ADVANCE ENERGY LIMITED ACN 111 823 762

PROSPECTUS

FOR

A non-renounceable rights issue to Eligible Shareholders of up to 49,499,356 Shares at an issue price of $0.08 per Share, on the basis of 5 Shares for every 7 Shares held as at the Record Date, to raise up to $3,959,948 before the costs of the Offer ("Rights Issue").

The Rights Issue is fully underwritten by Anndev Pty Ltd.

THIS OFFER CLOSES AT 5.00PM WST ON 5 August 2008

VALID ACCEPTANCES MUST BE RECEIVED BEFORE THAT TIME.

Please read the instructions in this Prospectus and on the accompanying Entitlement and Acceptance Form regarding the acceptance of your Entitlement under the Offer.

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY.

IF YOU ARE IN DOUBT ABOUT WHAT TO DO, YOU SHOULD CONSULT YOUR PROFESSIONAL ADVISER WITHOUT DELAY.

THE SHARES OFFERED BY THIS PROSPECTUS ARE OF A SPECULATIVE NATURE.

IMPORTANT INFORMATION

This Prospectus is dated 4 July 2008 and was lodged with the ASIC on that date with the consent of all Directors. Neither ASIC nor ASX nor their respective officers take any responsibility for the contents of this Prospectus.

No Shares will be issued on the basis of this Prospectus any later than 13 months after the date of this Prospectus (being the expiry date of this Prospectus).

A copy of this Prospectus is available for inspection at the registered office of the Company at Suite 4, 16 Ord Street, West Perth 6005, during normal business hours. The Company will provide a copy of this Prospectus to any person on request. The Company will also provide copies of other documents on request (see Section 5.5).

The Shares offered by this Prospectus should be considered speculative. Please refer to Section 4 for details relating to investment risks.

The Entitlement and Acceptance Form accompanying this Prospectus is important. Please refer to instructions in Section 1.9 regarding the acceptance of your Entitlement. Acceptances of Shares can only be submitted on an original Entitlement and Acceptance Form sent with a copy of this Prospectus by the Company. The Entitlement and Acceptance Form sets out an Eligible Shareholder’s Entitlement to participate in the Offer.

Revenues and expenditures disclosed in this Prospectus are recognised exclusive of the amount of goods and services tax, unless otherwise disclosed.

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

No action has been taken to permit the offer of Shares under this Prospectus in any jurisdiction other than Australia and New Zealand.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of those laws. This Prospectus does not constitute an offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus.

This document is important and should be read in its entirety before deciding to participate in the Offer. This does not take into account the investment objectives, financial or taxation or particular needs of any Applicant. Before making any investment in the Company, each Applicant should consider whether such an investment is appropriate to his/her particular needs, and considering their individual risk profile for speculative investments, investment objectives and individual financial circumstances. Each Applicant should consult his/her stockbroker, solicitor, accountant or other professional adviser without delay. Some of the risk factors that should be considered by potential investors are outlined in Section 4.

By returning an Entitlement and Acceptance Form, you acknowledge that you have received and read this Prospectus and you have acted in accordance with the terms of the Offer detailed in this Prospectus.

Definitions of certain terms used in this Prospectus are contained in Section 7. All references to currency are to Australian dollars and all references to time are to WST, unless otherwise indicated.

Eligible Shareholders with registered addresses in Australia and New Zealand only can obtain a copy of this Prospectus during the period of the Rights Issue on the Company's website, www.advanceenergyltd.com.au. The electronic version of this Prospectus does not include the Entitlement and Acceptance Form which accompanies the printed copy of this Prospectus to be mailed to Eligible Shareholders with registered addresses in Australia and New Zealand on or around 21 July 2008.

CORPORATE DIRECTORY

Current Directors

Alex Bajada Chairman Anthony Short Managing Director Gordon Sklenka Non-Executive Director

Lawyers

Clayton Utz Level 27, QV1 Building 250 St Georges Terrace Perth 6000 Western Australia

Auditor

Company Secretary

David Ballantyne

Registered Office

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street Subiaco 6008 Western Australia

Suite 4, 16 Ord Street West Perth 6005 Western Australia

USA Office

2401 Fountain View, Suite 416 Houston, TX 77057 United States of America

Share Registry

Advanced Share Registry Services Pty Ltd 150 Stirling Highway Nedlands 6009 Western Australia

ASX Code: AVD

Website: www.advanceenergyltd.com.au

PROPOSED TIMETABLE

Lodgement of Prospectus with ASIC and provision of copies to ASX Appendix 3B given to ASX Notice of pro rata offer sent to any option holders who cannot participate in the issue without first exercising their options	4 July 2008
Company sends letter to Shareholders containing information required by Appendix 3B	6 July 2008
Existing Shares quoted on an "ex" basis	14 July 2008
Record date for determining entitlements	18 July 2008
Prospectus and Entitlement and Acceptance Form despatched to Eligible Shareholders	21 July 2008
Announce to ASX that prospectus has been sent to shareholders	21 July 2008
Closing Date	5 August 2008
Shares quoted on a deferred settlement basis	6 August 2008
Shortfall notification date	7 August 2008
Anticipated date for allotment and issue of the Shares	12 August 2008
Anticipated date for despatch of holder statements (and last day for the Company to confirm to ASX all information required by Appendix 3B)	13 August 2008
Deferred Settlement trading ends	13 August 2008
Anticipated date of commencement of Shares trading	14 August 2008

This timetable is indicative only and subject to change. Subject to the Listing Rules, the Directors reserve the right to vary these dates, including the Closing Date for the Offer, without prior notice. Any extension of the Closing Date will have a consequential effect on the anticipated date for allotment and issue of the Shares. The Directors also reserve the right not to proceed with the whole or part of the Rights Issue at any time prior to allotment. In that event, the relevant Application Monies will be returned without interest.

Section	Page No
1.	Details of the Offer ............................................................................................ 7
2.	Effect of the Offer ............................................................................................ 13
3.	Action required by Shareholders .................................................................. 19
4.	Risk factors ..................................................................................................... 21
5.	Additional information .................................................................................... 28
6.	Directors' Statement and Consent ................................................................ 38
7.	Glossary of Terms .......................................................................................... 39

1. Details of the Offer

1.1 The Offer

The Offer under this Prospectus is a non-renounceable pro-rata offer to Eligible Shareholders on the basis of 5 Shares for every 7 Shares held on the Record Date at an issue price of $0.08 per Share ( “Offer” ).

The Company has, on issue, as at the date of this Prospectus, 69,299,099 Shares, 19,350,000 Options 9 CPSs and Converting Notes with a face value of $7,525,000.

On the basis that no Options, CPSs or Converting Notes are exercised or converted

prior to the Record Date, the Offer is for 49,499,356 Shares.

Where the determination of the Entitlement of any Eligible Shareholder results in a fraction of a Share, such fraction will be rounded down to the nearest whole Share.

Refer to Section 5.15 for a summary of the rights attaching to Shares and Section 2.1 for information on Options CPSs and Convertible Notes.

1.2 Company Background

Advance Energy Limited has focussed its activities on purchasing new assets and increasing production from existing projects situated both in Martin County and Palo Pinto areas of the United States of America.

Your Company achieved its operational objectives in 2007 and built a good platform to drive the overall property portfolio valuation. The year 2007 was highlighted by a 261% increase in full-year net attributable revenue from US$848,863 in 2006 to US$3,066,406 in 2007.

On the 22[nd] May 2008 the Directors announced the most recent independent valuation of your Company’s producing properties. W D Von Gonten and Co, (independent valuers to Sterling Bank of Texas) valued the properties at AU$33.84m, effective 1 March 2008. This valuation was undertaken using the industry standard discount rate of 10%.

Your Company continues to add significant value to the current asset portfolio through drilling new wells, enhancement activities and acquisitions. On the 14[th] May 2008 the directors announced the completion of the acquisition of the additional 67.5% operated working interest in its Motherlode Phase 1 project for US$3.7m. On the date of completion, this acquisition was contributing an additional 41 BOEPD net to your Company and is expected to increase its monthly revenue by approximately US$120,000.

Since listing on the ASX on 2 June 2006, your Company has not significantly diluted the shareholdings of existing shareholders in growing the value of the current asset portfolio. Advance Energy Limited has financed its activities through a mixture of debt funding, the issue of Convertible Notes and the reinvestment of cash flow.

The Directors expect to continue proving the business model by now offering for sale those properties considered appropriate to achieve maximum value. In addition, the company intends to continue to identify additional assets to augment the current portfolio and provide additional upside potential.

1.3 Purpose of the Offer

The purpose of the Offer is to raise funds to repay facilities used for the recent acquisition and operating activities including:

a) Repayment of certain Convertible Notes and/or the Finance Facility used to repay certain Convertible Notes;
b) Working capital; and
c) Meet the costs of this Offer, legal fees, document preparation fees, ASX and ASIC fees, the cost of printing and distributing this Prospectus and other miscellaneous expenses.

The total funds are proposed to be expended as follows:

Description of Cash Outflows	Offer
1. Repayment of Finance Facility provided by Underwriter and/or certain Convertible Notes (see note below)	$2,475,000
2. Working capital	$1,224,948
3. Costs of the Offer	$260,000
Total funds raised under this Offer	$3,959,948

The Company has a number of Convertible Notes on issue to investors. The term of some of these Convertible Notes have become due for repayment. The Company is in the process of negotiating replacement notes for two Convertible Notes (with a face value of $250,000 each) with the note holders. The Underwriter has also agreed to provide up to $2,000,000 to the Company by way of loan funds to repay certain Convertible Notes that fall due before the completion of the Rights Issue (" Finance Facility "), $300,000 of which has been drawn down for the repayment of certain Convertible Notes that fell due prior to the date of this Prospectus. The Company has agreed with the Underwriter that any funds provided by the Underwriter to the Company will be fully repaid when the Rights Issue is completed and following the issue of all the Shares under the Rights Issue.

The above table shows the face value of the relevant Convertible Notes that the Company expects it will be required to repay before or around the completion of the Rights Issue. If additional Convertible Notes are repaid before or around the completion of the Rights Issue (for instance, if the replacement or extension for the repayment of the two Convertible Notes (with a face value of $250,000 each, discussed above, cannot be achieved), the funds raised from the Offer to be used for working capital will be reduced by the corresponding amount.

The Directors believe that it is possible that the Company may need to raise further capital or source alternative debt funding in the future, in order to fund its ongoing activities, repay existing debt facilities and fund new opportunities as they arise.

1.4 Opening and Closing Dates

The Company will accept Entitlement and Acceptance Forms from the Record Date for determining Eligible Shareholders’ Entitlements under the Offer until 5.00pm WST on the Closing Date or such other date as the Directors in their absolute discretion shall determine, subject to the requirements of the Listing Rules.

1.5 Underwriting & sub-underwriting

The Rights Issue is fully underwritten by Anndev Pty Ltd (“ Anndev ”) under the Underwriting Agreement (the key terms and conditions of which are set out in Section 5.1). Anndev and its Associates (being Accord Investment Corporate Pty Ltd, Mr Robert Martin and Mrs Susan Martin (RP & SP Martin Superfund), RPM Super Pty Ltd and Temorex Pty Ltd) are currently Shareholders of the Company and, as at the date of this Prospectus, collectively hold a relevant interest in 7.12% of the voting shares in the Company. The effect on the ownership of the Company if Anndev is called on to meet its full commitments is set out in Section 2.4.

The Underwriter has entered into separate sub-underwriting deeds with parties, who are Associates of the Directors, (Director-associated Sub-underwriters) to sub-underwrite a portion of the Rights Issue. See Section 5.2 for further details.

Anndev and its Associates, who are currently Shareholders of the Company, have confirmed to the Company that they intend to take up all of their Entitlement as Eligible Shareholders with respect to their collective holding of 4,935,850 Shares.

Each Director-associated Sub-underwriter is also currently a Shareholder of the Company and has also confirmed to the Company that it intends to take up all of its Entitlement as an Eligible Shareholder with respect to its holding of Shares. The number of Shares each Director (and his nominees) holds is set out in Section 5.3.

1.6 Risks of the Offer

The Directors have taken various actions including commencing negotiations for a replacement of two Convertible Notes which have become due for repayment and the establishment of a $2,000,000 Finance Facility to facilitate repayment of the Convertible Notes that fall due before the completion of the Rights Issue in order for the Company to maintain existing debt structures on an ongoing basis. Please refer to Section 1.3 for further details.

In addition to the above, other specific risks associated with an investment in the Company are outlined in Section 4.

An investment in Shares should be regarded as speculative.

1.7 Non-renounceable offer

The Entitlement to Shares under the Offer is not renounceable. Accordingly, there will be no trading of Entitlements on ASX and you may not dispose of your Entitlements to subscribe for Shares to another party. If you do not take up your Entitlement Shares under the Offer by the Closing Date, the Offer to you will lapse.

1.8 Underwritten and no minimum subscription

The Rights Issue is fully underwritten.

There is no minimum amount sought to be raised by this Rights Issue. On the basis of the Underwriter's underwriting commitments under the Underwriting Agreement or if the Rights Issue is fully subscribed, the Rights Issue will raise approximately $3,959,948 before costs of the Offer but there is no obligation on the Company to not proceed to allotment of Shares if a lesser amount is raised.

There is no provision for oversubscriptions.

1.9 Entitlement and Acceptance Forms

An Application for the Shares constitutes an offer to acquire Shares on the terms and conditions set out in this Prospectus. Acceptance of a completed Entitlement and Acceptance Form by the Company creates a legally binding contract between the Applicant and the Company for the number of Shares accepted by the Company. The Entitlement and Acceptance Form does not need to be signed to be a binding acceptance of Shares.

If the Entitlement and Acceptance Form is not completed correctly it may still be treated as valid. The Directors’ decision as to whether to treat the acceptance as valid and how to construe, amend or complete the Entitlement and Acceptance Form is final.

1.10 Issue and dispatch

Shares under the Offer are expected to be issued, and security holder statements dispatched, on or before the date set out in the proposed timetable in this Prospectus.

It is the responsibility of Applicants to determine their allocation prior to trading in the Shares. Applicants who sell Shares before they receive their holding statements do so at their own risk.

1.11 Application Monies held on trust

All Application Monies received for the Shares will be held on trust in a bank account maintained solely for the purpose of depositing Application Monies received pursuant to this Prospectus until the Shares are issued. All Application Monies will be returned (without interest) if the Shares are not issued.

1.12 ASX quotation

Application has been made for the official quotation of the Shares. If permission is not granted by ASX for the official quotation of the Shares offered by this Prospectus within 3 months after the date of this Prospectus (or such period as the ASX allows), the Company will repay, as soon as practicable, without interest, all Application Monies received pursuant to this Prospectus.

1.13 CHESS

The Company participates in the Clearing House Electronic Subregister System, known as CHESS. ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532 (“ ASTC ”), a wholly owned subsidiary of ASX, operates CHESS in accordance with the Listing Rules and the Securities Clearing House Business Rules.

Under CHESS, Applicants will not receive a certificate but will receive a statement of their holding of Shares.

If you are broker sponsored, ASTC will send you a CHESS statement.

The CHESS statement will set out the number of Shares issued under this Prospectus, provide details of your holder identification number, the participant identification number of the sponsor and the terms and conditions applicable to the Shares.

If you are registered on the Issuer Sponsored subregister, your statement will be dispatched by Advanced Share Registry Services and will contain the number of Shares issued to you under this Prospectus and your 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 Shareholding changes. Shareholders may request a statement at any other time; however, a charge may be made for additional statements.

1.14 Residents Outside Australia and New Zealand

The Offer is not being extended to any shareholders whose registered address is outside Australia or New Zealand. The Company is of the view that it is unreasonable to make the Offer to shareholders outside Australia and New Zealand, having regard to:

the number of those Shareholders;
the number and value of Shares to be offered to those persons; and
the cost of complying with overseas legal requirements.

The Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer other than for shareholders in Australia and New Zealand. The Company is not required to make offers under the Prospectus to Shareholders other than in Australia and New Zealand. Where the Prospectus has been dispatched to Shareholders domiciled outside Australia or New Zealand and where the country's Shares code or legislation prohibits or restricts in any way the making of the offers contemplated by the Prospectus, the Prospectus is provided for information purposes only.

Shareholders resident in Australia or New Zealand holding shares on behalf of persons who are resident overseas are responsible for ensuring that taking up Entitlements under the Offer does not breach regulations in the relevant overseas jurisdiction. Return of a duly completed Entitlement and Acceptance Form will be taken by the Company to constitute a representation that there has been no breach of those regulations.

The sale of the Entitlements of Shareholders whose registered address is outside Australia or New Zealand will be at the prices and otherwise in such a manner as the Directors in their absolute discretion may determine. Any interest earned on the proceeds of the sale of such Entitlements will be applied against costs and expenses first, but any balance will accrue to the Company.

1.15 Taxation implications

The Directors do not consider it appropriate to give Shareholders advice regarding the taxation consequences of subscribing for Shares under this Prospectus.

The Company, its advisers and its officers do not accept any responsibility or liability for any such taxation consequences to Shareholders. As a result, Shareholders should consult their professional tax adviser in connection with subscribing for Shares under this Prospectus.

1.16 Major activities and financial information

A summary of the major activities and financial information relating to the Company for the financial year ended 31 December 2007 is set out in the Annual Report which is available on the Company's website at www.advanceenergyltd.com.au.

A summary of activities relating to the Company for the year ended 31 December 2007 is set out in the Annual Report, lodged with ASX on 31 March 2008. The Company's continuous disclosure notices (i.e. ASX announcements) since 31 March 2008 are listed in Section 5.5.

Copies of these documents are available free of charge from the Company. Directors strongly recommend that Shareholders and potential investors review these and all other announcements prior to deciding whether or not to participate in the Offer.

1.17 Privacy

The Company collects information about each Applicant provided on an Entitlement and Acceptance Form for the purposes of processing the Acceptance and, if the Acceptance is successful, to administer the Applicant’s security holding in the Company.

By submitting an Entitlement and Acceptance Form, each Applicant agrees that the Company may use the information provided by an Applicant on the Entitlement and Acceptance 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 and professional advisers, and to ASX and regulatory authorities.

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

An Applicant has an Entitlement to gain access to the information that the Company holds about that person subject to certain exemptions under law. A fee may be charged for access. Access requests must be made in writing to the Company’s registered office.

1.18 Enquiries concerning Prospectus

Enquiries relating to this Prospectus should be directed to the Company Secretary by telephone on 08 9486 1122.

2. Effect of the Offer

2.1 Capital structure on completion of the Offer

Balance at the date of this Prospectus To be issued under the Offer(1) Balance after the Offer	Number of Shares Number of Options(2) Number of CPSs(3) Number of Convertible Notes(4) 69,299,099 19,350,000 9 7,525,000 49,499,356 - - -
	118,798,455 19,350,000 9 7,525,000

(1) The number of Shares to be issued under the Offer assumes that no Options, CPSs or Convertible Notes are exercised or converted before the ex entitlement date.
(2) 13,850,000 $0.25 Options exercisable by 31/12/2010.
5,000,000 $0.60 Options exercisable by 15/12/2009.
250,000 $0.65 Options exercisable by 29/10/2009.
250,000 $0.40 Options exercisable by 31/12/2010.
(3) Each Converting Preference Share (CPS) convert into 1,000,000 shares as follows:

CPS – B (5 on issue) – upon the Company achieving 500 bopde. CPS – C (2 on issue) – upon the Company achieving 1,000 bopde. CPS – D (2 on issue) – upon the Company achieving 1,500 bopde.

Conversion or	Face Value	Convertible at	Number of
repayment date		(minimum)	securities
			convertible
			into
29/6/2008	250,000	$0.50	500,000	1
29/6/2008	250,000	$0.50	500,000	1
14/7/2008	520,000	$0.80	650,000	2
25/7/2009	1,000,000	$0.80	1,250,000	3
15/8/2008	50,000	$0.50	100,000	4
15/8/2008	25,000	$0.50	50,000	4
15/8/2008	50,000	$0.50	100,000	4
15/8/2008	1,000,000	$0.80	1,250,000	4
15/8/2008	50,000	$0.50	100,000	4
15/8/2008	50,000	$0.50	100,000	4
15/8/2008	430,000	$0.80	537,500	4
9/11/2008	1,000,000	$1.00	1,000,000	5
15/5/2009	1,300,000	$1.00	1,300,000	5
15/5/2009	1,000,000	$1.00	1,000,000	5
28/12/2009	550,000	See Note 5	See Note 5	6

Notes

1 To be repaid from the proceeds of the Offer or reissued as new notes 2 To be repaid from proceeds of a $2,000,000 Finance Facility provided by Anndev which will be repaid by proceeds of the Offer and / or the proceeds of the Offer
3 Reissue currently being negotiated on the same terms as Note 5 and on the conversion or repayment date as noted above (from the current conversion or repayment date of 25/7/2008). This may be subject to shareholder approval (if required under the Corporations Act and / or the Listing Rules)
4 To be repaid from the proceeds of the Offer
5 18 month term convertible at greater of $0.10 or 70% of VWAP on receipt of notification of conversion
6 Not due for repayment

2.2 Convertible Notes

At the completion of the Offer and following repayment of certain Convertible Notes from the proceeds of the Offer in accordance with Sections 1.3 and 2.1, the Company will have remaining Convertible Notes that will reach maturity in the next 12 months with a face value of approximately $4.3 million (excluding the two Convertible Notes with a face value of $250,000 each, which are the subject of negotiations discussed below).

As discussed in Section 1.3, the Company has commenced negotiations with the holders of two Convertible Notes with a face value of $250,000 each which have become due for repayment for the replacement of these notes by the issue of new convertible notes. If the Convertible Notes are to be replaced, the issue of the new convertible notes will occur at an appropriate time determined by the Board.

The Underwriter has also agreed to provide up to $2,000,000 to the Company under the Finance Facility to make repayments for other Convertible Notes (which have become due for repayment), that fall due before the completion of the Rights Issue.

In the event that the Company is required to repay any Convertible Notes in excess of the amount set out in Section 1.3, to the extent that the funds from the Finance Facility and the proceeds from the Rights Issue is not able to cover such repayments, the Directors may consider alternatives to finance the repayments including, but not limited to:

(a) An entitlement issue and placement of options.
(b) The disposal of oil and gas properties (currently under negotiation).

2.3 Pro forma statement of financial position

Audited 31 December 2007 $,000 1,936 740	Unaudited at 30 April 08 $,000 Subsequent Events $,000 700 (156) 778 -	Pro-forma Adjustments if Offer fully subscribed) $,000 Pro-forma Balance Sheet if Offer fully subscribed $,000 1,225 1,569 - 778
2,676 1,327 14,484 -	1,478 (156) 1,308 - 13,871 4,113 32 -	1,225 2,347 - 1,308 - 17,984 - 32
15,811	15,211 4,113	0 19,324
18,487	16,689 3,958	1,225 21,671
418 - 6,918 5,800 28	1,126 - - 2,480 - - 8,097 (500)- 17 -	- 1,126 (300) 1,980 (2,175) 5,422 - 17
13,164 37 2,300	9,240 1,980 35 - 6,081 2,158	(2475) 8,545 - 35 - 8,239
2,337	6,116 2,158	- 8,274
15,501	15,357 4,138	(2475) 16,819

2,986	1,332 (180)	3,700 4,852
9,029 581 (6,624)	9,029 - (41) - (7,656) (180)-	3,700 12,729 - (41) (7,836)
2,986	1,332 (180)	3,700 4,852

Basis of Preparation

The pro forma statement of financial position has been prepared in accordance with the draft ASIC Guide to Disclosing Pro Forma Financial Information (issued July 2005).

The pro forma balance sheets have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business. Refer to Section 2.2 for more details in relation to this matter.

The pro forma statement of financial position is based on the statement of financial position as at 30 April 2008 that has then been adjusted to reflect the following material transactions:

Subsequent Events

(a) The acquisition of an oil and gas property for $4,113,697 utilising short term unsecured borrowings of $1,935,000 and drawings of $2,300,000 on the loan facility provided by financiers to the Company's US subsidiary; and
(b) Net repayment of the bank loan of $142,105.

Pro Forma Adjustments

Proforma Adjustment	Allocation
Repayment of Convertible Notes	$1,655,000
Repayment of the Finance Facility	$820,000
Working Capital	$1,224,948
Costs of the Offer	$260,000

2.4 Voting power of the Underwriter & Directors

Depending on the level of acceptance by Eligible Shareholders of their Entitlements, the effect on the ownership in the Company of the Underwriter and the Director-associated Sub-underwriters should they be called on to fulfil all of its underwriting and subunderwriting obligations respectively is as follows:

	Acceptance of the Offer by Shareholders other than Underwriters and Director-associated Sub-underwriters (%)	Acceptance of the Offer by Shareholders other than Underwriters and Director-associated Sub-underwriters (%)	Acceptance of the Offer by Shareholders other than Underwriters and Director-associated Sub-underwriters (%)	Acceptance of the Offer by Shareholders other than Underwriters and Director-associated Sub-underwriters (%)	Acceptance of the Offer by Shareholders other than Underwriters and Director-associated Sub-underwriters (%)
	100%	75%	50%	25%	0%
Current number of Shares	69,299,099	69,299,099	69,299,099	69,299,099	69,299,099
Shares to be issued	49,499,356	49,499,356	49,499,356	49,499,356	49,499,356
Shares issued at completion of offer	118,798,455	118,798,455	118,798,455	118,798,455	118,798,455
Underwriter (Anndev) and Associates (1)
Existing Shareholding	4,935,850	4,935,850	4,935,850	4,935,850	4,935,850
Entitlement to shares under the Offer	3,525,607	3,525,607	3,525,607	3,525,607	3,525,607
Maximum Shares to be issued under the Underwriting commitment (excl Entitlement)	0	2,623,794	5,247,589	7,871,383	10,495,177
Maximum Shares following the Offer	8,461,457	11,085,251	13,709,046	16,332,840	18,956,634
Maximum percentage of Shares following the Offer	7.12%	9.33%	11.54%	13.75%	15,96%
Directors & Associates(2)
Alex Bajada
Maximum holding afterOffer	5,177,145	5,489,645	5,802,145	6,114,645	6,427,145
Maximum percentage of Shares	4.36%	4.62%	4.88%	5.15%	5.41%
Anthony Short
Maximum holding after Offer	14,828,571	15,609,821	16,391,071	17,172,321	17,953,571
Maximum percentage of Shares	12.48%	13.14%	13.80%	14,46%	15.11%
Gordon Sklenka
Maximum holding after Offer	5,142,857	5,611,607	6,080,357	6,549,107	7,017,857
Maximum percentage of Shares	4.33%	4.72%	5.12%	5.51%	5.91%

(1) The Underwriter has entered into sub-underwriting deeds for the balance of the Shares issued under the Rights Issue with various sub-underwriters (including the Director-associated Sub-underwriters who have collectively agreed to sub-underwrite up to 6,250,000 Shares). Please refer to Section 5.2 for further details.

(2) Taking into consideration each Director-associated Sub-underwriter taking up all of its Entitlement as Eligible Shareholder (see Section 1.5 for details of each Director-associated Sub-underwriters' intention with respect to its Entitlement) and its sub-underwriting commitments (discussed in Section 5.2).

Accord Investment Corporate Pty Ltd, Mr Robert Martin and Mrs Susan Martin (RP & SP Martin Superfund), RPM Super Pty Ltd, and Temorex Pty Ltd are Associates of the Underwriter.

3. Action required by Shareholders

3.1 Acceptance of Shares under this Prospectus

Should you wish to accept all of your Entitlement to Shares, then applications for Shares under this Prospectus must be made on the Entitlement and Acceptance Form which accompanies this Prospectus, in accordance with the instructions referred to in this Prospectus and on the Entitlement and Acceptance Form. Please read the instructions carefully.

Please complete the Entitlement and Acceptance Form by filling in the details in the spaces provided and attach a cheque for the amount indicated on the Entitlement and Acceptance Form.

Completed Entitlement and Acceptance Forms must be accompanied by a cheque in Australian dollars, crossed "Not Negotiable" and made payable to "Advance Energy Limited Share Issue Account" and lodged at any time after the issue of this Prospectus and on or before the Closing Date at the Company’s share registry (by delivery or by post) at:

By delivery Advanced Share Registry Services Pty Ltd 150 Stirling Highway Nedlands WA 6009 By post Advanced Share Registry Services Pty Ltd PO Box 1156 Nedlands WA 6909

3.2 If you wish to take up part of your Entitlement only

Should you wish to only take up part of your Entitlement, then applications for Shares under this Prospectus must be made on the Entitlement and Acceptance Form which accompanies this Prospectus in accordance with the instructions referred to in this Prospectus and on the Entitlement and Acceptance Form. Please read the instructions carefully.

Please complete the Entitlement and Acceptance Form by filling in the details in the spaces provided, including the number of Shares you wish to accept and the amount payable (calculated at $0.08 per Share accepted), and attach a cheque for the appropriate Application Monies.

By delivery Advanced Share Registry Services 150 Stirling Highway Nedlands WA 6009 By post Advanced Share Registry Services Pty Ltd PO Box 1156 Nedlands WA 6909

3.3 Entitlements not taken up

If you do not wish to accept any of your Entitlement, you are not obliged to do anything.

The number of Shares you hold and the entitlement attaching to those Shares will not be affected should you choose not to accept any part of your Entitlement.

3.4 Enquiries concerning your Entitlement

If you have any queries concerning your Entitlement please contact Advanced Share Registry Services, 150 Stirling Highway Nedlands, on Telephone: +61 8 9389 8033

4. Risk factors

Activities in the Company and its controlled entities, as in any business, are subject to risks, which may impact on the Company’s future performance. The Company and its controlled entities have implemented appropriate strategies, actions, systems and safeguards for known risks, however, some are outside its control.

The Directors consider that the following summary, which is not exhaustive, represents some of the major risk factors which Shareholders need to be aware of in evaluating the Company’s business and risks of increasing your investment in the Company. Shareholders should carefully consider the following factors in addition to the other information presented in this Prospectus.

The principal risks include, but are not limited to, the following:

4.1 Risks specific to Advance Energy

(a) Funding Ongoing Operations

The Directors have taken various actions including negotiating with holders of two Convertible Notes (with a face value of $250,000 each) which have become due for the replacement of these notes by the issue of new notes and the establishment of a $2,000,000 Finance Facility with the Underwriter in order that the Company can continue to meet its obligations on an ongoing basis. Please refer to Sections 1.3 and 2.2 for further details.

Further debt or equity raising will be required to increase production from current oil and gas properties. Additional equity financing, if available, may be dilutive to Shareholders and at lower prices than the current market price. Debt financing, if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain additional financing as needed, it will not be able to further develop its projects which may impact on the viability of the Company.

(b) Currency and Hedging Risk

Advance Energy’s main business operations are based in the USA. As a result, revenues, cash inflows, expenses, capital expenditure and commitments will be primarily denominated in United States dollars.

To comply with Australian reporting requirements for Advance Energy, the income, expenditure and cash flows of its subsidiary will be converted to and accounted for in Australian dollars. This will result in the income, expenditure and cash flows of the Company being exposed to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar, as determined in international markets.

The Company undertakes a hedging programme where it hedges a certain proportion of its expected production. This results in the Company being exposed to the effects of the change in currency (exchange rate) risk, which may have an adverse impact on the profitability and/or financial position of the Company. This exposure may be magnified in the event that the Company's production profile is insufficient to meet hedging commitments.

Advance Energy is reliant on a small number of key personnel and consultants. The loss of one or more of these key contributors could have an adverse impact on the operations and success of the business.

It may be particularly difficult for the Company to attract and retain suitably qualified and experienced people, given the current high demand in the industry and relatively small size of the Company, compared to other industry participants.

(d) Third Party Risks

The operations of the Company require the involvement of a number of third parties, including suppliers, contractors and customers. Financial failure, default or contractual non-compliance on the part of such third parties may have a material impact on the Company’s operations and performance. It is not possible for the Company to predict or protect itself against all such risks.

(e) Minority Interest in Projects

Advance Energy has a minority interest in certain of its projects and does not act as operator. There exists a risk that as a minority participant in the projects, the Company may have the value of its interest in its projects reduced by actions taken by majority holders or the operators. There may be few legal impediments preventing majority holders and operators from exploiting their positions as controlling joint venture participants to the detriment of minority participants in the Projects.

Should majority interest holders not act in the best interests of Advance Energy as a minority holder in any of its projects, this may have a material adverse effect on the value of Advance Energy’s holding in the project, which may in turn have a material adverse effect on the Company’s profitability and/or the market price of the Company’s Shares.

(f) New Projects and Acquisitions

The Company may consider acquisitions that may add value to the Company. The acquisition of new business opportunities (whether completed or not) may require the payment of monies (as a deposit and/or exclusivity fee) after only limited due diligence and prior to the completion of comprehensive due diligence. There can be no guarantee that any proposed acquisition will be completed or be successful. If the proposed acquisition is not completed, monies already advanced may not be recoverable, which may have a material adverse effect on the Company.

If an acquisition is completed, the Board will need to reassess, at that time, the funding allocated to current projects and new projects, which may result in the Company reallocating funds from other projects and/or the raising of additional capital (if available). Furthermore, notwithstanding that an acquisition may proceed upon the completion of due diligence, the usual risks associated with oil and gas activities will remain.

4.2 Oil and Gas Industry Risks

Advance Energy operates in the oil and gas sector and is subject to risks relating to exploration, drilling and production of oil and gas which may not generally be associated with other sectors.

The exploitation of oil and gas reserves and successful project development is considered to be of a high risk nature and contains inherent risks including but not limited to:

(a) Acquisition Risks

Prior to any acquisition, the Company will conduct due diligence on the projects to satisfy themselves in relation to the potential to successfully achieve an economically recoverable hydrocarbon reserve. There can be no guarantee, however, that such a reserve will result from such an acquisition and the Company may have expended resources which do not result in discoveries being economically viable.

(b) Exploration and Development Risks

Oil and gas exploration and development involves significant risks which only occasionally provide high rewards. In addition to the normal competition for prospective ground, and the high costs of discovery and development of an economic deposit, factors such as demand for commodities, stock market fluctuations affecting access to new capital, sovereign risk, environmental issues, labour disruption, project financing, foreign currency fluctuations and technical problems all affect the ability of a company to profit from a discovery.

There is no assurance that exploration and development of the Company’s projects, or any other projects that may be acquired in the future, will result in the discovery of an economic oil and gas deposit. Even if an apparently viable deposit is identified, there is no guarantee that it can be profitably exploited.

(c) Drilling Risks

The Company’s drilling operations may be curtailed, delayed or cancelled due to a number of factors including weather conditions, mechanical difficulties, shortage or delays in the delivery of rigs and/or other equipment and compliance with governmental requirements. While drilling may yield some hydrocarbons there can be no guarantee that the discovery will be sufficiently productive to justify commercial development or cover operating costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs.

(d) Operating Risks

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 or property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. Damages occurring as a result of such risks may give rise to claims against the Company. 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.

(e) Commercialisation of Discoveries

It may not always be possible for the Company to participate in the exploitation of any successful discoveries which may be made in any projects in which the Company has an interest. Such exploitation will involve the need to obtain 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. As described above, such further work may require the Company to meet or commit to financing obligations for which it may not have planned.

(f) Hydrocarbon Reserve Estimates

Hydrocarbon reserve estimates are an expression of judgment based on knowledge, experience and industry practice. Estimates that were valid when made may change significantly when new information becomes available.

In addition, reserve estimates are necessarily imprecise and depend to some extent on interpretations, which may prove inaccurate. Should the Company encounter oil and/or gas deposits or formations different from those predicted by past drilling, sampling and similar examinations, reserve estimates may have to be adjusted and production plans may have to be altered in a way which could adversely affect the Company’s operations.

(g) Competition

The Company will compete with other companies, including major oil companies. Some of these companies have greater financial and other resources than the Company and, as a result, may be in a better position to compete for future business opportunities. Many of the Company’s competitors not only explore for and produce oil and gas, but also carry out refining operations and market petroleum and other products on a worldwide basis. There can be no assurance that the Company can compete effectively with these companies.

(h) Claims by Indigenous Inhabitants

The current and future oil and gas assets of the Company may be subject to land claims by indigenous people. Should this occur, the Company’s ability to conduct exploration and/or mining activities may be affected, which may have a material adverse effect on the Company’s financial performance and the price at which its securities trade.

The Company is not aware of any land claims or potential claims by indigenous people in respect of its exploration activities that could significantly affect its tenure or mining exploration or any future production operations.

(i) Insurance

Insurance of all risks associated with oil and gas exploration and production is not always available and, where it is available, the cost may be high. The company will have insurance in place considered appropriate for the Company’s needs. Advance Energy may not be insured against all losses due to either the insurance not being available or due to the premium being excessive in relation to the benefits accruing.

(j) Government Regulation

The Company’s operations are in the oil and gas industry in the USA which is subject to extensive regulation and present operations are subject to regulation by the Texas Railroad Commission. Regulations relating to the exploration for and development, production, gathering and marketing of oil and gas will affect the Company’s operations. Some of the regulations set forth standards for discharge permits for drilling operations, drilling and abandonment bonds or other financial responsibility requirements, reports concerning operations, the spacing of wells, unitisation and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity to conserve supplies of oil and gas.

The Company cannot predict how existing, or future laws and regulations may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on the Company’s business or financial condition.

(k) Environmental and Other Regulatory Requirements

The Company’s operations will be subject to environmental laws, including but not limited to, those governing the management of waste, the protection of water and air quality, the discharge of materials into the environment, and the preservation of natural resources, impact and influence the Company’s operations. If the Company fails to comply with environmental laws regarding the discharge of oil, gas, or other materials into the air, soil or water it may be subject to liabilities to the government and third parties, including civil and criminal penalties.

Existing and possible future environmental legislation, regulations and actions could cause additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Before exploration and production activity can commence on any property, the Company must obtain regulatory approvals and there is no assurance that such approvals will be obtained.

The Company has, and may from time to time in the future agree to, indemnify sellers of producing properties against some liabilities for environmental claims associated with these properties.

(l) Hydrocarbon Product Prices

The market price of hydrocarbon products is volatile and cannot be controlled. If the price of hydrocarbons should drop significantly and remain depressed, the economic prospects of the projects which the Company has an interest in could be significantly reduced or rendered uneconomic. There is no assurance that, even if significant quantities of hydrocarbon products are discovered, a profitable market may exist for their sale. Factors beyond the control of the Company may affect the marketability of any commodity discovered. Oil and gas prices have fluctuated widely in recent years. The marketability is also affected by numerous other factors beyond the control of the Company, including government regulations relating to royalties, allowable production and importing and exporting of oil and gas and petroleum products, the effect of which cannot be accurately predicted.

(m) Title

The system for obtaining title to oil and gas leases in Texas and generally other areas of the United States that the Company may operate in is complex given that numerous parties may hold the undivided mineral rights to a particular tract of land. Securing the leases to those rights often requires lengthy negotiation with the various parties. In order to independently verify that the parties with whom the Company is dealing are the correct and sole holders of the mineral rights and to analyse the full rights and restrictions applying to the interest held by those parties requires that a company obtain detailed title opinions from appropriately qualified and experienced lawyers. This can be a lengthy and expensive process and the final opinions are often the subject of numerous qualifications. It is therefore customary that such title opinions are not sought until the company proposed to conduct a drilling operation and/or expend significant amounts of money on a particular lease.

The Company has adopted this customary approach and, accordingly, may not have obtained the detailed title opinions on its leases other than those that are currently in production or on which drilling has been proposed in the near future.

As a consequence there may be third parties that hold or claim mineral rights in relation to the leases held by the Company which have not previously been identified.

Further, some of the leases in which the Company has an interest may have a fixed term and be subject to applications for renewal. The renewal of the term of each lease is usually at the discretion of the relevant lessor. If a lease is not renewed or granted,

the Company may suffer significant damage through loss of the opportunity to develop and discover any oil or gas resources on that lease.

(n) Land Access

Immediate access to leases cannot in all cases be guaranteed. The Company may, from time to time, be required to seek consent of landholders or other persons or groups with an interest in real property encompassed by the Company’s leases. Compensation may be required to be paid by the Company to land holders in order that the Company may carry out exploration and/or production activities.

(o) Equipment and Personnel Availability

Due to exploration and development activities in the USA, and in Texas particularly, there may be delays in securing drilling rigs or other equipment and personnel required to carry out the Company’s planned activities.

In addition, there may also be upward pressure on costs and mechanical failure may result in delays which may result in significant cost overruns.

Any of these factors may have a material impact on the Company’s profitability and cash flows.

4.3 General Investment Risks

(a) Securities Investment

There are risks associated with any investment in securities. The prices at which the Company’s Shares trade, may fluctuate in response to a number of factors.

Furthermore, the stock market, and in particular the market for oil and gas exploration companies, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. There can be no guarantee that these trading prices will be sustained. These factors may materially affect the market price of the Shares regardless of the Company’s operational performance.

(b) Share Price Variations

The Shares are to be quoted on the ASX, where their price may rise or fall in relation to the issue price. The Shares issued 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. The value of the Shares will be determined by the stock market and will be subject to a range of factors beyond the control of the Company, and the Directors and officers of the Company. Such factors include, but are not limited to, the demand for and availability of Shares, movements in domestic interest rates, exchange rates, fluctuations in the Australian and international stock markets and general domestic and economic activity. Returns from an investment in the Shares may also depend on general stock market conditions as well as the performance of the Company. There can be no guarantee that an active market in the Shares will develop or that the market price of the Shares will not decline below the issue price.

(c) Regulatory Risks

Changes to legislation in Australia and the USA, including changes to the taxation system, may affect future earnings and the relative attractiveness of investing in the Company. Changes in government policy or statutory changes may affect the Company and the attractiveness of an investment in it.

(d) General Economic Conditions

Economic conditions in Australia, the USA and globally, may affect the performance of the Company. Factors such as currency fluctuations, inflation, interest rates, supply and demand and industrial disruption may have an impact on operating costs and share market prices. The Company’s future possible revenue and Share price can be affected by these factors all of which are beyond the control of the Company or its Directors. In addition, the Company’s ability to raise additional capital, should it be required, may be affected.

4.4 Investment 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 that the investment in the Company is speculative and should consult their professional adviser before deciding whether to apply for Shares pursuant to this Prospectus.

5. Additional information

5.1 Underwriting Agreement

The Company has entered into the Underwriting Agreement with Anndev to fully underwrite the Rights Issue. The key terms of the Underwriting Agreement are below.

The Underwriter will be paid by the Company an underwriting fee of 6% of the underwritten amount. The Company must pay the Underwriter's reasonable costs and expenses of underwriting the Offer.

The Underwriting Agreement provides for the appointment of sub-underwriters at the Underwriter's discretion. The key terms of the sub-underwriting deeds Anndev has entered into with Associates of the Directors (Director-associated Sub-underwriters) are set out in Section 5.2.

The Underwriter may terminate its obligations to satisfy a shortfall if any of the termination events specified below occur. These events are summarised as follows:

(a) the Underwriter reasonably forms the view that there is a material omission from the Prospectus, or that the Prospectus contains a statement that is misleading or deceptive;
(b) the Underwriter reasonably forms the view that any projection or forecast in the Prospectus becomes, to a material extent, incapable of being met, or is unlikely to be met;
(c) the All Ordinaries Index of ASX as determined at close of trading falls to a level that is 90% or less of the level at the close of trading on the execution date of the Underwriting Agreement;
(d) the approval of ASX to official quotation of the Shares being refused or not being granted;
(e) the Company or any officer of the Company contravening in any matter of substance any provision of its Constitution or any statute;
(f) the Company altering or announcing any intention to alter its capital structure or its Constitution without the prior consent of the Underwriter;
(g)
the Company being wound up;
(h) any meeting being called to consider a resolution for the winding up of the Company;
(i) any proceedings being commenced against the Company for its winding up;
(j) the Company being placed under official management or an inspector being appointed with respect to it or a receiver or manager of any of its assets being appointed pursuant to the Corporations Act;
(k) the Company committing any material breach of the Underwriting Agreement or failing to carry out any of its material obligations pursuant to the Underwriting Agreement;

(l) any act of God, war, revolution, or any other unlawful act against public order or authority, an industrial dispute, a governmental restraining, or any other event which is not within the control of the parties, lasting in excess of 2 weeks occurs;
(m) the occurrence of any calamity or crisis or any change in financial, political or economic conditions or currency exchange rates or controls in Australia or any restriction or limitation on the nature or basis of trading of equities on ASX;
(n) any material adverse change or disruption occurs in the existing financial markets, political or economic conditions of Australia, Japan, the United Kingdom, the United States of America or the international financial markets or any material adverse change occurs in national or international political, financial, economic conditions, in each case the effect of which is that, in the reasonable opinion of the Underwriter, it is impracticable to market the Offer or to enforce contracts to issue and allot or sub-underwrite the securities pursuant to this Prospectus or that the success of the Offer is likely to be adversely affected;
(o) any director of the Company being charged with an indictable offence relating to any financial or corporate matter;
(p) any law or regulation being introduced into the Parliament of the Commonwealth of Australia or any of the legislatures of the States or Territories of Australia or any prospective law or other measure being passed or becoming effective, having the effect of prohibiting, restricting or regulating the principal business of the Company, the Offer, or the operation of stock markets generally; or
(q) there is any material breach of the covenants contained in the Underwriting Agreement.

Nothing above prejudices or nullifies any claims for damages that the Underwriter may have against the Company for or arising out of any breach of covenant or failure by the Company to observe or perform the obligations on its part contained in the Underwriting Agreement.

The Company indemnifies the Underwriter and its officers and employees against all loss arising in any way out of any breach of law (whether by act or omission) in relation to the Offer or the Prospectus or issue or out of any announcement, advertising, publicity or other promotion made or distributed by the Company or on its behalf in relation to the Offer or the Prospectus, and such indemnity extends to all reasonable costs and expenses (including reasonable legal costs on a frill indemnity basis) in connection with them.

The indemnity in the Underwriting Agreement does not extend to an indemnity against any loss arising out of the wilful misconduct, fraud or negligence of the Underwriters.

5.2 Sub-underwriting by Director-associated Sub-underwriters

Fay Holdings Pty Ltd and Short Nominees Pty Ltd, companies associated with Mr Anthony Short, are each Eligible Shareholders and collectively hold 8,650,000 Shares. Fay Holdings Pty Ltd and Short Nominees Pty Ltd have agreed take up their collective Entitlement as Eligible Shareholders of 6,178,571 Shares. Fay Holdings Pty Ltd has also entered into a sub-underwriting deed with Anndev to sub-underwrite up to 3,125,000 Shares, or a total of approximately 18.80% of the Offer.

Currently, Mr Anthony Short and his Associates (including Fay Nominees Pty Ltd and Short Nominees Pty Ltd) have a relevant interest in 8,650,000 Shares. If Fay Holdings

Pty Ltd is obliged to take up all of its commitment as a sub-underwriter (and Mr Short and his Associates take up their Entitlements as Eligible Shareholders), Mr Short and his Associates will obtain a relevant interest in 15.11% of the capital of the Company (17,953,571 Shares).

Spartan Nominees Pty Ltd, a company associated with Mr Alex Bajada, has agreed to take up its Entitlements as an Eligible Shareholder of 2,157,144 Shares and to subunderwrite a total of up to 1,250,000 Shares, or approximately 6.88% of the Offer under a sub-underwriting deed with Anndev.

Currently, Mr Alex Bajada and his Associates have a relevant interest in 3,020,001 Shares. If Spartan Nominees Pty Ltd is obliged to take up all of its commitment as a sub-underwriter (and Mr Bajada and his Associates take up their Entitlements as Eligible Shareholders), Mr Bajada and his Associates will obtain a relevant interest in 5.41% of the capital of the Company (6,427,145 Shares).

Formaine Pty Ltd, a company associated with Mr Gordon Sklenka, has agreed to take up its Entitlement as an Eligible Shareholder of 2,142,857 Shares and to sub-underwrite a total of up to 1,875,000 Shares, or approximately 8.12% of the Offer under a subunderwriting deed with Anndev.

Currently, Mr Gordon Sklenka and his Associates have a relevant interest in 3,000,000 Shares. If Formaine Pty Ltd is obliged to take up all of its commitment as a subunderwriter (and Mr Sklenka and his Associates take up their Entitlements as Eligible Shareholders), Mr Sklenka and his Eligible Shareholder and to Associates will obtain a relevant interest in 5.91% of the capital of the Company (7,017,857 Shares).

Please refer to Section 1.5 for details of each Director-associated Sub-underwriter's intention with respect to its Entitlement as an Eligible Shareholder and Section 2.4 for details on the effect of the Rights Issue on the Directors' and their Associates' shareholdings in the Company.

The Directors and the Director-associated Sub-underwriters will not receive any fees as part of their sub-underwriting commitments.

Each sub-underwriting deed between Anndev and each Director-associated Subunderwriter provides that the parties may, by written notice, terminate that subunderwriting deed if an event of termination under the Underwriting Agreement occurs.

5.3 Directors' interests in Company Shares

The Directors or their nominees currently each hold Shares as follows:

Director	No. of Shares	No. of Options	No. of CPS
Alex Bajada	3,020,001	2,000,000	1
Anthony Short	8,650,000	4,000,000	3
Gordon Sklenka	3,000,000	2,000,000	1

5.4 Company is a disclosing entity

The Company is a disclosing entity under the Corporations Act. It is subject to regular reporting and disclosure obligations under both the Corporations Act and the Listing Rules. These obligations require the Company to notify ASX of information about specific events and matters as they arise for the purpose of ASX making the information

available to the stock market conducted by ASX. In particular, the Company has an obligation under the Listing Rules (subject to certain limited exceptions), to notify ASX once it is, or becomes aware of information concerning the Company which a reasonable person would expect to have a material effect on the price or value of the Company's Shares.

The Company is also required to prepare and lodge with ASIC yearly and half-yearly financial statements accompanied by a Directors' statement and report, and an audit review or report.

Copies of documents lodged with the ASIC in relation to the Company may be obtained from, or inspected at, an ASIC office (see Section 5.5 below).

5.5 Copies of documents

Copies of documents lodged by the Company in connection with its reporting and disclosure obligations may be obtained from, or inspected at, an office of ASIC. The Company will provide free of charge to any person who requests it during the period of the Offer, a copy of:

(a) the Annual Report of the Company for the year ended 31 December 2007, being the last financial year for which an annual financial report was lodged with the ASIC on 31 March 2008 in relation to the Company before the issue of this Prospectus;
(b) the following continuous disclosure notices given by the Company to notify ASX of information relating to the Company since the Company lodged its Annual Report for the year ended 31 December 2007 and before the date of issue of this Prospectus are as follows:
(c)

Date Lodged	Subject of Announcement
24/06/2008	Progress Report- Palo Pinto Workovers
23/06/2008	Non-Renounceable Issue
06/06/2008	Resignation/Appointment of Company Secretary
06/06/2008	Appendix 3B
28/05/2008	Results of Meeting
23/05/2008	Independent Valuation of Producing Properties
22/05/2008	Release of Securities from Escrow
14/05/2008	Mortherlode 1 Acquisition Closing
07/05/2008	Non-Renounceable Issue
05/05/2008	Hedging Program 2008
30/04/2008	Quarterly Activities Report
23/04/2008	Notice of Annual General Meeting/Proxy Form
21/04/2008	Well completion
18/04/2008	Acquisition in Martin County Texas
04/04/2008	Share Registry change of address

The following documents are available for inspection throughout the application period of this Prospectus during normal business hours at the registered office of the Company at Suite 4, 16 Ord Street, West Perth, Western Australia:

(a) this Prospectus;
(b) the Constitution; and

5.6 Information excluded from continuous disclosure notices

There is no information which has been excluded from a continuous disclosure notice in accordance with the Listing Rules, and which is required to be set out in this Prospectus.

5.7 Market price of Shares

The highest and lowest market sale prices of the Company’s Shares on ASX during the 3 months immediately preceding the date of lodgement of this Prospectus with the ASIC and the respective dates of those sales were:

Highest: $0.16 per Share on 7 May 2008 Lowest: $0.07 per Share on 1 July 2008

The latest available market sale price of the Company’s Shares on ASX prior to the date of lodgement of this Prospectus with the ASIC was $0.07 per Share on 1 July 2008.

5.8 Dividend policy

The Directors are not able to say when and if dividends will be paid in the future, as the payment of any dividends will depend on the future profitability, financial position and cash requirements of the Company.

5.9 Determination by the ASIC

The ASIC has not made a determination which would prevent the Company from relying on section 713 of the Corporations Act in issuing the Shares under this Prospectus.

5.10 Directors' interests

Except as disclosed in this Prospectus, no Director or proposed director, and no firm in which a Director or proposed director is a partner:

(a) has any interest nor has had any interest in the last two years prior to the date of this Prospectus in the formation or promotion of the Company, the Offer or property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or
(b) has been paid or given or will be paid or given any amount or benefit 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.

5.11 Directors remuneration

Shareholders have approved an aggregate amount of up to $250,000 to be paid as Directors' fees.

Directors received the following remuneration for the year ended 31 December 2007:

Director	Salary Consulting Fees $	Total $
Alex Bajada	59,042	59,042

Anthony Short	238,333	238,333
GordonSklenka	108,333	108,333

5.12 Interests of other persons

Except as disclosed in this Prospectus, the Underwriter, promoter and all other persons 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 do not have, and have not had in the 2 years before the date of this Prospectus, any interests 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 have been paid or agreed to be paid (in cash or Shares or otherwise) and no other benefit has been given or agreed to be given to any of those persons for services provided by those persons in connection with the formation or promotion of the Company or the Offer.

Anndev is acting as Underwriter to the Offer and will receive fees set out in Section 5.1. In addition, Anndev and its Associates currently hold a relevant interest in 4,935,850 Shares.

Clayton Utz will be paid approximately $30,000 (plus GST) in fees for legal services as at the date of this Prospectus in connection with the Offer. In addition, Clayton Utz has been paid or is entitled to be paid approximately $4,000 for legal services provided to the Company in the period of 2 years prior to the date of this Prospectus.

BDO Kendalls Audit & Assurance (WA) Pty Ltd acts as auditor of the Company and has been paid $138,355 (plus GST) for the provision of professional services in relation to the auditing of the financial statements of the Company and other professional services in the period of 2 years prior to the date of this Prospectus.

5.13 Expenses of Offer

The total expenses of the Offer are estimated at approximately $260,000 if the Offer is fully subscribed.

These expenses include underwriter's fees, legal fees, ASX and ASIC fees, the cost of preparation printing and distributing this Prospectus and other miscellaneous expenses.

These expenses have been paid or will be payable by the Company.

5.14 Consents

The following consents have been given in accordance with the Corporations Act and have not been withdrawn as at the date of lodgement of this Prospectus with the ASIC:

(a) Clayton Utz have given, and have not withdrawn, their written consent to being named in this Prospectus as lawyers to the Company. Clayton Utz have had no involvement in the preparation of any part of this Prospectus other than being named as lawyers of the Company. Clayton Utz have not authorised or caused the issue of this Prospectus or the making of the Offer. Clayton Utz make no representation regarding, and to the extent permitted by law excludes

any responsibility for, any statements in or omissions from any part of this Prospectus.

(b) Advanced Share Registry Services has given and, as at the date hereof, has not withdrawn, its written consent to be named as share registrar in the form and context in which it is named. Advanced Share Registry Services has had no involvement in the preparation of any part of this Prospectus other than being named as share registrar of the Company. Advanced Share Registry Services has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of this Prospectus.
(c) Anndev has given and, as at the date hereof, has not withdrawn, its written consent to be named as an underwriter of the Offer.
(d) BDO Kendalls Audit and Assurance (WA) Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as auditor of the company.
(e) Accord Investment Corporate Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as an Associate of Anndev in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Accord Investment Corporate Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Accord Investment Corporate Pty Ltd's intentions with respect to the Offer are based on statements made by Accord Investment Corporate Pty Ltd.
(f) Mr Robert Martin and Mrs Susan Martin (RP & SP Martin Superfund) have given and, as at the date hereof, have not withdrawn, their consent to be named as Associates of Anndev in the form and context in which thy are named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to them in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to their intentions with respect to the Offer are based on statements made by Mr Robert Martin and Mrs Susan Martin (RP & SP Martin Superfund).
(g) RPM Super Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as an Associate of Anndev in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to RPM Super Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to RPM Super Pty Ltd's intentions with respect to the Offer are based on statements made by RPM Super Pty Ltd.
(h) Temorex Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as an Associate of Anndev in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Temorex Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Temorex Pty Ltd's intentions with respect to the Offer are based on statements made by Temorex Pty Ltd.
(i) Fay Holdings Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as sub-underwriter in relation to the Offer in the form and context in which it is named and to the inclusion of the statements made

by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Fay Holdings Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Fay Holdings Pty Ltd's intentions with respect to the Offer are based on statements made by Fay Holdings Pty Ltd.

(j) Short Nominees Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as an Eligible Shareholder in relation to the Offer in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Short Nominees Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Short Nominees Pty Ltd's intentions with respect to the Offer are based on statements made by Short Nominees Pty Ltd.
(k) Spartan Nominees Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as sub-underwriter in relation to the Offer in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Spartan Nominees Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Spartan Nominees Pty Ltd's intentions with respect to the Offer are based on statements made by Spartan Nominees Pty Ltd.
(l) Formaine Pty Ltd has given and, as at the date hereof, has not withdrawn, its consent to be named as sub-underwriter in relation to the Offer in the form and context in which it is named and to the inclusion of the statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus in relation to Formaine Pty Ltd in the form and context in which they are so included. The statements made by the Company in Sections 1.5, 2.4 and 5 of this Prospectus relating to Formaine Pty Ltd's intentions with respect to the Offer are based on statements made by Formaine Pty Ltd.

5.15 Rights Attaching to Shares

A summary of the rights attaching to Shares in the Company is set out below. This summary is qualified by the full terms of the Constitution (a full copy of the Constitution is available from the Company on request free of charge) and does not purport to be exhaustive or to constitute a definitive statement of the rights and liabilities of Shareholders. These rights and liabilities can involve complex questions of law arising from an interaction of the Constitution with statutory and common law requirements. For a Shareholder to obtain a definitive assessment of the rights and liabilities which attach to Shares in any specific circumstances, the Shareholder should seek legal advice.

(a) Voting

At a general meeting, on a show of hands every Shareholder present in person has one vote. At the taking of a poll, every Shareholder present in person or by proxy and whose shares are fully paid has one vote for each of his or her Shares. On a poll, the holder of a partly paid share has a fraction of a vote with respect to the share. The fraction is equivalent to the proportion which the amount paid (not credited) bears to the total amount paid and payable (excluding amounts credited).

(b) General meetings

Each Shareholder is entitled to receive notice of, attend and vote at general meetings of the Company and to receive all notices, reports and financial reports and other documents required to be sent to Shareholders under the Constitution of the Company, the Corporations Act and the Listing Rules.

(c) Dividends

The Directors may pay to Shareholders any interim and final dividends as, in the Directors' judgement, the financial position of the Company justifies. The Directors may fix the amount, the record date for determining eligibility and the method of payment. All dividends must be paid to the Shareholders in proportion to the number and the amount paid on the shares held.

(d) Transfer of Sharess

Generally, all Shares in the Company are freely transferable subject to the procedural requirements of the Constitution, and to the provisions of the Corporations Act, the Listing Rules and the ASTC Settlement Rules. The Directors may decline to register an instrument of transfer received where the transfer is not in registrable form or where refusal is permitted under the Listing Rules or the ASTC Settlement Rules. If the Directors decline to register a transfer the Company must give reasons for the refusal. The Directors must decline to register a transfer when required by the Corporations Act, the Listing Rules or the ASTC Settlement Rules.

(e) Variation of rights

The Company may only modify or vary the rights attaching to any Shares with the prior approval by a special resolution of the holders of Shares, or with the written consent of the holders of at least three-fourths of the issued Shares.

(f) Directors

The minimum number of Directors is three and the maximum is ten. Currently, there are three Directors. Directors must retire on a rotational basis so that one-third of Directors must retire at each annual general meeting. Any other Director who has been in office for three or more years must also retire. A retiring Director is eligible for re-election. The Directors may appoint a Director either in addition to existing Directors or to fill a casual vacancy, who then holds office until the next annual general meeting.

(g) Decisions of Directors

Questions arising at a meeting of Directors are decided by a majority of votes. In the case of an equality of votes on a resolution, the Chairman has a casting vote.

(h) Issue of further Shares

Subject to the Constitution, the Corporations Act 2001 and the Listing Rules, the Directors may issue, or grant options in respect of, Shares to such persons on such terms as they think fit. In particular, the Directors may issue preference shares, including redeemable preference shares, and may issue shares with preferred, deferred or special rights or restrictions in relation to dividends, voting, return of capital and participation in surplus on winding up.

(i) Officers' indemnity

To the full extent permitted by the law and to the extent not covered by insurance, the Company must indemnify each officer of the Company against all losses and liabilities incurred by the person as an officer of the Company, including costs and expenses incurred in defending an action for liability incurred by that person.

(j) Alteration to the Constitution

The Constitution can only be amended by a special resolution passed by at least 75% of Shareholders present and voting at a general meeting. At least 28 days' notice of the intention to propose the special resolution must be given.

6. Directors' Statement and Consent

This Prospectus is issued by Advance Energy Limited. The issue of this Prospectus has been authorised by a resolution of the Directors of the Company.

In accordance with section 720 of the Corporations Act, each of the Directors of the Company has consented to the lodgement of this Prospectus with ASIC pursuant to section 718 of the Corporations Act and has not withdrawn that consent.

This Prospectus is signed for and on behalf of all the Directors by:

Gordon Sklenka Director

Dated: 4 July 2008

7. Glossary of Terms

These definitions are provided to assist persons in understanding some of the expressions used in this Prospectus.

$ means Australian dollars.

Acceptance means a valid acceptance of Shares made pursuant to this Prospectus on an Entitlement and Acceptance Form.

Accord Investment Corporation Pty Ltd means Accord Investment Corporation Pty Ltd ACN 008 788 154

Anndev means Anndev Pty Ltd ACN 122 321 644.

Annual Report means the financial report lodged by the Company with ASIC in respect to the year ended 31 December 2007 and includes the corporate directory, chairman’s report, review of activities, Shareholder information, financial report of the Company and its controlled entities for the year ended 31 December 2007, together with a Directors’ report in relation to that financial year and the auditor’s report for the period to 31 December 2007.

Applicant means a person who submits an Entitlement and Acceptance Form.

Application Monies means application monies for Shares received by the Company from an Applicant.

ASIC means the Australian Securities and Investments Commission.

ASTC means ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532.

Associate has the meaning given to it in the Corporations Act.

ASX means ASX Limited ABN 98 008 624 691 and where the context permits, the Australian Securities Exchange operated by ASX Limited.

Board means the Directors meeting as a board.

Business Day means Monday to Friday inclusive, other than a day that ASX declares is not a business day.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date means the date identified as such in the proposed timetable.

Company or Advance Energy means Advance Energy Limited ACN 111 823 762.

Constitution means the constitution of the Company as at the date of this Prospectus.

Convertible Notes means the convertible notes issued by the Company at the date of this Prospectus.

Corporations Act means the Corporations Act (Cth) 2001.

CPS means the converting preference shares issued by the Company at the date of this Prospectus.

Director-associated Sub-underwriter means Fay Holdings Pty Ltd, Spartan Nominees Pty Ltd or Formaine Pty Ltd, as the context requires, and Director-associated Subunderwriters means all of them.

Directors mean the directors of the Company as at the date of this Prospectus.

Eligible Shareholder means a person registered as the holder of Shares on the Record Date whose registered address is in Australia and New Zealand.

Entitlement means the entitlement to Shares under the Offer as set out in Section 1.1.

Entitlement and Acceptance Form means the Entitlement and acceptance form sent with this Prospectus that sets out the Entitlement of Shareholders to subscribe for Shares pursuant to the Offer.

Fay Holdings Pty Ltd means Fay Holdings Pty Ltd ACN 062 426 699.

Finance Facility has the meaning given to it in Section 1.3.

Formaine Pty Ltd means Formaine Pty Ltd ACN 009 423 509.

Issuer Sponsored means 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.

Listing Rules means the Listing Rules of ASX.

Offer means the Offer as defined in Section 1.1.

Prospectus means this prospectus dated in Section 6.

Record Date means 5:00pm (WST) on the date identified in the proposed timetable.

Rights Issue means the non-renounceable pro-rata issue pursuant to this Prospectus by the Company of 5 Shares for every 7 Shares held at an issue price of $0.08 per Share.

RPM Super Pty Ltd means RPM Super Pty Ltd ACN 126 077 478.

Section means a section of this Prospectus.

Share means an ordinary fully paid share in the capital of the Company.

Shareholders mean a holder of Shares.

Short Nominees Pty Ltd means Short Nominees Pty Ltd ACN 008 822 811.

Shortfall Shares means that number of the Securities that have not validly been applied for by the Closing Date.

Spartan Nominees Pty Ltd means Spartan Nominees Pty Ltd ACN 099 822 081.

Temorex Pty Ltd means Temorex Pty Ltd ACN 061 621 896.

Underwriter means Anndev.

Underwriting Agreement means the underwriting agreement between the Company and Anndev, referred to in Section 5.1.

WST means Western Standard Time, being the time in Perth, Western Australia.