of net loss of associate accounted for using
the equity method		(683,149)	-
Employee benefits expense		(110,265)	(331,220)
Employee share option expense		(46,066)	(354,147)
Corporate costs		(294,623)	(396,551)
Exploration expenditure written off	3	-	(2,630,020)
Exploration expenditure capitalised		158,201	-
Consultancy costs		(42,452)	(68,543)
Depreciation and amortisation expense		-	(47,918)
Other expenses		(131,773)	(216,795)
Loss before income tax expense		(1,137,318)	(3,984,373)
Income tax expense		-	-
Net loss attributable to members of the parent		(1,137,318)	(3,984,373)
Basic and diluted loss per share (cents per share)		(1.08)	(3.78)
The accompanying notes form part of these financial	statements.

Comet Ridge Limited

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CONDENSED BALANCE SHEET AS AT 31 DECEMBER 2008

Note Assets Current Assets Cash and cash equivalents Trade and other receivables Other financial assets Total Current Assets Non-Current Assets Investments accounted for using the equity method Deferred exploration, evaluation and development expenditure 3 Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets Equity Issued capital 4 Reserves Accumulated losses Total Equity	Consolidated 31-Dec-08 30-Jun-08 A$ A$ 436,657 798,145 300,000 1,269,636 50,226 43,219
	786,883 2,111,000
	9,454,212 7,301,554 2,575,717 2,232,882
	12,029,929 9,534,436
	12,816,812 11,645,436
	430,407 1,180,464
	430,407 1,180,464
	430,407 1,180,464
	12,386,405 10,464,972
	19,168,879 19,170,079 1,761,773 (1,298,178) (8,544,247) (7,406,929)
	12,386,405 10,464,972

The accompanying notes form part of these financial statements.

Comet Ridge Limited

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CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

Balance at 1 July 2007 Option reserve on recognition of bonus element of options Exchange differences arising on translation of foreign operations Loss attributable to members of parent entity Balance at 31 December 2007 Balance at 1 July 2008 Shares issue costs on conversion of options Option reserve on recognition of bonus element of options Exchange differences arising on translation of foreign operations Loss attributable to members of parent entity Balance at 31 December 2008	Consolidated
	Issued Capital Option Reserve Foreign Currency Translation Reserve Accumulated Losses Total
	A$ A$ A$ A$ A$ 19,069,679 668,836 (959,814) (3,046,332) 15,732,369 - 354,147 - - 354,147 - - (367,618) - (367,618) - - - (3,984,373) (3,984,373)
	19,069,679 1,022,983 (1,327,432) (7,030,705) 11,734,525
	19,170,079 1,133,092 (2,431,270) (7,406,929) 10,464,972 (1,200) - - - (1,200) - 46,066 - - 46,066 - - 3,013,885 - 3,013,885 - - - (1,137,318) (1,137,318)
	19,168,879 1,179,158 582,615 (8,544,247) 12,386,405

The accompanying notes form part of these financial statements.

Comet Ridge Limited

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CONDENSED CASH FLOW STATEMENT FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

Cash flows from operating activities Receipts from customers and joint venture partners Payments to suppliers and employees Interest received Net cash used in operating activities Cash flows from investing activities Payments for exploration and evaluation expenditure Proceeds from sale of investments Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Payments for share issue costs Net cash provided by/(used in) financing activities Net increase/(decrease) in cash held Cash and cash equivalents at the beginning of the period Effects of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the period	Consolidated 31-Dec-08 31-Dec-07 A$ A$ Inflows/(Outflows) 229,114 1,628,096 (422,201) (3,232,449) 11,549 105,608
	(181,538) 1,498,745
	(342,835) (2,322,331) - 3,000,000 - (55,278)
	(342,835) (622,391)
	(1,200) -
	(1,200) -
	(525,573) (876,354) 798,145 3,123,845 164,085 (43,752)
	436,657 2,203,739

The accompanying notes form part of these financial statements.

Comet Ridge Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The half-year consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134: Interim Financial Reporting, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

The half-year report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the group as in the full financial report.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2008 and any public announcements made by Comet Ridge Limited and its subsidiaries during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

Basis of preparation

The half-year report has been prepared on a historical cost basis. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company’s annual financial report for the year ended 30 June 2008.

During the period, the presentation currency was changed from US dollars to Australian dollars. Comparative information has been restated in Australian dollars.

For the purpose of preparing the half-year report, the half-year has been treated as a discrete reporting period.

Going Concern

The Group’s half-year financial report has been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. At 31 December 2008, the Group had working capital of $356,476 and had incurred losses of $1,137,318 for the half year then ended. The loss includes the Group’s equity share of $683,149 (loss) incurred by Comet Ridge Resources, LLC.

Subsequent to the half year end (refer to Note 7), the Company announced the proposed merger of Comet Ridge Limited and Chartwell Energy Limited to create a well funded coal seam gas company with a diverse portfolio of exploration assets in Australia and New Zealand. The merged entity will have approximately A$7 million in cash at the time of completion. On the 17[th] of February 2009, the Company drew down on a Convertible Note Deed in favour of Chartwell Energy Limited pursuant to the Merger Implementation Agreement. As a consequence the Company issued 1,000,000 convertible notes for A$1 each to raise $1,000,000. The convertible notes will mature on 9 February 2010 if not converted beforehand.

Comet Ridge Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Going Concern (Continued)

The proposed merger with Chartwell Energy Limited is subject to various conditions, including the approval of the Comet Ridge Limited shareholders via a General Meeting to be held in April 2009. The Directors are of the opinion that the company is a going concern based on the successful completion of the merger with Chartwell Energy Limited. Should this merger not be completed successfully, there is significant uncertainty as to whether the Company will be able to realise its assets and extinguish its liabilities in the normal course of business.

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

Significant accounting judgments and key estimates

The preparation of interim financial reports requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

In preparing this half-year report, the significant judgements made by management in applying the accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report for the year ended 30 June 2008.

Adoption of new and revised Accounting Standards

In the half-year ended 31 December 2008, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2008.

It has been determined by the Company that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Company’s accounting policies.

Comet Ridge Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

NOTE 2 – LOSS FROM ORDINARY ACTIVITIES

The following items are relevant in explaining the financial performance for the half-year:

Interest revenue Oil and gas sales Miscellaneous income Foreign exchange gains (losses) Total Revenue	Consolidated 31-Dec-08 31-Dec-07 A$ A$ 11,549 105,608 - 6,995 1,337 - (77) 8
	12,809 112,611

NOTE 3 – DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE

Costs carried forward in respect of areas of interest in the following phases: Exploration and evaluation phase – at cost Balance at 1 July Expenditure incurred Impairment expense Foreign currency translation Sale and derecognition Development phase – at cost Balance at beginning of half-year Expenditure incurred Impairment Accumulated amortization Foreign currency translation Sale and derecognition Total deferred exploration, evaluation and development expenditure	Consolidated 31-Dec-08 30-Jun-08 A$ A$ (6 months) (12 months) 2,232,882 9,638,156 342,835 4,422,126 - (2,323,411) - (921,773) - (8,582,216)
	2,575,717 2,232,882 - 103,811 - 5,450 - (76,022) - (8,724) - (12,669) - (11,846)
	- -
	2,575,717 2,232,882

Total recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent on the successful development and commercial exploitation or sale of the respective areas.

Comet Ridge Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

NOTE 4 – ISSUED CAPITAL

Ordinary shares Issued and fully paid Movements in ordinary shares on issue At 1 July 2008 Shares issue cost on conversion of options 26 June 08 At 31 December 2008	Consolidated 31-Dec-08 30-Jun-08 A$ A$ 19,168,879 19,170,079
	31-Dec-08 31-Dec-08 Number A$ 105,375,950 19,170,079 - (1,200)
	105,375,950 19,168,879

Subsequent to the end of the reporting period the Company issued 1,000,000 convertible notes for A$1 each to raise $1,000,000. The Notes were issued pursuant to Convertible Note Deed in favour of Chartwell Energy Limited and which was executed pursuant to the Merger Implementation Agreement with Chartwell Energy Limited.

The Convertible Notes have a face value of $1,000,000 (“Principal Sum”); an interest rate of 6% per annum; and mature on 9 February 2010 (if not converted beforehand).

Upon conversion, the note would convert to fully paid ordinary shares in the Company calculated as follows:

A N = B

where:

• N = the number of Shares following the conversion;

• A = the Principal Sum; and

• B = the Conversion Price, being the VWAP in respect of the 5 consecutive trading days before the date of the Conversion Notice, provided that such conversion price will not be greater than $0.085.

Comet Ridge Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2008

NOTE 5 – SEGMENT REPORTING

The following table presents the revenue and profit information regarding geographical segments for the half-year periods ended 31 December 2008 and 2007:

Continuing operations

	Australia	USA	Eliminations	Consolidated
	A$	A$	A$	A$
31 December 2008
Segment revenue	9,398	3,411	-	12,809
Segment result	(388,617)	(748,701)	-	(1,137,318)
31 December 2007
Segment revenue	68,875	43,736	-	112,611
Segment result	(781,865)	(3,202,508)	-	(3,984,373)

Geographical segments represent Comet Ridge Limited’s primary basis of segmentation.

NOTE 6 – CONTINGENT LIABILITIES

There were no contingent liabilities requiring disclosure.

NOTE 7 – SUBSEQUENT EVENTS

On the 9[th] of February 2009, the Company announced a proposed merger with Chartwell Energy Limited. The merged companies will create a well funded coal seam gas company with a diverse portfolio of exploration assets in Australia and New Zealand. The merged entity will have:

• Approximately A$7 million in cash;

• Prospective coal seam gas assets in New Zealand;

• Prospective coal seam gas acreage in Australia in the Mohalo project area in the Bowen Basin, the Galilee Basin and permits in Northern New South Wales;

• Investment in Comet Ridge Resources, LLC providing exposure to exploration and oil field redevelopment projects in the United States;

• New Board members that bring wealth of coal seam gas technical and business experience from their involvement in Sunshine Gas Limited; and

• a Brisbane based organization with highly experienced management and technical staff.

On the 17[th] of February 2009, the Company drew down on a Convertible Note Deed in favour of Chartwell Energy Limited pursuant to the Merger Implementation Agreement. As a consequence the Company issued 1,000,000 convertible notes for A$1 each to raise $1,000,000. The convertible notes will mature on 9 February 2010 if not converted beforehand.

Other than the above, there were no other subsequent events requiring disclosure in these financial statements.

Comet Ridge Limited

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DIRECTORS’ DECLARATION

In the opinion of the Directors of Comet Ridge Limited (“the company”):

1. The financial statements and notes thereto, as set out on pages 6 to 14 are in accordance with the Corporations Act 2001 including:

2. a. Complying with AASB 134: Interim Financial Reporting and the Corporations Regulations; and

3. b. Giving a true and fair view of the consolidated entity’s financial position as at 31 December 2008 and of its performance for the half-year then ended.

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

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s.303(5) of the Corporations Act 2001.

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J W Schneider

EXECUTIVE CHAIRMAN

Dated this 13th day of March 2009

Comet Ridge Limited

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of

COMET RIDGE LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report, which comprises the condensed balance sheet as at 31 December 2008, the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the half-year ended on that date, other selected explanatory notes and the directors’ declaration, of Comet Ridge Limited and the entities it controlled during the half-year ended 31 December 2008 (“consolidated entity”).

Directors’ Responsibility for the Half-Year Financial Report

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

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and other Financial Reports Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001, including giving a true and fair view of the consolidated entity’s financial position as at 31 December 2008 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Comet Ridge Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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

Level 2 15 Rheola Street West Perth 6005 PO Box 263 West Perth 6872 Western Australia. Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers

Comet Ridge Limited

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Independence

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

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Comet Ridge Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position at 31 December 2008 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Significant Uncertainty Regarding Continuation as a Going Concern

Without qualification to the conclusion expressed above, we draw attention to Note 1 to the half-year financial report which states that the company is dependent upon the successful completion of the merger with Chartwell Energy Limited to continue as a going concern. Should this merger not be completed successfully, there is significant uncertainty whether the company will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

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HLB MANN JUDD Chartered Accountants

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Perth, Western Australia 13 March 2009

L DI GIALLONARDO Partner