QUARTERLY REPORT FOR THE PERIOD ENDING JUNE 30, 2002.

HIGHLIGHTS FOR THE QUARTER

1. Commencement of fracture stimulation and testing of good oil show zones in Vacqueros and Monterey Formation of up to 283 metres in San Antonio-1 in California in late July/early August 2002 targeting up to 106 million barrels of oil.
2. San Joaquin Basin, California Monterey horizontal drilling activity at Sunrise Gas discovery adjacent to Kingfisher, Raven and Condor Prospects with gas-in-place potential of up to 1.2 trillion cubic feet of gas.
3. Potential for strong industry interest in the Kingfisher, Raven and Condor Prospect Monterey horizontal drilling farmout opportunities resulting in drilling in second half 2002 with success at Sunrise Monterey horizontal drilling and fracture stimulation.
4. Scheduled September 2002 drilling in EP 413, North Perth Basin, of Jingemia-1 with dual reservoir targets of up to 12 million barrels of oil, if oil is present, and 29 billion cubic feet of gas, if gas is present, following completion of drilling operations at Hovea-3 in the adjacent Arc Energy Hovea oil and gas field.
5. Victoria Petroleum 5.7685% near free carried interest through drilling of Jingemia-1 adjacent to recent significant Roc Oil Cliff Head oil discovery to the west and Arc Energy Hovea oil and gas discoveries to the east.
6. Commencement of 2002 offshore Carnarvon Basin drilling program with scheduled October 2002 drilling of Ceres-1 in WA-261-P targeting up to 22 million barrels of oil, if oil is present.
7. Continuing offshore Carnarvon Basin drilling with scheduled November 2002 drilling of Argos-1 in WA-254-P adjacent to the Legendre Oil Field targeting up to 11 million barrels of oil, if oil is present.
8. The continuing Coalbed Methane development program in Queensland Surat Basin permit ATP 695P by Queensland Gas Company Ltd with commencement of drilling of Carla-1 in late July 2002 targeting potential Coalbed Methane reserves in ATP 695P of up to 500 billion cubic feet of gas.
9. Planned late 2002 drilling in Queensland, Surat Basin permit ATP 574P of North Giligulgul-1 targeting up to 23 million barrels of oil, if oil is present, following the completion of processing of February 2002 seismic survey to define the drilling location.
10. Net oil and gas production for the six months ending 31 December 2001 of 123 million cubic feet of gas and 11,637 barrels of oil equal to 180 barrels of oil equivalent per day for 18.4%-owned Kestrel Energy, Inc., a US NASDAQ public company (Code: KEST)
11. Continuing oil and gas production development activities in USA to increase oil and gas production in the USA producing properties in Louisiana, New Mexico, Oklahoma and Wyoming, to increase June 30, 2001 proved reserves of 2.6 million barrels of oil equivalent with a future undiscounted net cash flow of A$54 million and net present value of A$27 million at a discount rate of 10%.
12. Planned participation in a drilling program of up to fifteen wells in the next eight months.

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