COMET RIDGE LIMITED — Interim / Quarterly Report 2011

Oct 30, 2011

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31 October 2011

SEPTEMBER QUARTERLY REPORT

Highlights:

• Announcement of Sale of 5% interest in ATP 337P (Mahalo Block) to Stanwell for $7 million and grant of option to Stanwell to purchase further future equity in exchange for funding up to $8 million of Comet Ridge’s expenditure commitments

• 252 km of Galilee Basin 2D seismic acquisition successfully completed after end of the quarter in the Gunn Project Area

• Certification of 244 PJ of 3C Contingent Resources across Greymouth Coalfield in New Zealand

• Strategic Addition to New Zealand exploration acreage made on West Coast

Australian Permits:

ATP 743P and ATP 744P – Galilee Basin, QLD (Comet Ridge 100%)

Comet Ridge commenced its planned 2D seismic acquisition survey in Queensland’s prospective Galilee Basin on 13 September 2011. By the end of the September quarter, Comet Ridge had successfully completed the acquisition of 110 km of 2D seismic line data.

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Subsequent to the end of the quarter, the survey was concluded with the total acquisition of 252 km of 2D seismic, with the seismic contractor released on 23 October.

The seismic programme has been designed to define the structural nose observed in the Gunn Project Area, and will enable Comet Ridge to better locate future pilot production and appraisal wells. The seismic data will be processed and interpreted and then integrated into the current basin models, and

Figure 1 – Gunn Project Area, ATP 744P, Galilee Basin, 2011 seismic acquisition.

Comet Ridge Limited T: +61 7 3221 3661 E: info@cometridge.com.au 283 Elizabeth St, Brisbane, Qld, 4000 Australia ABN 47 106 092 577 F: +61 7 3221 3668 W: www.cometridge.com.au GPO Box 798, Brisbane, Qld, 4001 Australia

ASX CODE: COI

Comet Ridge Limited

will have a major impact on Comet Ridge’s drilling programme in the Galilee Basin in 2012.

Comet Ridge continues to minimise its footprint over its area of operations in the Galilee Basin, with a significant proportion of the recent seismic acquisition conducted along the edge of existing roadways. The company consulted with local landowners before finalising the line selection for the survey, and has been appreciative of the advice, support and assistance received from landowners whilst the survey was being conducted.

Galilee Basin Operator’s Forum (GBOF) & Water Management

GBOF is a group of 10 petroleum and coal seam gas companies who are jointly undertaking and funding a detailed baseline water assessment report for the Galilee Basin, prior to any commercial gas production from that area.

The RPS Group, the expert hydrogeological consultancy undertaking the work on behalf of GBOF, is nearing completion of its study which is based upon the substantial amount of water bore data that is available from over 10,000 wells (some reaching back over 100 years) in the Galilee Basin. This study primarily examines shallow water bore data from the many geological zones that make up the Great Artesian Basin (GAB) and also examines the limited water bore data that is available from the Permian Betts Creek Beds and Aramac Coal Measures which lie beneath the GAB. A formal report, detailing the key findings from this study, will soon be available for technical review, with the study expected to be presented to the Central Western Queensland Remote Area Planning and Development Board (RAPAD), based in Longreach, over the next couple of months. RAPAD is a unified local government organisation which aims to assist and facilitate the growth and development of the Central West and wider Outback region.

The study will also be provided to the Queensland Water Commission (QWC) which is the Queensland Government body responsible for monitoring and managing the impacts of groundwater extraction by petroleum and gas tenure holders, including coal seam gas production. The RPS study will provide the QWC with a detailed and important historical reference for the Galilee Basin.

The website for the Galilee Basin Operator’s Forum can be found at www.gbof.com.au.

Community Engagement

Comet Ridge continues to engage constructively and co-operatively with the local community at both a local government and individual landowner level in the Galilee Basin.

With other members of GBOF, Comet Ridge met with RAPAD, DERM’s LNG Enforcement Unit (a part of the Queensland Department of Environment and Resource Management), DEEDI (Queensland Department of Employment, Economic Development and Innovation) and other community representatives during July. These meetings discussed the GBOF water study, and technical detail around exploration for gas in the Galilee Basin, and specifically drilling and seismic operations. This was the second meeting for the year, with a third meeting with RAPAD likely in December.

ATP 337P Mahalo – Bowen Basin, QLD (Comet Ridge 40%, stepping down to 35%)

On 30 September 2011, Comet Ridge announced that it had agreed a binding Sale and Purchase Option Agreement (SPOA) for its 40% interest in the ATP 337P Mahalo Coal Seam Gas asset with Stanwell Corporation.

The key highlights of the transaction are as follows:

• The sale of an initial 5% interest in ATP 337P Mahalo for $7 million;

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• The grant of an option to acquire either an additional 15% (Option A) or 35% (Option B) interest in ATP 337P Mahalo in exchange for funding up to $8 million of expenditure commitments associated with the Comet Ridge 40% interest in the upcoming ATP 337P Mahalo pilot programs;

• In order to exercise the Option, Stanwell will be required to pay Comet Ridge consideration based on the ATP 337P Mahalo certified 2P reserves as at 31 December 2013, but this reserves date may be extended to as late as 31 December 2014;

• In order to exercise Option A, Stanwell will pay $0.80 per GJ multiplied by 15% of the 2P Reserves;

• In order to exercise purchase Option B, Stanwell will pay $0.80 per GJ multiplied by 15% of the 2P Reserves plus $1.15 per GJ multiplied by 20% of the 2P Reserves;

• The minimum payments for exercise of the options are $5 million for Option A and $10 million for Option B;

This is a significant transaction for Comet Ridge since it releases cash for Comet Ridge to fund its exploration and appraisal activities at its other highly prospective assets, while retaining exposure to the considerable upside associated with the upcoming ATP 337P Mahalo Pilot Projects. This transaction also achieves great alignment between Buyer and Seller, not just at the transaction date, but right through the duration of the Option Agreement.

The SPOA provides a mechanism for the market to value the ATP 337P Mahalo asset, which the company believes is not fully reflected in Comet Ridge’s current share price.

The interest being divested is in the Mahalo Farmin Area (ATP 337P Mahalo), which is the northern part of permit ATP 337P. Comet Ridge holds a 40% interest in ATP 337P Mahalo, with Santos QNT Pty Ltd and Australia Pacific LNG (Origin / ConocoPhillips / Sinopec) each holding a 30% interest.

At this juncture the documentation to effect the assignment of the initial 5% interest is being finalised by the parties to the transaction as well as the joint venture participants. It is expected that this will be concluded by mid-November with the transaction due for completion within two business days thereafter.

Figure 2 – ATP 337 Mahalo Block

The ATP 337P Mahalo Joint Venture first Pilot Project is expected to spud in early December. Progress was made during the quarter on landowner approvals and the planning of the pilot wells and associated infrastructure.

The aim of the Pilot Project is to convert 2C and 3C Contingent Resources into 2P and 3P Reserves. It is anticipated that a second Pilot Project will be progressed in 2012 to expand the reserves base for ATP 337P Mahalo.

By the end of the quarter Petroleum Lease applications covering the whole of the Mahalo farm-in area had been submitted to the Queensland Government for approval.

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PEL 427 and PEL 428 – Gunnedah Basin, NSW (Comet Ridge 25% & 40%)

Santos announced on 19 July 2011 that it had reached a binding agreement to acquire 100% of the outstanding ordinary shares in Eastern Star Gas (ESG) and has been unanimously recommended by ESG directors, and recently approved by shareholders. The announcement also details the subsequent sale of a 20% working level interest in ESG’s permits in the Gunnedah Basin, not including the two permit areas in which Comet Ridge holds interests, to TRUenergy for A$284 million.

ESG is the Coal Seam Gas Operator for Comet Ridge’s Gunnedah Basin permits PEL 427 and PEL 428 where Comet Ridge holds a 25% and 40% interest respectively. These permits are located immediately north and west of ESG’s key CSG permit PEL 238, which contains the Narrabri Gas Project and the Wilga Park Gas Fired Power Station.

This transaction represents one of the few remaining consolidation opportunities in the Gunnedah Basin, and expands Santos’ acreage holding into the very north of the basin to include PEL 427 and PEL 428.

As previously reported, the Work Programme and Budgets for PEL 427 and PEL 428 for this year were agreed before the end of 2010, but the ability to carry out those programmes continues to be delayed by a combination of land access issues and a NSW Government review of CSG activities.

Exploration activities in PEL 427 are focused on better delineating the extent of the Permian coals in the Bellata Trough, in the south east of the permit. A new seismic acquisition programme was scheduled for early 2011, followed by a core hole scheduled for drilling by May 2011.

A 75 km seismic acquisition programme was also scheduled in PEL 428 for early 2011, followed by a core hole in 2012. The seismic line is expected to be acquired in a north-south direction in the south west leg of PEL 428, providing insights into the depositional environment in the south of the permit.

State Government approval has been received for 2D seismic acquisition surveys in PEL 427 and PEL 428. However, while discussions with Local Governments and relevant landowners are progressing, suitable access arrangements have not yet been obtained for all aspects of the proposed surveys.

The State Government review of CSG activities has meant that permit renewals are also being delayed, affecting activities in PEL 427.

Both PEL 427 and PEL 428 are being managed within the constraints discussed above, and the Joint Venture partners anticipate that planned activities in these permits will recommence in 2012.

New Zealand Permits:

PMP 50100 Greymouth Block and PEP 50279 Buller Block – West Coast (Comet Ridge 100%)

Comet Ridge announced on 21 July 2011 that it was granted an extension of its New Zealand West Coast exploration permit PEP 50279, increasing the total area of this permit to 4,802 km[2] . Comet Ridge has a 100% interest in both PEP 50279 and also in the adjoining mining permit PMP 50100 located immediately to the south. This extension provides one continuous area for exploration and future development of the CSG resources in the Greymouth area.

The Paparoa coal measures extend across the north of PMP 50100 and into the southern margin of the PEP 50279 permit area, and underlie the Brunner coal measures, both of which are mined in a number of places on the West Coast.

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The PEP 50279 Extension Area includes a known coal mining precinct, and strategically links Comet Ridge’s CSG resources in the northwest of PMP 50100 with the company’s other CSG resources in the northeast of PMP 50100.

This permit extension allows Comet Ridge to focus on fully appraising the Paparoa coal measures in this area as a single resource, and will prove to be important in the accessing and commercialisation of the thicker coals north and east of the town of Runanga.

On 26 September Comet Ridge announced its first Coal Seam Gas (CSG) resource certification in the Greymouth Coalfield, located in the West Coast of the South Island of New Zealand. The Greymouth Coalfield is situated over much of Petroleum Mining Permit PMP 50100, and the south western corner of Petroleum Exploration Permit PEP 50279.

Figure 3 –Additional Exploration Acreage, PEP 50279, West Coast, NZ

The Contingent Resources (recoverable) announced by Comet Ridge are detailed below:

		Greymouth Coalfield Net Recoverable Resources	Greymouth Coalfield Net Recoverable Resources	Greymouth Coalfield Net Recoverable Resources
Permit	COI Interest	1C(PJ)	2C(PJ)	3C(PJ)
PMP50100(Greymouth)	100%	45	88	168
PEP50279(Buller Block)	100%	20	39	76
	COI TOTAL	65	127	244

The Contingent Resources have been certified by industry recognised, Independent Reserves Certifiers, Netherland, Sewell & Assoc (NSAI) of Dallas, Texas.

The certification represents the first coal seam gas resources independently certified on the West Coast, and the first for Comet Ridge in New Zealand. The certification has been based on drilling results from a combination of coal seam gas wells and a significant number of coal core holes across the area, and demonstrates that a significant volume of recoverable gas is present in this area. Commercial gas production from the Greymouth coalfields area has the potential to make a significant contribution to the energy supply equation in this region.

Comet Ridge is currently processing and interpreting the data acquired in its recently completed Airborne Gravity Gradiometry (AGG) survey programme. This is being incorporated into regional geological modeling of the West Coast in the South Island of New Zealand, which will help Comet Ridge identify the highest value CSG targets for the 2012 drilling programme.

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PEP 50280 – North Waikato, North Island (Comet Ridge 100%)

Comet Ridge, with Canberra based consultancy FroGTech, have been progressing with the processing and interpreting of the data acquired in its recently completed Airborne Gravity Gradiometry (AGG) survey programme in PEP 50280. Preliminary results from this interpretation were received from FroGTech subsequent to the end of the Quarter.

The results of this study will provide valuable guidance to Comet Ridge in selecting the preferred locations for drilling in PEP 50280, scheduled for early 2012.

USA

Comet Ridge Resources LLC (Comet Ridge 17.257%)

During the Quarter, Comet Ridge Resources LLC (CRR) was preparing to drill an additional six appraisal wells in the Florence Field, commencing in October, with site selection and permitting completed. The Florence Field has now cumulatively produced over 440,000 barrels of oil for CRR. Florence production averaged approximately 520 barrels of oil per day over the Quarter.

The Company has received all permits required to drill the Yeti well that will be drilled on the Caldwell Creek structure at Grays Harbor in Washington State. Drilling of the well has been postponed until the middle of 2012 due to anticipated heavier than average rainfall forecasted for the region resulting from a strengthening La Niña weather event.

CRR continues to actively evaluate a number of other farm-in and acquisition opportunities in the USA.

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Stephen Rodgers Company Secretary Comet Ridge Limited

For further information please contact:

Tor McCaul Managing Director Comet Ridge Limited tor.mccaul@cometridge.com.au +61 7 3221 3661

Media: Dianne Monopoli Principal Consultant Three Plus dianne@threeplus.com.au +61 7 3503 5700

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COMET RIDGE LIMITED - OVERVIEW

Comet Ridge Limited has significant Coal Seam Gas (CSG) projects in key regions of Queensland, northern New South Wales and New Zealand, as well as oil and gas interests in the United States. Gas resources have been independently certified at four projects. The company is listed on the Australian Securities Exchange (ASX Code: COI) and is based in Brisbane. The Board and Management are experienced in establishing and developing energy projects.

Corporate Strategy

Comet Ridge has gained early entry into well-located exploration areas, allowing shareholders to gain substantial leverage into the upside value potential associated with exploration success.

Comet Ridge conducts CSG exploration and appraisal, with the aim of maturing exploration acreage from Gas Resources into Proven and Probable Gas Reserves. This process initially involves drilling wells in order to certify Prospective and Contingent Resources and then through further appraisal via Pilot Projects, progressing into certified Reserves.

Where possible, Comet Ridge takes high equity positions in its large exploration permits, including a 100% interest in both its Galilee Basin and New Zealand assets. Comet Ridge has 40% equity in the ATP 337P Mahalo block in the Bowen Basin, and holds 25% and 40% equity respectively in PEL 427 and PEL 428 in NSW.

Certified Resources

In executing our strategy, Comet Ridge has successfully independently certified the following Prospective and Contingent Resources:

Comet Ridge Limited – Net Recoverable Resources	Comet Ridge Limited – Net Recoverable Resources	Comet Ridge Limited – Net Recoverable Resources
Project	Location	Contingent Resource(PJ)	Prospective Resource(PJ)
Gunn Project Area(ATP 744P)	Galilee Basin, Qld	1,870	597*
Mahalo Block(ATP 337P)	Bowen Basin, Qld	442	-
PEL 427 and PEL 428	Northern NSW	231	1022
PMP 50100 and PEP 50279	West Coast,South Island,NZ	244	-
Total		2,787	1,619

*Where the auditor has detailed Prospective Resources in a range (low, middle and high) the mid-range case has been listed in the table.

Work Program

Comet Ridge has an active exploration and appraisal work program for CSG projects in Queensland, northern NSW and New Zealand. The first Pilot Project for ATP 337P Mahalo is planned for 2011, with additional exploration and appraisal work planned for the Galilee Basin, northern NSW and NZ.

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Comet Ridge Limited T: +61 7 3221 3661 E: info@cometridge.com.au 283 Elizabeth St, Brisbane, Qld, 4000 Australia ABN 47 106 092 577 F: +61 7 3221 3668 W: www.cometridge.com.au GPO Box 798, Brisbane, Qld, 4001 Australia

ASX CODE: COI

Comet Ridge Limited

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10.

Name of entity

COMET RIDGE LIMITED

	ABN 47 106 092 577 Consolidated statement of cash flows		Quarter ended (“current quarter”) 30 SEPTEMBER 2011	Quarter ended (“current quarter”) 30 SEPTEMBER 2011
			30 SEPTEMBER 2011
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows		Current quarter $A’000		Year to date (3 months) $A’000
		(1,976) - - (636) 71.		(1,976) - - (636) 71.
		(2,541)		(2,541)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities – advances to joint venture 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		(1) (195)		(1) (195)
		(196)		(196)
		(2,737)		(2,737)

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1.13 Total operating and investing cash flows (brought forward)	(2,737)	(2,737)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows
	-	-
Net increase/ (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(2,737) 7,235. (36)	(2,737) 7,235. (36)
	4,462	4,462

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Current quarter $A’000

• 1.23 Aggregate amount of payments to the parties included in item 1.2 1.24 Aggregate amount of loans to the parties included in item 1.10

• 1.25 Explanation necessary for an understanding of the transactions

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.

• 3.1 Loan facilities

Amount available $A’000	Amount used $A’000

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3.2 Credit standby arrangements

Estimated cash outflows for next quarter

$A’000 Exploration and evaluation 2,514 Development - Production - Administration 620 Total 3,134

• 4.1 Exploration and evaluation

• 4.2 Development

• 4.3 Production 4.4 Administration Total

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	4,462	7,235
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	4,462	7,325

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
	PEP 50279	Increase in total area of Permit from 4,779 klm2 to4,802 klm2	100%	100%

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Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs,redemptions
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs	307,351,144	307,351,144
7.5 +Convertible debt securities(description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options (description and conversion factor) Performance Rights (vesting date and conditions) 7.8 Performance Rights Issued during quarter 7.9 Exercised during quarter 7.10 Options Expired during quarter	130,000 300,000 15,192,500 7,150,000 500,000 500,000 500,000 1,000,000 730,000 730,000		Exercise price $0.419 $0.419 $0.169 $0.269 $0.50 $0.65 $0.50 $0.65 Nil Nil	Expiry date 3 Dec 2011 6 Dec 2011 30 Jun 2012 30 Jun 2012 30 Nov 2013 31 Jan 2014 28 Feb 2014 31 Mar 2014 Vesting Date 1 July 2012 1 July 2013
	730,000 730,000		Nil Nil	Vesting Date 1 July 2012 1 July 2013
	3,800,000 30,000		$0.419 $0.419	3 Aug 2011 6 Sept 2011
7.11 Debentures (totals only)

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7.12 Unsecured notes (totals only)

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

• 2 This statement does / ~~(does not~~ * (delete one) give a true and fair view of the matters disclosed.

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Sign here: ............................................................ ~~(Director~~ /Company secretary)

Date: .31 October 2011....................

Print name: STEPHEN RODGERS.

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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