Continental Closes First Institutional Placement

Continental Energy has closed a private equity placement with Macquarie Bank. The placement was arranged by the London office of Macquarie's Energy Capital Group with Macquarie Bank 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 US$ 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 US$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.

Andrew Sinclair, head of Macquarie's Energy Capital Group in London, said of the placement, "Many years of diligent exploration effort by Continental has identified a very attractive drilling portfolio on the highly prospective Bengara II block. Continental and its partners have now commenced an aggressive drilling program to appraise and develop Bengara II. Macquarie is excited to join Continental at this time and looks forward to a long and successful relationship."

The company's President, Richard L. McAdoo, said of the placement, "We are very pleased to have Macquarie as our first major institutional investor. Macquarie has an outstanding reputation as an innovative investment banker and a major player in international oil and gas mergers, acquisitions and project finance. The $100,000,000 financing mandate will, if brought to fruition, provide us the all important war chest to back up our new ventures, acquisitions, and Bengara-II development and thereby move Continental from an exploration to a development stage company."

Macquarie Bank Limited is a diversified international provider of specialist financial and investment banking services, with more than 10,000 people in 24 countries. Through its Energy Capital Group, with offices in Houston, London and Sydney, Macquarie Bank provides a wide array of strategic debt and equity capital for the global oil and gas industry.

Continental Energy Corporation is an international oil and gas exploration company, focused entirely on making major oil or gas discoveries in Indonesia.


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