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UNITED STATES SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 20-FANNUAL REPORTFOR FISCAL YEAR 2007 ENDED JUNE 30, 2007

REGISTRATION STATEMENT PURSUANT TO SECTION
      12(b) OR (g) OFTHE SECURITIES EXCHANGE ACT OF 1934ORXXX
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR
      15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934; for
      fiscal year ended 6/30/07ORTRANSITION REPORT PURSUANT TO SECTION 13 OR
      15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934


Commission file number 0-17863

CONTINENTAL ENERGY
CORPORATION(Exact name of Registrant as specified in
its charter)

British Columbia, Canada(Jurisdiction
of incorporation or organization)

14001 Dallas Parkway, Suite 1200, Dallas, Texas 75240,
USA(Address of principal executive offices)

Securities to be registered pursuant to
      Section 12(b) of the Act:
    NoneSecurities to be registered pursuant to
      Section 12(g) of the Act:
    NoneSecurities for which there is a reporting
      obligation pursuant to Section
    None15(d) of the Act:Indicate the number of outstanding shares
      of each of the issuer's classesof
      capital or common stock as of the close of the period covered by
    68,637,381the annual report:
      Common SharesIndicate by check mark whether the
      registrant(1)has filed all reports required to be filed by Section 13 or
      15(d) of the Securities Exchange Act of 1934 during the preceding 12
      months (or for such shorter period that the registrant was required to
      file such reports), and (2) has been subject to such filing requirements
      for the past ninety days.Yes
    No XXXIndicate by check mark which financial statement
      item the registrant has elected to follow:
    Item-17XXX
    Item-18 ____


Report Date : October 29, 2007

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CONTINENTAL ENERGY CORPORATIONForm 20 F Annual
Report Fiscal 2006 End June 30, 2006

TABLE OF CONTENTS
    PagePART-I
    ITEM-#1
    DESCRIPTION OF THE BUSINESS
    3ITEM-#2
    DESCRIPTION OF THE COMPANYS OIL & GAS
      PROPERTIES
    9ITEM-#3
    LEGAL PROCEEDINGS
    9ITEM-#4
    SHARE OWNERSHIP AND CONTROL OF THE
      COMPANY
    10ITEM-#5
    NATURE OF SHARE TRADING MARKET
    12ITEM-#6
    EXCHANGE CONTROLS LIMITATION AFFECTING
      SECURITY HOLDERS
    13ITEM-#7
    TAXATION
    13ITEM-#8
    FINANCIAL PERFORMANCE DATA &
      DISCUSSION
    14ITEM-#9
    MANAGEMENTS ANALYSIS OF RESULTS OF
      OPERATIONS
    19ITEM-#10
    DIRECTORS AND OFFICERS OF THE REGISTRANT
    25ITEM-#11
    COMPENSATION OF DIRECTORS AND OFFICERS
    27ITEM-#12
    OPTIONS TO PURCHASE SECURITIES FROM
      REGISTRANT
    28ITEM-#13
    INTEREST OF MANAGEMENT IN CERTAIN
      TRANSACTIONS
    29PART-II
    ITEM-#14
    DESCRIPTION OF SECURITIES TO BE
      REGISTERED
    29**PART-III**
    ITEM-#15
    CONTROLS AND PROCEDURES
    30ITEM-#16
    CHANGES IN SECURITIES AND SECURITY FOR
      REGISTERED SECURITIES
    30PART-IV
    ITEM-#17
    FINANCIAL STATEMENTS (Attached Hereto As
      Exhibit-11 At End Of This Form-20f)
    30ITEM-#18
    FINANCIAL STATEMENTS (Attached Pursuant
      To item-#17)
    31ITEM-#19
    EXHIBITS
    31LIST OF EXHIBITS & ATTACHMENTSExhibits-1 through Exhibit-9
    33Exhibits-10 through Exhibit-11
    34Exhibit-31 Sarbanes Oxley 302
      Certifications
    34Exhibit-32 Furnished Copy Sarbanes
      Oxley 906 Certification
    36Attachment as Exhibit-11 &
      ITEM-#17 Annual Audited Financial Statements
    37


Page - 2

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|**P A R T - I**                                    
|---------------------------------------------------
|ITEM - # 1**GENERAL
      DESCRIPTION OF BUSINESS**

The Registrants name is Continental Energy Corporation
(hereinafter also referred to as the Company). The Company is an oil and gas
exploration enterprise focusing its efforts on making commercial discoveries and
establishing petroleum production in low to medium risk and high potential
reward properties in Indonesia. The Company is an exploration stage, junior,
resource company with a non-producing oil and gas exploration property located
in Indonesia.

INTRODUCTION AND OVERVIEW

Name and Incorporation - The Company was
incorporated in British Columbia, Canada, on May 29, 1984 under the name "Intl.
Focus Res. Inc." On January 3, 1996 the name was changed to "Continental Copper
Corporation". On October 23, 1997 the name was changed to "Continental Energy
Corporation".

Domicile & Securities Regulatory Compliance -
The Companys home country is Canada. The Companys host countries by virtue of
listing of the Companys common shares for trading purposes include the United
States of America. The Companys common shares trade according to the rules and
regulations of the Companys home country securities regulatory agency, the
"British Columbia Securities Commission" or "BCSC" and the applicable laws,
rules and regulations of its host countries. The Companys only share trading
market is the NASD Electronic OTC Bulletin Board under the symbol "CPPXF". The
Company is a fully reporting US Securities Exchange Commission EDGAR filer.

Fiscal Year - The Company's fiscal year ends June
30th. At the Company's 1/25/06 Annual General Meeting the shareholders approved
a change in the date of the Company's fiscal year end from July 31, to June 30.
Therefore the date of June 30, 2006 marks the new ending date of the Company's
fiscal year and fiscal year 2006 consisted of 11 months instead of 12.

Annual Report - This US Securities and Exchange
Commission ("US-SEC") Form-20F filing is made as an "Annual Report" pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934. This Annual Report
includes audited financial statements as of the most recently completed fiscal
year ended June 30, 2006 (6/30/06 or Fiscal 2006 in the forms commonly employed
herein).

Report Date - This Annual Report was prepared in
October 2007. Information contained herein is current and valid as at October
29, 2007, (10/29/07) the "Report Date" except where the context specified
otherwise.

Principal Offices - The Company's head office is
located at 14001 Dallas Parkway, Suite 1200, Dallas, Texas 75240, USA; the
contact person is James D. Eger, Director; the telephone number is (972)
934-6774 and the facsimile number is (972) 934-6718. The internet world wide web
site URL address is www.continentalenergy.com. The e-mail address is
mail@continentalenergy.com. The Company's executive office is located in Premier
Business Centers Dallas office suites. The Company began occupying this
facility in February 2004 and considers the facility adequate for current needs.

Currency - Unless otherwise noted herein the
symbol $ refers to US Dollars. The term CDN$ refers to Canadian Dollars. Rupiah
or its abbreviation Rp. refers to currency of the Republic of Indonesia.

Definitions, Terminology, Abbreviations & Conversions- Information on definitions, terminology, concepts and provisions of
Production Sharing Contracts is included in the Exhibits hereto. Particularly,
the reader is referred to ITEM-#19 below together with the external information
sources referred to therein for a glossary and definitions of many technical and
contractual terms used in this report.

COMMON SHARES AND TRADING MARKETS

All references herein to common shares refer to the Company's
authorized share capital of "Common Shares" without Par Value unless otherwise
indicated. All references herein to common shares refer to the Company's
authorized share capital of "Preferred Shares" without Par Value unless
otherwise indicated. The Preferred Shares are not listed or registered for
trading on any exchange or trading system. The only share trading market for the
Common Shares is the NASD Electronic OTC Bulletin Board under the symbol
"CPPXF".

SUBSIDIARIES

Continental Energy Corp. Prior to 1998 the
Company conducted some business in the United States through its wholly-owned
subsidiary, Continental Energy Corp., a Nevada Corporation, incorporated on
10/07/97 with its registered office address at Suite 260, 6121 Lakeside Drive,
Reno, Nevada. At the Report Date this subsidiary is inactive. It has been
dormant since 1998 and the Company has no short term plans to revive it.

Page - 3

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Continental-GeoPetro (Bengara-II) Ltd. is a
company incorporated on 09/09/97 under the British Virgin Islands International
Business Corporations Act of 1988 with an authorized share capital of $50,000
consisting of 50,000 common shares having par value of $1.00 each. Pursuant to a
name change certificate dated 06/05/03 the name was changed from "Apex
(Bengara-II) Ltd." as originally incorporated to "Continental-Wisdom-GeoPetro
(Bengara-II) Ltd." The name was changed again on 12/17/03 to
"Continental-GeoPetro (Bengara-II) Ltd." (CGB2). CGB2 was incorporated
expressly for the sole purpose of holding and operating the Bengara-II Block
property pursuant to Bengara-II production sharing contract. CGB2 has no other
business or assets and owns only a 100% undivided holding in the Bengara-II PSC.
During Fiscal 2007, the Company sold 70% of its interest in CGB2 (See section
below in this report entitled Disposition of Interest in Principal
Properties). At the Report Date, the Company owns 9,000 common shares of CGB2
representing an 18% stake and a corresponding 18% stake in its Bengara-II Block
property. GeoPetro Resources Company of San Francisco owns 6,000 common shares
representing a 12% shareholding in CGB2 and CNPC (Hong Kong) Ltd. of Hong Kong
owns 35,000 common shares representing a 70% shareholding.

CG Xploration Inc. On 11/18/05 the Company
incorporated a new jointly owned and jointly controlled special purpose joint
venture subsidiary domiciled in Delaware named CG Xploration Inc. (CGX). CGX
is incorporated with an authorized share capital of 1,000 common shares having a
par value of $0.01 each. The Company owns 500 shares representing a 50% stake in
CGX and GeoPetro Resources Company of San Francisco also owns 50%. At the Report
Date CGX has no properties but through it the Company continues to create,
review, and evaluate new venture oil and gas exploration and production
opportunities in Indonesia in accordance with a CGX shareholders agreement dated
1/1/07. CGX is accounted for as a joint venture in the Company's financial
statements and further discussion of CGX is made in the following section
entitled "Joint Ventures".

TXX Energy CorporationOn 1/16/06 the Company
incorporated a new wholly owned special purpose subsidiary in Texas named TXX
Energy Corporation (TXX). The registered office address of TXX is Suite 1200,
14001 Dallas Parkway, Dallas, Texas, 75240. TXX was formed for the purposes of
pursuing oil and gas exploration and production opportunities in the USA. At the
Report Date TXX has no properties but through it the Company continues to review
USA oil and gas exploration and production opportunities from time to time.

Continental Biofuels CorporationOn 8/30/07 the
Company incorporated, as a cofounder, a new partially owned, special purpose
joint venture subsidiary domiciled in Delaware named Continental Biofuels
Corporation (CBC). The registered offices of CBC are located at 16192 Coastal
Highway, Lewes, Delaware, 19958. CBC is incorporated with an authorized share
capital of 3,000 common shares having a par value of $0.01. The Company
subscribed and purchased 1,000 shares of the 2,500 issued and fully paid share
capital of CBC representing a 40% stake in CBC. The remaining 60% stake in CBC
is held by a cofounder group of five private investors led by Casimir Capital LP
of New York which includes two Directors of the Company, each holding a 10%
stake. At the Report Date the Company exerts significant management control of
CBC because the two sole directors of CBC area also officers and directors of
the Company. The Company expects this management control to be relinquished and
the Companys shareholding stake to be diluted in the short term as new
investors enter CBC as contemplated in the cofounders CBC shareholders
agreement dated 10/17/07. At the Report Date CBC has no properties but is
planning new joint venture palm oil to biodiesel projects in SE Asia with
existing palm oil plantation owners.

JOINT VENTURES

At the Report Date the Company does not participate in any
active joint ventures pursuant to joint operating agreements. However, the
Company does participate in certain jointly owned and jointly controlled special
purpose joint venture subsidiaries.

Bengara-II Block Exploration: Joint VentureDuring Fiscal 2007, in a letter agreement dated 09/29/06 the Company and
GeoPetro Resources Company agreed to terminate in its entirety the Bengara-II
joint operating agreement. This terminations coincided with the sale by the
Company and by GeoPetro of 70% of each of their respective shares of Bengara to
CNPCHK (See disposition to CNPCHK in the section entitled Disposition of
Interest in Principal Properties below).

CG Xploration Inc.: Joint Venture SubsidiaryOn
11/18/05 the Company incorporated a new jointly owned and jointly controlled
special purpose joint venture subsidiary domiciled in Delaware named CG
Xploration Inc. (CGX). The Company owns 50% of CGX and GeoPetro Resources
Company (GeoPetro) of San Francisco owns 50%. CGX was formed for the express
purpose of identifying, evaluating, and acquiring new oil and gas production
sharing contracts with the Indonesian government in new areas limited to the
Indonesian portions of the islands of Borneo and New Guinea. CGX is accounted
for as a joint venture in the Company's financial statements. The Company and
GeoPetro jointly control the operations of CGX in the proportions 50/50 in
accordance with a CGX shareholders agreement dated 1/1/07. See further
discussion of CGX in the previous section entitled "Subsidiaries".

CURRENCY AND EXCHANGE RATES

The Company's financial statements are stated in US Dollars
(US$) and are prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP); nevertheless, the financial statements conform in all
material respects with US GAAP, except as disclosed in footnotes to the
financial statements. The Company transacts business in three currencies;
Canadian Dollars, USA Dollars and Indonesian Rupiah. Herein, all references to
"CDN$" refer to Canadian Dollars and all references to "$" or "US$" refer to
United States Dollars, unless otherwise specified. The Government of Canada
permits a floating exchange rate to determine the value of the Canadian Dollar
against the US Dollar. Herein, all references to "Rupiah" and "Rp." refer to the
Indonesian currency Rupiah. The Government of Indonesia permits a floating
exchange rate to determine the value of the Rupiah against the US Dollar. A
substantial portion of the Companys oil and gas property operating expenditures
is transacted in Rupiah. Table No. 1 sets forth the rate of exchange for the
Canadian Dollar at the end of each of the five most recent fiscal years, with
years 2002  2005 ended July 31st and 2006 and 2007 ended June
30th. the average rates for the year, and the range of high and low
rates for each year. For purposes of this Table No. 1, the rate of exchange
means the noon buying rate in New York City for cable transfers in foreign
currencies as certified for

Page - 4

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customs purposes by the Federal Reserve Bank of New York. The
table sets forth the number of Canadian Dollars required under that formula to
buy one US Dollar. The average rate means the average of the exchange rates on
the last day of each month during the period. Table No. 1 also sets forth the
rate of exchange of the Indonesian Rupiah against the US Dollar at the end of
the past six calendar years sourced from the internet URL
www.forexdirectory.net/idr.html.

Table No. 1 RELEVANT
      FOREIGN CURRENCY EXCHANGE RATES Canadian Dollars Equal to
      One USA DollarAverage
    High
    Low
    CloseMonth Ended 09/30/07
    1.0301
    1.0594
    0.9914
    0.9929Fiscal Year Ended
      06/30/07
    1.1330
    1.1873
    1.0461
    1.0593Fiscal Year Ended 06/30/06
    1.1588
    1.2187
    1.0990
    1.1150Fiscal Year Ended
      07/31/05
    1.20
    1.2260
    1.1834
    1.1876Fiscal Year Ended 07/31/04
    1.33
    1.3324
    1.3184
    1.1860Fiscal Year Ended
      07/31/03
    1.50
    1.59
    1.33
    1.41


Indonesian Rupiah Equal to One USA DollarSpot RateMonth Ended
      09/30/07
    9,065Fiscal Year Ended
      06/30/07
    9,010Fiscal Year Ended
      06/30/06
    9,262Fiscal Year Ended
      07/31/05
    10,175Fiscal Year Ended
      07/31/04
    9,350Fiscal Year Ended
      07/31/03
    8,529


CURRENT STATUS SUMMARY OF THE COMPANYS OIL & GAS
PROPERTIES

A summary of the current status of the Companys oil and gas
properties at the Report Date is set out in this section below. For additional
descriptive detail of the Companys oil and gas properties see section in this
report below entitled ITEM-#2 "Description of the Oil and Gas Properties.

Location of Companys Oil & Gas Properties -
As of the Report Date the Companys oil and gas properties are located as
follows:

The Bengara-II Block property is
located mostly onshore and partially offshore in the Indonesian province of East
Kalimantan on the east coast of the island of Borneo.

Property Lease Hold Situation - As of the Report
Date the Companys oil and gas properties lease hold situation is as follows:

The Bengara-II Block property is
held pursuant to a "Production Sharing Contract" ("PSC") dated 12/04/97 between
the Companys 18% owned Continental-GeoPetro (Bengara-II) Ltd. (CGB2)
subsidiary and the Minister of Mines and Energy of the Republic of Indonesia.
CGB2 is the sole party to the PSC and owner of 100% of the production sharing
contractors rights to the Bengara-II property in accordance with the provisions
of the PSC. The Bengara-II PSC provides for CGB2 to take up to 80% of the
revenues from all petroleum sales to reimburse 100% of its sunk historical
exploration/development investment together with current period production
operating costs as non-taxable "Cost Recovery". Any revenues from any production
period remaining after CGB2 receiving such Cost Recovery are "split" and shared
26.7857% to CGB2 and 73.2143% to BPMigas in the case of crude oil and 62.50% to
CGB2 and 37.50% to BPMigas in the case of natural gas. The Company owns an 18%
shareholding interest in CGB2. For additional details on the Bengara-II PSC
terms and conditions see the following paragraph and also the subsection
Material Commitments in ITEM-#9 Management's Discussion And Analysis Of
Financial Condition And Results Of Operation of this report below.

The Production Sharing Contract or
PSC is the form by which the government of Indonesian grants oil and gas
concession rights. In return for a commitment to conduct an exploration work
program of PSC specified, annual minimum expenditure monetary amounts, a "Work
Program", a PSC Contractor will receive exclusive rights to explore for and
exploit and produce any petroleum found within his PSC contract area for a term
of 30 years consisting of an 10-year exploration period followed by a 20-year
production period. The signature feature of the PSC contract is the concept and
provision for "Cost Recovery". Cost Recovery provisions permit any Contractor
making a commercial discovery of petroleum within his PSC contract area to fully
recover ALL of his prior expenditures within the PSC contract area out of first
revenue from oil and gas production prior to sharing any remaining revenue with
the government. The Indonesian government regulatory agency known as BPMigas
administers PSC contracts and regulates the activities of all PSC Contractors
in Indonesia.

Companys Net Ownership Position
in its Properties - As of the Report Date the Company owns a net
interest in oil and gas properties as follows:

Bengara-II Block Property
Ownership. The Company owns 18% of the authorized and issued share capital
of Continental-GeoPetro (Bengara-II) Ltd. and through it a corresponding 18%
ownership of the Bengara-II PSC and the Bengara-II Block property.

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Companys Property Acreage Position- As of the
Report Date the Company owns oil and gas property acreage positions as follows:

Bengara-II Block Acreage. The
Company owns an 18% interest in approximately 599,722 gross acres in the
Bengara-II Block property corresponding to a "net" acreage holding of 107,950
acres according to its 18% proportional share of ownership. Originally the
Bengara-II Block consisted of an area of 4,867 square kilometers or about 1.2
Million acres. However the PSC dictates periodic relinquishments of portions of
the PSC contract areas and in June 2001 and again in March 2007 partial
relinquishments of acreage were made reducing the total area of the Bengara-II
Block to the 599,722 gross acres currently held.

ACQUISITION OF INTEREST PRINCIPAL PROPERTIES

During Fiscal 2007 the Company made no new acquisitions of oil
and gas properties. At the commencement and end of Fiscal 2007 the Company owned
an interest in one principal oil and gas property, in Indonesia. These
properties are described in more detail in the section of this report entitled
ITEM-#2: "Description of the Companys Oil and Gas Properties" below. The
original acquisition of interests in these properties by the Company is further
described as follows:

Bengara-II Property
Acquisition-In accordance with a shares sale and purchase agreement
dated effective 8/01/98 the Company purchased 50,000 common shares of
Continental-GeoPetro (Bengara-II) Ltd. (CGB2). The 50,000 shares purchased
represent 100% of the authorized, issued and outstanding share capital of CGB2
making it then a wholly owned subsidiary of the Company. Since CGB2 owns a 100%
interest in the Bengara-II Production Sharing Contract covering the Bengara-II
Block the Companys 100% ownership in CGB2 reflects a corresponding 100%
ownership in the Bengara-II property. Since acquisition, some dispositions of
Bengara-II property interest have been made. See section entitled "Disposition
of Interest in Principal Properties" below.

DISPOSITION OF INTEREST IN PRINCIPAL PROPERTIES

During Fiscal 2007 the Company made a disposition of a portion
of its interest in Continental-GeoPetro (Bengara-II) Ltd. (CGB2) and its
Bengara-II Production Sharing Contract covering the Bengara-II Block property.
Also, prior to Fiscal 2007 the Company had made certain earlier dispositions of
interests in CGB2 and its Bengara-II Block oil and gas properties as follows:

GeoPetro Disposition - During
Fiscal 2000, in a farm-out agreement dated effective 1/01/00 (the GeoPetro
FOA") the Company farmed out a 40% of its 100% undivided interest in its
Bengara-II Block property to GeoPetro Resources Company (GeoPetro) in the form
of a sale of a corresponding 40% stake in the authorized share capital of
Continental-GeoPetro (Bengara-II) Ltd. (CGB2). The Company retained a 60%
interest stake in CGB2 and through it a corresponding 60% stake in the
Bengara-II Block property. The Company and GeoPetro also entered into a joint
operating agreement dated effective 1/01/00 (the "JOA") which define the roles
of the Company and GeoPetro with respect to the operations of the Bengara-II
Block property as well as the CGB2 holding and property operating company. In an
agreement dated 9/29/06 the Company and GeoPetro terminated the provisions of
both the GeoPetro FOA and the Bengara-II JOA. These terminations coincided with
the sale by the Company and by GeoPetro of 70% of each of their respective
shares of Bengara to CNPCHK (See disposition to CNPCHK below).

CNPCHK Disposition - During
Fiscal 2007, the Company and GeoPetro each sold, pursuant to a share sale and
purchase agreement dated 9/29/06, a 70% portion of their respective shares of
Continental-GeoPetro (Bengara-II) Ltd. (CGB2) to CNPC (Hong Kong) Ltd.
(CNPCHK). The Company retained an 18% share of CGB2 and its Bengara-II
Production Sharing Contract covering the Bengara-II Block property. To earn its
70% stake in the Bengara-II Block property: 1) CNPCHK paid an earning obligation
in cash in the amount of $18,700,000 into CGB2 to be used exclusively to pay for
drilling of exploratory and other wells and CGB2 operating costs on the
Bengara-II Block property; 2) CNPCHK will provide low interest development loans
funding of CGB2 and carry the Companys 18% share of such costs for appraisal
and development work until the earlier of a) an additional amount of $41,300,000
over and above the $18,700,000 earning obligation funds has been expended or b)
the month after the first commercial lifting of crude oil from the Bengara area
is delivered and sold; and 3) CNPCHK will pay a cash bonus in the amount of
$3,000,000 to the Company and $2,000,000 to GeoPetro contingent upon the
approval by Indonesian authorities of the first plan of development (POD) for
any oil and gas discovery within the Bengara area.

OPERATORSHIP AND MANAGEMENT

The Company does not directly manage operations of its resource
properties. Management and operatorship of each property is the responsibility
of one of the Companys subsidiary or affiliate companies and the degree of
control over direct management of each property exerted by the Company is
largely dependent upon the amount of participating interest held by the Company
in the subsidiary or affiliate in proportion to that held by other interest
holders. Other factors affecting the degree of Companys direct control include
the number of Company designated directors on the boards of the subsidiaries and
affiliates and the provisions of any applicable joint venture agreements or
shareholders agreements in effect. As of the Report Date the management and
control of the Companys oil and gas properties is organized as follows.

The Bengara-II Block property is
owned, operated and managed by Continental-GeoPetro (Bengara-II) Ltd. (CGB2)
The Company owns an 18% share holding interest in CGB2 and may nominate 1 of 3
directors to its board. Direct property management activity of the Bengara-II
PSC and Block is exercised through CGB2 which in turn is controlled by its 70%
majority shareholder CNPCHK.

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RESERVES AND OPERATIONAL ACTIVITIES

Proven ReservesThere are no proven
reserves of any classification in any of the Companys oil and gas properties.

Wells Drilled or Participated InThe
Company participated in the drilling of 4 wells on its Bengara-II Block property
during its last 2 fiscal years and up to the Report Date.

Other Exploration and Development ActivityExploration work activity other than drilling on the Bengara-II Block
property during the last fiscal year and up to the Report Date was limited to
annual geological field surveys, selective seismic reprocessing, geological and
geophysical interpretation, evaluation, and prospect generation.

Exploration & Development ExpendituresThe Companys investments in, and joint venture reimbursements, from its
oil and gas properties are summarized in the following table:

| | Table No. 2 EXPLORATION AND DEVELOPMENT
      EXPENDITURES |     |                 |                
| | ---------------------------------------------------------- | --- | --------------- | ---------------
| |                                                            |     | Fiscal Year End | Fiscal Year End
| |                                                            |     | 6/30/07         | 6/30/06        
| | Investment (1,3)                                           |     |                 |                
| | Bengara (2)                                                | US$ | 259,886         | 343,914        
| | Yapen (5)                                                  | US$ | -               | -              
| | Bangkudulis (2,4)                                          | US$ | -               | -              
| | Joint venture                                              |     |                 |                
| | Reimbursements (3)                                         |     |                 |                
| | Bengara                                                    | US$ | 146,500         | 352,104        
| | Yapen (5)                                                  | US$ | -               | -              
| | Bangkudulis (4)                                            | US$ | -               | -              

| | Notes to the Table:                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. The differences in the timing of the investing
      activities are largely attributable to the timing of expenditures on the
      Indonesian properties due to the availability of cash for investment.
| | 2. The Company continues to evaluate expenditures for
      impairment as incurred and writes off impaired costs in the period when
      incurred.                                                         
| | 3. Some differences in prior periods due to change of
      fiscal year end from 7/31/06 to 6/30/06.                                                                                                        
| | 4. The Company sold 100% of its interest in the Bangkudulis
      property in Fiscal 2005 on 7/31/05.                                                                                                       
| | 5. The Company sold 100% of its interest in the Yapen
      property in Fiscal 2006 on 10/26/05.                                                                                                            

Competitive Conditions - The oil and gas industry
is highly competitive. This competition includes 1) bidding for oil and natural
gas rights; 2) obtaining often limited amounts of risk capital for necessary
exploration and drilling expenditures and 3) marketing of produced oil and gas.
In each case the Company will be competing with other companies and individuals,
some of which have far greater resources than those possessed by the Company.

Environmental Protection Requirements - Under the
terms of its Indonesian concessions the Companys minority owned subsidiary
Continental-GeoPetro (Bengara-II) Ltd. (CGB2) is obligated to conduct an
environmental baseline study in each PSC contract area prior to commencing
activities. CGB2 is also obligated to take necessary precautions to protect
ecological systems, navigation and fishing and prevent pollution of land, sea or
rivers during petroleum operations. Upon expiration, termination or
relinquishment of any part of the contract area or abandonment of any field,
CGB2 is obliged to remove all equipment and installations brought by CGB2 to the
contract area and to perform all necessary site restoration activities required
by law. In the event CGB2 assigns its operations and interest in the contract
area to another party or to BPMigas or to a BPMigas designee, then CGB2 will be
released from its obligation to remove equipment and installations and restore
the site further, provided that in such event CGB2 will transfer all accumulated
funds reserved for such removal and restoration to BPMigas.

CGB2 is obliged to include in the annual work program and
budget submission to BPMigas/Pertamina provision for and estimates of
anticipated abandonment and site restoration costs for each well drilled in the
contract area by CGB2. In so doing, CGB2 ensures ultimate cost recovery from
production proceeds of all such abandonment and site restoration costs that CGB2
may incur. It is obliged to include in the requisite plan of development,
submitted to BPMigas/Pertamina for each commercial discovery, provision for, and
estimates of, anticipated field abandonment and field facilities site
restoration costs, together with a plan for reserving funds over the productive
life of a field to pay for the abandonment and restoration. These funds are
included in the AWP&B for each calendar year. CGB2 is thereby entitled to
cost recovery from production proceeds of all such abandonment and site
restoration costs. See also section below ITEM-#9: "Risk Factors - Environmental
Risks" for further specific discussion of specific environmental regulations
applicable to CGB2's Indonesia oil and gas properties and operations.

Staffing and Employees - The Company employs and
pays 100% of the costs of one full-time administrative staff in its Dallas
office, its VP and acting CFO. The Dallas office handles financial,
administrative, corporate governance and securities regulatory matters.
Independent legal counsel, accountants, auditors and engineers are retained and
utilized as required.

The Companys 50% owned joint venture company, CG Xploration
Inc. (CGX) maintains a 400 square meter office in Jakarta with a full time
staff of 12 for the purposes of new venture development. Costs of running the
CGX Jakarta offices, including personnel costs are shared 50/50 by the Company
and the Companys CGX joint venture partner GeoPetro Resources Company.

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Currently the Company has adequate staff and personnel to carry
out its exploration and development programs planned for next year. Accordingly,
the Company does not anticipate any significant addition to personnel during the
next year unless new projects are realized. There is no collective bargaining
agreement in place with any staff.

Regulations and Government Rules- Normal
practices to reduce noise, changes to air quality and water quality are expected
to be sufficient. The Company has obtained all necessary permits for
exploration/development work performed to date and anticipates no material
problems in obtaining the necessary permits to proceed with development. The
Company is aware of no proposed or existing Indonesian regulations pertaining to
environmental matters which might have a material impact on the Company's future
financial performance with the exception of those matters discussed in ITEM-#9.

Competition- There is competition from other
oil/gas exploration/development companies with operations similar to that of the
Company's. Many of the companies with which the Company competes have operations
and financial strength many times that of the Company. Nevertheless, the market
for the Company's possible future production of oil/gas tends to be commodity
oriented, rather than company oriented. Accordingly, the Company expects to
compete by keeping its production costs low through judicious selection of which
portions of its properties to develop and keeping overhead charges within
industry standards.

Revenues- The Company generated no material
revenue from operations during the last five fiscal years.

Foreign Operations- All of the Company's
resource properties and the focus of its operations and growth strategy lays
overseas in the Republic of Indonesia. This concentration of assets and effort
involves a high degree of political risk unique to the situation of the country
in which such operations are focused. See ITEM-#9 section "Political Risk" for
further specific discussion of Indonesia political risk.

USA vs. Foreign Sales/Assets- At fiscal years
ended 6/30/07, 6/30/06, and 7/31/05 respectively $150,034, $129,775, and $56,861
of the Company's assets were located in Indonesia and $1,613,914, $2,387,240,
and $240,240 of the assets were located in Canada. The Company does not have any
material assets in the United States. The Company has no sales for the years
ended 6/30/07, 6/30/06, and 7/31/05.

PLAN OF OPERATIONS

Sources of Funds, Liquidity and Working
CapitalThe Company has been acquiring and exploring oil/gas
properties and at the end of Fiscal 2007 had not received material revenue from
operations. The Company does not anticipate material revenue from operations
during Fiscal 2008. At the Report Date:

The Company had 13,740,000 warrants
outstanding entitling the holders to purchase 13,740,000 common shares at prices
between $0.15 and $1.00. See Table No. 4 below. Although there are no guarantees
that any warrants will be exercised the Company would receive additional capital
upon any warrant exercise.

The Company had 5,150,000 stock options
outstanding entitling the holders to purchase 5,150,000 common shares at prices
between $0.15 and $0.65. See Table No. 4 below. Although there are no guarantees
that any options will be exercised the Company would receive additional capital
upon any option exercise.

The Company continually seeks new
private placements and from time to time considers other equity offerings of its
securities with investors to provide funds required for acquisition of new
properties and future work on those properties during future fiscal years;
however, there can be no assurance that any further external financings can be
completed.

Uses of FundsThe Company anticipates
cash demands for calendar 2008 in respect of further appraisal and exploration
drilling in the Bengara-II Block but will not have an estimation of the
magnitude of these demands until the 2007 drilling program is completed. The
Company intends to spend internally available funds during 2008 on the
identification, evaluation and acquisition of new international oil and gas
properties, particularly in Indonesia.

****ITEM - # 2 DESCRIPTION OF OIL
& GAS PROPERTIES****

SUMMARY DESCRIPTION OF THE BENGARA-II BLOCK

The Bengara-II Block is located mostly onshore but partially
offshore astride the Bulungan River Delta in the Indonesian province of East
Kalimantan on the northeast coast of the island of Borneo. The Bengara-II Block
originally provided the Company oil and gas exploration and production rights to
a total area of 4,867 square kilometers or about 1.2 Million acres; however in
June 2001 and March 2007 two mandatory partial relinquishments of acreage as
stipulated in the Bengara-II PSC reduced the total area of the Bengara-II Block
to 2,247 square kilometers or 599,722 acres. The Bengara-II Block can be
characterized as a high potential medium risk oil and gas exploration property.
There has been one well drilled on the property that encountered significant
flows of gas and gas condensate. There is no current oil or gas production on
the property.

Geological Setting- Geologically the Bengara-II
Block lies in the Tarakan Basin near major oilfields on Tarakan and Bunyu
Islands. More than 310 million barrels of oil and 97 billion cubic feet of gas
have been produced from the Tarakan Basin from 349 wells in 15 recognized
fields. Over 7,000 meters of highly prospective deltaic sediments are expected
to exist in the eastern portion of the Block and the presence of high quality
reservoir

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sands in close juxtaposition to organically rich and thermally
mature source rocks is well documented. Sedimentary conditions for the
generation and preservation of hydrocarbons in the Bengara-II Block are ideal
throughout the entire expected stratigraphic section.

Muara Makapan-#1 Gas and Condensate Discovery-
Since 1938, only two wells have been drilled in the Bengara-II Block. One of
these is a substantial gas discovery. The Muara Makapan-#1 was drilled in 1988
by Deminex from a swamp barge positioned on one of the Bulungan River Delta
distributary mouth channels. It reached a total depth of 3,300 meters within the
Naintupo Formation The well was plugged and abandoned as a gas discovery. It
tested 19.5 million cubic feet of gas per day together with 602 barrels of
condensate per day from 12 meters of deltaic sandstones of the Pliocene lower
Tarakan Formation at a depth of 1,900 meters.

Old Oil Field- A striking feature of the Block
is the presence of a 1-hectare "Lake of Oil". In 1998 a Company field geology
team located the oil lake and at least four steel pipes, believed to be old
wellheads from a circa 1915 "Galiadap Field" oil production operation, still
actively leaking oil and water and feeding the "Oil Lake".

Plays & Prospects- Nearly 2,200 line
kilometers of 2D seismic data available within the Bengara-II Block are adequate
for selection of drilling prospects. The Company has identified and conceived 18
separate and unique petroleum "Plays" within the Bengara-II Block as well as 96
"Prospects" and over 450 seismically identified "Leads", many associated with
seismic character anomalies and direct hydrocarbon indications.

Calendar 2007 Drilling Program- As at the Report
Date, 3 drilling rigs and 1 workover rig engaged by the Companys Indonesian
affiliate, Continental-GeoPetro (Bengara-II) Ltd., are at work in the Bengara-II
Block drilling and testing the following 4 wells:

- Seberaba-1At the Report Date the Seberaba-1 is conducting
  tests after setting a 7 liner at 2,914m, short of its planned total depth of
  4,000m
- Seberaba-4At the Report Date the Seberaba-4 is setting a
  cement plug at 2,600m after setting 7 liner at 2,578m, short of its planned
  total depth of 2,700m.
- Seberaba-3At the Report Date the Seberaba-3 is preparing to
  sidetrack at 1,700m after getting stuck and cementing an 800m fish in the
  hole. Planned total depth is 2,800m.
- Punga-1At the Report Date the Punga-1 is drilling below
  1,500m on its way to a planned total depth of 2,800m.

Related Info on the Bengara-II Block- For
additional information on the Bengara-II Block elsewhere discussed in this
report see the sections in ITEM-#9 entitled "Bengara-II PSC Annual Work Program
and Budget" and "Bengara-II PSC Commitments".

ITEM - # 3 LEGAL
PROCEEDINGS

Except for the following, as of the Report Date, the Company
knows of no material, active or pending legal proceedings against them; nor is
the Company involved as a plaintiff in any material proceeding or pending
litigation except for the following.

- On June 22, 2007 the Company registered a claim in the Vancouver Registry
  of the Supreme Court of British Columbia against Gail Margaret Schell,
  Executrix of the estate of Gary Robert Schell; Gail Margaret Schell; and
  Milner Downs Equestrian Centre Ltd. to recover an amount of approximately
  CDN$183,000, plus interest and legal costs, that the Company believes is owed
  to it by its deceased former Director and Officer Mr. Gary R. Schell. The suit
  is in progress as of the date of the Report Date.

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ITEM - # 4 CONTROL OF
REGISTRANT

SHARE CAPITAL

Authorized Share Capital- The authorized capital
of the Company consists of Six Hundred Million (600,000,000) shares divided into
Five Hundred Million (500,000,000) common shares without par value and One
Hundred Million (100,000,000) preferred shares without par value.

Authorized Common Shares- All of the 500,000,000
authorized common shares of the Registrant are of the same class and, once
issued, rank equally as to dividends, voting powers, and participation in
assets. Holders of common shares are entitled to one vote for each share held of
record in all matters to be acted upon by the shareholders. Holders of common
shares are entitled to receive such dividends as may be declared from time to
time by the Board of Directors, in its discretion, out of funds legally
available therefore.

Authorized Preferred Shares- The authorized
capital of the Registrant includes 100,000,000 preferred shares having the
preferential rights and obligations as described in the section in Item-#9
"Authorized Capital Changed" below. The Board of Directors, using its own
discretion, may from time to time by resolution, alter the Articles of the
Company to divide the preferred shares into special series or classes of
preferred shares in differing amounts of preferred shares having separate
special terms and conditions attached to each such series. The directors may
create and designated a particular series of preferred shares, fix the number of
preferred shares to be included in such designated series, and determine the
consideration for which any series is to be sold or issued. Further, the
directors may create, define and attach special rights and restrictions to the
preferred shares of any particular series including, rates and other conditions
of any dividends; the rights and terms of provisions for cancellation,
redemption, conversion, exchange, and/or retraction of the series; and the terms
and conditions of any voting rights or restrictions. Holders of preferred shares
shall be entitled, on the distribution of assets of the Company or on the
liquidation, dissolution or winding-up of the Company, to receive before any
distribution to be made to holders of common shares or any other series or class
of shares capital ranking junior to the preferred shares as specifically
provided in the special rights and restrictions attached to any particular
series of the preferred shares issued.

Issued and Outstanding Share Capital- At the
Companys most recently completed Fiscal 2007 year end on 6/30/07 the total
number of common shares issued and outstanding was 63,372,381. As of the Report
Date the total number of common shares issued and outstanding is 68,637,381.
Zero preferred shares were issued at Fiscal 2007 year end and none are issued as
of the Report Date. The authorized and issued share capital of the Company is
summarized in the table below.

Table No. 3AUTHORIZED AND ISSUED SHARE CAPITALAuthorized Capital
    Issued and Outstanding Share CapitalType of Security
    **Number of****Shares**
    Last AuditedYear End
      6/30/07
    Last UnauditedQuarter End 9/30/07
    At The Report Date10/29/07Common Shares
    **500,000,000**
    63,372,381
    68,637,381
    68,637,381Preferred Shares
    **100,000,000**
    0
    0
    0


Fully Diluted Basis Shareholding- As at the
Report Date, on a fully diluted basis, there are 87,527,381 common shares of the
Company either issued or allocated under unexercised outstanding options and
warrants. This fully-diluted total includes 68,637,381 common shares actually
issued and outstanding plus 13,740,000 outstanding unexercised warrants and plus
5,150,000 outstanding unexercised options to purchase additional common shares
as summarized in the table below.

Table No. 4 FULLY DILUTED SHAREHOLDINGType of Security
    Last AuditedYear End
      6/30/07
    Last UnauditedQuarter End 9/30/07
    At The Report Date10/29/07Common Shares
    63,372,381
    
    68,637,381
    
    68,637,381Warrants
    3,725,000
    
    13,740,000
    
    13,740,000Options
    4,650,000
    
    5,150,000
    
    5,150,000Fully
      Diluted Total
    71,747,381
    
    87,527,381
    
    87,527,381


RIGHTS AND RESTRICTIONS OF SHARE CAPITAL

Upon liquidation, dissolution or winding up of the Registrant,
holders of common shares are entitled to receive pro rata the assets of the
Registrant, if any, remaining after payments of all debts and liabilities. No
shares have been issued subject to call or assessment. There are no pre-emptive
or conversion rights and no provisions for redemption or purchase for
cancellation, surrender, or sinking or purchase funds. The Company is not aware
of any Restrictions or limitations on the rights of non-resident or foreign
owners to hold, vote, or receive remittance on the Registrant's securities,
other than those discussed in ITEM-#6, "Exchange Controls and Other Limitations
Affecting Security Holders". There are no restrictions on the repurchase or
redemption of common shares of the Registrant while there is any arrearage in
the payment of dividends or sinking fund installments. Provisions as to the
modification, amendment or variation of such shareholder rights or provisions
are contained in the Company Actof British Columbia. Unless the
Company Actor the Registrant's Articles or memorandum otherwise provide,
any action to be taken by a resolution of the members may be taken by an
ordinary resolution or by a vote of a majority or more of the shares represented
at the shareholders' meeting. The Registrant's Articles and the B.C. Company
Actcontain provisions which require a "special resolution" for effecting
certain corporate actions. Such a "special resolution" requires a three-quarters
vote of shareholders rather than a simple majority for passage. The principle
corporate actions that

Page - 10

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require a "special resolution" include: a) Transferring
Company's jurisdiction from British Columbia to another jurisdiction; b) Giving
material financial assistance to executive officers and/or directors; c)
Material conflicts of interest by Directors; d) Disposing of all/substantially
all of Company's undertakings; e) Removing a Director before expiration of term
of office; f) Certain alterations of share capital; g) increasing the number of
authorized shares; h) subdivision, consolidation and/or changes in shares; i)
reduction in capital; j) Changing the Company name; k) Altering any restrictions
on the Company's business; and l) Amalgamations with another company.

SHARE HOLDING DISTRIBUTION

Principal Escrow Shares - As of the Report Date
there are no Company securities held in escrow for any purposes.

Options and Warrants - Refer to ITEM-#12,
"Options to Purchase Securities from Registrant or Subsidiaries", for a
description of stock options and share purchase warrants.

Nationality of Shareholders - The Company is a
publicly-owned corporation the shares of which are owned by Canadian residents,
US residents, and residents of other countries, most notably Indonesia. The
Company is not owned or controlled directly or indirectly by another corporation
or any foreign government, other than disclosed below. Refer to "ITEM-#5" for
more information on US resident shareholders.

Owners of More than 10% of Companys Securities -
To the knowledge of the directors and senior officers of the Company, no person
beneficially owns, directly or indirectly, or exercises control or direction
over shares carrying more than 10% of the voting rights attached to all shares
of the Company except two companies operating as a nominee securities
depositories for brokerage companies, the Canadian Depository for Securities,
Inc. (CDS) and an American depository, CEDE. At the Report Date CDS appears as
the registered holder of 38,034,872 shares of the Company representing 55% of
the Companys issued and outstanding shares as at the Report Date. At the Report
Date CEDE appears as the registered holder of 11,680,433 shares of the Company
representing 17% of the Companys issued and outstanding shares. The Company is
not aware of the identities of beneficial owners of the shares held by nominee
depositories CDS or CEDE.

Shareholders Rights Instruments - To the best of
the knowledge of the Company there are no special agreements conferring special
rights on certain shareholders other than those conferred upon all common
shareholders in accordance with the Companys memorandum and articles of
association and prevailing securities laws and regulations thereon. This section
refers to disclosure required under Exhibit-2.

Voting Trusts - To the best of the knowledge of
the Company there are no known voting trusts, share pooling agreements or other
similar collaborative voting action agreements amongst any shareholders. This
section refers to disclosure required under Exhibit-3.

Share Ownership by Directors and Officers  The
table below lists, as at the Report Date, all Directors and Executive Officers
who beneficially own the Company's securities and the amount of the Company's
securities owned by the Directors and Executive Officers as a group. The
calculation of the percentage of securities owned by each individual Director
and Executive Officer is based upon the fully-diluted shareholding (including
unexercised but outstanding options and warrants) owned by each individual
Director and Executive Officer as a percentage of the 68,637,381 common shares
actually outstanding adjusted by the addition of the amount of options and
warrants owned by the individual Director or Executive Officer listed in Table
No.10 and Table No. 11 under Item-#12 below.

Table No. 5 SHAREHOLDINGS OF DIRECTORS AND EXECUTIVE
      OFFICERS AT REPORT DATEType of Security
    Name of Beneficial Owner
    Number Shares, Options &
      ***Warrants Owned***
    % of Total IssuedCommon Shares Common Shares Common Shares
      Common Shares Common Shares
    Richard L. McAdoo (1) James D.
      Eger (2) David T.W. Yu (3) Paul L. Hayes, Jr. (4) Phillip B.
      Garrison (5)
    6,619,158 1,930,000
      7,166,668 500,000 500,000
    9.6% 2.8% 10.4% 0.7%
      0.7%Total
      Held by Directors/Officers as a Group
    16,715,826
    24.4%


Notes to Table:1.
    Director and President of the
      Company. The total amount of shares shown in the table includes 1,000,000
      currently exercisable stock options plus 790,000 currently exercisable
      common share purchase warrants and 4,829,158 fully paid common shares. All
      securities shown are held directly.2.
    Director and CFO of the Company. The
      total amount of shares shown in the table includes 1,000,000 currently
      exercisable stock options and 930,000 fully paid common shares. All
      securities shown are held directly except 20,000 shares held beneficially.3.
    Non executive independent director of
      the Company. The total amount of shares shown in the table includes
      500,000 currently exercisable stock options plus 2,000,000 currently
      exercisable common share purchase warrants and 5,166,668 fully paid common
      shares. All securities shown are held directly.4.
    Non executive independent director of
      the Company. The total amount of shares shown in the table includes
      500,000 currently exercisable stock options, no warrants and no fully paid
      common shares. All securities shown are held directly.5.
    Non executive independent director of
      the Company. The total amount of shares shown in the table includes
      500,000 currently exercisable stock options, no warrants and no fully paid
      common shares. All securities shown are held directly.


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ITEM - # 5 NATURE OF TRADING
MARKET

TRADING MARKETS &
EXCHANGES

The Company's common shares trade on the NASD Electronic OTC
Bulletin Board in the United States under the symbol "CPPXF", since 3/24/98.
Table No. 4 lists the volume of trading and high, low and closing sales prices
on the NASD Electronic OTC Bulletin Board for the Company's common shares for
the last eight fiscal quarters. The closing price of the common shares on the
Report Date was $0.60.

Table No. 6NASD OTC ELECTRONIC
      BULLETIN BOARD TRADING ACTIVITYFor the Period:Quarter Ended
    Common SharesTrading
      Volume
    High Price
    US$ Dollar Sales PriceLow Price
    Closing PriceQuarter Ended - 9/30/2007
    3,380,082
    .75
    .53
    .71Quarter Ended - 6/30/2007
    3,147,158
    .84
    .52
    .69Quarter Ended - 3/31/2007
    4,306,626
    .95
    .33
    .715Quarter Ended - 12/31/2006
    3,877,725
    .45
    .25
    .385Quarter Ended - 9/30/2006
    3,588,573
    .325
    .115
    .30Quarter Ended - 6/30/2006
    1,638,968
    .26
    .14
    .14Quarter Ended - 4/30/2006
    5,493,749
    .35
    .17
    .21Quarter Ended -
      1/31/2006
    1,655,047
    .235
    .12
    .20


REGISTRAR & TRANSFER AGENT

The Company's common shares are issued in registered form.
Shares are issued and records for all issues are kept and maintained by the
Companys "registrar and transfer agent", Computershare Investor Services,
(formerly known as Montreal Trust Company) located in Vancouver, British
Columbia, Canada.

DIVIDENDS

The Company has not declared any dividends for the last five
fiscal years and does not anticipate that it will do so in the foreseeable
future. The present policy of the Company is to retain future earnings for use
in its operations and the expansion of its business.

US SHAREHOLDER INTERESTS

Number of Shareholders- The Company has
researched to the best of its ability, the indirect holdings of its common
shares. Indirect share holdings are held by share depository institutions on
behalf of brokerage firms and their clients. The names and addresses of the
actual beneficial owners of individual shareholders is not known to the Company
or the depository institutions. Based on the number of proxy materials requested
of the Company by various brokerage houses for distribution to shareholders of
record on 10/2/07 the record date for the Companys Fiscal Year 2007 annual
general meeting, the Company estimates that it has in excess of 800 shareholders
including 188 known registered shareholders plus other unknown shareholders
whose unregistered shares are held by two depositories, CDS (in Canada) and CEDE
(in USA).

Registered US Shareholders- On the 10/2/07
record date of the Company's annual general meeting, the list of registered
shareholders of the Companys common shares as maintained by the registrar and
transfer agent showed a total of 188 registered shareholders. A total of 101 of
these registered shareholders have United States of America "US" registration
addresses and together they hold 3,847,979 shares representing about 5.6% of the
total amount of Company common shares issued and outstanding.

Unregistered US Shareholders- The Company also
estimates based on the number of proxy materials requested by US based brokerage
firms following the notice to shareholders of record as of the 10/2/07 record
date for the Companys 2007 Annual General Meeting that there are approximately
700 unregistered, "holders of record" resident in the United States, holding
approximately 11,720,433 common shares representing about 17.1% of the total
amount of Company common shares issued and outstanding.. Based on these
estimates the combined registered and unregistered US resident shareholders is
estimated to total approximately 801 shareholders holding 15,528,792 common
shares representing a 22.6% stake in the total amount of Company common shares
currently issued and outstanding at the 10/2/07 record date.

US Shareholders Having Warrants- On the Report
Date the Company records 7 holders of 13,740,000 outstanding share purchase
warrants, none of whom are resident in the United States. Warrants were issued
in conjunction with private placements. All warrants are non-transferable.

US Shareholders Having Options- On the Report
Date, the Company records 11 holders of 5,150,000 outstanding incentive stock
options, 6 of whom are resident in the United States, holding a combined amount
of 2,050,000 options or 39.8% of the total amount of options outstanding.
Options are granted as incentives in conjunction with service as a director,
employee, consultant, or contractor with the Company or its subsidiaries. All
options are non-transferable and expire within 90-days of termination of
service, employment or contract.

ADRs- The Company's common shares are
registered to trade directly on the NASD OTC BB in the United States and not in
the form of American Depository Receipts (ADR's) or similar certificates.

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ITEM - # 6 EXCHANGE CONTROLS AND
OTHERLIMITATIONS AFFECTING
SECURITY HOLDERS

Except as discussed in ITEM-#7, "Taxation", the Company is not
aware of any Canadian federal or provincial laws, decrees, or regulations that
restrict the export or import of capital, including foreign exchange controls,
or that affect the remittance of dividends, interest or other payments to
non-Canadian holders of the common shares. There are no limitations on the right
of non-Canadian owners to hold or vote the common shares imposed by Canadian
federal or provincial law or by the charter or other constituent documents of
the Company.

The Investment Canada Act(the "IC Act") governs
acquisitions of Canadian business by a non-Canadian person or entity. The IC
Actrequires a non-Canadian (as defined in the IC Act) making an
investment to acquire control of a Canadian business, the gross assets of which
exceed certain defined threshold levels, to file an application for review with
the Investment Review Division of Industry Canada. The IC Actprovides,
among other things, for a review of an investment in the event of acquisition of
"control" in certain Canadian businesses in the following circumstances:

|1. | If the investor is a non-Canadian and is a national of a
      country belonging to the North American Free Trade Agreement ("NAFTA")
      and/or the World Trade Organization ("WTO") ("NAFTA or WTO National"), any
      direct acquisition having an asset value exceeding $179,000,000 is
      reviewable. This amount is subject to an annual adjustment on the basis of
      a prescribed formula in the IC Actto reflect inflation and real
      growth within Canada. This threshold level does not apply in certain
      sections of Canadian industry, such as uranium, financial services (except
      insurance), transportation services and cultural services (i.e. the
      publication, distribution or sale of books, magazines, periodicals (other
      than printing or typesetting businesses), music in print or machine
      readable form, radio, television, cable and satellite services; the
      publication, distribution, sale or exhibition of film or video recordings
      on audio or video music recordings), to which lower thresholds as
      prescribed in the IC Actare applicable.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2. | If the investor is a non-Canadian and is not a NAFTA or a
      WTO National, any direct acquisition having an asset value exceeding
      $5,000,000 and any indirect acquisition having an asset value exceeding
      $50,000,000 is reviewable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3. | If the investor is a non-Canadian and is a NAFTA or a WTO
      National, an indirect acquisition of control is reviewable if the value of
      the assets of the business located in Canada represents more than 50% of
      the asset value of the transaction or the business is involved in uranium,
      financial services, transportation services or cultural services (as set
      forth above).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Finally, certain transactions prescribed in the IC Actare exempted from review altogether. In the context of the Company, in
essence, three methods of acquiring control of a Canadian business are regulated
by the IC Act: (i) the acquisition of all or substantially all of the
assets used in carrying on business in Canada; (ii) the acquisition, directly or
indirectly, of voting shares of a Canadian corporation carrying on business in
Canada; or (iii) the acquisition of voting shares of an entity which controls,
directly or indirectly, another entity carrying on business in Canada. An
acquisition of a majority of the voting shares of a Canadian entity, including a
corporation, is deemed to be an acquisition of control under the IC Act.
However, under the IC Act, there is a rebuttable presumption that control
is acquired if one-third of the voting shares of a Canadian corporation or an
equivalent undivided interest in the voting shares of such corporation are held
by a non-Canadian person or entity. An acquisition of less than one-third of the
voting shares of a Canadian corporation is deemed not to be an acquisition of
control. An acquisition of less than a majority, but one-third or more, of the
voting shares of a Canadian corporation is presumed to be an acquisition of
control unless it can be established that, on the acquisition, the Canadian
corporation is not, in fact, controlled by the acquirer through the ownership of
voting shares. For partnerships, trusts, joint ventures or other unincorporated
Canadian entities, an acquisition of less than a majority of the voting
interests is deemed not to be an acquisition of control.

In addition, if a Canadian corporation is controlled by a
non-Canadian, the acquisition of control of any other Canadian corporation by
such corporation may be subject to the prior approval of the Investment Review
Division, unless it can be established that the Canadian corporation is not in
fact controlled by the acquirer through the ownership of voting shares. Where an
investment is reviewable under the IC Act, the investment may not be
implemented unless it is likely to be of net benefit to Canada. If an applicant
is unable to satisfy the Minister responsible for Industry Canada that the
investment is likely to be of net benefit to Canada, the applicant may not
proceed with the investment. Alternatively, an acquirer may be required to
divest control of the Canadian business that is the subject of the investment.
In addition to the foregoing, the IC Actprovides for formal notification
under the IC Actof all other acquisitions of control by Canadian
businesses by non-Canadian investors. The notification process consists of
filing a notification within 30 days following the implementation of an
investment, which notification is for information, as opposed to review,
purposes.

ITEM - # 7 TAXATION

Canadian Federal Income Tax Considerations- The
following summary discusses only the Canadian federal income tax considerations
generally applicable to a holder (a "Holder") of one or more common shares of
the Company who, for the purposes of the Income Tax Act (Canada) (the "Tax Act")
is a non-resident of Canada who holds common shares as capital property. The
summary deals with the provisions of the Tax Act in force on 12/31/99. It does
not discuss all the tax consequences that may be relevant to particular holders
in light of their circumstances or to holders subject to special rules. It is
therefore not intended to be, nor should it be construed to be, legal or tax
advice to any holder of common shares of the Company and no opinion or
representation with respect to the Canadian income tax consequences to any such
holder or prospective holder is made. Holders and prospective holders should
therefore consult their own tax advisers with respect to their particular
circumstances.

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Dividends- A Holder will be subject to Canadian
withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be
available under an applicable tax treaty, of the gross amount of any dividend
paid or deemed to be paid on common shares. Under the Canada-US Income Tax
Convention (1980) as amended by the Protocols signed on 6/14/83, 3/28/84,
3/17/95, and 7/29/97 (the "Treaty"), the rate of Part XIII Tax applicable to a
dividend on common shares paid to a Holder who is a resident of the United
States and who is the beneficial owner of the dividend, is 5%. If the Holder is
a company that owns at least 10% of the voting stock of the Company paying the
dividend, and, in all other cases, the tax rate is 15% of the gross amount of
the dividend. The Company will be required to withhold the applicable amount of
Part XIII Tax from each dividend so paid and remit the withheld amount directly
to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares- A Holder who
disposes of a common share, including by deemed disposition on death, will not
normally be subject to Canadian tax on any capital gain (or capital loss)
thereby realized unless the common share constituted "taxable Canadian property"
as defined by the Tax Act. Generally, a common share of a public corporation
will not constitute taxable Canadian property of a Holder if the share is listed
on a prescribed stock exchange unless the Holder or persons with whom the Holder
did not deal at arm's length alone or together held or held options to acquire,
at any time within the five years preceding the disposition, 25% or more of the
shares of any class of the capital stock of the Company. The CDNX is a
prescribed stock exchange under the Tax Act. A Holder who is a resident of the
United States and realizes a capital gain on a disposition of a common share
that was taxable Canadian property will nevertheless, by virtue of the Treaty,
generally be exempt from Canadian tax thereon unless (a) more than 50% of the
value of the common shares is derived from, or from an interest in, Canadian
real estate, including Canadian mineral resource properties, (b) the common
share formed part of the business property of a permanent establishment that the
Holder has or had in Canada within the 12 month period preceding the
disposition, or (c) the Holder is an individual who (i) was a resident of Canada
at any time during the 10 years immediately preceding the disposition, and for a
total of 120 months during any period of 20 consecutive years, preceding the
disposition, and (ii) owned the common share when he ceased to be resident in
Canada. A Holder who is subject to Canadian tax in respect of a capital gain
realized on a disposition of a common share must include three quarters of the
capital gain (taxable capital gain) in computing the Holder's taxable income
earned in Canada. The Holder may, subject to certain limitations, deduct
three-quarters of any capital loss (allowable capital loss) arising on a
disposition of taxable Canadian property from taxable capital gains realized in
the year of disposition in respect to taxable Canadian property and, to the
extent not so deductible, from such taxable capital gains realized in any of the
three preceding years or any subsequent year.

United States Taxation- For federal income tax
purposes, an individual who is a citizen or resident of the United States or a
domestic corporation ("US Taxpayer") will recognize a gain or loss on the sale
of the Company's common shares equal to the difference between the proceeds from
such sale and the adjusted tax basis of the common shares. The gain or loss will
be a capital gain or capital loss if the Company's common shares is a capital
asset in the hands of the US Taxpayer. For federal income tax purposes, a US
Taxpayer will be required to include in gross income dividends received on the
Company's common shares. A US Taxpayer who pays Canadian tax on a dividend on
common shares will be entitled, subject to certain limitations, to a credit (or
alternatively, a deduction) against federal income tax liability.

A domestic corporation that owns at least 10% of the voting
shares of the Company should consult its tax advisor as to applicability of the
deemed paid foreign tax credit with respect to dividends paid on the Company's
common shares. Under a number of circumstances, United States Investor acquiring
shares of the Company may be required to file an information return with the
Internal Revenue Service Center where they are required to file their tax
returns with a duplicate copy to the Internal Revenue Service Center,
Philadelphia, PA 19255. In particular, any United States Investor who becomes
the owner, directly or indirectly, of 10% or more of the shares of the Company
will be required to file such a return. Other filing requirements may apply, and
United States Investors should consult their own tax advisors concerning these
requirements.

This is not intended to be, nor should it be construed to be,
legal or tax advice to any holder of common shares of the Company and no opinion
or representation with respect to the US income tax consequences to any such
holder or prospective holder is made. Holders and prospective holders should
therefore consult their own tax advisers with respect to their particular
circumstances.

ITEM - # 8 FINANCIAL DATA &
DISCUSSION

REVIEW OF SELECTED FINANCIAL DATA LAST FIVE
FISCAL YEARS

The selected financial data for Fiscal years ended 6/30/06 and
6/30/07 is derived from the financial statements of the Company that have been
audited by Dale Matheson Carr-Hilton Labonte LLP, Chartered Accountants, as
indicated in their auditors report that is included elsewhere in this Annual
Report. The selected financial data for Fiscal years ended 7/31/05 are derived
from the financial statements of the Company that have been audited by Staley
Okada & Partners, Chartered Accountants. The selected financial data set
forth for the Fiscal years ended 7/31/03 and 7/31/04 are derived from the
Company's audited financial statements, not included herein, but filed with
previous Annual Reports and incorporated herein by this reference. The selected
financial data should be read in conjunction with the financial statements and
other financial information included elsewhere in the Annual Report. The Company
has not declared any dividends since incorporation and does not anticipate that
it will do so in the foreseeable future. The present policy of the Company is to
retain future earnings for use in its operations and the expansion of its
business.

Selected financial data for the Companys last five fiscal
years is presented in the table below. The financial data is derived from the
financial statements of the Company, which have been prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP), the application of
which, in the case of the Company, conforms in all material respects for the
periods presented with US GAAP, except as disclosed in footnotes to the
financial statements. For its 7/31/02 year-end reporting, and all subsequent
reporting, the Company adopted the U.S. currency as its reporting currency and
has prepared its financial statements on that basis.

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Table No. 7 SELECTED
      FINANCIAL DATA FOR LAST FIVE FISCAL YEARS (US$ in
      000, except per share data)Fiscal Year End
    Fiscal Year End
    Fiscal Year End
    Fiscal Year End
    Fiscal Year End6/30/07
    6/30/06*
    7/31/05
    7/31/04
    7/31/03Revenue
    
    -
    -
    -
    -Net Income (Loss)
    (2,603)
    1,923
    2,181
    (1,609)
    (2,047)Earnings (Loss)
      Per Share  Basic
    (0.04)
    0.03
    0.04
    (0.03)
    (0.06)Earnings (Loss)
      Per Share  Diluted
    (0.04)
    0.03
    0.03
    (0.03)
    (0.06)Dividends per
      Share
    0.00
    0.00
    0.00
    0.00
    0.00Weighted Average
      No. of Shares (000)
    59,325
    56,661
    51,280
    47,140
    36,469Working Capital
    1,565
    2,287
    (39)
    (825)
    (490)Oil and Gas
      Properties
    0.001
    0.001
    0.002
    0.003
    0.003Mineral Properties
    0
    0
    0
    0
    0Long Term Debt
    0
    0
    0
    0
    0Shareholder Equity
      (deficiency)
    1,653
    2,357
    (2)
    (4,154)
    (4,086)Total Assets
    1,764
    2,517
    297
    489
    1,084US GAAP Shareholders' Equity(deficiency)
    1,653
    2,357
    (2)
    (4,154)
    (4,085)US GAAP Net (Loss)
    (2,603)
    1,923
    2,181
    (1,609)
    (2,046)US GAAP Net (Loss)
      per Share Basic
    (0.04)
    0.03
    0.04
    (0.03)
    (0.06)US GAAP Net (Loss)
      per Share Diluted
    (0.04)
    0.03
    0.03
    (0.03)
    (0.06)US GAAP 000's
      Weighted Avg Shares
    59,325
    56,661
    51,280
    47,140
    36,467


*Note:The Fiscal Year
Ended 6/30/06 is for a period of 11 months due to a change in fiscal year end.

How Earnings Per Share Are Calculated - Under
Canadian generally accepted accounting principals the calculation of basic loss
per share is calculated using the weighted average number of common shares
outstanding during the year as well as excluding any common stock equivalents
that may be outstanding, if such common stock equivalents are not anti-dilutive.
This weighted average number of common shares outstanding includes any shares
that remain in escrow that are contingently cancelable, that may be earned out
based on the company incurring a certain amount of exploration and development
expenditures. Under United States generally accepted accounting principals, the
weighted average number of common shares outstanding excludes any shares that
remain in escrow that are contingently cancelable, but may be earned out based
on the company incurring a certain amount of exploration and development
expenditures. This refers to disclosure required under Exhibit-6.

How Reported Ratios Are Calculated - The Company
has not calculated and is not reporting any ratio of earning to fixed charges,
to combined fixed charges or to any dividends and has not calculated and
reported any other ratios, other than earnings per share as set forth above, in
this report; and hence no basis for such calculation is included. This section
refers to disclosure required under Exhibit-7.

FINANCIAL RESULTS OF OPERATIONS

The following discussion of the Company's financial results
includes those for the most recently completed fiscal quarter ended 9/30/07 and
the most recently completed last three fiscal years ended 6/30/07, 6/30/06, and
7/31/05. Comparisons to "the same period last year" refer to financial results
for the same fiscal period ended the previous fiscal year and may be read
together with audited, consolidated financial statements for the previous fiscal
year ended 6/30/06. The section for the most recent quarter ended 9/30/07 should
be read together with the Company's quarterly interim unaudited financial
statements which were filed under Form-6K and are hereby incorporated for
reference.

FINANCIAL RESULTS FOR THE MOST RECENTLY COMPLETED FISCAL
QUARTER ENDED 9/30/07

The quarter ended 9/30/07 marks the first quarter of the
Companys annual fiscal year ending 6/30/08. All balances referred to in the
following discussion are in US$ currency.

Current Working Capital Situation at end Most Recent
Fiscal Quarter Ended 9/30/07- As at 9/30/07, the Company's consolidated
financial statements reflect a working capital position of $4,329,577. This
represents an increase in the working capital of $2,764,765 compared to the
6/30/07 working capital of $1,564,812. The increase was mainly due to the
private equity placement with Macquarie for $3,350,000 offset by the Companys
general and administrative expenditures during the period. The cash balance at
9/30/07 was $4,437,157 compared to $1,514,279 as at 6/30/07, an increase of
$2,922,878. The Company used $292,650 for operating activities during the three
months ended 9/30/07 compared with $519,413 in the three months ended 9/30/06.
The cash resources used for investing activities during the three months ended
9/30/07 was $44,222 compared with a net recovery of $96,388 in the three months
ended 9/30/06. The Companys property expenditures continue to be at a
maintenance level until management decides to commence further exploration and
development of its Indonesian properties. The prior year amount includes the
proceeds from the sale of Bengara shares in the amount of $21,000. The cash
resources provided by financing activities during the three months ended 9/30/07
was $3,259,750 compared with $nil in the three months ended 9/30/06.

Investments during Most Recent Fiscal Quarter Ended
9/30/07- During the three months ended 9/30/07, the Company invested
$18,960 in its Indonesian oil & gas properties. The Company also invested
$25,262 in equipment purchases mainly relating to computer and computer
software.

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Finance during Most Recent Fiscal Quarter Ended 9/30/07- During the three months ended a total of 5,265,000 new shares were
issued pursuant to private placements for net proceeds to the Company of
$3,259,750. During the three months ended 6/30/07 there were no Stock Options or
Warrants exercised. On 9/30/07, the Company had options outstanding granted to
directors, officers and consultants to purchase an aggregate of 5,150,000 shares
at prices ranging from $0.15 to $0.65 and expiring at varying dates between June
29, 2008 and June 30, 2010. On 9/30/07, the Company had warrants outstanding to
purchase an aggregate of 13,740,000 shares at prices ranging from $0.15 to $1.00
and expiring at June 30, 2008.

Expenses during Most Recent Fiscal Quarter Ended 9/30/07- Overall, the Company had a loss from operations during the three
months ended 9/30/07 of $678,530 compared to $535,380 in the three months ended
9/30/06. The Company had a loss per share of $0.01 in 2007 compared to a loss
per share of $0.01 in 2006. During the current period the Company generated
$28,267 in interest income compared with $25,626 in the prior period. General
and administrative expenses decreased by $29,359 from $717,196 to $687,837 for
the three months ended 9/30/06 and 2007 respectively. The significant changes to
general and administrative expenses are as follows. The Company recorded
stock-based compensation expense, relating to management and consulting
contracts, of $200,128 for the three months ended 9/30/07 compared to $118,941
in the three months ended 9/30/06. During the prior period, the Company amended
the terms of certain share purchase warrants outstanding. The Company recorded
the fair value of the amended warrants as financing fees, being $112,723 for
2006. There were no warrants amended in the current period. Management fees
increased by $150,764 from $91,571 to $242,335. The increase is due to the
Company having to pay 100% of two management positions in the current period
which were shared on a 60/40 basis with the Companys joint venture partner in
Bengara prior to the sale of 70% of the Companys interest in Bengara. The
Company also paid bonuses of $60,000 to two directors in recognition of valuable
service to the Company. Rent decreased by $53,718 from $64,210 to $10,492. The
decrease relates to lower costs in Jakarta. Travel decreased by $79,344 from
$118,941 to $39,597. Investor relations increased by $50,457 from $10,928 to
$61,385. The increase is due to two investor relation contracts, advertising
contracts and conferences which Companys management attended during the period.
All other expense groups are consistent with the comparative period and some
decreased slightly.

FINANCIAL RESULTS FOR THE COMPANYS MOST RECENTLY
COMPLETED FISCAL YEAR 2007, ENDED 6/30/07 All balances referred to in
the following discussion are in US$ currency unless otherwise indicated.

Working Capital Situation at end Most Recent Fiscal Year
Ended 6/60/07- As at 6/30/07, the Company's consolidated financial
statements reflect a working capital position of $1,564,812. This represents a
decrease in the working capital of approximately $722,110 compared to the
6/30/06 working capital of $2,286,922. The decrease was mainly due to the
Companys general and administrative expenditures during the period offset by
financing proceeds. The cash balance at 6/30/07 was $1,514,279 compared to
$2,395,727 as at 6/30/06, a decrease of $881,448. The Company used $1,757,963
for operating activities during the year ended 6/30/07 compared with $1,307,858
in the eleven months ended 6/30/06. The cash resources used for investing
activities during the year ended 6/30/07 was $156,818 compared with $3,515,074
which was provided in the eleven months ended 6/30/06. The Companys property
expenditures continue to be at a maintenance level until management decides to
commence further exploration and development of its Indonesian properties. The
current year amount includes the proceeds from the sale of Bengara shares in the
amount of $21,000 as well as equipment purchases of $55,574. The prior year
amount includes the proceeds from the Yapen sale, net of closing costs in the
amount of $3,506,834 as well as equipment purchases of $99,950. The cash
resources provided by financing activities during the year ended 6/30/07 was
$1,033,333 compared with $89,613 in the eleven months ended 6/30/06. During the
current period the company received proceeds of $1,033,333 for share issuances
compared with $102,000 in the prior eleven month period.

Investments during Most Recent Fiscal Year Ended 6/30/07- During the year ended 6/30/07, the Company invested $259,886 in its
Indonesian oil & gas properties and recovered $146,500 from its farm out
partner, GeoPetro. The Company also invested $55,574 in equipment purchases
mainly relating to computer and computer software.

Finance during Most Recent Fiscal Year Ended 6/30/07- During the year ended 6/30/07 there were 3,330,000 Stock Options and
2,823,334 Warrants exercised, and 111,111 shares issued for services generating
proceeds to the company of $1,033,333. On 6/30/07, the Company had options
outstanding granted to directors, officers and consultants to purchase an
aggregate of 4,650,000 shares at prices ranging from $0.15 to $0.65 and expiring
at varying dates between June 29, 2008 and 6/30/09. On 6/30/07, the Company had
warrants outstanding to purchase an aggregate of 3,725,000 shares at prices
ranging from $0.15 to $0.40 and expiring at 6/30/08.

Income during Most Recent Fiscal Year Ended 6/30/07- Overall, the Company had a loss from operations during the year ended
6/30/07 of $2,603,000 compared to income of $1,923,117 in the eleven months
ended 6/30/06. The largest difference was the fact that the Company sold its
Yapen subsidiary in the prior year for cash proceeds of $3,600,000 and recorded
a gain of $3,506,833 on disposition. During the current year, the Company sold
70% of its shares in its Bengara subsidiary for cash proceeds of $21,000 and
recorded a gain of $23,906 on disposition. The Company had a loss per share of
$0.04 in 2007 compared to income per share of $0.03 in 2006. The fully diluted
loss per share is $0.04 in 2007 compared to income per share of $0.03 in 2006.
During the year ended 6/30/07, the Company elected to remove certain accounts
payable in the amount of $15,739 off its books during the current fiscal period
due to the fact that they were over 6 years old and the Company has received no
correspondence from these vendors over this period. These payables were on the
books of the Company when the current management took over the Company and have
been maintained for conservative purposes, but upon legal advice they are now
being written off resulting in a gain of $15,739. During the current year the
Company generated $81,995 in interest income compared with $75,856 in the prior
eleven month period ended 6/30/06.

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Expenses during Most Recent Fiscal Year Ended 6/30/07- General and administrative expenses increased by $1,123,687 from
$1,487,567 to $2,611,254 for the eleven months ended 6/30/06 and year ended
6/30/07 respectively. The significant changes to general and administrative
expenses are as follows. The Company recorded stock-based compensation expense,
relating to management and consulting contracts, of $673,242 for the year ended
6/30/07 compared to $178,564 in the eleven months ended 6/30/06. During the
period, the Company amended the terms of certain share purchase warrants
outstanding. The Company has recorded the fair value of the amended warrants as
financing fees, being $112,723 for 2007 compared to $155,419 for 2006.
Management fees increased by $324,890 from $415,632 to $740,522. The increase is
due to an increase to a directors management contract as well as utilizing
additional management staff in the Companys Indonesian operations and bonuses
of $200,000 paid to two directors in recognition of valuable service to the
Company. The company utilized more consultants in the period and therefore spent
$127,901 which is an increase of $62,869 over the prior period. Rent increased
by $22,189 from $67,797 to $89,986. The increase relates to higher premises
costs in Dallas. Travel increased by $104,063 from $134,166 to $238,229. The
travel increase is due to the companys efforts to promote its properties and
business plan as well as the establishment of strategic relationships throughout
the world. Investor relations increased by $155,769 from $13,127 to $168,896.
The increase is due to two investor relation contracts, advertising contracts
and conferences which Companys management attended throughout the year. Office
expenses increased by $36,569 from $109,818 to $146,387. The increase in office
expenses is due the increased activity of the company and is consistent with the
general increase of operating expenses in the current period. Professional fees
increased by $129,540 from $74,271 to $203,811. The current period consisted of
higher accounting and auditing costs. Foreign exchange loss decreased by $16,052
from $23,677 to $7,625. All other expense groups appear consistent with the
comparative period and some decreased slightly.

FINANCIAL RESULTS FOR FISCAL YEAR 2006, ENDED
7/31/06All balances referred to in the following discussion
are in US$ currency unless otherwise indicated.

Working Capital Situation at Fiscal Year End 6/30/06- As at 6/30/06, the Company's consolidated financial statements reflect
a working capital position of $2,286,922. This represents an increase in the
working capital of approximately $2,325,988 compared to the 7/31/05 working
capital deficit of $39,066. The increase was mainly due to the Company selling
its Yapen subsidiary and receiving gross cash proceeds of $3,600,000. The
increase was offset by general and administrative requirements during the
period. The cash balance at 6/30/06 was $2,395,727 compared to $98,898 as at
7/31/05, an increase of $2,296,829. The Company used $1,307,858 for operating
activities during the eleven months ended 6/30/06 compared with $889,816 in the
year ended 7/31/05. The cash resources provided by investing activities during
the eleven months ended 6/30/06 was $3,515,074 compared with using $8,599 in the
year ended 7/31/05. The Companys property expenditures were reduced to a
maintenance level until management decides to commence further exploration and
development of its Indonesian properties. The current year amount includes the
proceeds from the Yapen sale, net of closing costs in the amount of $3,506,834
as well as equipment purchases of $99,950. The closing costs included payment of
cash bonuses totaling $90,000 to two executive officers in recognition of
exceptional service to the Company and its shareholders in their respective
capacity and influence in concluding the Yapen sale. The cash resources provided
by financing activities during the eleven months ended 6/30/06 was $89,613
compared with $871,000 in the year ended 7/31/05. During the current period the
company received proceeds of $102,000 for share issuances compared with $883,735
in the prior year. Cash on hand is sufficient to fund the Companys overhead
costs and exploration objectives for the immediate future. The Company intends
to continue to use various strategies to minimize its dependence on equity
capital, including the securing of joint venture partners where appropriate.

Investments during Fiscal Year Ended 6/30/06-
During the eleven months ended 6/30/06, the Company invested $343,914 in its
Indonesian oil & gas properties and recovered $352,104 from its farm out
partner, GeoPetro. Of the amount invested, $114,000 relates to cash bonuses paid
to the team working in the Companys Bengara subsidiary. GeoPetro contributed
their 40% share of the bonuses. The Company also invested $99,950 in equipment
purchases mainly relating to computer and computer software.

Finance during Fiscal Year Ended 6/30/06.-
During the eleven months ended 6/30/06 there were 480,000 Stock Options and
200,000 Warrants exercised, generating proceeds to the company of $102,000. On
6/30/06, the Company had options outstanding granted to directors, officers and
consultants to purchase an aggregate of 8,302,426 shares at prices ranging from
$0.15 to $0.20 and expiring at varying dates between 7/30/06 and 4/30/09. On
6/30/06, the Company had warrants outstanding to purchase an aggregate of
7,368,334 shares at prices ranging from $0.15 to $0.60 and expiring at varying
dates between 7/14/06 and 6/30/08.

Income during Fiscal Year Ended 6/30/06 -
Overall, the Company had income from operations during the eleven months ended
6/30/06 of $1,923,117 compared to income of $2,180,617 in the year ended
7/31/05. The largest difference was the fact that the Company sold its Yapen
subsidiary for cash proceeds of $3,600,000 and recorded a gain of $3,506,833 on
disposition during the current period. During the prior year, the Company sold
its GATB subsidiary and recorded a gain of $4,059,868 on disposition. The
purchaser acquired the Companys interest in GATB for $1,000 and assumed all the
liabilities and obligations of GATB. Due to all of the fixed assets of the
subsidiary having been written down to $1 prior to the disposal, the GATB
subsidiary had a consolidated negative net book value of $4,058,868.
Consequently, the disposal resulted in a gain on disposition. The Company had
income per share of $0.03 in 2006 compared to $0.04 in 2005. The fully diluted
income per share is $0.03 in 2006 compared to $0.03 in 2005. During the eleven
months ended 6/30/06, the Company recorded terminated farm out proceeds in the
amount of $100,000. This was a contribution by joint venture partner GeoPetro in
relation to the costs of shares issued by the Company on the China Wisdom farm
out in 2003. There was no similar item in the prior period. The Company recorded
gain on settlement of debt of $48,850 in the current year. This was a result of
the Company negotiating a reduction of certain payables in the amount of $41,995
and the Company electing to remove certain accounts payable in the amount of
$6,855 off its books during the current fiscal period due to the fact that they
were over 6 years old and the Company has received no correspondence from these
vendors over this period. These payables were on the books of the Company when
the current management took over the Company and have been maintained for
conservative purposes, but upon legal advice they are now being written off
resulting in a gain of $6,855. During the current period the Company generated
$75,856 in interest income due to the large cash balance on hand. There was no
interest in the comparative period.

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Expenses during Fiscal Year Ended 6/30/06 -
During the eleven months ended 6/30/06, the Company was ordered to pay
Cornell/Yorkville $250,000 plus $79,045 in accumulated interest. The total of
$329,045 is recorded as settlement of court judgment. General and administrative
expenses decreased by $323,469 from $1,811,036 to $1,487,567 for the year ended
7/31/05 and eleven months ended 6/30/06 respectively. The significant changes to
general and administrative expenses are as follows. The Company recorded
stock-based compensation expense, relating to management and consulting
contracts, of $178,564 for the eleven months ended 6/30/06 compared to $803,481
in the year ended 7/31/05. During the period, the Company amended the terms of
certain share purchase warrants outstanding. The Company has recorded the fair
value of the amended warrants as financing fees, being $155,419 for 2006
compared to $161,903 for 2005. During the period, management wrote down a
receivable of $138,178 owing from a company controlled by the estate for a
deceased director and recorded it as a bad debt. There were no bad debts
recorded in the prior year. Management fees increased by $93,092 from $322,540
to $415,632. The increase is due to an increase to a directors management
contract as well as utilizing additional management staff in the Companys
Indonesian operations. The company utilized more consultants in the period and
therefore spent $65,032 which is an increase of $60,032 over the prior period.
Rent increased by $6,753 from $61,044 to $67,797. The increase relates to higher
premises costs in Dallas and Jakarta. Travel increased by $74,387 from $59,779
to $134,166. The travel increase is due to the companys efforts to promote its
properties and business plan as well as the establishment of strategic
relationships throughout the world. Office expenses decreased by $30,057 from
$139,875 to $109,818. The decrease in office expenses is mostly due to the
disposal of the Companys GATB subsidiary in the prior year and resulting
reduced operating expenses in the current period. Professional fees decreased by
$23,792 from $98,063 to $74,271. The prior period consisted of higher legal
costs which did not exist in the current period. Foreign exchange loss decreased
by $50,435 from $74,112 to $23,677. This reduction is also due to selling GATB
and removing the need to revalue large Rupiah denominated assets and liabilities
previously held in GATB. All other expense groups appear consistent with the
comparative period and most decreased slightly.

FINANCIAL RESULTS FOR FISCAL YEAR 2005, ENDED
7/31/05All balances referred to in the following discussion are in
US$ currency unless otherwise indicated.

Working Capital Situation at Fiscal Year End 6/30/05- As at Fiscal Year ended 7/31/05, the Company's consolidated financial
statements reflect a working capital deficit of $39,066. This represents a
decrease in the working capital deficit of approximately $785,000 compared to
the 7/31/04 deficit of $824,545. The decrease was due to the Company obtaining
significant funding during the 2005 year in the form of private placements and
exercise of options and warrants. The cash balance at 7/31/05 was $98,898
compared to $126,313 as at 7/31/04, a decrease of $27,415. To further improve
its working capital position the company is pursuing other private placements
and farm-out agreements for its properties. See subsequent events section for
details on the sale of Yapen. The Company used $889,816 for operating activities
during the Fiscal Year ended 7/31/05 compared with $1,127,045 in the prior year.
The Company used $8,599 for investing activities after joint venture
contributions during the Fiscal Year ended 7/31/05 compared with using $29,130
in the prior year. The Companys property expenditures were reduced to a minimal
level until such time as financing is obtained to continue further exploration
and development of its Indonesian properties. The cash resources provided by
financing activities during the Fiscal Year ended 7/31/05 was $871,000 compared
with $480,361 in the prior year. The majority of the periods cash increase
relates to private placements of $545,000, option exercises of $328,735 and
warrant exercises of $67,500.

Investments During Fiscal Year Ended 7/31/05 -
During the Fiscal Year ended 7/31/05 the Company invested approximately $191,000
in its Indonesian oil & gas properties and recovered $178,000 from its farm
out partner, GeoPetro.

Financing During Fiscal Year Ended 7/31/05- On
12/13/04 a Private Placement of 133,333 Units, consisting of one common share
and one share purchase warrant to purchase one additional common share for $0.50
until 6 December 2006, was completed. Proceeds to the Company were $20,000. No
finders fees were paid. On 2/7/05 a Private Placement of 100,000 Units,
consisting of one common share and one warrant to purchase one common share for
$0.50 until 7 February 2007, was completed. Proceeds to the Company were
$15,000. No finders fees were paid. On 4/18/05 the Company completed a private
placement of 50,000 of the company's common shares at a price of $0.20 per
share. Proceeds to the Company were $10,000. No finders fees were paid. On 4/
28/05 the Company completed a private placement of 3,333,334 units of the
companys securities at a price of $0.15 per unit. Each unit consists of one
common share plus one non-transferable share purchase warrant to purchase
additional share at a fixed exercise price of $0.50 for a term of two years. The
private placement raised $500,000 working capital for the Company. The Company
paid a finders fee to an arms length party who arranged the placement a total
of $50,000 in cash and $25,000 in the form of 166,667 units of the placement.
During the Fiscal year ended 7/31/05 there were 2,155,490 Stock Options and
300,000 Warrants exercised, generating proceeds to the company of $396,235. At
Fiscal Year ended 7/31/05, the Company had options outstanding granted to
directors, officers, consultants and employees to purchase an aggregate of
8,932,426 shares at prices ranging from $0.15 to $0.20 and expiring at varying
dates between 12/30/05 and 4/30/07. At Fiscal Year ended 7/31/05, the Company
had warrants outstanding to purchase an aggregate of 10,481,146 shares at prices
ranging from $0.15 to $0.60 and expiring at varying dates between 9/10/05 and
4/27/07.

Income During Fiscal Year Ended 7/31/05-
The Company had no revenue during the Fiscal year ended 7/31/05.

Expenses During Fiscal Year Ended 7/31/05 -
Overall, the Company had income from operations during the Fiscal year ended
7/31/05 of $2,180,617 compared to a loss of $1,609,125 in the prior year. The
major changes in the 2005 Fiscal year as compared with the 2004 Fiscal year are
outlined as follows. The largest difference was the fact that the Company sold
its GATB subsidiary and recorded a gain of $4,059,868 on disposition. There were
no disposals in the Fiscal Year ended 7/31/04, however, the Company did receive
$251,869 from farm out proceeds in the 2004 Fiscal year and recorded a gain on
reduction of contingent and conditional liabilities of $328,500. There were no
such proceeds or gains in the 2005 Fiscal year.

After making accounting adjustments for equipment returned and
a reclassification of prepaid expenditures misallocated in a prior period, the
Company wrote down its resource properties to nominal values, which resulted in
an expense in the amount of $12,961. In the Fiscal Year ended

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7/31/04, the property write-down was $252,613. General and
administrative expenses decreased by $121,574 from $1,932,610 to $1,811,036 for
the fiscal years ended 7/31/04 and 7/31/05 respectively. The significant changes
to general and administrative expenses were lower management fees in the 2005
Fiscal year. Management fees decreased by $155,791 from $478,331 to $322,540 for
the years ended 7/31/04 and 7/31/05 respectively. The decrease is due to the
loss of a director in the Langley office coupled with lower management fees paid
out by the Companys subsidiaries and offset by one additional management
position in the Companys Dallas office. During the 2005 Fiscal year, the
Company amended the terms of certain share purchase warrants outstanding. The
Company has recorded the fair value of the amended warrants as financing fees,
being $161,903 for 2005 compared to $281,662 for 2004 which was a decrease of
$119,759. Staff Wage expense decreased to $nil from $25,163 due to the closure
of the Langley office. Investor relations costs decreased by $23,997 from
$30,105 to $6,108 for the years ended 7/31/04 and 7/31/05 respectively. Interest
and bank charges decreased by $19,604 from $19,130 to a net recovery of $474 for
the years ended 7/31/04 and 7/31/05 respectively. Office expenses decreased by
$18,060 from $157,935 to $139,875 for the year ended 7/31/04 and 2005
respectively.

The stock compensation expense in the 2005 fiscal year was
$803,481 compared to $686,557 in the prior year which is an increase of
$116,924. (During the 2005 Fiscal year, the granting of new stock options
resulted in stock compensation expense of $497,775. The modification of exercise
prices and expiry dates of existing stock options resulted in additional stock
compensation expense of $305,706.) The financing costs, interest on loans and
foreign exchange loss line item was $74,112 compared to a gain of $39,798 in the
Fiscal Year ended 7/31/04. The increase is mainly due to the revaluing of the
Companys Rupiah denominated payables during the 2005 Fiscal year as well as a
one time interest charge of $44,373 relating the shares for debt transaction in
the Companys GATB subsidiary. Professional fees increased by $31,752 from
$66,311 to $98,063 for the years ended 7/31/04 and 7/31/05 respectively. The
increase is due to additional legal work done during the 2005 Fiscal year with
respect to various agreements and the increasing costs of regulatory compliance
with respect to audit and accounting requirements. Rent and utilities increased
by $10,448 from $50,596 to $61,044. This mostly relates to the company
relocating offices in Jakarta. All other expense groups appear consistent with
the comparative period.

ITEM - # 9 MANAGEMENT'S DISCUSSION AND
ANALYSISOF FINANCIAL CONDITION AND
RESULTS OF OPERATION

The Company has no oil or gas production, no revenues, and no
internally generated income of any kind. The Company owns an oil and gas
exploration concession in Indonesia. The Company's management considers the
Bengara-II Block to be a medium risk and high potential reward property.

LIQUIDITY AND CAPITAL RESOURCES

Cash on hand is sufficient to fund the Companys overhead costs
and exploration objectives for the immediate future. The Company intends to
focus its efforts on acquisition of oil and gas producing properties to generate
revenue.

MATERIAL EVENTS OCCURING DURING THE LAST FISCAL YEAR ENDED
6/30/07

New AuditorThe Company engaged Dale Matheson
Carr-Hilton Labonte LLP of Vancouver, BC, as the Company's auditors on 10/13/06.

Sale of Bengara-II InterestOn 9/29/06 the
Company signed definitive agreements closing its sale of 70% of its shareholding
in its Continental-GeoPetro (Bengara-II) Ltd. subsidiary and its Bengara-II
Production Sharing Contract to CNPC as per the Company's 7/11/06 press release.
Continental will retain an 18% stake in Continental-GeoPetro (Bengara-II) Ltd.
("CGB2") and its 3,649 square kilometer Bengara-II Production Sharing Contract
("PSC") in East Kalimantan, Indonesia. CNPCHK (Indonesia) Limited, ("CNPC") is a
wholly owned subsidiary of CNPC (Hong Kong) Limited who is party to the
agreements as guarantor. To earn its 70% stake in CGB2, CNPC paid an Earning
Obligation in cash in the amount of $18,700,000 into a CGB2 account jointly
controlled by Continental, which funds shall be used exclusively to pay for
exploration drilling on the Bengara-II PSC area. CNPC shall also provide
development loans up to a maximum limit of $41,300,000 over and above the
$18,700,000 Earning Obligation to CGB2 and thereby carry all of Continental's
18% share of Bengara-II development costs on any oil or gas discoveries made for
a combined total CGB2 expenditure of $60,000,000. CNPC will also pay directly to
Continental a cash bonus in the amount of $3,000,000 contingent upon the first
commercial oil or gas discovery within the Bengara-II PSC area. Effective
9/29/06, all consultant and rental contracts were terminated by CGB2 due to the
sale of majority interest to CNPC. CGB2 paid 3 months severance on these
contracts totaling approximately $133,000 of which the Company has paid its 60%
share. The Company's President & CEO, Mr. Richard L. McAdoo, has resigned as
CEO of CGB2 but shall remain as a director of CGB2 and as its Chief Exploration
Officer or CXO.

New Finder West CoastThe Company engaged
American West Pacific Intl Invest Corp ("AWP") of San Francisco to provide
successful efforts private placement sourcing at its own risk and expense. The
Company shall pay a "Finder's Fee" equal to fifteen percent (15%) of the actual
cash proceeds received by the Company from the private placement subscription
funds; half the said Finder's Fee (7.5%) in the form of cash and half (7.5%) in
the form of Units valued at the subscription price. Additionally, in the event
the Placee exercises any warrants obtained as part of the Units then the Company
shall pay AWP a cash fee equivalent to ten percent (10%) of the actual cash
proceeds received by the Company from the warrants exercise.

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New Finder East CoastThe Company engaged
Sichenzia Ross Friedman Ference LLP of New York City to source private
placements and prepare related SEC filings and registration statements for the
Company. The Company paid a $2,500 retainer and, subject to the finder's
successful efforts, the Company shall pay a flat fee of $ 27,500 upon the close
of a financing plus an additional $ 10,000 on filing of a SB2 registration
statement and a further $ 10,000 thirty days thereafter.

Public RelationsThe Company entered into an
investor relations contract with The Money Channel, for a series of weekly radio
interviews to promote the Company to air from mid-November 2006 through
mid-February 2007 at a flat fee of $25,000

Bengara-II Drilling Funded- CNPC paid in October
2006 its Earning Obligation under its deal to buy a 70% stake in CGB2 in cash in
the amount of $18,700,000 into a CGB2 account jointly controlled by Continental,
which funds shall be used exclusively to pay for exploration drilling on the
Bengara-II PSC area.

New Jakarta Office Opened- The Company's 18%
owned Continental-GeoPetro (Bengara-II) Ltd. subsidiary closed its Fatmawati
office in Jakarta and opened a new office from 11/30/06 at 8th Floor Plaza
Mutiara, Jl. Lingkar Mega Kuningan Kav. E I-2, Jakarta, 12950, Indonesia, Phone
+6221-5785-2419, Fax +6221-5785-2420

Bengara-II First Drilling Tendered- The
Company's 18% owned Indonesian subsidiary Continental-GeoPetro (Bengara-II) Ltd.
("CGB2") has called for tenders to provide turn-key, integrated drilling
services to drill the first of four planned wildcat exploration wells on the
Bengara-II PSC, onshore East Kalimantan. CGB2. Bid submission closes on the 18th
of December and CGB2 expects to award the drilling contract shortly thereafter.
The first well of the 2006-07 drilling program shall be the Seberaba-1
exploration well which shall be drilled to a total depth of 4,200 meters (13,780
feet). The Seberaba-1 is located to test 4 different oil-prospective
stratigraphic levels on a large fault closed structure evident on seismic.

Oil & Gas Activities Report- The Company
filed an annual report on its oil and gas activities under a Form-51-101F1, F2
and F3 filing with, and as required by, Canadian securities regulators. The
report may be downloaded from the SEDAR website.

Management Employment Contracts- The Company
signed Employment Agreements with two officers and one senior manager.

Investment Banker Hired - The Company hired Carter Securities,
LLC of New York City to assist the Company in raising capital through private
placements of the Companys stock or issuance of convertible debentures. The
engagement was signed by the parties on 2/15/07 and had an exclusive term of 60
days.

New Bank Account Established- The Company opened
a bank account at Park Cities Bank, Dallas, Texas, to facilitate its future USA
operations and financing activities.

Payroll Processor Hired- The Company hired
Automated Data Processing, Seattle, Washington, to handle its payroll and tax
reporting.

Bengara-II Acreage Relinquished- During April
2007 the Companys 18% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd.
made its 2nd scheduled relinquishment of area of the Bengara-II PSC
in Indonesia as required by the production sharing contract. At the end of the
Past Quarter the area of the Bengara-II PSC contract stood at 2,427 square
kilometers or 600,000 acres of which the Companys net acreage is 18% or 108,000
acres.

Seberaba-1 Well Spudded - On 4/25/07 the
Companys first exploration well on the Bengara-II Block, Seberaba-1, was
spudded. The well is programmed to be drilled to a total depth of 4,000 meters
(13,120 feet), and will intersect four separate potential pay zones.

Share Issues Activity During Fiscal 2007 - During
Fiscal 2007 the Company issued 6,264,445 new shares generating total proceeds to
the company of $1,033,333 as follows:

- A total of 111,111 new common shares were issued in exchange for services
  received of a value to the Company of $80,000.
- A total of 2,823,334 new common shares were issued in accordance with
  exercise of share purchase warrants related to previous year private
  placements and the Company received $ 481,833 in proceeds there from.
- A total of 3,330,000 common shares were issued in accordance with the
  exercise of incentive stock options resulting in net proceeds to the Company
  of $574,500.

Shareholding at Fiscal 2007 Year End- As at the
date of the Companys Fiscal 2007 year end on 6/30/07 the Company had:

- 63,372,381 common shares issued and outstanding.
- 4,650,000 unexercised stock options issued and outstanding.
- 3,725,000 unexercised warrants issued and outstanding.
- Nil preferred shares issued and outstanding.

MATERIAL EVENTS OCCURRING SINCE THELAST FISCAL YEAR END 6/30/07 UNTIL THE REPORT DATE

The following is a discussion of three material events, which
have occurred which have significant impact on the Company the implications of
which are discussed below and the section entitled "Material Commitments".

Seberaba-4 Appraisal Well Spudded in Bengara-II
Block - On 8/27/07 the Company announced that its 18% owned Indonesian
subsidiary Continental-GeoPetro (Bengara-II) Ltd. ("CGB2") has spudded the
Seberaba-4 appraisal well. The Seberaba-4 is the first of 3 planned appraisal
wells to further evaluate the Seberaba structure in the Bengara-II Block,
onshore East Kalimantan, Indonesia. Drilling of the Seberaba-4 to a planned

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total depth of 2,800 meters (9,186 feet) is expected to take up
to 48 days at a cost of over $5,300,000. The Seberaba-4 will test an updip
structural culmination of the large Seberaba structure at a position on the same
structure approximately 2.5 kilometers southeast of the Seberaba-1 exploration
well location.

Institutional Private Placement with Macquarie Bank- On 8/29/07 the Company closed a private equity placement with
Macquarie Bank Limited. The placement was arranged by the London office of
Macquaries Energy Capital Group with Macquarie Bank Limited (Macquarie)
subscribing the equity for its own account. Continental issued 5,000,000 common
shares at a price of $0.65 per share for net proceeds of $3,250,000. The
placement included a total of 10,000,000 attached warrants with each having an
exercise price of $0.90 per common share for a term of three years. When
exercised, the warrants will provide additional net proceeds of $9,000,000. In
addition to the equity placement, Continental also executed a mandate letter
with Macquarie which outlines indicative terms and conditions under which
Macquarie, on an exclusive basis and subject to technical and commercial due
diligence, will arrange additional finance of up to $100,000,000 for the company
in the form of senior secured credit, hedging, and equity facilities. The
proceeds from such additional funding shall be used to support both further
development of the companys Bengara-II Block oil and gas interests and to
purchase or acquire and develop additional international oil and gas interests.
The placement is the first equity investment in Continental by an institutional
investor. At the close of the placement the 5,000,000 shares owned by Macquarie
represent a position of 7.65% of Continentals issued and outstanding share
capital. Exercise by Macquarie of its warrants would increase its ownership to
19.4% on a partially diluted basis. The securities issued in the placement are
subject to applicable hold periods and trading restrictions under regulation-S
of the US Securities Act of 1933 and may only be offered, sold or otherwise
transferred outside the US or inside the US in accordance with applicable
exemptions from registration. Continental entered an agreement granting to
Macquarie piggyback registration rights in the event of a Continental initiated
registration of any restricted securities and demand registration rights at any
time after the second anniversary of the placement. The company paid a one-time,
5% arrangement fee to Macquaries Energy Capital Group in the form of 250,000
common shares in lieu of cash. No additional brokerage or finders fees were
incurred or paid. The shares and warrants were acquired by Macquarie for
investment purposes and, depending on market and other conditions; Macquarie may
increase or decrease its ownership of, or control or direction over, securities
of Continental.

New Director- On 9/16/07 the Company appointed
Mr. Phillip B. Garrison as a Director to fill a vacancy on the board. Mr.
Garrison is a resident of Dubai, United Arab Emirates. He is a graduate of the
University of Oklahoma and holds an MBA from Southern Methodist University. He
is a CPA registered in Texas. He is a past President of the American Business
Council in Dubai and is a trustee of the American School of Dubai. After
graduation from OU Mr. Garrison began his career in 1975 in the Oklahoma City
office of the public accounting firm of Arthur Young and Company (now Ernst
& Young) before eventually becoming the Director of Tax in its Hong Kong
office. In 1987 he joined Caltex (a Chevron-Texaco joint venture company) in its
Irving, Texas office before being posted to Caltexs Dubai office in 1994. After
serving in various regional positions he was appointed Managing Director - Gulf
Region responsible for all aspects of Caltex downstream and marketing activities
in the Middle East. In 2001 he founded Downstream Developments Inc. in Dubai and
consults on and develops ventures for transportation and logistics, oil and gas
infrastructure projects, and petroleum product marketing. Recently he has worked
with the Falcon Group of Dubai, a FEDEX subcontractor in the Middle East and
North Africa, as its Managing Director - Ground, where he ran operations for
land express cargo and logistics services. He is presently working with
Specialist Group Dubai as its executive officer in charge of operations for its
British Military contracts providing logistics, bulk fuels transportation, and
waste management services in Iraq and other parts of the Middle East region.

Seberaba-3 Appraisal Well Spudded in Bengara-II
Block - On 9/24/07 the Company announced that its 18% owned Indonesian
subsidiary Continental-GeoPetro (Bengara-II) Ltd. ("CGB2") has spudded the
Seberaba-3 appraisal well. The Seberaba-3 is the second of 3 planned appraisal
wells to further evaluate the Seberaba structure in the Bengara-II Block,
onshore East Kalimantan, Indonesia. Drilling of the Seberaba-3 to a planned
total depth of 2,800 meters (9,186 feet) is expected to take up to 49 days at a
cost of over $5,400,000. The Seberaba-3 will test an updip structural
culmination of the large Seberaba structure at a position on the same structure
approximately 2.3 kilometers northwest of the Seberaba-1 exploration well
location, and approximately 5.0 kilometers northwest of the Seberaba-4 appraisal
well location. The Seberaba-3 appraisal well is being drilled with the same
drilling rig used to drill the Seberaba-1 wildcat exploration well. Drilling on
Seberaba-1 was terminated short of the planned 4,000m total depth after having
reached a total depth of 2,946m. A 7 liner was set at 2,917m in the third
sidetrack after the original hole and first two sidetrack holes were lost due to
encountering a zone of overpressure below 2,930m. A smaller workover rig has
been moved onto the Seberaba-1 to conduct a series of drill stem tests.

Punga-1 Exploration Well Spudded in Bengara-II
Block - On 10/15/07 the Company announced that its 18% owned Indonesian
subsidiary Continental-GeoPetro (Bengara-II) Ltd. ("CGB2") has spudded the
Punga-1 exploration well. The Punga-1 is the fourth well to be drilled as part
of the 2007 drilling program for the Bengara-II Block, onshore East Kalimantan,
Indonesia. Drilling of the Punga-1 to a planned total depth of 2,800 meters
(9,186 feet) is expected to take up to 60 days at a cost of over $6,000,000. The
Punga-1 will test a large, seismically mapped structural culmination at a
location approximately 16 miles southeast of the Seberaba-1 exploration well
location, and approximately 12 miles southeast of the Seberaba-4 appraisal well
location.

Biofuels Subsidiary Formed - On 10/17/07 the
Company entered a cofounder shareholders agreement pertaining to a new,
partially-owned, special purpose, joint venture subsidiary incorporated in
Delaware named Continental Biofuels Corporation (CBC). The Company subscribed
and purchased 1,000 shares of the 2,500 issued and fully paid share capital of
CBC representing a 40% stake, and largest single shareholding, in CBC. The
remaining 60% stake in CBC is held by a cofounder group of five private
investors led by Casimir Capital Group LLC of New York which includes two
Directors of the Company, each of whom purchased a 10% stake. The Companys CFO,
Mr. James D. Eger has been appointed as the first President and CEO of CBC.
During the short term the Company expects this management control to be
relinquished and the Companys shareholding stake in CBC to be diluted when new
investors join CBC in anticipated private or public fundings.

The Company and its management have a long track record in oil
and gas exploration in remote areas of Indonesia. This experience provides
contacts, knowledge of local business practices, and long standing personal
relationships with Indonesian and Malaysian palm oil plantation owners

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and local government plantation permit providers. As a result,
the Company is in a unique position to act in the role of facilitator and
strengthen CBCs SE Asian operational capability and assist CBC to capitalize on
palm oil plantation acquisition or development opportunities. At this time the
Company does not intend to invest further working capital in CBC and expects its
management role in CBC to be limited to a short term start up period. The
Company views the investment in CBC as a broadening of its commercial asset base
in keeping with its geographic focus on Asia, particularly Indonesia.

Share Issues Activity Between Fiscal 2007 and the Report
Date- Between the Fiscal 2007 year end and the Report Date the Company
issued 5,265,000 new shares pursuant to private placements for net proceeds to
the Company of $ 3,265,000

Shareholding at the Report Date- As at the
Report Date on 10/29/07 the Company had:

- 68,637,381 common shares issued and outstanding.
- 5,150,000 unexercised stock options issued and outstanding.
- 13,740,000 unexercised warrants issued and outstanding.
- Nil preferred shares issued and outstanding.

MATERIAL COMMITMENTS

A summary of the current status of all material contracts,
commitments and expenditure obligations of the Company as of the Report Date are
described below. The Company intends to meet its commitments by a combination of
raising funds through placement of its securities and through farm out of
promoted working interests in its Indonesian properties. There is no guarantee
the Company will be successful in raising sufficient capital and the inability
to meet its obligations may have material adverse detrimental effects on the
Company, its operations and its particular resource properties.

Bengara-II PSC CommitmentsAs of the Report Date,
the Bengara-II PSC is currently in its Contract Year-10 of the 10 Contract Years
exploration period of the Bengara-II PSC ending 12/4/07. Within this 10-year
exploration period the Bengara-II operator, the Company's 18% owned subsidiary,
Continental-GeoPetro (Bengara-II) Ltd. (hereinafter CGB2), is obliged to drill
4 exploration wells and or expend at least $25,000,000 on petroleum exploratory
"Work Commitments" within the Bengara-II contract area. As at the Report Date a
total of approximately $ 28,000,000 has been spent by CGB2. This expenditure
exceeds the total Bengara-II PSC Work Commitment and the Company believes that
neither the Company nor CGB2 has any further funding commitments or obligations
with regard to the Bengara-II PSC Work Commitments.

At the end of the 10-year exploration period on 12/4/07 CGB2
may elect to relinquish the Bengara-II PSC back to the Indonesian government in
its entirety with no further obligation. Alternatively, depending upon the
results of the 2007 drilling program currently underway in the Bengara-II Block
at the Report Date, and subject to making a final scheduled relinquishment of
area of the Bengara-II Block reducing it to 240,275 acres (970 square
kilometers) or net 43,213 acres to the Companys 18% interest), the companys
CGB2 affiliate may elect one of two additional alternatives.

First, CGB2 may file a plan of development with the Indonesian
PSC authorities for any oil or gas discovery made on the Bengara-II Block which,
if and when, approved will automatically invoke the full remaining 20-year term
of the Bengara-II PSC until 12/4/27. In such case the Company would have no
additional mandatory PSC commitments for either exploration, development or
production activities. Second, CGB2 may file an application for an additional
period of time up to a few years to complete a specific 3D seismic program or
further appraisal and delineation drilling to more fully assess and appraise a
promising prospect prior to filing a formal plan of development. In either of
these two alternative cases the approval of the election made by CGB2 would be
subject to approval of Indonesian PSC authorities.

Continental-GeoPetro (Bengara-II) Ltd. Funding As
provided for in the agreement (the Bengara Shareholders Agreement) between the
shareholders of Bengara dated 9/29/06 concurrent with the sale of interest to
CNPCHK (see "Disposition of Interest in Principal Properties section above) the
Companys 18% shareholding interest in Bengara and its Bengara-II PSC is not
subject to cash calls and there are no provisions for Bengara or any other
shareholder to impose a funding obligation on the Company in respect of Bengara
or the Bengara-II PSC. However, in the event of a discovery of oil or gas in the
Bengara-II PSC the Company recognizes that Bengara may incur substantial
exploitation expenditures in bringing any discovery to production. In the event
that the shareholders of Bengara agree that it is more desirable to fund Bengara
with loans from shareholders subject to some amended shareholders agreement or a
joint operating agreement then the Company may elect to enter such new agreement
and in accordance with the provisions thereof fund its 18% shareholding portion
of field development expenditures.

RISK FACTORS

The nature of the Company's business, oil and gas exploration,
places the entire foundation of the enterprise in a high-risk category. Oil and
gas exploration involves a very high degree of risk. There is no assurance that
expenditures to be made, as intended by the Company on exploration or "wildcat"
drilling of its properties will result in any discoveries of oil and gas in
commercially exploitable quantities. The marketability of any oil and gas
actually discovered will be affected by numerous factors beyond the control of
the Company including availability of a market for gas, oil and gas market price
fluctuations, the proximity and capacity of transport and processing equipment,
additional financing and government regulation. Drilling and production
operations involve risks including blowouts, oil spills and fires (each of which
could result in damage to or destruction of wells, production facilities or
other properties, or injury to persons). Completion of a well does not assure a
profit on the investment or recovery of drilling, completion and operating
costs. In addition, drilling hazards or environmental damage could greatly
increase the cost of operations, and various field operating conditions may
adversely affect the Company's production from successful wells. Competition
among oil companies for quality properties

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and limited amounts of drilling capital is intense. Specific
risk factors are described below and listed in the priority in which Management
feels they pose the most serious risk facing the Company.

Financing Risks - The Company is not generating
income or revenue, has generated losses to date and does not presently have
sufficient financial resources to undertake by itself all of its planned
acquisitions or to fund its contractual commitments. The Companys ability to
continue as a going concern depends upon its ability to obtain financing. There
is no assurance that the Company will be able to obtain such financing on
acceptable terms, or at all. There is no assurance that the Company will be able
to extend or defer its contractual work commitments in the event sufficient
funds are not available. It is possible that prolonged inability of the Company
to fund its commitments could result in a loss of some or all of its interest.
Management is pursuing all available options to raise working capital and funds
for its various projects. There can be no assurance that the Management will be
successful.

Dependency on PSC Contracts - The Company's
principal assets are its interests in its Indonesian oil and gas properties. The
PSC contract terms contain requirements regarding quality of service, capital
expenditure, legal status of concessionaires, restrictions on transfer and
encumbrance of assets and other restrictions. Any failure to comply with these
arrangements could result, under certain circumstances, in the revocation of the
PSC, and therefore termination of development, production, drilling and other
petroleum operations. Furthermore, all plant, property and equipment purchased
by Continental-GeoPetro (Bengara-II) Ltd. for use pursuant to PSC operations
becomes the property of BPMigas. The cost of such materials may be recovered
only if commercial production is established within the PSC area in accordance
with provisions of the PSC.

Dependency on POD - As of the Report Date, the
Bengara-II PSC is currently in its Contract Year-10 of the 10 Contract Years
exploration period of the Bengara-II PSC ending 12/4/07 and the Company's 18%
owned subsidiary, Continental-GeoPetro (Bengara-II) Ltd. (hereinafter
Bengara), has exceeded its PSC contract obligation to drill 4 exploration
wells and expend at least $25,000,000 on petroleum exploratory "Work
Commitments" within the Bengara-II contract area. Encouraging drilling results
up to the Report Date have given the Company and its fellow shareholders of
Bengara confidence to prepare a Plan of Development (a POD) for the Bengara-II
PSC which Bengara intends to submit for approval of Indonesian authorities
before the 12/4/07 end of the exploration period. In the event the POD is
approved then the remaining 20-year term through 12/2/27 of the Bengara-II would
come into effect. Alternatively, depending upon future drilling results, Bengara
may elect to apply for an extension of the 10-year exploration period or apply
for additional time to appraise drilling results and prepare a new POD or a
revised POD. There can be no assurance that Bengara will be successful in
obtaining the approval of Indonesian authorities for any POD or of any
application for additional time to explore or prepare additional PODs. It is
possible that inability of Bengara to obtain approval of a POD or an extension
of time therefore could result in a loss of some or all of its interest in the
Bengara-II PSC.

Political Risks - Indonesia - The Company's
investments in Indonesia are subject to the political risks of foreign
investment. These include potential changes in laws affecting foreign ownership,
contract and area tenure, government participation, taxation, royalties, duties,
rates of exchange and exchange controls. Any new Indonesian government policies
adverse to the Company could include a change in crude oil pricing policy,
expropriation, nationalization, renegotiation or nullification of existing
concessions and contracts, taxation policies, foreign exchange and repatriation
restrictions, international monetary fluctuations and currency controls. Direct
and indirect effects of the decline in value of the Rupiah have included high
levels of domestic inflation, reductions in employment, high interest rates,
unavailability of traditional sources of financing, and an overall contraction
in production and income levels. These conditions have affected and may continue
to affect the operating environment in Indonesia, as well as the cost and
availability of financing for natural resources development efforts. Impediments
to a return to more normal economic conditions in Indonesia, or shocks to the
system that exacerbate current adverse economic conditions, could originate from
various sources, including further social unrest, terrorism, Islamic
fundamentalism, secessionist provinces, lack of government effectiveness due to
political uncertainty, or policy initiatives adverse to foreign investment.
Recent changes to Indonesian petroleum legislation could impact the Company's
concessions or operations on those concessions as implementation guidelines
related to the new legislation are released by the government. Increasing calls
for economic autonomy among many Indonesian provinces may impact the Company's
Indonesian concessions or operations thereon as local provinces and regencies
receive more control over their natural resources from the central government.

Oil and Gas Exploration Risks - Oil and gas
exploration involves a high degree of risk. There is no assurance that
expenditures to be made by the Company on its oil and gas properties will result
in any discoveries of oil and gas in commercial quantities. The Company intends
to participate in the drilling of both exploratory and development wells.
Exploratory wells have a much greater dry hole risk than do development wells.
The marketability of any oil and gas, which may be acquired or discovered, will
be affected by numerous factors beyond the control of the Company. These factors
include market fluctuations, the proximity and capacity of oil and gas pipelines
and processing equipment, rig availability and government regulation, including
regulations relating to prices, taxes, royalties, land tenure, allowable
production and environmental protection.

Operating Risks - Production operations involve
risks normally incident to such activities, including blowouts, oil spills and
fires (each of which could result in damage to or destruction of wells,
production facilities or other properties, or injury to persons). Completion of
a well does not assure a profit on the investment or recovery of drilling,
completion and operating costs. In addition, drilling hazards or environmental
damage could greatly increase the cost of operations, and various field
operating conditions may adversely affect the Company's production from
successful wells. These conditions include delays in obtaining governmental
approvals or consents, shut-in of connected wells resulting from extreme weather
conditions, insufficient storage or transportation capacity. While close well
supervision and effective maintenance operations can contribute to maximizing
production rates over time, production delays and declines from normal field
operating conditions cannot be eliminated and can be expected to adversely
affect operating revenues from time to time in varying degrees.

Risk of Future Changes in Regulatory Environment
- The Indonesian Government has exercised and continues to exercise significant
influence over many aspects of the Indonesian economy, including the oil and gas
industry, Indonesian business generally, investments, taxes and the capital
markets. The Bengara-II property and operations there upon, are governed by
Indonesian laws and regulations relating to the development, production,
marketing, pricing, transportation and storage of crude oil, taxation and
environmental and safety matters. Any new government policies adverse to the
Company could include a change in crude oil pricing policy, expropriation,
nationalization, renegotiation or nullification of existing

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concessions and PSC contracts, taxation policies, foreign
exchange and repatriation restrictions, international monetary fluctuations and
currency controls. Such changes and developments could have a material adverse
effect on private sector entities in general and on the Company in particular.

Management - The Company depends entirely upon
its management to identify, acquire, finance and operate a portfolio of oil and
gas exploration properties through which the Company can grow and achieve oil
production and a steady income. The Company's management is comprised of a small
number of key employees with technical skills and expertise in the business, the
loss of any one of whom could harm the Company. The Company does not currently
maintain "key-man" insurance for any of its employees.

Minority Shareholding Risks - The Company holds a
minority 18% shareholding in its principal Bengara-II PSC oil and gas property
through its affiliate Continental-GeoPetro (Bengara-II) Ltd. With this level of
interest the shareholders agreement in place offers only very limited degree of
management control or influence by the Company in the event of a disputed
management action endorsed by the other majority and controlling shareholders.
This lack of management control could have a detrimental effect upon the value
of the Companys interests.

Directors Conflicts of Interest - Certain
directors of the Company are also directors, officers or shareholders of other
companies that are similarly engaged in the business of acquiring, developing
and exploiting natural resource properties. Such associations may give rise to
conflicts of interest from time to time. The directors of the Company are
required by law to act honestly and in good faith with a view to the best
interests of the Company and to disclose any interest, which they may have in
any project or opportunity of the Company. If a conflict of interest arises at a
meeting of the board of directors, any director in a conflict will disclose his
interest and abstain from voting on such matter. In determining whether or not
the Company will participate in any project or opportunity, the director will
primarily consider the degree of risk to which the Company may be exposed and
its financial position at that time. Persons considering the purchase of Company
securities must appreciate that they will be required to rely on the judgment of
these individuals in resolving such conflicts as they may arise.

Currency/Exchange Rate Risk - All of the
Companys material financial obligations and commitments are denominated in US
Dollars while its primary source of financing is the issuance of equity
securities in Canada for Canadian currency. A substantial amount of the
Company's business transactions will be denominated in Indonesian Rupiah due to
operations on its principal properties. The Companys financial statements are
kept in US Dollars. The Indonesian currency, the Rupiah, has decreased
substantially in terms of the US Dollar during the past few years. See
historical foreign currency exchange rates set forth in Table-1 above in the
section "ITEM-#1: Currency and Exchange Rates". Fluctuations in the Rupiah may
have a substantial effect on the Companys financial statements due to related
gains or losses due to the rate changes. Until such time as it achieves revenue
from petroleum production the Company does not hedge and engage in other
strategies to protect itself from adverse fluctuations in the respective
exchange rate. Significant variations in exchange rates could have a material
adverse effect on the ability of the Company to meet its obligations.

MATERIAL TRENDS AND UNCERTAINTIES

The Company's securities are highly speculative and trade in a
specialized market of investors willing to take a large degree of risk for a
possibly large reward. World oil prices have risen to relatively high levels
recently, largely on fears of supply disruption with possible terrorist acts.
Given the uncertainty, world oil prices are likely to fluctuate and be volatile,
possibly over a wide range, with developments as to the resolution of the
conflicts with Iraq and international terrorism proceed.

The rebounding of the previously vigorous Asian economies is
clearly evident and expected to regain much of its forward momentum this year
and next. This rebound offers a triple benefit for the Company as increasing
Asian demand buoys world oil prices, international funds and emerging markets
funds refocus interest and investment on the region and larger oil companies
refocus exploration and development activities in the Asian geographic region.

Resource exploration is a speculative venture involving
substantial risk. There is no certainty that the expenditures to be made by the
Company in the acquisition of interests in properties under its various
agreements will result in discoveries of commercial quantities of oil/gas.
Further, the marketability of oil/gas that may be acquired or discovered by the
Company will be affected by numerous factors beyond the control of the Company.
These factors include market price fluctuations, the proximity and capacity of
oil/gas markets, availability of needed equipment, transportation costs and
government regulations. The exact effect of these factors cannot be accurately
predicted, the combination of these factors may result in the Company not
receiving an adequate return on capital.

The future development of the properties of the Company and
acquisition of new properties shall depend upon the ability of the Company to
finance through the joint venturing of projects, debt financing, equity
financing or other means. The Company intends to raise required additional funds
by selling equity or debt securities, until it develops or acquires cash flow
from operations. While the Company has been successful in raising the necessary
funds in the past, there can be no assurance it can continue to do so. If such
funds cannot be secured, the Company will be forced to curtail its
exploration/development efforts to a level for which funding can be secured.
There is no assurance that the Company will be successful in obtaining such
financing. This situation could be exacerbated by acts of international
terrorism or unforeseen political disturbances.

The Company does not know of any other trends or uncertainties
that are reasonably likely to result in, material changes to its liquidity at
present or in the foreseeable future. Material increases or decreases in the
Company's liquidity are substantially determined by the success or failure of
its exploration programs or the acquisition of new properties and projects.

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OUTLOOK

The Company is an oil and gas exploration company engaged in
the assembly of a portfolio of high potential oil and gas exploration prospects.
At present the Company does not have any producing properties and has no
revenue. The Company is focusing its efforts in Indonesia where large tracts of
acreage can be accumulated, there is a long and positive history of oil
exploration success, and geological conditions are favorable for hydrocarbon
accumulation. The Company has long experience operating in Indonesia and has the
advantage of local knowledge to facilitate definition and acquisition of
prospective acreage. Oil exploration involves a high degree of technical and
commercial risk and is characterized by a continuous need for fresh capital. The
Company will try to minimize and spread this risk by joint-venturing in its oil
exploration projects with other companies and participating in properties
exhibiting a range of risk profiles to reduce its cost exposure and enhance the
possibility of wildcat success.

For calendar year 2008, the Company's management has set the
following strategic objectives, which it hopes to accomplish during the year.
These goals, in order of priority, are:

|1. | Obtain an approved plan of development for the Bengara-II
      PSC to secure its full term until 12/4/27.                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                          
|2. | Participate in the drilling of additional exploration
      wells on the Bengara-II property.                                                                                            
|   |                                                                                                                                                                                          
|3. | Acquire a 3D seismic survey over the Seberaba-Punga
      structure in the Bengara-II property for the purposes of effectively
      planning further appraisal and development drilling.
|   |                                                                                                                                                                                          
|4. | Make acquisitions of interests in new oil and gas
      properties particularly ones with existing production or short term
      development to production.                             

ITEM - # 10 DIRECTORS AND OFFICERS OF THE
REGISTRANT

DIRECTORS

The table below lists, as at the Report Date, the names of all
the Directors of the Company. The Directors generally serve in their respective
capacities from their election on the day of the Annual General Meeting of the
Company held each year normally in January and will serve until the next Annual
General Meeting or until a successor is duly elected, unless the office is
vacated in accordance with the Articles of the Company. Casual vacancies on the
Board of Directors are filled by the remaining Directors and the persons filling
those vacancies hold office until the next Annual General Meeting at which time
they may be re-elected or replaced. The Company distinguishes its directors into
two groups, "Executive Directors" and "Non-Executive Directors". Executive
Directors are those directors who also serve as Executive Officers employed
under contract for such service by the Company. Non-Executive Directors are
those directors who do not serve also as Executive Officers of the Company and
have not contractual relationship with the Company for personal services outside
those of being a director. At the Report Date the Company has three
Non-Executive directors, Mr. Garrison, Mr. Hayes and Mr. Yu and two Executive
Directors Mr. McAdoo and Mr. Eger.

Table No. 8 DIRECTORSName
    Age
    Date First Appointed a DirectorRichard L. McAdoo (1) (5) (6)
    53
    January 1999Paul
      L. Hayes, Jr. (2)
    70
    April
      2003David T.W. Yu (3) (4) (5)
    52
    May
      2005James D. Eger (2) (4) (6)
    57
    October 2004Phillip B. Garrison (7) (4) (5)
    54
    September 2007


Notes to table:
    (1)
    Resident of Indonesia and citizen of the United
      States.(2)
    Resident and citizen of the United States.(3)
    Resident and citizen of Hong Kong.(4)
    Members of the Audit Committee of the Board of
      Directors.(5)
    Members of the Executive Compensation Committee
      of the Board of Directors.(6)
    Members of the Reserves Committee of the Board
      of Directors.(7)
    Resident of Dubai and citizen of the United
      States.


DIRECTORS COMMITTEES

Audit Committee- The board of directors has
created an "Audit Committee" and duly appointed executive director Eger and
non-executive directors Garrison and Yu to serve on the committee. The Audit
Committee is charged with the responsibility of coordinating, reviewing and
working with the Companys auditors with respect to the annual fiscal year end
audit. Mr. Eger serves as the committees chairman.

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Executive Compensation Committee - The board of
directors has created an "Executive Compensation Committee" and duly appointed
executive director McAdoo and non-executive directors Garrison and Yu serve on
the committee. The Compensation Committee is charged with the responsibility to
review and recommend contracts and terms of compensation to be paid to Company
management. Mr. McAdoo serves as the committees chairman.

Reserves Committee- The board of directors has
created a "Reserves Committee" and duly appointed executive directors McAdoo and
Eger to serve on the committee. The Reserves Committee is charged with the
responsibility of oversight of the Company's oil and gas reserves and activity
reporting in compliance with Canadian regulatory practices under National
Instrument 51.

RESUMES OF DIRECTORS

Richard L. McAdoo holds a Bachelors degree in
Geology and Masters degree in Geophysics from Texas Tech University; and a
Masters degree in Business Administration from Boston University. He is
registered as a Certified Petroleum Geologist by the American Association of
Petroleum Geologists. Actively involved in the international oil exploration and
production business for the last 28 years, Mr. McAdoo has held a variety of
technical and management positions in exploration and production for Mobil Oil
Company, Phillips Petroleum Company, Jackson Exploration, Inc., Triton Energy
Corporation, Tracer Petroleum Company, and others in many regions including the
North Sea, Middle East, Africa, South America, FSU and Asia. Mr. McAdoo is
President of the Company. Until 9/29/06 Mr. McAdoo was also a director,
President and CEO of the Company's 60% owned subsidiary Continental-GeoPetro
(Bengara-II) Ltd.

James D. Egerholds a Bachelors degree in Earth
Science from Antioch College, and three Masters degrees -- in Geology, Marine
Affairs, and Business Administration -- from the University of Florida,
University of Rhode Island, and Boston University, respectively. His career
spans more than 25 years, with more than 13 years in international oil
exploration, and 12 years in the securities and investments industry. Initially,
he served as an exploration geologist with Phillips Petroleum Company, from 1978
to 1982, in Bartlesville, Oklahoma, as well as Singapore and London. His
overseas assignments included working in the North Sea, North Africa and
Indonesia. In 1982, he joined Jackson Exploration, serving as the company's
General Manager and Chief Geologist in Jakarta, and later in Dallas where he was
responsible for overseeing that company's new ventures activities. In 1987, he
joined Dean Witter Reynolds Inc., stationed both in New York and Dallas, where
he specialized in energy futures, international equities, and options and
currency trading. In 1992 he was named Vice President of Finance for Tracer
Petroleum in Vancouver, where he was responsible for financing activities and
management of the company's cash assets. In 1994 he joined Southwest Securities
Inc. in Dallas, where he specialized in oil and gas and international equities.
From 1998 to 2000 he was President of Dimensions West Energy, Inc. and in 2000
rejoined Southwest Securities in Dallas until leaving in 2004 to join the
company.

Paul L. Hayes, Jr.'sexperience includes over
twenty years in each of the securities and energy industries. After graduating
in Petroleum Engineering from the University of Oklahoma, he was employed by
Exxon in Venezuela. After four years, he returned to the United States to get
his MBA from Harvard University after which he worked for Mobil Oil and Amoco in
Argentina and New York City. When the Board of Amoco moved the International
division back to Chicago, he left and became an oil analyst for William D.
Witter, Inc. He was with Witter for four years and then started his own NASD
firm, Hayes Brothers Securities, Inc. in Greenwich CT. After four years, he sold
his office to Fahnestock & Co. and became head of research and later worked
as an oil analyst for Oppenheimer & Co. and for Yorkton Securities in
Toronto.

David T.W. Yu is a resident of Hong Kong, and is
an experienced independent financial professional with thirty years experience
in the securities, commodities, bullion, and foreign exchange trading business
in Hong Kong. He has been employed by Rothschild & Sons, Shearson American
Express, and Citibank. Recently Mr. Yu has led negotiations that led to long
term intergovernmental oil supply agreements between the Chinese government and
oil producing nations in Africa in exchange for Chinese government backed
investment in economic development, trade and infrastructure projects. He is
currently working on similar deals in South America and in Indonesia.

Phillip B. Garrison is a resident of Dubai,
United Arab Emirates. He is a graduate of the University of Oklahoma and holds
an MBA from Southern Methodist University. He is a CPA registered in Texas. He
is a past President of the American Business Council in Dubai and is a trustee
of the American School of Dubai. He began his career in 1975 in the Oklahoma
City office of the public accounting firm of Arthur Young and Company (now Ernst
& Young) before eventually becoming the Director of Tax in its Hong Kong
office. In 1987 he joined Caltex (a Chevron-Texaco joint venture company) in its
Irving, Texas office before being posted to Caltexs Dubai office in 1994. After
serving in various regional positions he was appointed Managing Director - Gulf
Region responsible for all aspects of Caltex downstream and marketing activities
in the Middle East. In 2001 he founded Downstream Developments Inc. in Dubai and
consults on and develops ventures for transportation and logistics, oil and gas
infrastructure projects, and petroleum product marketing. Recently he has worked
with the Falcon Group of Dubai, a FEDEX subcontractor in the Middle East and
North Africa, as its Managing Director - Ground, where he ran operations for
land express cargo and logistics services. He is presently working with
Specialist Group Dubai as its executive officer in charge of operations for its
British Military contracts providing logistics, bulk fuels transportation, and
waste management services in Iraq and other parts of the Middle East region.

EXECUTIVE OFFICERS

The table below lists, as at the Report Date, the names of all
of the Executive Officers of the Company. Executive Officers are appointed by
the Board of Directors and hold office indefinitely at the pleasure of the Board
of Directors. The term "Executive Officers" includes and is limited to those
members of management who are either President, Vice President, Secretary,
Treasurer or Chairman of the Company or hold position of similar capacity in
wholly owned subsidiaries.

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Table No. 9 EXECUTIVE OFFICERSName
    Age
    Current Title
    Date AppointedRichard L. McAdoo (1)
    53
    President & CEO
    November 1999James D. Eger (2)
    57
    Vice President, CFO & Secretary
    February 2004


Notes to table:(1)
    Spends substantially
      full time on the affairs of the Company and its subsidiaries. He resides
      in Jakarta, Indonesia, and is employed under contract to
      Continental-GeoPetro (Bengara-II) Ltd. He is also CXO Chief Exploration
      Officer and a Director of the Companys 18% owned Indonesian subsidiary:
      Continental-GeoPetro (Bengara-II) Ltd. He is also a Director and President
      COO of the Companys 50% owned Indonesian joint venture company CG
      Xploration Inc. He is also a Director and Chairman of the Companys 40%
      owned joint venture company Continental Biofuels Corporation.(2)
    Spends substantially
      full time on the affairs of the Company and resides in Dallas, TX, USA. He
      is employed under full time contract to the Company. He is also a Director
      and President & CEO of the Companys 40% owned joint venture company
      Continental Biofuels Corporation.


Orders- No Director or Executive Officer has
been the subject of any order, judgment, or decree of any governmental agency or
administrator or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority of such person or of any
corporation of which he is a Director and or Executive Officer, to engage in the
securities business or in the sale of a particular security or temporarily or
permanently restraining or enjoining any such person or any corporation of which
he is an officer or director from engaging in or continuing any conduct,
practice, or employment in connection with the purchase or sale of securities,
or convicting such person of any felony or misdemeanor involving a security or
any aspect of the securities business or of theft or of any felony. During the
past 10 years, no director, officer or promoter of the Company has been the
subject of any penalties or sanctions by a court or securities regulatory
authority related to the trading in securities, promotion or management of a
publicly traded Company, or theft or fraud.

Multiple Directorships- Paul L. Hayes, Jr. is
also a director of Capco Energy Inc. (an OTC-Bulletin Board traded public
company) also involved in oil and gas exploration and development. While some
Executive Officers and Directors of the Company are involved in other business
ventures and may not spend full time on the affairs of the Company, the Company
believes that each devotes as much time to the affairs of the Company as are
required to satisfactorily carry out their duty.

Arrangements & Relationships- There are no
family relationships between any two or more Directors or Executive Officers.
There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which anyone was selected as a Director or
Executive Officer.

ITEM - # 11 COMPENSATION OF OFFICERS AND
DIRECTORS

COMPANY DIRECTOR COMPENSATION

The Company pays cash compensation in the amount of $15,000 per
annum to its Directors for their service in their capacity as Directors.
Directors are also entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors. The Board of Directors may also award special remuneration
to any Director undertaking any special services on behalf of the Company other
than services ordinarily required of a Director. Other than indicated below no
Director received any additional compensation for his services as a Director of
the Company, including committee participation and/or special assignments.
During Fiscal 2006, the Company paid 4 directors cash compensation totaling
$60,000 solely for their services as directors to the Company. The compensation
of executives of the Company is reviewed by the Compensation Committee and set
by a vote of the Board of Directors. Refer to ITEM-#13.

Non-Executive Director CompensationNon-Executive Directors are those directors not employed or paid by the
Company in any capacity such as officer or consultant.

Paul L. Hayes, Jr., Non-Executive DirectorDuring Fiscal
2007, Mr. Hayes served as a Non-Executive Director of the Company and was paid
an annual fee of $15,000 solely for his services as a director. The Company
expects to pay the same annual amount for each Fiscal Year that Mr. Hayes
continues to serve as a director. The Company did not pay any additional cash
compensation of any kind to Mr. Hayes for services not solely as a director
during Fiscal 2007 and does not expect to pay any additional cash compensation
to during Fiscal 2008. Mr. Hayes accepted appointment to the board of directors
in an action minuted on 4/14/03 filling a vacancy. See ITEM-#12 for his stock
options.

David T.W. Yu, Non-Executive DirectorDuring Fiscal
2007, Mr. Yu served as a Non-Executive Director of the Company and was paid an
annual fee of $15,000 solely for his services as a director. The Company expects
to pay the same annual amount for each Fiscal Year that Mr. Yu continues to
serve as a director. The Company did not pay any additional cash compensation of
any kind to Mr. Yu for services not solely as a director during Fiscal 2007 and
does not expect to pay any additional cash compensation to during Fiscal 2008.
Mr. Yu accepted appointment to the board of directors in an action minuted on
4/29/05 filling a vacancy. See ITEM-#12 for his stock options.

Phillip B. Garrison, Non-Executive DirectorDuring
Fiscal 2007, Mr. Garrison did not serve as a Director of the Company. The
Company expects to pay Mr. Garrison an amount of $15,000 during Fiscal 2008 and
the same annual amount for each Fiscal Year that Mr. Garrison continues to serve
as a director. The Company did not pay any additional cash compensation of any
kind to Mr. Garrison for services not solely as a director during Fiscal 2007
and does not expect to pay any additional cash compensation to during Fiscal
2008. Mr. Garrison accepted appointment to the board of directors in an action
minuted on 9/17/07 filling a vacancy. See ITEM-#12 for his stock options.

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Contracts & Compensation of Executive
DirectorsExecutive Directors are those directors who are
directly or indirectly employed by the Company and serving as paid officers,
advisors or employees of the Company in addition to their unpaid service as a
director. The following directors have contracts with the Company and are
Executive Directors. All contracts with the Company for directors, officers and
senior management are reviewed by the Compensation Committee.

Richard McAdoo, Director, President and CEOPursuant to
an employment contract dated 1/01/07 with the Companys President and CEO to
provide executive management from the Companys Jakarta office the Company pays
him an annual salary of $210,000. Prior to the date of his employment contract
and during Fiscal 2006/2005 the Company indirectly paid a 60% portion of his
salary, bonuses and accommodations through its funding its 60% joint venture
share of Continental-GeoPetro (Bengara-II) Ltd. During Fiscal 2006/2005, he was
so paid or accrued total compensation in the amounts of $150,000 and $150,000
respectively. During the current year the Company paid him a bonus of $125,000
in recognition of his efforts in the Bengara-II disposition. In addition, during
the period, the Company provided its 60% share of total costs of accommodations
provided him in Indonesia in the amount of $19,020 (2006 - $33,000; 2005 -
$36,000). Subsequent to the year-end, he was paid a bonus of $30,000 in
recognition of his efforts in the Companys first institutional placement.

James D. Eger, Director, VP and CFOPursuant to an
employment contract dated 1/01/07 with the Companys Vice President and CFO, Mr.
James D. Eger to provide executive management from the Companys Dallas office
the Company pays him an annual salary of $150,000. During Fiscal 2006/2005, Mr.
Eger was paid or accrued total compensation by the Company in the amounts of
$110,000 and $90,000 respectively. During the current year the Company paid him
a bonus of $75,000 in recognition of his efforts in the Bengara-II disposition.
Subsequent to the year-end, he was paid a bonus of $30,000 in recognition of his
efforts in the Companys first institutional placement.

CONTRACTS & COMPENSATION OF EXECUTIVE OFFICERS

The Company has only two executive officers, Mr. McAdoo and Mr.
Eger, whose contracts and compensation are discussed in the preceding section
pursuant to their service also as directors of the Company.

Stock OptionsThe Company grants
incentive stock options to Directors and to Officers and employees; refer to
ITEM-#12, "Options to Purchase Securities from Registrant or Subsidiaries". All
stock options are set at levels determined from time to time by the board of
directors in accordance with applicable securities regulations pursuant to a
Stock Option Plan adopted by shareholders at the Companys annual general
meeting on 1/25/06.

Pension Plans & Stock Ownership ProgramsNo funds were set aside or accrued by the Company during Fiscal 2007 to
provide pension, retirement or similar benefits for Directors or Executive
Officers. Except for the stock option program discussed in ITEM-#12, the Company
has no material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to the Company's Directors or Executive Officers.

Termination CompensationThe Company
has no plans or arrangements in respect of remuneration received or that may be
received by Executive Officers of the Company in Fiscal 2007 to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control, where the value of such compensation exceeds $100,000 per
Executive Officer. No Executive Officer/Director received other compensation in
excess of the lesser of $25,000 or 10% of such officer's cash compensation, and
all Executive Officers/Directors as a group did not receive other compensation
which exceeded $25,000 times the number of persons in the group or 10% of the
compensation.

ITEM - # 12 OPTIONS TO PURCHASE
SECURITIESFROM REGISTRANT OR
SUBSIDIARIES

Incentive Stock Options to purchase securities from the Company
can be granted only to Directors, Officers, employees and consultants and
Employees of the Company in accordance with applicable securities regulations.
All optionees other than directors and officers must be employees or consultants
or subcontractors engaged under written contract by the Company. The Company has
a formal written stock option plan that was adopted at the Companys AGM on
1/25/06 At the Report Date, the Company had 5,150,000 stock options outstanding
entitling the holders to purchase 5,150,000 common shares at exercise prices
between $0.40 and $0.65. The names and titles of the Directors and Executive
Officers of the Company to whom outstanding stock options have been granted and
the number of common shares subject to such options are set forth in the table
below. Options shown in the table are effective as at the Report Date and
include the number of options granted to directors and executive officers as a
group. Outstanding options to other employees and consultants as a group is also
shown.

Table No. 10STOCK OPTIONS OUTSTANDING AT THE REPORT
      DATEName of OptioneeDirectors & Officers
    US$ OptionExercise
      Price
    **Date Option Expires**
    Number ofOptions
    PercentOf TotalRichard McAdoo, Director & Officer
    $0.15
    4/30/09
    1,000,000
    28.6%James D. Eger, Director
    $0.15
    4/30/09
    1,000,000
    28.6%Paul
      L. Hayes, Director
    $0.15
    6/29/08
    500,000
    14.3%David T.W. Yu, Director
    $0.65
    6/30/09
    500,000
    14.3%


Page - 28

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Phillip B.
      Garrison, Director
    $0.65
    6/30/10
    500,000
    14.3%Total
      Directors & Officers as a Group
    3,500,000
    68%Other Optionees as
      a Group
    $0.40 to $0.65
    Various
    1,650,000
    32%Total
      Stock Options Outstanding at the Report Date
    5,150,000
    100%


At the Report Date, the Company had 13,740,000 share purchase
warrants outstanding entitling the holders to purchase 13,740,000 common shares
at prices between $0.15 and $1.00. All of the share purchase warrants issued by
the Company have been issued in conjunction with private placements of Company
securities. The table below lists share purchase warrants outstanding, the date
the share purchase warrants were issued, the exercise price, and the expiration
date of the share purchase warrants.

Table No. 11 SHARE PURCHASE WARRANTS OUTSTANDINGDate WarrantsIssued
    Number ofWarrants
      Outstanding
    Warrant ExercisePrice US$
    Date WarrantsExpire6/9/03
    935,000
    $0.15
    6/30/084/29/05
    2,000,000
    $0.40
    6/30/087/14/03
    790,000
    $0.15
    6/30/087/29/07
    15,000
    $1.00
    7/29/098/29/07
    10,000,000
    $0.90
    8/29/10Total at
      Report Date
    13,740,000


ITEM - # 13 INTEREST OF MANAGEMENT IN CERTAIN
TRANSACTIONS

Since the end of the Company's fiscal year at 6/30/07 there are
no transactions, or proposed transactions, which have materially affected or
will materially affect the Company in which any director, officer, or beneficial
holder of more that 10% of the outstanding common shares, or any of their
respective relatives, spouses, associates or affiliates has had or will have any
direct or material indirect interest.

P A R T - IIITEM - # 14 DESCRIPTION OF SECURITIES TO BE
REGISTERED

Debt Securities to be Registered.This
Form-20F filing is made as an annual report and matters ordinarily required to
be disclosed pursuant to this sub-heading of this ITEM-#14 are not applicable. A
description of the Companys currently registered securities is made in ITEM-#4,
ITEM-#5 and ITEM-#12.

American Depository Receipts.This
Form-20F filing is made as an annual report and matters ordinarily required to
be disclosed pursuant to this sub-heading of this ITEM-#14 are not applicable. A
description of the Companys registered securities is made in ITEMS#4, #5 and
#12.

Other Securities to be Registered.This Form-20F filing is made as an annual report and matters ordinarily
required to be disclosed pursuant to this sub-heading of this ITEM-#14 are not
applicable. A description of the Companys registered securities is made in
ITEMS-#4, #5 and #12.

Page - 29

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P A R T - IIIITEM - # 15 CONTROLS AND PROCEDURES

Evaluation of disclosure controls and
procedures.The Companys principal executive officer and its
principal financial officer, after evaluating the effectiveness of the Companys
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e) on 6/30/07 concluded that, as of such date, the Companys
disclosure controls and procedures were adequate and effective to ensure that
material information relating to the Company and its consolidated subsidiaries
would be made known to them by others within those entities.

Changes in internal control over financial reporting.There were no changes in the Companys internal control over
financial reporting procedures or in other factors that have materially
affected, or are reasonably likely to materially affect these internal controls
over financial reporting subsequent to the date of management's last evaluation.

ITEM - # 16 CHANGES IN SECURITIES AND CHANGES
INSECURITY FOR REGISTERED
SECURITIES

This Form-20F filing is made as an annual report and matters
ordinarily required to be disclosed pursuant to this ITEM-#16 are not
applicable. A description of the Companys currently authorized, issued,
outstanding and registered securities is made in ITEMS-#4, #5 and #12.

P A R T - IVITEM - # 17 FINANCIAL STATEMENTS

Commencing for its 7/31/02 year-end the Company adopted the
U.S. currency as its reporting currency and has prepared its financial
statements since then on that basis. The accounts of the Company are now
prepared in U.S. dollars and the Companys Canadian operations are translated
into U.S. dollars under the temporal method. The Company's financial statements
are prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP), the application of which, in the case of the Company,
conforms in all material respects for the periods presented with US GAAP, except
as disclosed in footnotes to the financial statements.

AUDITORS

The Company engaged Dale Matheson Carr-Hilton Labonte LLP
("DMCL") Chartered Accountants, of Vancouver, BC, as the Company's auditors on
10/13/06. DMCL is a member of the Institute of Chartered Accountants of British
Columbia. The firm is also a member of the Canadian Institute of Chartered
Accountants. In addition, DMCL is registered with the Public Company
Accountability Oversight Board.

Previously, Staley, Okada & Partners, Chartered
Accountants, of Vancouver, British Columbia, Canada were the Companys auditors
since the Companys incorporation in 1984.

AUDITS, REPORTING, FINANCIAL STATEMENTS AND THEIR
APPLICABILITY

The Company prepares annual audited consolidated financial
statements as at its year end date of 30 June. These consolidated financial
statements include the accounts of the company and its majority owned
subsidiaries. During the course of the Companys fiscal year management prepares
unaudited quarterly consolidated financial statements as at September 30,
December 31, and March 31 which are filed with British Columbia Securities
Commission within 60 days of the quarters end.

ELECTRONIC FILING AT THE SEDAR WEBSITE

The Company makes continuous financial and corporate
information disclosure as well as statutory filings with Canadian securities
regulators on the internet at the "SEDAR" website www.sedar.com. SEDAR is the
"System for Electronic Document Archiving and Retrieval" employed by Canadian
securities regulatory commissions to enable publicly traded companies to
electronically file and archive documents and filings in compliance with
applicable laws and securities trading regulations. The Company began filing
electronically on SEDAR in 1997.

STATEMENT ON AGE OF FINANCIAL STATEMENTS

The audited financial statements included pursuant to this
ITEM-#17 are effective as at the Companys Fiscal 2007 year end at 6/30/07. The
date of the auditors report for the same financial statements is 9/28/07. The
Report Date of this Form-20F Annual Report is 10/29/07. The actual electronic
filing of this Form-20F report and its Exhibits, including the Fiscal 2007
financial statements, on EDGAR is scheduled for 11/7/07. Elapsed time between
the fiscal year end effective date of the financial statements and the effective
date of the auditors report is 90 days. Elapsed time between the fiscal year
end effective date of the financial statements and the Report Date is 121 days.

Page - 30

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FINANCIAL STATEMENTS ATTACHMENT & INDEX

The auditors report and audited financial statements as required
  under ITEM-#17 are included attached hereto, are incorporated herein as Exhibit-11
  attached with this Form-20F Annual Report on the pages shown in the table of
  contents following.

Consolidated Financial
        StatementsTable of ContentsAttached Hereto as Exhibit-11 on Pages
        as Indicated Below
      Page1. Financial Statement Title Page
      372. Auditor's Report, dated 9/28/07, 11/27/06 and 12/18/06
      383. Prior Auditor's Report, dated 11/23/05 and 12/18/06
      394. Consolidated Balance Sheet at 6/30/07 and 6/30/06
      405. Consolidated Statement of Shareholders Equity (Deficiency)
        for Periods ended 6/30/07, 6/30/06, and 7/31/05
      416. Consolidated Statement of Operations for the Periods
        ended 6/30/07, 6/30/06, and 7/31/05
      427. Consolidated Statement of Cash Flows for the Periods
        ended 6/30/07, 6/30/06, and 7/31/05
      438. Notes to the Consolidated Financial Statements
      44


ITEM - # 18 FINANCIAL STATEMENTS

The Registrant has elected to provide its financial statements
  pursuant to ITEM-#17.

ITEM - # 19 EXHIBITS

INDEX TO EXHIBITS

The following Exhibits are incorporated herein this Form-20F
  and are attached hereto following the signatures below at the page number indicated
  on the following index:

ATTACHED EXHIBITS TITLE & CONTENTS
      PageExhibit-1: Certificate, Memorandum & Articles
        of Incorporation(Incorporating previously filed documents by reference)
      33Exhibit-2: Shareholder Rights Instruments(Incorporating
        previously filed documents by reference)
      33Exhibit-3: Voting Trusts(Incorporating by
        reference to Item-4 above in this filing)
      33Exhibit-4: Material Contracts(Incorporating
        previously filed documents by reference)
      33Exhibit-5: Foreign Patents
      33Exhibit-6: Statement How Earnings Per Share Calculated(Incorporating by reference to Item-8 above in this filing)
      33Exhibit-7: Statement How Reported Ratios Are Calculated(Incorporating by reference to Item-8 above in this filing)
      33Exhibit-8: Parent & Subsidiaries(Incorporating
        by reference to Item-1 above in this filing)
      33Exhibit-9: Statement on Age of Financial Statements(Incorporating by reference to Item-17 above in this filing)
      33Exhibit-10: GLOSSARY
      34Exhibit-11: Financial Statements Attachments Pursuant to ITEM-#17: (See
        Table of Contents Above)Exhibit-31: Sarbanes Oxley Act of 2002 Section 302 Certificates
        CFO and CEO
      34Exhibit-32: Furnished Copy of Sarbanes Oxley Act of 2002
        Section 906 Certificate
      36


Page - 31

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COPIES & DISTRIBUTION

This Form-20F annual report and its Exhibits, including the
audited financial statements at Fiscal 2007 year end 6/30/07, was submitted for
filing electronically on the US-SEC's EDGAR system in November 2007.

SARBANES OXLEY CERTIFICATIONS

Certificates by the Company's CEO and CFO regarding the
internal controls of the Company as required by Section 302 of the Sarbanes
Oxley Act of 2002 are filed with and as a part of this Form-20F in the required
form in Exhibit-31.

The certification required related to this Form-20F annual
report pursuant to 18 USC Section 1350 as adopted pursuant to Section 906 of the
Sarbanes Oxley Act of 2002 is furnished below in Exhibit-32.

SIGNATURES

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Form-20F Fiscal 2007 year end 6/30/07 annual report
on its behalf.

Continental Energy
Corporation(Registrant)

"James D. Eger"
_____________________________By: James D. Eger, Director & CFO
Report Date: October 29, 2007

Page - 32

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|E X H I B I T S 1 THROUGH 11 & 31
      & 32         
|-----------------------------------------------------
|EXHIBITS AND/OR ATTACHMENTS TO THE                   
|Form-20F For Fiscal 2007 Ended 6/30/07 Filed
      By
|CONTINENTAL ENERGY CORPORATION                       

E X H I B I T - 1 : CERTIFICATE, MEMORANDUM & ARTICLES
OF INCORPORATION.Materials required to be filed under this Exhibit-2
are incorporated into this Annual Report Form-20F filing by this reference.
Exhibit-1 consists of those copies of the Companys certificate of
incorporation, certificates of name changes, memorandum of incorporation, and
articles of association already filed with the US-SEC under cover of previous
filings made with the US-SEC by the Company including but not limited to the
most recently filed Form-20F Annual Report for the Companys last fiscal year
(as amended), Form-20F Annual Report filings for previous years; and any
information filed as part of a Form-6K periodic filings of material changes,
news, contracts or events affecting the Company.

E X H I B I T - 2 : SHAREHOLDERS RIGHTS INSTRUMENTSThe disclosure required to be filed under this Exhibit-2 is incorporated
into this Annual Report Form-F filing by the following reference. Exhibit-2
disclosure consists of the same materials referred to and incorporated by
reference under Exhibit-1 above. All instruments defining rights of holders of
Company securities instruments are therein described or presented in their
entirety. A statement commenting upon shareholder rights instruments issued by
the Company relative to the date of this annual report is also set forth in the
body of this Form-20F within ITEM-#4 under the section entitled Shareholders
Rights Instruments.

E X H I B I T - 3 : VOTING TRUSTSThe disclosure
required to be filed under this Exhibit-3 is incorporated into this Annual
Report Form-F filing by the following reference. Exhibit-3 disclosure consists
of the same materials referred to and incorporated by reference under Exhibit-1
above and/or under Exhibit-4 below. Any share voting trusts, pooling agreements
or similar agreements regarding collaborative voting of the Companys shares are
therein described or presented in their entirety. A statement commenting upon
voting trusts known to the Company relative to the date of this annual report is
also set forth in the body of this Form-20F within ITEM-#4 under the section
entitled Voting Trusts.

E X H I B I T - 4 : MATERIAL CONTRACTSMaterials
required to be filed under this Exhibit-3 is incorporated into this Annual
Report Form-20F filing by this reference. Exhibit-3 consists of those copies of
the Companys material contracts already filed with the US-SEC under cover of
previous filings made with the US-SEC by the Company (as amended); including,
but not limited to, the most recently filed Form-20F Annual Report for the
Companys last fiscal year, Form-20F Annual Report filings for previous years;
and information filed as part of Form-6K filings of material changes, news,
contracts or events affecting the Company.

E X H I B I T - 5 : FOREIGN PATENTSThe Company does
not have any foreign patents. The Company has never registered any foreign
patents in the past and does not contemplate registering any foreign patents in
the future.

E X H I B I T - 6 : STATEMENT HOW EARNINGS PER SHARE
CALCULATEDThe disclosure required to be filed under this Exhibit-6 is
incorporated into this Annual Report Form-F filing by the following reference. A
statement commenting upon how earnings per share are calculated is set forth in
the body of this Form-20F within ITEM-#8 under the section entitled How
Earnings Per Share Are Calculated.

E X H I B I T - 7 : STATEMENT HOW REPORTED RATIOS ARE
CALCULATEDThe disclosure required to be filed under this Exhibit-7 is
incorporated into this Annual Report Form-F filing by the following reference. A
statement commenting upon how any ratio of earning to fixed charges, any ratio
of earnings to combined fixed charges and preferred stock dividends or any other
ratios in the registration statement or report is set forth in the body of this
Form-20F within ITEM-#8 under the section entitled How Reported Ratios Are
Calculated.

E X H I B I T - 8 : SUBSIDIARIESThe disclosure
required to be filed under this Exhibit-8 is incorporated into this Annual
Report Form-F filing by the following reference. The identity and relationship
of the registrant as parent company and its subsidiaries is set forth in the
body of this Form-20F within ITEM-#1 under the section entitled Subsidiaries.

E X H I B I T - 9 : STATEMENT ON AGE OF FINANCIAL STATEMENTSThe disclosure required to be filed under this Exhibit-9 is incorporated
into this Annual Report Form-F filing by the following reference. A statement
commenting upon the age of the attached audited financial statements of the
Company relative to the date of this annual report is set forth in the body of
this Form-20F within ITEM-#17 under the section entitled Statement on Age of
Financial Statements.

Page - 33

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|E X H I B I T - 10 :
      GLOSSARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Technical Terms Definitions-
      The meaning of certain technical words, terms and phrases commonly used in
      the oil and gas industry and also used in this Annual Report Form-20F are
      described in the glossary filed by the Company on EDGAR in January 2003 as
      Exhibit-10A of the Company's Annual Report Form-20F for its fiscal 2002
      year end.                                                                                                                                                                                                                                      
|
|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Production Sharing Contract Terms- Certain words, terms, phrases and concepts used to describe the
      Company's Indonesian oil and gas concessions, and the Production Sharing
      Contracts ("PSC") from whence they are derived, are unique or
      contractually defined. For the benefit of the reader many of these terms
      are defined and described in the glossary filed by the Company on EDGAR in
      January 2003 as Exhibit-10B Parts-A and B of the Company's Annual Report
      Form-20F for its fiscal 2002 year end. The same definitions apply to this
      Annual Report Form-20F.
|
|
|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|E X H I B I T - 11 : AUDITED
      ANNUAL FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Annual audited financial statements are attached
      hereto after the exhibits as referenced in Item-17 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|E X H I B I T - 12 TO 30:
      (INTENTIONALLY LEFT BLANK)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|E X H I B I T - 31 : SARBANES
      OXLEY ACT OF 2002 SECTION 302 CEO AND CFO CERTIFICATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The disclosure required to be filed
      pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is included
      below in this Exhibit-31 in the form required as Certificates by the
      Company's CEO and its CFO.                                                                                                                                                                                                                                                                                                                                                                                       
|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|CFO CERTIFICATE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|I, James D. Eger, certify that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|1. | I have reviewed and read this annual report on Form 20-F
      of Continental Energy Corporation;                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on my knowledge, this report does not contain any
      untrue statement of a material fact or omit to state a material fact
      necessary to make the statements made, in light of the circumstances under
      which such statements were made, not misleading with respect to the period
      covered by this report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on my knowledge, the financial statements, and
      other financial information included in this report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the company as of, and for, the periods presented in this
      report;                      
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The companys other certifying officer and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the company and have:                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (a)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (c)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (d)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|5. | The companys other certifying officer and I have
      disclosed, based on our most recent evaluations of internal control over
      financial reporting, to the companys auditors and the audit committee of
      the companys board of directors (or persons performing the equivalent
      functions):                   
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (a)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (b)                                                                                                                                                                                                                                                                                                                               

|Dated: October 29, 2007 | /s/ James D. Eger                                                          
|----------------------- | ---------------------------------------------------------------------------
|                        | James D. Eger, Chief Financial Officer
      (Principal Accounting Officer)

Page - 34

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CEO CERTIFICATE

I, Richard L. McAdoo, certify that:

|1. | I have reviewed and read this annual report on Form 20-F
      of Continental Energy Corporation;                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                   
|2. | Based on my knowledge, this report does not contain any
      untrue statement of a material fact or omit to state a material fact
      necessary to make the statements made, in light of the circumstances under
      which such statements were made, not misleading with respect to the period
      covered by this report;
|   |                                                                                                                                                                                                                                                                                                                                   
|3. | Based on my knowledge, the financial statements, and
      other financial information included in this report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the company as of, and for, the periods presented in this
      report;                      
|   |                                                                                                                                                                                                                                                                                                                                   
|4. | The companys other certifying officer and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the company and have:                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (a)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (c)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (d)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|5. | The companys other certifying officer and I have
      disclosed, based on our most recent evaluations of internal control over
      financial reporting, to the companys auditors and the audit committee of
      the companys board of directors (or persons performing the equivalent
      functions):                   
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (a)                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                   
|   | (b)                                                                                                                                                                                                                                                                                                                               

|Dated: October 29, 2007 | /s/ Richard L.
      McAdoo                          
|----------------------- | -----------------------------------------------------
|                        | Richard L. McAdoo, President, CEO
      and Director.

Page - 35

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E X H I B I T - 32 : SARBANES OXLEY ACT OF 2002 SECTION 906
CERTIFICATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F for fiscal
year ended June 30, 2007 of Continental Energy Corporation, a British Columbia,
Canada corporation (the Company), as filed with the Securities and Exchange
Commission on the date hereof (the Annual Report), I, Richard L. McAdoo,
President and Chief Executive Officer of the Company certify, pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:

|1. | The Annual Report fully complies with the requirements of
      Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
      and                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                        
|2. | The information contained in the Annual Report fairly
      presents, in all material respects, the financial condition and results of
      operations of the Company.

|Dated: October 29, 2007 | /s/ Richard L. McAdoo                         
|----------------------- | ----------------------------------------------
|                        | Richard L. McAdoo, President, CEO and Director

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F for fiscal
year ended June 30, 2007 of Continental Energy Corporation, a British Columbia,
Canada corporation (the Company), as filed with the Securities and Exchange
Commission on the date hereof (the Annual Report), I, James D. Eger, Chief
Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

|3. | The Annual Report fully complies with the requirements of
      Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
      and                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                        
|4. | The information contained in the Annual Report fairly
      presents, in all material respects, the financial condition and results of
      operations of the Company.

|Dated: October 29, 2007 | /s/ James D. Eger                                                          
|----------------------- | ---------------------------------------------------------------------------
|                        | James D. Eger, Chief Financial
      Officer (Principal Accounting Officer)

A signed original of this written statement required by
Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version
of this written statement required by Section 906, has been provided to
Continental Energy Corporation and will be retained by Continental Energy
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.

Page - 36

---

|CONTINENTAL ENERGY
    CORPORATION
|----------------------------------
|(An Exploration Stage Company)    
|CONSOLIDATED FINANCIAL STATEMENTS 
|30 June 2007 and 2006             
|Expressed in U.S. dollars         

---



|INDEPENDENT AUDITORS REPORT
|----------------------------
|                            

To the Shareholders of Continental Energy Corporation (An
Exploration Stage Company)

We have audited the consolidated balance sheets of Continental
Energy Corporation (An Exploration Stage Company) as at June 30, 2007 and 2006,
the consolidated statements of operations, shareholders equity (deficiency) and
cash flows for the year ended June 30, 2007 and for the eleven months ended June
30, 2006. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with Canadian generally
accepted auditing standards and with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
June 30, 2007 and 2006, the results of its operations and cash flows for the
year ended June 30, 2007 and for the eleven months ended June 30, 2006 in
accordance with Canadian generally accepted accounting principles.

DMCL

DALE MATHESON CARR-HILTON LABONTELLPChartered Accountants

Vancouver, Canada September 28, 2007

|COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED
      STATES
|-------------------------------------------------------------------
|REPORTING DIFFERENCES                                              
|                                                                   

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
the financial statements are affected by conditions and events that cast
substantial doubt on the Companys ability to continue as a going concern, such
as those described in Note 1 to the financial statements. Our report to the
shareholders dated September 28, 2007 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors report when these are adequately disclosed in the
financial statements.

DMCL

DALE MATHESON CARR-HILTON LABONTELLPChartered Accountants

Vancouver, Canada September 28, 2007



---



|Report of Independent Registered Public
      Accounting Firm
|-------------------------------------------------------------
|                                                             

To the Shareholders of Continental Energy Corporation:

We have audited the accompanying consolidated balance sheets of
Continental Energy Corporation (the Company) as at 31 July 2005 and the
related consolidated statements of operations, shareholders' deficiency, and
cash flows for the year ended 31 July 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Canadian
generally accepted audit standards and with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as at 31 July 2005 and the results of its operations and its cash flows
for the year ended 31 July 2005, in accordance with Canadian generally accepted
accounting principles.

|                                                                             | Staley, Okada & Partners
|---------------------------------------------------------------------------- | --------------------------
|                                                                             |                           
|Vancouver, B.C.                                                              | STALEY, OKADA & PARTNERS  
|23 November 2005, (except for Note 13 which is dated 18
      December 2006) | CHARTERED ACCOUNTANTS     
|                                                                             |                           

|Comments By Auditors For U.S. Reader On
      Canada - U.S. Reporting Conflict
|------------------------------------------------------------------------------
|                                                                              

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
financial statements are affected by future events, the outcome of which is
indeterminable. As discussed in Note 1, the Companys continued existence as a
going concern is dependent upon the future economic success of its exploration
and development activities, the Companys ability to continue to secure adequate
financing and the Company achieving a positive cash flow and profitable
operations. Our report to the shareholders dated 23 November 2005 (except as
to Note 13 which is dated 18 December 2006), is expressed in accordance with
Canadian reporting standards, which do not require a reference to such going
concern considerations in the auditors report when the situation is adequately
disclosed in the financial statements.

|                                                                            | Staley, Okada & Partners
|--------------------------------------------------------------------------- | --------------------------
|                                                                            |                           
|Vancouver, B.C.                                                             | STALEY, OKADA & PARTNERS  
|23 November 2005 (except for Note 13 which is dated 18
      December 2006) | CHARTERED ACCOUNTANTS     
|                                                                            |                           



---

|Continental Energy Corporation  | Statement 1
|------------------------------- | -----------
|(An Exploration Stage Company)  |            
|**Consolidated Balance Sheets** |            

|                                                       |   | 30 June     |   |   | 30 June     |  
|------------------------------------------------------ | - | ----------- | - | - | ----------- | -
|ASSETS                                                 |   | 2007        |   |   | 2006        |  
|Current                                                |   |             |   |   |             |  
|Cash                                                   | $ | 1,514,279   |   | $ | 2,395,727   |  
|Accounts receivable                                    |   | 43,088      |   |   | 3,951       |  
|Prepaid expenses and deposits                          |   | 117,894     |   |   | 47,058      |  
|                                                       |   | 1,675,261   |   |   | 2,446,736   |  
|Investment in Bengara(Note
      4ai)                  |   | 1           |   |   | -           |  
|Resource Property Costs(Note 4)                        |   | 1           |   |   | 1           |  
|Equipment(Note 5)                                      |   | 88,685      |   |   | 70,278      |  
|                                                       | $ | 1,763,948   |   | $ | 2,517,015   |  
|                                                       |   |             |   |   |             |  
|                                                       |   |             |   |   |             |  
|LIABILITIES                                            |   |             |   |   |             |  
|Current                                                |   |             |   |   |             |  
|Accounts payable and accrued liabilities               | $ | 110,449     |   | $ | 159,814     |  
|                                                       |   |             |   |   |             |  
|SHAREHOLDERS EQUITY                                   |   |             |   |   |             |  
|Share Capital- Statement 2 (Note 6)                    |   | 11,731,566  |   |   | 10,063,516  |  
|Common Share Subscriptions-
      Statement 2 (Note 6) |   | 7,500       |   |   | -           |  
|Contributed Surplus- Statement 2                       |   | 3,221,931   |   |   | 2,998,183   |  
|Deficit- Statement 2                                   |   | (13,307,498 | ) |   | (10,704,498 | )
|                                                       |   | 1,653,499   |   |   | 2,357,201   |  
|                                                       | $ | 1,763,948   |   | $ | 2,517,015   |  

ON BEHALF OF THE BOARD:"Richard L.
      McAdoo"
    , Director"James D.
      Eger"
    , Director


- See Accompanying Notes -


---

|Continental Energy Corporation                                         | Statement 2
|---------------------------------------------------------------------- | -----------
|(An Exploration Stage Company)                                         |            
|**Consolidated Statements of** Shareholders Equity
      (Deficiency) |            

|                                        |  | Common Shares |  |   | Common Share |   |   | Contributed   |  |   |           |   |   |             |    
|--------------------------------------- |  | ------------- |  | - | ------------ | - | - | ------------- |  | - | --------- | - | - | ----------- | ---
|                                        |  | Shares        |  |   | Amount       |   |   | Subscriptions |  |   | Surplus   |   |   | Deficit     |    
|                                        |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|Balance - 31 July 2004                  |  | 49,375,412    |  | $ | 22,129,686   |   | $ | -             |  | $ | 2,075,975 |   | $ | (28,359,351 | ) $
|Issuance of shares for:                 |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|Private
      placements                |  | 3,616,667     |  |   | 545,000      |   |   | -             |  |   | -         |   |   | -           |    
|Exercise of warrants                    |  | 300,000       |  |   | 82,923       |   |   | -             |  |   | (15,423   | ) |   | -           |    
|Exercise of
      options               |  | 2,155,490     |  |   | 611,861      |   |   | -             |  |   | (283,126  | ) |   | -           |    
|Finder's fee - Financing                |  | 166,667       |  |   | -            |   |   | -             |  |   | -         |   |   | -           |    
|Shares for debt                         |  | 813,700       |  |   | 122,055      |   |   | -             |  |   | -         |   |   | -           |    
|Shares issuance costs                   |  | -             |  |   | (57,500      | ) |   | -             |  |   | -         |   |   | -           |    
|Financing fees - warrants               |  | -             |  |   | -            |   |   | -             |  |   | 161,903   |   |   | -           |    
|Stock-based compensation                |  | -             |  |   | -            |   |   | -             |  |   | 803,481   |   |   | -           |    
|Income for the year -
      Statement 3 |  | -             |  |   | -            |   |   | -             |  |   | -         |   |   | 2,180,617   |    
|Balance - 31 July 2005                  |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|- Restated (Note 6 & 13)                |  | 56,427,936    |  |   | 23,434,025   |   |   | -             |  |   | 2,742,810 |   |   | (26,178,734 | )  
|Issuance of shares for:                 |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|Exercise of
      warrants              |  | 200,000       |  |   | 45,648       |   |   | -             |  |   | (15,648   | ) |   | -           |    
|Exercise of options                     |  | 480,000       |  |   | 134,962      |   |   | -             |  |   | (62,962   | ) |   | -           |    
|Financing fees - warrants               |  | -             |  |   | -            |   |   | -             |  |   | 155,419   |   |   | -           |    
|Stock-based compensation                |  | -             |  |   | -            |   |   | -             |  |   | 178,564   |   |   | -           |    
|Reduction in capital (Note
      1)     |  | -             |  |   | (13,551,119  | ) |   | -             |  |   | -         |   |   | 13,551,119  |    
|Income for the period - Statement 3     |  | -             |  |   | -            |   |   | -             |  |   | -         |   |   | 1,923,117   |    
|                                        |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|Balance - 30 June 2006                  |  | 57,107,936    |  |   | 10,063,516   |   |   | -             |  |   | 2,998,183 |   |   | (10,704,498 | )  
|Issuance of shares for:                 |  |               |  |   |              |   |   |               |  |   |           |   |   |             |    
|Shares issued for services              |  | 111,111       |  |   | 80,000       |   |   | -             |  |   | -         |   |   | -           |    
|Exercise of
      warrants              |  | 2,823,334     |  |   | 610,528      |   |   | -             |  |   | (128,695  | ) |   | -           |    
|Exercise of options                     |  | 3,330,000     |  |   | 1,000,522    |   |   | 7,500         |  |   | (433,522  | ) |   | -           |    
|Share issuance costs                    |  | -             |  |   | (23,000      | ) |   | -             |  |   | -         |   |   | -           |    
|Financing fees - warrants               |  | -             |  |   | -            |   |   | -             |  |   | 112,723   |   |   | -           |    
|Stock-based compensation                |  | -             |  |   | -            |   |   | -             |  |   | 673,242   |   |   | -           |    
|Loss for the year - Statement 3         |  | -             |  |   | -            |   |   | -             |  |   | -         |   |   | (2,603,000  | )  
|Balance - 30 June 2007                  |  | 63,372,381    |  | $ | 11,731,566   |   | $ | 7,500         |  | $ | 3,221,931 |   | $ | (13,307,498 | ) $

- See Accompanying Notes -

---

|Continental Energy Corporation            | Statement 3
|----------------------------------------- | -----------
|(An Exploration Stage Company)            |            
|**Consolidated Statements of Operations** |            

|                                                                |   | For the    |       |   | For the Eleven |   |   | For the        |  
|--------------------------------------------------------------- | - | ---------- | ----- | - | -------------- | - | - | -------------- | -
|                                                                |   | Year Ended |       |   | Months Ended   |   |   | Year Ended     |  
|                                                                |   | 30 June    |       |   | 30 June        |   |   | 31 July        |  
|                                                                |   | 2007       |       |   | 2006           |   |   | 2005           |  
|                                                                |   |            |       |   |                |   |   | Restated (Note |  
|                                                                |   |            |       |   |                |   |   | 6
      & 13   | )
|                                                                |   |            |       |   |                |   |   |                |  
|Expenses                                                        |   |            |       |   |                |   |   |                |  
|Amortization                                                    | $ | 37,167     |       | $ | 66,837         |   | $ | 35,544         |  
|Bad debt (Note 7b)                                              |   | -          |       |   | 138,178        |   |   | -              |  
|Consulting                                                      |   | 127,901    |       |   | 65,032         |   |   | 5,000          |  
|Filing fees                                                     |   | 21,475     |       |   | 11,464         |   |   | 10,104         |  
|Financing fees - warrants
      (Note 6e & f)                   |   | 112,723    |       |   | 155,419        |   |   | 161,903        |  
|Foreign exchange loss                                           |   | 7,625      |       |   | 23,677         |   |   | 74,112         |  
|Interest and bank charges
      (recovery)                      |   | 5,548      |       |   | 4,687          |   |   | (474           | )
|Investor relations                                              |   | 168,896    |       |   | 13,127         |   |   | 6,108          |  
|Management fees (Note
      7a)                                 |   | 740,522    |       |   | 415,632        |   |   | 322,540        |  
|Office expenses                                                 |   | 146,387    |       |   | 109,818        |   |   | 139,875        |  
|Professional fees                                               |   | 203,811    |       |   | 74,271         |   |   | 98,063         |  
|Rent, office maintenance and utilities                          |   | 89,986     |       |   | 67,797         |   |   | 61,044         |  
|Shareholder communication and
      transfer agent              |   | 8,239      |       |   | 8,981          |   |   | 9,032          |  
|Stock-based compensation (Note 6d &
      f)                    |   | 673,242    |       |   | 178,564        |   |   | 803,481        |  
|Telephone                                                       |   | 29,503     |       |   | 19,917         |   |   | 24,925         |  
|Travel and accommodation                                        |   | 238,229    |       |   | 134,166        |   |   | 59,779         |  
|                                                                |   |            |       |   |                |   |   |                |  
|Loss Before the Undernoted                                      |   | (2,611,254 | )     |   | (1,487,567     | ) |   | (1,811,036     | )
|                                                                |   |            |       |   |                |   |   |                |  
|Other Income (Expenses)                                         |   |            |       |   |                |   |   |                |  
|Gain on settlement of debt                                      |   | 15,739     |       |   | 48,850         |   |   | -              |  
|Gain on disposal of GATB (Note 4b)                              |   | -          |       |   | -              |   |   | 4,059,868      |  
|Gain on disposal of Yapen
      (Note 4aii)                     |   | -          |       |   | 3,506,833      |   |   | -              |  
|Gain on disposal of Bengara (Note 4ai)                          |   | 23,906     |       |   | -              |   |   | -              |  
|Interest income                                                 |   | 81,995     |       |   | 75,856         |   |   | -              |  
|Loss on disposal or write-down of equipment                     |   | -          |       |   | -              |   |   | (55,254        | )
|Settlement of court judgment                                    |   | -          |       |   | (329,045       | ) |   | -              |  
|Terminated farm out proceeds                                    |   | -          |       |   | 100,000        |   |   | -              |  
|(Write-down) recovery of
      resource property costs (Note 4) |   | (113,386   | )     |   | 8,190          |   |   | (12,961        | )
|                                                                |   |            |       |   |                |   |   |                |  
|Income (Loss) for the Period                                    | $ | (2,603,000 | )     | $ | 1,923,117      |   | $ | 2,180,617      |  
|                                                                |   |            |       |   |                |   |   |                |  
|                                                                |   |            |       |   |                |   |   |                |  
|Income (Loss)
      per Share - Basic                           | $ | (0.04      | **)** | $ | 0.03           |   | $ | 0.04           |  
|Income (Loss) per Share - Diluted                               | $ | (0.04      | **)** | $ | 0.03           |   | $ | 0.03           |  
|                                                                |   |            |       |   |                |   |   |                |  
|                                                                |   |            |       |   |                |   |   |                |  
|Weighted
      Average Number of Shares Outstanding - Basic     |   | 59,325,041 |       |   | 56,661,170     |   |   | 51,280,433     |  
|                                                                |   |            |       |   |                |   |   |                |  
|Weighted
      Average Number of Shares Outstanding - Diluted   |   | 64,695,755 |       |   | 69,270,906     |   |   | 69,350,779     |  

- See Accompanying Notes -

---

|Continental Energy Corporation        | Statement 4
|------------------------------------- | -----------
|(An Exploration Stage Company)        |            
|Consolidated Statements of Cash Flows |            

|                                                                |   | For the    |   |   | For the Eleven |   |   | For the        |  
|--------------------------------------------------------------- | - | ---------- | - | - | -------------- | - | - | -------------- | -
|                                                                |   | Year Ended |   |   | Months Ended   |   |   | Year Ended     |  
|                                                                |   | 30 June    |   |   | 30 June        |   |   | 31 July        |  
|                                                                |   | 2007       |   |   | 2006           |   |   | 2005           |  
|                                                                |   |            |   |   |                |   |   | Restated (Note |  
|Cash Resources
      Provided By (Used In)                      |   |            |   |   |                |   |   | 6
      & 13   | )
|                                                                |   |            |   |   |                |   |   |                |  
|Operating Activities                                            |   |            |   |   |                |   |   |                |  
|Income (loss) for the period                                    | $ | (2,603,000 | ) | $ | 1,923,117      |   | $ | 2,180,617      |  
|Items not affecting cash                                        |   |            |   |   |                |   |   |                |  
|Accrued interest
      on debt settled for shares               |   | -          |   |   | -              |   |   | 44,373         |  
|Amortization                                                    |   | 37,167     |   |   | 66,837         |   |   | 35,544         |  
|Bad debt                                                        |   | -          |   |   | 138,178        |   |   | -              |  
|Financing fees - warrants
      (Note 6e & f)                   |   | 112,723    |   |   | 155,419        |   |   | 161,903        |  
|Gain on
      settlement of debt                                |   | (15,739    | ) |   | (48,850        | ) |   | -              |  
|Gain on disposal of GATB
      (Note 4b)                        |   | -          |   |   | -              |   |   | (4,059,868     | )
|Gain on disposal
      of Yapen (Note 4aii)                     |   | -          |   |   | (3,506,833     | ) |   | -              |  
|Gain on sale of Bengara (Note
      4ai)                        |   | (23,906    | ) |   | -              |   |   | -              |  
|Loss on disposal
      or write-down of equipment               |   | -          |   |   | -              |   |   | 55,254         |  
|Revaluation of contingent and
      conditional liabilities     |   | -          |   |   | -              |   |   | (47,873        | )
|Stock-based
      compensation (Note 6d & f)                    |   | 673,242    |   |   | 178,564        |   |   | 803,481        |  
|Terminated farm out proceeds                                    |   | -          |   |   | (100,000       | ) |   | -              |  
|Recovery
      (write-down) of resource property costs (Note 4) |   | 113,386    |   |   | (8,190         | ) |   | 12,961         |  
|Changes in current assets and liabilities                       |   |            |   |   |                |   |   |                |  
|Accounts
      receivable                                       |   | (39,137    | ) |   | (2,321         | ) |   | (8,556         | )
|Prepaid expenses and deposits                                   |   | 8,499      |   |   | (25,830        | ) |   | 44,427         |  
|Accounts payable
      and accrued liabilities                  |   | (21,198    | ) |   | (77,949        | ) |   | (112,079       | )
|                                                                |   |            |   |   |                |   |   |                |  
|                                                                |   | (1,757,963 | ) |   | (1,307,858     | ) |   | (889,816       | )
|Investing Activities                                            |   |            |   |   |                |   |   |                |  
|Disposition of Bengara                                          |   | (8,858     | ) |   | -              |   |   | -              |  
|Resource property costs                                         |   | (259,886   | ) |   | (343,914       | ) |   | (185,960       | )
|Resource property costs
      reimbursed by joint venturers     |   | 146,500    |   |   | 352,104        |   |   | 178,000        |  
|Proceeds from terminated farm out agreement                     |   | -          |   |   | 100,000        |   |   | -              |  
|Proceeds from disposition of
      GATB, net                    |   | -          |   |   | -              |   |   | 1,000          |  
|Proceeds from disposition of Yapen, net                         |   | -          |   |   | 3,506,834      |   |   | -              |  
|Proceeds from sale of Bengara
      shares, net                 |   | 21,000     |   |   | -              |   |   | -              |  
|Purchase of equipment, net of recovery                          |   | (55,574    | ) |   | (99,950        | ) |   | (1,639         | )
|                                                                |   |            |   |   |                |   |   |                |  
|                                                                |   | (156,818   | ) |   | 3,515,074      |   |   | (8,599         | )
|                                                                |   |            |   |   |                |   |   |                |  
|Financing Activities                                            |   |            |   |   |                |   |   |                |  
|Capital lease obligation                                        |   | -          |   |   | (12,387        | ) |   | (20,235        | )
|Share capital issued for cash, net                              |   | 1,033,333  |   |   | 102,000        |   |   | 891,235        |  
|                                                                |   |            |   |   |                |   |   |                |  
|                                                                |   | 1,033,333  |   |   | 89,613         |   |   | 871,000        |  
|                                                                |   |            |   |   |                |   |   |                |  
|Change in Cash                                                  |   | (881,448   | ) |   | 2,296,829      |   |   | (27,415        | )
|                                                                |   |            |   |   |                |   |   |                |  
|Cash position - Beginning                                       |   | 2,395,727  |   |   | 98,898         |   |   | 126,313        |  
|                                                                |   |            |   |   |                |   |   |                |  
|Cash Position -
      Ending                                    | $ | 1,514,279  |   | $ | 2,395,727      |   | $ | 98,898         |  
|                                                                |   | -          |   |   |                |   |   |                |  
|Supplemental Schedule of Non-Cash Transactions                  |   |            |   |   |                |   |   |                |  
|Issuance of shares for:                                         |   |            |   |   |                |   |   |                |  
|Finder's fee - Financing                                        | $ | -          |   | $ | -              |   | $ | 25,000         |  
|Debt settlement                                                 | $ | -          |   | $ | -              |   | $ | 122,055        |  
|Services                                                        | $ | 80,000     |   | $ | -              |   | $ | -              |  
|Assets and liabilities
      disposed upon GATB disposition     |   |            |   |   |                |   |   |                |  
|Current assets                                                  | $ | -          |   | $ | -              |   | $ | 31,823         |  
|Current
      liabilities                                       | $ | -          |   | $ | -              |   | $ | (682,979       | )
|Contingent and conditional liabilities                          | $ | -          |   | $ | -              |   | $ | (3,407,712     | )

- See Accompanying Notes -

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|1. | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Continental Energy Corporation (Continental or the
      Company) is an oil and gas exploration company engaged in the
      acquisition of a portfolio of oil and gas exploration properties with high
      potential resource prospects. Continental is focusing its efforts in
      Indonesia where large tracts of acreage can be accumulated, there is a
      history of oil exploration success, and geological conditions are
      favorable for hydrocarbon accumulation. Continental is an exploration
      stage company and none of its oil and gas properties currently generate
      revenue.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On 25 January 2006 the Companys shareholders approved
      that the Company's fiscal year-end be changed from 31 July to 30
    June.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On 28 November 2005 the Companys board proposed that the
      Company petition a British Columbia (BC) court to reduce the deficit
      attributable to such prior years as the court may allow. The proposal was
      approved by vote of the shareholders at the Annual General Meeting on 25
      January 2006. On 29 March 2006, the BC court approved a reduction in the
      capital of the Company in the amount of $13,551,119
    (CDN$20,796,667).                                                                                                                                                
|  
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These financial statements have been prepared on a going
      concern basis, which assumes that the Company will be able to realize its
      assets and discharge its liabilities in the normal course of operations.
      Should the Company be unable to continue as a going concern, it may be
      unable to realize the carrying value of its assets and meet its
      liabilities as they become payable. Subsequent to 30 June 2007, the
      Company completed an equity financing for $3,250,000.                                                                                                    
|  
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company has restated its financial statements for the
      year ended 31 July 2005 in order to record the fair value of share
      purchase warrants and stock options that were amended by the Company in
      that year (Note 6 &13).                                                                                                                                                                                                                                                                                                                                                                      
|  
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                                 
|-- | ------------------------------------------------
|   |                                                 
|2. | Significant Accounting Policies
      Continued
|   |                                                 
|   | b)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   | c)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   | d)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                                 
|-- | ------------------------------------------------
|   |                                                 
|2. | Significant Accounting Policies
      Continued
|   |                                                 
|   | d)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   | e)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   | f)                                              
|   |                                                 
|   |                                                 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                                 
|-- | ------------------------------------------------
|   |                                                 
|2. | Significant Accounting Policies
      Continued
|   |                                                 
|   | g)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   | h)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   | i)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   | j)                                              
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   |                                                 
|   | k)                                              
|   |                                                 
|   |                                                 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2. | Significant Accounting Policies
      Continued                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | l)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3. | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company's financial instruments consist of cash,
      accounts receivable and accounts payable. The carrying value of these
      financial instruments approximates their fair value due to their
      short-term maturity or capacity of prompt liquidation. Except as noted
      below, it is managements opinion that the Company is not exposed to
      significant interest, currency or credit risks arising from the financial
      instruments.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company is exposed to currency risk in that some of
      its subsidiary operations are transacted in Indonesian Rupiah. The U.S.
      dollar value of the assets and liabilities of the subsidiary denominated
      in Rupiah will fluctuate due to changes in foreign exchange. The Company
      does not use any hedging instruments to reduce its foreign currency
      exposure.                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | Resource Property Costs                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Details of oil and gas properties are as
  follows:                                                                                                                                                                                                                                                                                                                                                                                                               

| |         |   | 30 June |  |   | Exploration & |   |   | Costs                 |   |   | Recovery     |   |   | 30 June | 
| | ------- | - | ------- |  | - | ------------- | - | - | --------------------- | - | - | ------------ | - | - | ------- | 
| |         |   | 2006    |  |   | Development   |   |   | Reimbursed by         |   |   | (Impairment/ |   |   | 2007    | 
| |         |   | Balance |  |   | (Recovery)    |   |   | Joint
      Venturers |   |   | Abandonment) |   |   | Balance | 
| | Bengara | $ | 1       |  | $ | 259,886       |   | $ | (146,500              | ) | $ | (113,386     | ) | $ | 1       | 
| |         |   |         |  |   |               |   |   |                       |   |   |              |   |   |         | 
| |         |   | 31 July |  |   | Exploration & |   |   | Costs                 |   |   | Recovery     |   |   | 30 June | 
| |         |   | 2005    |  |   | Development   |   |   | Reimbursed by         |   |   | (Impairment/ |   |   | 2006    | 
| |         |   | Balance |  |   | (Recovery)    |   |   | Joint Venturers       |   |   | Abandonment) |   |   | Balance | 
| | Bengara | $ | 1       |  | $ | 343,914       |   | $ | (352,104              | ) | $ | 8,190        |   | $ | 1       | 
| | Yapen   |   | 1       |  |   | (1            | ) |   | -                     |   |   | -            |   |   | -       | 
| |         | $ | 2       |  | $ | 343,913       |   | $ | (352,104              | ) | $ | 8,190        |   | $ | 1       | 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                     
|-- | ------------------------------------
|   |                                     
|4. | Resource Property Costs
  Continued
|   |                                     
|   | a)                                  
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     

| | Assets                             | $ | 9,522   |  
| | ---------------------------------- | - | ------- | -
| | Liabilities                        |   | (12,428 | )
| | Negative net book value of Bengara |   | (2,906  | )
| | Proceeds on disposition            |   | 21,000  |  
| | Gain on disposition of Bengara     | $ | 23,906  |  

| | ii) | Yapen                                                                                                                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                    
| |     | Pursuant to a share sale and purchase agreement dated 26
      October 2005, the Company and GeoPetro sold 100% of their respective
      shares of Yapen to Nations Energy Company Ltd., an unrelated buyer, for
      $6,000,000 cash. The Company was paid and received its 60% share of the
      Yapen sale proceeds of $3,600,000 at closing.
| |     |                                                                                                                                                                                                                                                                                                                                                    
| |     | This transaction resulted in a gain of $3,506,833 net of
      associated costs and taxes, calculated as follows based on the net book
      values recorded in Yapen as at 26 October
2005:                                                                                                                                                       

| | Assets                                                        | $ | 1         | 
| | ------------------------------------------------------------- | - | --------- | 
| | Liabilities                                                   |   | -         | 
| | Net book value of Yapen                                       |   | 1         | 
| | Proceeds on disposition, net of bonuses and legal
      costs |   | 3,506,834 | 
| | Gain on disposition of Yapen                                  | $ | 3,506,833 | 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                                     
|-- | ------------------------------------
|   |                                     
|4. | Resource Property Costs
  Continued
|   |                                     
|   | b)                                  
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     
|   |                                     

| | Assets                                 | $ | 31,823     |  
| | -------------------------------------- | - | ---------- | -
| | Current Liabilities                    |   | (682,979   | )
| | Contingent and Conditional Liabilities |   | (3,407,712 | )
| | Negative net book value of GATB        |   | (4,058,868 | )
| | Proceeds on disposition                |   | 1,000      |  
| | Gain on disposition of GATB            | $ | 4,059,868  |  

| | The purchaser acquired the Companys interest
      in GATB for $1,000 and assumed all the liabilities and obligations of GATB.
      Due to all of the fixed assets of the subsidiary having been written down
      to $1 prior to the disposal, the GATB subsidiary had a consolidated negative
      net book value of $4,058,868. Consequently, the disposal resulted in a gain
      on disposition.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|

|5. | Equipment              
|-- | -----------------------
|   | Details are as follows:

| |                                 |   |         |  |   |              |  |   | 30 June 2007 | 
| | ------------------------------- | - | ------- |  | - | ------------ |  | - | ------------ | 
| |                                 |   |         |  |   | Accumulated  |  |   | Net          | 
| |                                 |   | Costs   |  |   | Amortization |  |   | Book Value   | 
| | Automobiles                     | $ | 17,561  |  | $ | 1,427        |  | $ | 16,134       | 
| | Computer equipment and software |   | 123,293 |  |   | 70,240       |  |   | 53,053       | 
| | Field survey equipment          |   | 23,270  |  |   | 3,772        |  |   | 19,498       | 
| |                                 | $ | 164,124 |  | $ | 75,439       |  | $ | 88,685       | 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                     
|-- | --------------------
|   |                     
|5. | Equipment
Continued

| |                        |   |         |  |   |              |  |   | 30 June 2006     | 
| | ---------------------- | - | ------- |  | - | ------------ |  | - | ---------------- | 
| |                        |   |         |  |   | Accumulated  |  |   | Net              | 
| |                        |   | Costs   |  |   | Amortization |  |   | Book
      Value | 
| | Automobiles            | $ | 66,510  |  | $ | 66,510       |  | $ | -                | 
| | Computer equipment     |   | 117,904 |  |   | 57,618       |  |   | 60,286           | 
| | Field survey equipment |   | 104,883 |  |   | 95,527       |  |   | 9,356            | 
| | Furniture              |   | 6,788   |  |   | 6,152        |  |   | 636              | 
| |                        | $ | 296,085 |  | $ | 225,807      |  | $ | 70,278           | 

|   |              
|-- | -------------
|   |              
|6. | Share Capital
|   |              
|   | a)           
|   |              
|   |              
|   |              
|   | b)           
|   |              
|   |              
|   |              
|   |              
|   |              
|   |              
|   |              
|   |              
|   |              
|   |              

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                         
|-- | ------------------------
|   |                         
|6. | Share Capital Continued
|   |                         
|   | c)                      
|   |                         
|   |                         
|   |                         
|   | d)                      
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                         
|-- | ------------------------
|   |                         
|6. | Share Capital Continued
|   |                         
|   | d)                      
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                         
|-- | ------------------------
|   |                         
|6. | Share Capital Continued
|   |                         
|   | d)                      
|   |                         
|   |                         
|   |                         
|   |                         

| |                                    |  |            |   |   | Weighted        | 
| | ---------------------------------- |  | ---------- | - | - | --------------- | 
| |                                    |  |            |   |   | average         | 
| |                                    |  | Number of  |   |   | exercise price  | 
| |                                    |  | options    |   |   | per
      share | 
| |                                    |  |            |   |   |                 | 
| | Options outstanding, 31 July, 2005 |  | 8,932,426  |   | $ | 0.15            | 
| | Options granted                    |  | 250,000    |   |   | 0.15            | 
| | Options exercised                  |  | (480,000   | ) |   | 0.15            | 
| | Options cancelled                  |  | (400,000   | ) |   | 0.15            | 
| |                                    |  |            |   |   |                 | 
| | Options outstanding, 30 June, 2006 |  | 8,302,426  |   | $ | 0.15            | 
| | Options granted                    |  | 2,200,000  |   |   | 0.56            | 
| | Options exercised                  |  | (3,330,000 | ) |   | 0.17            | 
| | Options expired                    |  | (2,522,426 | ) |   | 0.17            | 
| |                                    |  |            |   |   |                 | 
| | Options outstanding, 30 June 2007  |  | 4,650,000  |   | $ | 0.33            | 

| | As at 30 June 2007, the following share purchase options
      were outstanding: |           |           |  |                  
| | -------------------------------------------------------------------------------- | --------- | --------- |  | -----------------
| |                                                                                  | Number of | Price per |  |                  
| | Options                                                                          | shares    | Share     |  | Expiry
      date
| |                                                                                  |           |           |  |                  
| |                                                                                  | 750,000   | $0.15     |  | 29 June 2008     
| |                                                                                  | 2,000,000 | $0.15     |  | 30 April 2009    
| |                                                                                  | 500,000   | $0.40     |  | 30 June 2009     
| |                                                                                  | 1,400,000 | $0.65     |  | 30 June 2009     
| |                                                                                  |           |           |  |                  
| | Total outstanding and exercisable                                                | 4,650,000 |           |  |                  

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                         
|-- | ------------------------
|   |                         
|6. | Share Capital Continued
|   |                         
|   | e)                      
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         
|   |                         

| |          | Number of | Price per |  |             
| | -------- | --------- | --------- |  | ------------
| | Warrants | Shares    | Share     |  | Expiry Date 
| |          |           |           |  |             
| |          | 2,000,000 | $0.40     |  | 30 June 2008
| |          | 1,725,000 | $0.15     |  | 30 June 2008
| |          |           |           |  |             
| |          | 3,725,000 |           |  |             

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                         
|-- | ------------------------
|   |                         
|6. | Share Capital Continued
|   |                         
|   | f)                      
|   |                         
|   |                         

| |                                                                                                                                                                         | 30
      June 2007 | 30
      June 2006 | 31
      July 2005
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------ | ------------------
| | Expected dividend yield                                                                                                                                                 | 0.00%              | 0.00%              | 0.00%             
| | Expected stock price volatility                                                                                                                                         | 91% - 99%          | 95% - 140%         | 117% - 140%       
| | Risk-free interest rate                                                                                                                                                 | 4.02% - 4.73%      | 2.90% - 4.44%      | 2.90% - 3.15%     
| | Expected life of options (years)                                                                                                                                        | 0.79  2.79        | 1.02  3.42        | 1.04  2.08       
| |                                                                                                                                                                         |                    |                    |                   
| | The fair value of each warrant
      amendment is estimated on the date of amendment using the Black-Scholes
      option-pricing model with the following assumptions:
|
| |                                                                                                                                                                        
| |                                                                                                                                                                         | 30
      June 2007 | 30
      June 2006 | 31
      July 2005
| | Expected dividend yield                                                                                                                                                 | 0.00%              | 0.00%              | 0.00%             
| | Expected stock price volatility                                                                                                                                         | 96%                | 95%                | 117% - 127%       
| | Risk-free interest rate                                                                                                                                                 | 4.02%              | 4.41%              | 3.03% - 3.15%     
| | Expected life of warrants (years)                                                                                                                                       | 1.79               | 1.00  2.00        | 1.00  1.75       

Option pricing models require the
input of highly subjective assumptions including the estimate of the share price
volatility. Changes in the subjective input assumptions can materially affect
the fair value estimate, and therefore the existing models do not necessarily
provide a reliable single measure of the fair value of the Companys stock
options.

|   |                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                
|7. | Related Party Transactions                                                                                                                                                                                     
|   |                                                                                                                                                                                                                
|   | All related party transactions have been disclosed
      elsewhere in these consolidated financial statements, except as
      follows:                                                                        
|   |                                                                                                                                                                                                                
|   | a)                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                
|   | b)                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                
|   | c)                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                
|   | The above transactions, occurring in the normal course of
      operations, are measured at the exchange amount, which is the amount of
      consideration established and agreed to by the related
  parties.

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |             
|-- | ------------
|   |             
|8. | Income Taxes
|   |             

| | a) | A reconciliation of income taxes at statutory rates with
      the reported taxes is as follows:
| | -- | ------------------------------------------------------------------------------------------------

| |                                        |   | 2007       |   |   | 2006      |   |   | 2005       |  
| | -------------------------------------- | - | ---------- | - | - | --------- | - | - | ---------- | -
| |                                        |   |            |   |   |           |   |   |            |  
| | Income (loss) before income taxes      | $ | (2,603,000 | ) | $ | 1,923,117 |   | $ | 2,180,617  |  
| | Canadian federal and provincial income |   |            |   |   |           |   |   |            |  
| | tax rates                              |   | 34.12%     |   |   | 34.12%    |   |   | 34.12%     |  
| |                                        |   |            |   |   |           |   |   |            |  
| | Expected income tax (recovery)         |   | (888,144   | ) |   | 656,168   |   |   | 744,027    |  
| | Items not deductible for income tax    |   |            |   |   |           |   |   |            |  
| | purposes                               |   | 1,502,851  |   |   | (503,377  | ) |   | 1,590,206  |  
| | (Unrecognized) recognized benefit of   |   |            |   |   |           |   |   |            |  
| | non-capital losses                     |   | (614,707   | ) |   | (152,791  | ) |   | (2,334,233 | )
| |                                        |   |            |   |   |           |   |   |            |  
| | Total income taxes (recovery)          | $ | -          |   | $ | -         |   | $ | -          |  
| |                                        |   |            |   |   |           |   |   |            |  
| | Represented by:                        |   |            |   |   |           |   |   |            |  
| | Current income tax                     | $ | -          |   | $ | -         |   | $ | -          |  
| | Future income tax recovery             | $ | -          |   | $ | -         |   | $ | -          |  

| | b) | The significant components of the Company's future income
      tax assets and liabilities are as follows:
| | -- | ----------------------------------------------------------------------------------------------------------

| |                                               |   | 2007       |   |   | 2006       |   |   | 2005       |  
| | --------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |                                               |   |            |   |   |            |   |   |            |  
| | Future income tax assets (liabilities)        |   |            |   |   |            |   |   |            |  
| | Non-capital loss carry forwards               | $ | 1,128,909  |   | $ | 855,898    |   | $ | 976,735    |  
| | Capital loss carry forwards                   |   | 272,971    |   |   | 53,176     |   |   | 48,821     |  
| | Share issue costs                             |   | 14,126     |   |   | 19,619     |   |   | 17,265     |  
| | Undepreciated capital cost in
      excess of |   |            |   |   |            |   |   |            |  
| | accounting
      net book value               |   | 240,711    |   |   | 216,950    |   |   | 179,618    |  
| | Mineral properties                            |   | 624,070    |   |   | 590,195    |   |   | 541,866    |  
| |                                               |   | 2,280,787  |   |   | 1,735,838  |   |   | 1,764,305  |  
| |                                               |   |            |   |   |            |   |   |            |  
| | Valuation allowance                           |   | (2,280,787 | ) |   | (1,735,838 | ) |   | (1,764,305 | )
| |                                               |   |            |   |   |            |   |   |            |  
| | Net future income
      tax assets            | $ | -          |   | $ | -          |   | $ | -          |  

The Company has non-capital losses for
Canadian tax purposes of approximately $3,504,845CDN available to offset against
taxable income in future years, which, if unutilized, will expire through to
2027. The Company has capital losses for Canadian tax purposes of approximately
$1,694,951CDN available to offset capital gains in the future. Subject to
certain restrictions, the Company also has resource exploration expenditures of
approximately $1,937,507CDN available to reduce taxable income of future years.
Future tax benefits which may arise as a result of these losses, resource
deductions and other tax assets have not been recognized in these financial
statements, and have been offset by a valuation allowance.

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|   |                      
|-- | ---------------------
|   |                      
|9. | Segmented Information

| |                              |   | North      |   |   | Indonesia |   |   | Consolidated |  
| | ---------------------------- | - | ---------- | - | - | --------- | - | - | ------------ | -
| |                              |   | America    |   |   |           |   |   |              |  
| | 30 June 2007                 |   |            |   |   |           |   |   |              |  
| | Segmented revenue            | $ | -          |   | $ | -         |   | $ | -            |  
| | Segmented income (loss)      | $ | (2,175,576 | ) | $ | (427,424  | ) | $ | (2,603,000   | )
| | Identifiable assets          | $ | 1,613,914  |   | $ | 150,034   |   | $ | 1,763,948    |  
| | 30 June 2006                 |   |            |   |   |           |   |   |              |  
| | Segmented revenue            | $ | -          |   | $ | -         |   | $ | -            |  
| | Segmented income (loss) (i)  | $ | 2,426,457  |   | $ | (503,340  | ) | $ | 1,923,117    |  
| | Identifiable assets          | $ | 2,387,240  |   | $ | 129,775   |   | $ | 2,517,015    |  
| | 31 July 2005                 |   |            |   |   |           |   |   |              |  
| | Segmented revenue            | $ | -          |   | $ | -         |   | $ | -            |  
| | Segmented income (loss) (ii) | $ | 2,630,209  |   | $ | (449,592  | ) | $ | 2,180,617    |  
| | Identifiable assets          | $ | 240,240    |   | $ | 56,861    |   | $ | 297,101      |  

| | i)  | The North America income for the eleven months ended 30
      June 2006 includes a gain of $3,506,833 from the disposition of the
      Companys Yapen subsidiary during the 2006 fiscal year (Note 4aii)as well as terminated farm-out proceeds of $100,000.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                               
| | ii) | The income for North America for the year ended 31 July
      2005 includes a gain of $4,059,868 from the disposition of the Companys
      GATB subsidiary during the prior year (Note
4b).                                                                 

|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                 
|10. | Comparative Figures                                                                                             
|    |                                                                                                                 
|    | Certain of the comparative figures have been reclassified
      to conform with the current years presentation.
|    |                                                                                                                 
|    |                                                                                                                 
|11. | Subsequent Events                                                                                               
|    |                                                                                                                 
|    | Subsequent to 30 June 2007:                                                                                     
|    |                                                                                                                 
|    | a)                                                                                                              
|    |                                                                                                                 
|    | b)                                                                                                              
|    |                                                                                                                 
|    | c)                                                                                                              
|    |                                                                                                                 
|    | d)                                                                                                              

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                         
|12. | Differences between Canadian and United States
      Generally Accepted Accounting Principles (GAAP)                                                                                                                                                  
|    |                                                                                                                                                                                                                                                         
|    | Canadian GAAP varies in certain significant respects from
      US GAAP. The effect of the principal measurement differences on the
      Companys consolidated financial statements is quantified below and
      described in the accompanying notes:
|    |                                                                                                                                                                                                                                                         
|    | a)                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                         
|    | b)                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                         
|    | c)                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                         
|    | d)                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                         
|    | e)                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                         

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                               
|--- | --------------------------------------------------------------
|    |                                                               
|12. | Differences between Canadian and United States GAAP Continued
|    |                                                               
|    | f)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    | g)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    | h)                                                            
|    |                                                               
|    |                                                               

| |                       |   | 30
      June 2007 |  |   | 30
      June 2006 | 
| | --------------------- | - | ------------------ |  | - | ------------------ | 
| | Current assets        | $ | 110,422            |  | $ | 51,709             | 
| | Non-current assets    |   | 66,061             |  |   | 17,314             | 
| | Total assets          | $ | 176,483            |  | $ | 69,023             | 
| |                       |   |                    |  |   |                    | 
| | Current liabilities   |   | 1,755              |  |   | 449                | 
| | Long-term liabilities |   | -                  |  |   | -                  | 
| | Total liabilities     | $ | 1,755              |  | $ | 449                | 

| |                                       |   |                 |   |   | Eleven Months |   |   | Year Ended | 
| | ------------------------------------- | - | --------------- | - | - | ------------- | - | - | ---------- | 
| |                                       |   | Year Ended 30   |   |   | Ended 30 June |   |   | 31 July    | 
| |                                       |   | June
      2007 |   |   | 2006          |   |   | 2005       | 
| | Operating Expenses                    | $ | 107,497         |   | $ | 4,890         |   | $ | -          | 
| | Write-down of resource property costs |   | 92,678          |   |   | 42,230        |   |   | -          | 
| | Net loss for the period               | $ | 200,175         |   | $ | 47,120        |   | $ | -          | 
| |                                       |   |                 |   |   |               |   |   |            | 
| | Net cash used in:                     |   |                 |   |   |               |   |   |            | 
| | Operating activities                  | $ | (184,332        | ) | $ | (46,775       | ) | $ | -          | 
| | Investing activities                  | $ | (61,148         | ) | $ | (19,710       | ) | $ | -          | 
| | Financing activities                  | $ | -               |   | $ | -             |   | $ | -          | 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                               
|--- | --------------------------------------------------------------
|    |                                                               
|12. | Differences between Canadian and United States GAAP Continued
|    |                                                               
|    | i)                                                            

| |                                                         |   |               |   |   |                    |   |   |             |  
| | ------------------------------------------------------- | - | ------------- | - | - | ------------------ | - | - | ----------- | -
| |                                                         |   |               |   |   | Eleven             |   |   | Year Ended  |  
| |                                                         |   | Year Ended 30 |   |   | Months Ended       |   |   | 31 July     |  
| |                                                         |   | June 2007     |   |   | 30
      June 2006 |   |   | 2005        |  
| |                                                         |   |               |   |   |                    |   |   |             |  
| | Deficit - As reported                                   | $ | (13,307,498   | ) | $ | (10,704,498        | ) | $ | (26,178,734 | )
| | Stock compensation expense on option granted to         |   |               |   |   |                    |   |   |             |  
| | non-employees
      (Note 12a)                          |   | (164,573      | ) |   | (164,573           | ) |   | (164,573    | )
| | Stock compensation expense on escrow shares
      (Note |   |               |   |   |                    |   |   |             |  
| | 12b)                                                    |   | (139,485      | ) |   | (139,485           | ) |   | (139,485    | )
| |                                                         |   |               |   |   |                    |   |   |             |  
| | Deficit in accordance with United States GAAP           | $ | (13,611,556   | ) | $ | (11,008,556        | ) | $ | (26,482,792 | )

| | j) | The impact of the above differences between Canadian and
      United States GAAP on the statement of changes in shareholders equity, as
      reported, is as follows:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                           |  | Common Shares |  |   | Accumulated |  |   | Contributed |   |   |           | 
| | ----------------------------------------- |  | ------------- |  | - | ----------- |  | - | ----------- | - | - | --------- | 
| |                                           |  | Number        |  |   | Amount      |  |   | Deficit     |   |   | Surplus   | 
| |                                           |  |               |  |   |             |  |   |             |   |   |           | 
| | Shareholders equity balance as reported  |  |               |  |   |             |  |   |             |   |   |           | 
| | at 31 July 2005 (Restated)                |  | 56,427,936    |  | $ | 23,434,025  |  | $ | (26,178,734 | ) | $ | 2,742,810 | 
| | Stock compensation expense on option      |  |               |  |   |             |  |   |             |   |   |           | 
| | granted to non-employees (Note
      12a) |  | -             |  |   | -           |  |   | (164,573    | ) |   | 164,573   | 
| | Stock compensation expense on escrow      |  |               |  |   |             |  |   |             |   |   |           | 
| | shares (Note 12b)                         |  | -             |  |   | -           |  |   | (139,485    | ) |   | 139,485   | 
| | Shareholders equity in accordance with   |  |               |  |   |             |  |   |             |   |   |           | 
| | United States GAAP at 31 July
      2005  |  |               |  |   |             |  |   |             |   |   |           | 
| | (Restated)                                |  | 56,427,936    |  | $ | 23,434,025  |  | $ | (26,482,792 | ) | $ | 3,046,868 | 
| |                                           |  |               |  |   |             |  |   |             |   |   |           | 
| | Shareholders equity balance as reported  |  |               |  |   |             |  |   |             |   |   |           | 
| | at 30 June 2006                           |  | 57,107,936    |  | $ | 10,063,516  |  | $ | (10,704,498 | ) | $ | 2,998,183 | 
| | Stock compensation expense on option      |  |               |  |   |             |  |   |             |   |   |           | 
| | granted to non-employees (Note
      12a) |  | -             |  |   | -           |  |   | (164,573    | ) |   | 164,573   | 
| | Stock compensation expense on escrow      |  |               |  |   |             |  |   |             |   |   |           | 
| | shares (Note 12b)                         |  | -             |  |   | -           |  |   | (139,485    | ) |   | 139,485   | 
| |                                           |  |               |  |   |             |  |   |             |   |   |           | 
| | Shareholders equity in accordance with   |  |               |  |   |             |  |   |             |   |   |           | 
| | United States GAAP at 30 June 2006        |  | 57,107,936    |  | $ | 10,063,516  |  | $ | (11,008,556 | ) | $ | 3,302,241 | 
| |                                           |  |               |  |   |             |  |   |             |   |   |           | 
| | Shareholders equity balance as reported  |  |               |  |   |             |  |   |             |   |   |           | 
| | at 30 June 2007                           |  | 63,372,381    |  | $ | 11,739,066  |  | $ | (13,307,498 | ) | $ | 3,221,931 | 
| | Stock compensation expense on option      |  |               |  |   |             |  |   |             |   |   |           | 
| | granted to non-employees (Note
      12a) |  | -             |  |   | -           |  |   | (164,573    | ) |   | 164,573   | 
| | Stock compensation expense on escrow      |  |               |  |   |             |  |   |             |   |   |           | 
| | shares (Note 12b)                         |  | -             |  |   | -           |  |   | (139,485    | ) |   | 139,485   | 
| |                                           |  |               |  |   |             |  |   |             |   |   |           | 
| | Shareholders equity in accordance with   |  |               |  |   |             |  |   |             |   |   |           | 
| | United States GAAP at 30 June 2007        |  | 63,372,381    |  | $ | 11,739,066  |  | $ | (13,611,556 | ) | $ | 3,525,989 | 

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                               
|--- | --------------------------------------------------------------
|    |                                                               
|12. | Differences between Canadian and United States GAAP Continued
|    |                                                               
|    | k)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    | l)                                                            
|    |                                                               
|    |                                                               

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                               
|--- | --------------------------------------------------------------
|    |                                                               
|12. | Differences between Canadian and United States GAAP Continued
|    |                                                               
|    | l)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               

---

|Continental Energy Corporation            
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|30 June 2007 and 2006                     

|    |                                                               
|--- | --------------------------------------------------------------
|    |                                                               
|12. | Differences between Canadian and United States GAAP Continued
|    |                                                               
|    | m)                                                            
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               
|    |                                                               

|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|    |                                                                                                           
|13. | Restatements                                                                                              
|    | The Company has restated its financial
      statements for the year ended 31 July 2005 in order to record
|    | the fair value of share purchase warrants and
      stock options that were amended by the Company, as    
|    | disclosed in Note 6d & e.                                                                                 

| |                     |  | 31 July 2005      |  
| | ------------------- |  | ----------------- | -
| | Balance Sheet       |  | As
      Reported |  
| |                     |  | $                 |  
| | Share Capital       |  | 23,310,162        |  
| | Contributed Surplus |  | 2,206,382         |  
| | Deficit             |  | (25,518,443       | )

| |                            |  | Year Ended 31 July 2005 | 
| | -------------------------- |  | ----------------------- | 
| | Income Statement           |  | As
      Reported       | 
| |                            |  | $                       | 
| | Financing fees  warrants  |  | -                       | 
| | Income for the year        |  | 2,342,520               | 
| | Income per share  basic   |  | 0.05                    | 
| | Income per share - diluted |  | 0.03                    | 

---