Comet Ridge : 24 Sep 2020 Annual Report to Shareholders

Comet Ridge

ANNUAL

REPORT2020

N

Mahalo	Mahalo
North	Mahalo
Comet Ridge 100%	East
	Comet Ridge 100%	Far East

Comet Ridge 100%

PLR2020-1-2

ATP 2048

PLR

2020-1-1

Arcturus Gas Plant

	PL1083	PL1082
Denison	PCA
	302
		PCA 303
		PCA
Pipeline	304

Mahalo

Gas Project

Comet Ridge 40%

LEGEND

Comet Ridge Tenement

Gas Pipeline

25km

Comet Ridge Limited - Annual Report for the Year Ended 30 June 2020
Overview of Activities ...................................................................................................................................................................	1
2020 Annual Reserves Statement...............................................................................................................................................	12
Corporate Governance Overview Statement ................................................................................................................................	15
Directors' Report........................................................................................................................................................................	16
Auditor's Independence Declaration...........................................................................................................................................	30
Consolidated Statement of Profit or Loss and Other Comprehensive Income ...............................................................................	31
Consolidated Statement of Financial Position ..............................................................................................................................	32
Consolidated Statement of Changes in Equity .............................................................................................................................	33
Consolidated Statement of Cash Flows .......................................................................................................................................	34
Notes to the Financial Statements...............................................................................................................................................	35
Directors' Declaration.................................................................................................................................................................	59
Independent Auditor's Report .....................................................................................................................................................	60
Additional Information ................................................................................................................................................................	66
Corporate Directory....................................................................................................................................................................	68

Comet Ridge Limited - Annual Report for the Year Ended 30 June 2020

Overview of Activities

Key Points

• Underlying loss after tax of $4.8 million (2019: $4.0 million).
• Statutory net loss after tax of $10.4 million after write-off of $5.6 million of previously capitalised exploration and evaluation expenditure.
• Cash balance of $4.6 million at 30 June 2020, boosted after year end with receipt of $1.3 million of research and development tax incentives.
• Mahalo Gas Project awarded Environmental Approvals and Petroleum Leases.
• Mahalo North awarded Authority to Prospect (ATP 2048).
• Mahalo Gas Hub position boosted after year end with two new blocks (east of Mahalo North) to be awarded to Comet Ridge.

Highlights

Comet Ridge has key gas assets in three basins in eastern Australia, split into two groups:

1. The newly won Mahalo North Block (ATP 2048) and Mahalo Gas Project, that are close to infrastructure and existing producing fields and are better suited for near-term production.
2. The Galilee and Gunnedah Basin assets, that cover extremely large areas and are in the exploration and appraisal phase.

Key developments for the 2020 financial year include:

ü Mahalo North

1. In October 2019, Comet Ridge was appointed preferred tenderer for the 450km2 Mahalo North block. The block is highly prospective, located directly north and contiguous with the Mahalo Gas Project and is close to infrastructure.

1. Comet Ridge Mahalo North Pty Ltd was formally awarded Authority to Prospect (ATP) 2048 on 29 April 2020 as 100% equity holder.

1. Modelling of data across the Mahalo North Block estimates that a 1500m long dual lateral well, could flow gas in the range of 2-3 TJ/d which is consistent with the observed performance of both Mahalo 7 and Mira 6 lateral wells in the Mahalo Gas Project Area.

1. Non-bindingletter of intent signed with adjacent gas producer and infrastructure owner Denison Gas (Queensland) Pty Ltd to explore options for gas processing and transport services from Mahalo North via the Denison Gas Pipeline to Queensland Gas Pipeline which connects Gladstone and the domestic market.

1. Application for a Petroleum Survey Licence (PSL) for the Greater Mahalo Development Area submitted to DNRME late in the June 2020 quarter.

ü Mahalo Gas Project

1. Three key government approvals for the Mahalo Gas Project occurred during the June 2020 quarter:
2. 1. The Department of Agriculture, Water and the Environment granted approval under the Commonwealth Government Environment Protection and Biodiversity Conservation Act (EPBC).
   2. Queensland Department of Environment and Science granted environmental approval for the Mahalo Gas Project, and;
   3. Queensland Department of Natural Resources, Mines and Energy granted Petroleum Leases (PLs) 1082 (Humboldt) and 1083 (Mahalo) for a term of 30 years. These Petroleum Lease awards are the final joint venture regulatory approval required for the project to move forward to production.

1. Award of Potential Commercial Area (PCA) 302, PCA 303 and PCA 304 over the southern part of the Mahalo Project Area on 8 April 2020.

ü Galilee Permits

1. Interpretation of the 2019 Koburra 2D seismic acquisition program and subsequent processing resulted in the identification of regional trends, firming up existing leads and prospects and identification of new leads across the Deeps Project Area.

1. Confirmation of four-way dip closure on the Lake Galilee Structure, elevating it to a drillable target.

1. Albany 2 well spudded on 30 July 2019 and was drilled to a total depth of 2702m. Wireline logs indicated good reservoir quality and the presence of gas in the target reservoir. 62m of core was also acquired across key reservoir intervals.

1. Successful sidetrack of Albany 1 to a total depth of 2822m. Strong gas shows were measured throughout the entire section.

Comet Ridge Limited I Annual Report 2020

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Comet Ridge Limited - Annual Report for the Year Ended 30 June 2020

1. Three intervals of the Lake Galilee Sandstone were successfully stimulated in the Albany 2 well in December 2019. This was the first attempt to stimulate the Lake Galilee Sandstone reservoir section in the Galilee Basin and vindicates the view that the reservoir is a high-grade stimulation candidate.

1. The three intervals were successfully flowed back with the assistance of nitrogen, with over 90% of the stimulation fluid being recovered. Analysis of a gas sample collected during build-up period over Christmas shut-down confirmed gas composition is comparable to Albany-1 gas.

1. Vintage Energy Limited (Vintage) earned an additional 15% interest in the Galilee "Deeps" Joint Venture by funding its contribution to the 2D seismic program and Albany drilling program, bringing its total interest to 30%.

ü Gunnedah

1. The NSW Department of Planning, Industry and Environment (DPIE) recommended approval of Santos's Narrabri Gas Project with conditions in mid-June 2020. The project is being considered by the NSW Independent Planning Commission to make a final determination on the project in 2020. If Santos is successful with its development application, that would potentially re-open the Gunnedah acreage for appraisal. Comet Ridge continues to be in a position to watch and follow.

ü Corporate

1. On 27 November 2019, Comet Ridge successfully raised $10.0m via a placement to institutional and sophisticated investors. This was immediately followed by the opening of a Share Purchase Plan which closed on 17 December, raising a further $1.6m for the Company.

1. A strategic review of the Company was completed and as a result the board determined the best way to maintain value to shareholders was achieved by retaining both asset groups under one corporate structure and primarily focussing on the 100% Mahalo North block - bringing it into production in a low cost, fit for purpose development.

1. As a result of Coronavirus (COVID-19) and the fall in the oil price, the Board and Management of Comet Ridge Limited committed to reduce capital spend during this volatile time which included cuts to contractor numbers and days, reductions to staff salaries and Directors fees (net of superannuation and tax) to be taken in equity (subject to shareholder approval).

1. In accordance with relevant accounting standards, Comet Ridge has conducted a detailed review of asset carrying values at 30 June 2020, resulting in a non-cashwrite-off of previously drilled and capitalised coal seam gas wells in the Company's Galilee Basin permits totalling $5.48 million. These wells are in areas likely to be relinquished in the future as part of the Company's applications for Potential Conventional Areas over the most prospective parts of the permits or that lie outside the defined CSG fairway. Comet Ridge has a very large acreage and Contingent Resource position in the Galilee Basin and future appraisal and development of the CSG "Shallows" and conventional "Deeps" projects remain a key priority for the Company.

1. The potential of Comet Ridge's Galilee Basin permits have been boosted by the recent Federal Government announcement to prioritise the Galilee Basin (along with the North Bowen and Beetaloo Basins) for new gas supply to underpin the post-COVID national economic recovery.

1. Subsequent to year end, cash receipts of $1.3m were received relating to FY 2018 and FY 2019 refundable Research & Development tax offsets.

1. Comet Ridge made two key appointments during the year:
2. 1. Former Arrow Energy chief executive, Shaun Scott joined the board as a Non-executive Director on 16 October 2019; and
   2. Phil Hicks as Chief Financial Officer (on a contract basis) on 1 July 2020.

1. Comet Ridge announced on 21 September 2020 that its Mahalo Gas Hub position was significantly expanded with two new blocks (east of Mahalo North) to be awarded by the Queensland Government as part of their recent tender process.

Permit Interest

Comet Ridge has interests in five permits in the Bowen and Galilee Basins in Queensland, and three in the Gunnedah Basin in New South Wales (Figure 1 and Table 1). Comet Ridge is in the process of surrendering its 100% interest in PMP 50100 in New Zealand. This is currently being processed by New Zealand Petroleum and Minerals.

Comet Ridge Limited I Annual Report 2020

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