Continental Energy Forms New Ventures Exploration Company

Continental Energy says that Continental and its partner, GeoPetro Resources Company, have formed CG Xploration Inc. to pursue new venture oil and gas exploration and production projects and obtain new exploration concessions in Indonesia. CG Xploration Inc. is incorporated in Delaware and is owned 50/50 by Continental and GeoPetro. Continental's President, Mr. Richard L. McAdoo, has been named "President & CXO" of CG Xploration Inc. and will lead the new company's exploration and new ventures development activities.

Mr. Richard L. McAdoo, said of the new company: "The recent sale of our Yapen Block provides Continental and GeoPetro with sufficient funds to take advantage of several promising new venture opportunities in Indonesia during 2006. CG Xploration Inc. will actively pursue, develop and acquire new venture opportunities on behalf of Continental and GeoPetro. We are already evaluating production acquisition opportunities and plan to participate in several undeveloped field exploitation opportunities and older field rehabilitation opportunities which state oil company Pertamina has announced for tender in 2006."

"We have also had our eyes on several promising new exploration concessions for some time and plan to acquire rights to explore them in 2006. We are particularly fond of the East Kalimantan area of Indonesia and consider it our core area of interest. East Kalimantan has been producing oil since 1899 and several new elephant size oil, gas and condensate discoveries have been made there in the past three years by Unocal and ENI among others. We have developed considerable technical expertise in East Kalimantan due to our activities there in the Bengara-II Block over the past eight years and have a strong competitive advantage with our understanding of the oil and gas rich geology of this area."

Mr. James D. Eger, Continental's CFO said, "The new and improved financial and fiscal production sharing terms and incentives available to oil and gas exploration companies in Indonesia continue to make Indonesia a very attractive place to explore for and produce hydrocarbons. Our long experience in Indonesia puts us in a very favorable position to strike the best deals possible on new concessions."