COMET RIDGE LIMITED — Interim / Quarterly Report 2014

Apr 27, 2014

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28 April 2014

March 2014 Quarterly Report

Highlights:

• Comet Ridge buys back Mahalo interests from Stanwell

• Galilee Basin Underground Water Impact Report formally approved by Government

• Research & Development Tax Concession Refund of $2.98m received

• Stimulation operations successfully undertaken on Mahalo 3 and 5 wells with increase in productivity confirmed, dewatering ongoing with continued gas production

• Galilee Basin CSG and deeper conventional gas potential continues to be evaluated whilst considering partnering options

• NSW approaching gas industry crisis point and gas supply shortage

Australian Permits

ATP 337P Mahalo – Bowen Basin, Qld (Comet Ridge increasing from 35 to 40%)

Revised Agreement with Stanwell

Comet Ridge announced on 19 March 2014 that it had executed a revised agreement ( 2014 Agreement ) with Stanwell Corporation Limited ( Stanwell ) in relation to the Mahalo Gas Project (MGP). The 2014 Agreement supersedes the Sale & Purchase Option Agreement entered into by the parties in September 2011. Key points of the 2014 Agreement are set out below:

• 2014 Agreement executed with Stanwell replaces original Sale & Purchase Option Agreement signed in September 2011.

• Provides for the transfer by Stanwell to Comet Ridge of its current 5% interest in the MGP and the relinquishment of its option to acquire up to a further 35% interest in the MGP in exchange for (at Stanwell’s election exercisable at Final Investment Decision (FID) of the MGP) either:

• Stanwell and Comet Ridge entering into a 20 PJ to 40 PJ gas sales agreement; or

• Stanwell receiving a cash payment of $20 million (escalated at CPI).

• Restores Comet Ridge’s equity interest in the MGP to 40% (subject to joint venture consent).

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

In September 2011, Stanwell:

• purchased a 5% interest in the MGP for $7 million;

• agreed to fund up to $8 million of Comet Ridge’s expenditure commitments relating to the MGP (carrying Comet Ridge through the 2012/13 Pilot Program); and

• secured an option to acquire up to a further 35% interest in the MGP from Comet Ridge at an average price of $1.00/GJ of 2P reserves certified by 31 December 2014.

The 2014 Agreement provides for the transfer to Comet Ridge by Stanwell of its current 5% interest in the MGP and the relinquishment of Stanwell’s option to acquire up to a further 35% interest in the MGP in exchange for either of the following at FID of the MGP:

• Stanwell and Comet Ridge entering into a 20 PJ to 40 PJ gas sales agreement; or

• Stanwell receiving a cash payment $20 million, escalated at CPI.

If a GSA is selected, Stanwell will enter into a GSA with Comet Ridge for the supply of a minimum of 20 PJ and a maximum of 40 PJ of gas, delivered via one third of Comet Ridge’s produced equity gas from the MGP over 10 years. Take or pay provisions apply to the GSA and gas pricing is linked to LNG netback and a fixed return over field costs. Stanwell is entitled to receive a pricing discount amortised over the term of the GSA reflecting its $15 million investment in the MGP to date.

If the cash payment is selected, Comet Ridge will pay $20 million to Stanwell (escalated at CPI) around the time of FID, representing reimbursement of Stanwell’s expenditure to date with an uplift reflecting an increase in value and funding costs. If FID for the MGP is not reached within four years, Stanwell will receive the cash payment as the default position.

Key Benefits of 2014 Agreement to Comet Ridge

• Restores Comet Ridge’s interest in the MGP to 40% with consideration in the form of a GSA or cash payment deferred until FID for the MGP;

• Comet Ridge retains optionality to maximise value achieved for its equity gas (in addition to the 20 PJ to 40 PJ available to Stanwell under the GSA Election);

• Provides Comet Ridge with exposure to increased gas prices from gas production or reserves from the MGP in a tightening East Australian gas market; and

• Delivers value to Comet Ridge with no cash consideration prior to FID.

Comet Ridge’s resource position, at the conclusion of this transaction, will be as follows:

Mahalo Gas Project Contingent Resources – COI 40% interest
1C (PJ)	2C (PJ)	3C (PJ)
83	221	442

Commenting in March on the agreement with Stanwell, Comet Ridge Managing Director Tor McCaul said that “Significant progress has been made at the Mahalo Gas Project since the initial agreement with Stanwell was entered into in September 2011. Stanwell has invested $15 million in the project to date which has funded Comet Ridge’s share of costs associated with the construction of the Mahalo and Mira Field Pilots and their ongoing operation as well as providing working capital to the Company. We are pleased to have been able to agree a revised position with Stanwell which could provide Stanwell with 20 PJ to 40 PJ of gas, and yet allows Comet Ridge to retain a large equity component in the project with the associated resource and value upside. We remain excited by the fundamentals of the project, in an environment where gas is short and gas prices continue to rise.”

Conditions

The 2014 Agreement becomes effective following the other MGP equity participants consenting to the assignment of the equity interest (consistent with the 2011 Sale & Purchase Option Agreement).

Mahalo Block Pilot Operations

The operational focus during the quarter involved the stimulation of the Mahalo 3 and Mahalo 5 wells and continued dewatering of the coals in the northern part of the Mahalo Block. These pilots are a key component of a Joint Venture plan to book gas reserves across a large part of the Mahalo project area. Having two independent pilot schemes operating concurrently significantly increases the likelihood of achieving a commercial gas rate for establishing reserves, and also allows the Joint Venture to gather valuable data on optimal well completion design for field development.

During the quarter, Mahalo 3 and Mahalo 5 were both stimulated via under-reaming and a jet wash and the wells were subsequently put back on production test. In line with current practice in other parts of Queensland, the wells were brought on at a low pump rate with the plan to steadily increase pumping speeds over time which is designed to protect the reservoir from shock or damage. A gradual and steady increase in gas rates from the Mahalo field is being measured. Analysis of the post stimulation performance on both wells shows that there has been an improvement in productivity from the field work conducted. The current plan for the Mahalo field is to continue to dewater and allow gas rates to steadily improve.

At the Mira pilot project, approximately 13km southeast of the Mahalo pilot, a series of pressure build up surveys have been run and the wells are being brought back on line one at a time. The Mira 5 well has shown a significant productivity improvement which may be related to a much more gradual increase in pumping speed. Interference testing will shortly be finalised at Mira and the plan is to continue to dewater that field, in a similar fashion to the Mahalo field.

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Figure 1 – ATP 337P Mahalo

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ATP 743P and ATP 744P – Galilee Basin, Qld (Comet Ridge 100%) ATP 1015P Farm-in Area – Galilee Basin, Qld (Comet Ridge 20%)

Underground Water Impact Report approved by Department of Environment and Heritage Protection

The highly successful Gunn 2 Extended Production Test (EPT), which flowed at 400 bwpd (barrels of water per day) has led to the submission of a formal Underground Water Impact Report (UWIR) to the Department of Environment and Heritage Protection, as required by legislation under the Water Act 2000 (Qld).

This report was concluded during the December quarter and released for public review and comment in early January 2014. The report concludes that the Betts Creek Coal reservoir is isolated from shallow aquifers that are used for local stock watering, and due to the impermeable nature of the 300 m thick Rewan Formation between the shallow aquifers and the Betts Creek Coals, no impact will be seen in the shallow aquifer units. The Water Act requires that if there were any impacts, the Company would need to “make good” any impact on local farmers through drilling of new water bores, provision of CSG produced water, or other means.

All landowners in the project area were formally notified by letter, and notices placed in a local newspaper, as required by law. In addition, a series of one-on-one meetings were conducted between the Company and landowners to explain the formal process required by law, and to run through the conclusions of the study that was conducted and the content of the UWIR.

Comet Ridge continues to enjoy very positive relationships with local graziers, communities and regional councils in the Galilee Basin as the Company works to support local businesses wherever possible. Over the past few years the Company has worked (in a range of formal and informal settings) to explain the science behind exploration and appraisal of gas resources and reserves and also to understand the local farming and business environment in which we are operating.

After attending the first GasFields Community Leaders Council (North) meeting held in Emerald last year, the Company was pleased to participate in the second meeting for the council which was held in Moranbah in February. These meetings continue to be very useful in bringing gas companies, regional councils, State Government and agriculture groups together to continue to ensure that regional Queensland will enjoy the benefits of gas production for decades to come.

Equity Partner for a Gunn Project Area Pilot or Pre-Sale of Gas

Several commercial options exist for development of gas from the eastern Galilee Basin. With the significant 3C Contingent Resource base at Comet Ridge’s Gunn Project Area and the positive results from the Gunn 2 EPT, Comet Ridge is continuing to evaluate various options for funding the ongoing development of the Gunn Project Area.

Shale Gas and Deeper Conventional Gas Potential

Further technical work continued during the quarter, in particular to evaluate the significant conventional gas potential in the Company’s Galilee Basin blocks. Significant gas potential outside of coal seams exists with the deeper section yet to be drilled and tested by Comet Ridge. Natural gas flared from a conventional well drilled by a previous tenure holder, in the area around the Gunn Project Area, is a real demonstration of the further gas prospectivity in the eastern part of the Galilee Basin.

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Figure 2 – ATP 744P Gunn Project Area and Farm-in Area

Gunnedah Basin, NSW (Comet Ridge CSG equity: PEL 427: 50%, PEL 428: 60%, PEL 6: 22.5%)

Comet Ridge continues to work with its Joint Venture partner and CSG Operator Santos, to renew the Joint Venture’s Gunnedah Basin permits and plan the future work programme to evaluate a number of Permian-aged troughs that have been identified through the acreage position. Several of these troughs may contain large volumes of recoverable gas, in similar fashion to the Bohena Trough just to the south of PEL 427. To date, PEL 427 has been extended for a period of three years and extensions continue to be processed for PEL 428 and PEL 6.

Comet Ridge’s three contiguous licences are located in the northern Gunnedah Basin, immediately north and west of Santos’ Narrabri CSG Project in the Bohena Trough, and cover a total area of approximately 18,000 km[2] . Comet Ridge currently holds between 22.5% and 60% CSG interest and between 97.5% and 100% conventional oil and gas equity across these permits and is the conventional operator. Santos operates the CSG interest.

With the recent change in leadership in NSW, Comet Ridge believes that state now has an opportunity to shape the onshore gas debate to consider the science as well as the social and economic benefits that a robust onshore gas industry has the potential to bring (as Queensland and South Australia have been effectively able to do) rather than the radical anti-fossil fuel position that is so often presented in the media. NSW is surprisingly yet to look just across the border to the north, to the significant experience that Queensland has been able to gather over the past 20 years with gas production from coal seams. 90% of the natural gas consumed in homes and industry in Queensland now comes from coal seams with well over 4,000 landowners actively participating with the industry.

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Figure 3 – Gunnedah Basin tenement position

USA Interest

Comet Ridge Resources LLC (Comet Ridge 10.2%)

The company continues to seek partners for its two Rocky Mountain plays.

Recent announcements by competitors regarding oil discoveries in a deeper reservoir objective have confirmed the significant potential of the Company's position in SE Colorado. The Company is reprocessing its extensive 3D seismic database and expects to generate additional prospects for drilling later in the year.

In the northern Rockies the Company focus is on advanced seismic processing work aimed at identifying superior reservoir trends.

Research & Development Tax Concession Received

During the quarter, the Company received a Research and Development Tax Concession refund of $2.98m. The Research & Development (R&D) Concession is the principle Commonwealth Government initiative to increase research and development (R&D) in Australia. Eligible companies who qualify under the scheme are entitled to a rebate on approved R&D expenditure.

At the end of the March 2014 quarter, Comet Ridge had a cash position of $7m.

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Stephen Rodgers Company Secretary

For further information please contact:

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

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 certified, by independent professional certifiers, 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, with the intention of progressing into certified Reserves.

Where possible, Comet Ridge takes high equity positions in its large exploration permits, including a 100% interest in two blocks in the Galilee Basin and two blocks in New Zealand. Comet Ridge has 35% equity in the ATP 337P Mahalo Block in the Bowen Basin, and CSG equity of 22.5%, 50% and 60% respectively in PEL 6, PEL 427 and PEL 428 in the Gunnedah Basin in New South Wales.

Work Programme

Comet Ridge has an active exploration and appraisal work plan for CSG projects in eastern Australia, focused on the conversion of contingent resources to reserves.

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

Comet Ridge Limited