QUARTERLY REPORT FOR THE PERIOD ENDING JUNE 30, 2001

HIGHLIGHTS FOR THE QUARTER

1. Commencement of drilling of Eagle Oil Field horizontal appraisal well and drilling into primary target oil zone at 4,320 metres measured depth in San Joaquin Basin, California targeting reserve of up to 24 million barrels of oil and 62 billion cubic feet of gas, following up 223 barrels of oil per day and 0.7 million cubic feet gas per day 1986 discovery well.
2. Follow on drilling in mid August 2001 of the Kingfisher Prospect targeting potential oil and gas reserve of up to 25 million barrels of oil and 189 billion cubic feet of gas, if oil and gas is present.
3. Follow on drilling program in the San Joaquin Basin, California of up to four wells over next twelve months targeting potential reserves of up to 100 million barrels of oil and 495 billion cubic feet of gas, if oil and gas are present, subject to farmout and leasing.
4. High gas prices in San Joaquin Basin of around US$4 per thousand cubic feet (A$8 per thousand cubic feet) with oil prices of US$25/barrel (A$48/bbl) provide strong economic return potential for success in the Eagle horizontal appraisal well and the Kingfisher No. 1 well and any subsequent oil and gas discovery in the forthcoming planned San Joaquin Basin drilling program
5. The successful drilling with flows of gas to surface of the first Coalbed Methane wells in Surat Basin permits ATP 465P and ATP 574P by farminee Queensland Gas Company Ltd in the quarter targeting potential Coalbed Methane reserves in ATP 465P and ATP 574P of up to 1.2 trillion cubic feet.
6. Continuing gas production development activities in USA to increase gas production in the USA producing properties and in Greens Canyon Project, Green River Basin, Wyoming, by 18.4% owned Kestrel Energy Inc., a US NASDAQ public company (Code: KEST).
7. Net oil and gas production estimate for the March 2001 quarter of 14,500 barrels oil equivalent equal to 158 barrels of oil equivalent per day for 18.4%-owned Kestrel Energy, Inc.
8. Planned participation in a drilling program of up to fourteen wells in the next eight months as per the attached planned 2001 Drilling Schedule.

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