Production Verses T/O:

Good afternoon All

Being one of the long-term holders here plus having invested in numerous small cap companies over the past 40 years – I think that it’s important to look at our market cap/share price and realistically look what average percentage uplift occurs in the Junior oil/gas marketplace when someone looks to make a move and buy a company such as ours out.

From where we sit today a 40% - 60% uplift in the share price/market cap will I am sure been viewed by most of us as an insult as is most unlikely to be voted through by the shareholding majority. Likewise those working on the settlement price of historical deals will be unlikely to stump up anywhere close to what our shareholding majority see as being a fair price to walk away – thus I believe that it is almost a dead certainty that we will not be taken-out before production is reached.

Moving forward – once the inevitable barriers have been overcome and we reach production – then it becomes a different ball game.

Once we move from a development company with ‘cash burn’ into a producer with a positive income stream – then we will be valued on a PE/ratio basis with longevity of income stream/production taken into account which should be the basis of our market cap at that point.

There is of course a hybrid position – in that a ‘third party’ steps into the frame and for an agreed percentage free carries us into production and beyond which I now feel is the most likely outcome.

Such a deal benefits both parties – and if Santos exercises it’s right to negotiate with Comet Ridge to increase its stake up to a holding of 50% - presumably in both Mahalo blocks – then that should give us the financial muscle to fast-track the Mahalos to production alongside Santos on an equal joint ownership basis.

We mustn’t forget that Santos’s MD and CEO Kevin Gallagher commented in August last year “Santos is keen to continue to develop our Queensland resources and this transaction provides another option for additional gas reserves. We look forward to working collaboratively with Comet Ridge to assess the potential of the Mahalo gas project.”

However if I was making decisions for Santos – I’d be biding my time just hoping that COI’s cash burn and financial liabilities meant that our company was backed into a corner with nowhere to go before making a move. This is a risky strategy in that there have been a number of previous occasions where things looked unfavourable to say the least for COI – yet somehow our management managed to steer our small cap boat through those choppy waters to arrive at the position which we enjoy today.

The better the gas flows – the greater the upside.

I believe that we will be producing gas alongside Santos – the big question is once that point is reached whether Santos will want to double up on it’s 50% ownership of the Mahalos – or whether a third party will step into the frame.

Until then we wait.

Just my thoughts.