4.

Non executive independent director of the Company. The total amount of shares shown in the table includes 500,000 currently exercisable stock options and -0- fully paid common shares. All securities shown are held directly.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 17

ITEM - # 5   NATURE OF TRADING MARKET

TRADING MARKETS & EXCHANGES

Original IPO - The Company’s initial public offering was effective, only in Canada, on the Vancouver Stock Exchange under the auspices of the British Columbia Securities Commission on 6/24/85 under a former name, Intl. Focus Res. Inc.  The CUSIP No. is 210909-10-7.

Cease Trade Period - The common shares were cease traded on the Vancouver Stock Exchange from 3/2/93 until 2/28/97 for non-compliance with statutory filing requirement. As part of the reactivation, the Company completed a one-for-five consolidation of its common shares effective 1/3/96; all references to the number of common shares and/or per share data in this Annual Report refer to post-consolidation figures unless otherwise indicated.

VSE to CDNX - From 6/24/85 the Company's common shares traded on the Vancouver Stock Exchange (the "VSE") under the symbol "KK" and continued trading when the VSE merged with the Alberta Stock Exchange and changed its name to the Canadian Venture Stock Exchange (the "CDNX") on 11/29/99.

Halt Trade Period - On 3/21/01, the CDNX suspended trading of the Company's shares pending the Company's clarification and further actions regarding certain matters related to the Company's pending application to acquire GATB. In a letter to the Company dated 6/18/01 the CDNX advised that the Company's 6/07/01 submission has satisfactorily resolved the issues which gave rise to the trading suspension. The CDNX reinstated trading of the Company’s common shares and trading recommenced upon 7/12/01.

Frankfurt Stock Exchange - The Company’s common shares trade on the Frankfurt Stock Exchange, tier level three, in Germany under the symbol "CNZ" commencing on 10/8/99. The Company allowed its listing to lapse to inactive status due to lack of any appreciable trading volume and as of 02/02/02 the share prices are no longer quoted on the Frankfurt Stock Exchange.

Delisting from CDNX - The Company's common shares traded on the Canadian Venture Stock Exchange, the "CDNX" (formerly the Vancouver Stock Exchange until 11/29/99) in Vancouver, British Columbia, Canada, under the symbol "KK" between 6/24/85 and 8/10/01. The Company voluntarily delisted its common shares from trading on the CDNX in July 2001 and the last day the Company’s shares actually traded on the CDNX was 8/10/01 at a closing price of CDN$0.45.

OTC Bulletin Board - The Company's common shares trade on the NASD Electronic OTC Bulletin Board in the United States under the symbol "CPPXF", since 3/24/98. Table No. 4 lists the volume of trading and high, low and closing sales prices on the NASD Electronic OTC Bulletin Board for the Company's common shares for the last eight fiscal quarters.  The closing price of the common shares on 12/30/05 was US$ 0.19.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 18

REGISTRAR & TRANSFER AGENT

The Company's common shares are issued in registered form. Shares are issued and records for all issues are kept and maintained by the Company’s "registrar and transfer agent", Computershare Investor Services, (formerly known as Montreal Trust Company) located in Vancouver, British Columbia, Canada.

DIVIDENDS

The Company has not declared any dividends for the last five fiscal years and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.

US SHAREHOLDER INTERESTS

Number of Shareholders - The Company has researched to the best of its ability, the indirect holdings of its common shares. Indirect share holdings are held by share depository institutions on behalf of brokerage firms and their clients.  The names and addresses of the actual beneficial owners of individual shareholders is not known to the Company or the depository institutions.  Based on the number of proxy materials requested of the Company by various brokerage houses for distribution to shareholders of record on 12/07/05 the Report Date for the Company’s Fiscal Year 2005 annual general meeting, the Company estimates that it has in excess of 1,150 shareholders including 196 known registered shareholders.

Registered US Shareholders - On the 12/7/05 record date of the Company's annual general meeting, the list of registered shareholders of the Company‘s common shares as maintained by the registrar and transfer agent showed a total of 196 registered shareholders.  A total of 102 of these registered shareholders have United States of America "US" registration addresses and together they hold 3,529,088 shares representing about 6.21% of the total amount of Company common shares issued and outstanding.

Unregistered US Shareholders - The Company also estimates based on the number of proxy materials requested by US based brokerage firms that there are approximately 630 unregistered, "holders of record" resident in the United States, holding approximately 9,488,193 common shares.  Based on these estimates the combined registered and unregistered US resident shareholders is estimated to total approximately 732 shareholders holding 13,017,281 common shares representing a 22.91% stake in the total amount of Company common shares currently issued and outstanding at 12/31/05.

US Shareholders Having Options and Warrants - On 12/31/05, the Company records 19 holders of 8,695,334 outstanding share purchase warrants outstanding, 2 of whom are  resident in the United States holding a combined amount of 433,333 warrants or 5.0 % of the total amount of warrants outstanding.  Warrants were issued in conjunction with private placements or loans.  All warrants are non-transferable. On 12/31/05, the Company records 14 holders of  8,382,426 outstanding incentive stock options, 7 of whom are  resident in the United States holding a combined amount of 3,260,000 options or 38.9 % of the total amount of options outstanding.  Options are granted in conjunction with service as a director, employment, or contracting for services with the Company or its subsidiaries.  All options are non-transferable and expire within 90-days of termination of service, employment or contract.

ADR’s - The Company's common shares are registered to trade directly on the NASD OTC BB in the United States and not in the form of American Depository Receipts (ADR's) or similar certificates.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 19

ITEM - # 6   EXCHANGE CONTROLS AND OTHER

LIMITATIONS  AFFECTING SECURITY HOLDERS

Except as discussed in ITEM-#7, "Taxation", the Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the common shares.  There are no limitations on the right of non-Canadian owners to hold or vote the common shares imposed by Canadian federal or provincial law or by the charter or other constituent documents of the Company.

The Investment Canada Act (the "IC Act") governs acquisitions of Canadian business by a non-Canadian person or entity. The IC Act requires a non-Canadian (as defined in the IC Act) making an investment to acquire control of a Canadian business, the gross assets of which exceed certain defined threshold levels, to file an application for review with the Investment Review Division of Industry Canada.  The IC Act provides, among other things, for a review of an investment in the event of acquisition of "control" in certain Canadian businesses in the following circumstances:

1.

If the investor is a non-Canadian and is a national of a country belonging to the North American Free Trade Agreement ("NAFTA") and/or the World Trade Organization ("WTO") ("NAFTA or WTO National"), any direct acquisition having an asset value exceeding $179,000,000 is reviewable. This amount is subject to an annual adjustment on the basis of a prescribed formula in the IC Act to reflect inflation and real growth within Canada.  This threshold level does not apply in certain sections of Canadian industry, such as uranium, financial services (except insurance), transportation services and cultural services (i.e. the publication, distribution or sale of books, magazines, periodicals (other than printing or typesetting businesses), music in print or machine readable form, radio, television, cable and satellite services; the publication, distribution, sale or exhibition of film or video recordings on audio or video music recordings), to which lower thresholds as prescribed in the IC Act are applicable.

2.

If the investor is a non-Canadian and is not a NAFTA or a WTO National, any direct acquisition having an asset value exceeding $5,000,000 and any indirect acquisition having an asset value exceeding $50,000,000 is reviewable.

3.

If the investor is a non-Canadian and is a NAFTA or a WTO National, an indirect acquisition of control is reviewable if the value of the assets of the business located in Canada represents more than 50% of the asset value of the transaction or the business is involved in uranium, financial services, transportation services or cultural services (as set forth above).

Finally, certain transactions prescribed in the IC Act are exempted from review altogether. In the context of the Company, in essence, three methods of acquiring control of a Canadian business are regulated by the IC Act: (i) the acquisition of all or substantially all of the assets used in carrying on business in Canada; (ii) the acquisition, directly or indirectly, of voting shares of a Canadian corporation carrying on business in Canada; or (iii) the acquisition of voting shares of an entity which controls, directly or indirectly, another entity carrying on business in Canada. An acquisition of a majority of the voting shares of a Canadian entity, including a corporation, is deemed to be an acquisition of control under the IC Act.  However, under the IC Act, there is a rebuttable presumption that control is acquired if one-third of the voting shares of a Canadian corporation or an equivalent undivided interest in the voting shares of such corporation are held by a non-Canadian person or entity.  An acquisition of less than one-third of the voting shares of a Canadian corporation is deemed not to be an acquisition of control.  An acquisition of less than a majority, but one-third or more, of the voting shares of a Canadian corporation is presumed to be an acquisition of control unless it can be established that, on the acquisition, the Canadian corporation is not, in fact, controlled by the acquirer through the ownership of voting shares. For partnerships, trusts, joint ventures or other unincorporated Canadian entities, an acquisition of less than a majority of the voting interests is deemed not to be an acquisition of control.

In addition, if a Canadian corporation is controlled by a non-Canadian, the acquisition of control of any other Canadian corporation by such corporation may be subject to the prior approval of the Investment Review Division, unless it can be established that the Canadian corporation is not in fact controlled by the acquirer through the ownership of voting shares. Where an investment is reviewable under the IC Act, the investment may not be implemented unless it is likely to be of net benefit to Canada.  If an applicant is unable to satisfy the Minister responsible for Industry Canada that the investment is likely to be of net benefit to Canada, the applicant may not proceed with the investment.  Alternatively, an acquirer may be required to divest control of the Canadian business that is the subject of the investment. In addition to the foregoing, the IC Act provides for formal notification under the IC Act of all other acquisitions of control by Canadian businesses by non-Canadian investors.  The notification process consists of filing a notification within 30 days following the implementation of an investment, which notification is for information, as opposed to review, purposes.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 20

ITEM - # 7   Taxation

Canadian Federal Income Tax Considerations - The following summary discusses only the Canadian federal income tax considerations generally applicable to a holder (a "Holder") of one or more common shares of the Company who, for the purposes of the Income Tax Act (Canada) (the "Tax Act") is a non-resident of Canada who holds common shares as capital property.  The summary deals with the provisions of the Tax Act in force on 12/31/99.  It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules.  It is therefore not intended to be, nor should it be construed to be, legal or tax advice to any holder of common shares of the Company and no opinion or representation with respect to the Canadian income tax consequences to any such holder or prospective holder is made.  Holders and prospective holders should therefore consult their own tax advisers with respect to their particular circumstances.

Dividends - A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares.  Under the Canada-US Income Tax Convention (1980) as amended by the Protocols signed on 6/14/83, 3/28/84, 3/17/95, and 7/29/97 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%.  If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend.  The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares - A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act.  Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The CDNX is a prescribed stock exchange under the Tax Act.  A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada. A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada.  The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.

United States Taxation - For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("US Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares.  The gain or loss will be a capital gain or capital loss if the Company's common shares is a capital asset in the hands of the US Taxpayer. For federal income tax purposes, a US Taxpayer will be required to include in gross income dividends received on the Company's common shares.  A US Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.  

A domestic corporation that owns at least 10% of the voting shares of the Company should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares. Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.

This is not intended to be, nor should it be construed to be, legal or tax advice to any holder of common shares of the Company and no opinion or representation with respect to the US income tax consequences to any such holder or prospective holder is made.  Holders and prospective holders should therefore consult their own tax advisers with respect to their particular circumstances.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 21

ITEM - # 8   FINANCIAL DATA & DISCUSSION

REVIEW OF SELECTED FINANCIAL DATA LAST FIVE FISCAL YEARS

The selected financial data for Fiscal years ended July 31, 2005, 2004 and 2003 are derived from the financial statements of the Company that have been audited by Staley Okada & Partners, Chartered Accountants (formerly Staley, Okada, Chandler & Scott, Chartered Accountants)  as indicated in their auditor’s report that is included elsewhere in this Annual Report.  The selected financial data set forth for the Fiscal years 2005/2004/2003 are derived from the Company's audited financial statements, not included herein, but filed with previous Annual Reports and incorporated herein by this reference. The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Annual Report. The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.

Selected financial data for the Company’s last five fiscal years is presented in the table below. The financial data is derived from the financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to the financial statements. For its 7/31/02 year-end reporting, and all subsequent reporting, the Company adopted the U.S. currency as its reporting currency and has prepared its financial statements on that basis. Accordingly, all prior years' figures have been recast in the U.S. currency.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 22

How Earnings Per Share Are Calculated - Under Canadian generally accepted accounting principals the calculation of basic loss per share is calculated using the weighted average number of common shares outstanding during the year as well as excluding any common stock equivalents that may be outstanding, if such common stock equivalents are not anti-dilutive.  This weighted average number of common shares outstanding includes any shares that remain in escrow that are contingently cancelable, that may be earned out based on the company incurring a certain amount of exploration and development expenditures. Under United States generally accepted accounting principals, the weighted average number of common shares outstanding excludes any shares that remain in escrow that are contingently cancelable, but may be earned out based on the company incurring a certain amount of exploration and development expenditures. This refers to disclosure required under Exhibit-6.

How Reported Ratios Are Calculated - The Company has not calculated and is not reporting any ratio of earning to fixed charges, to combined fixed charges or to any dividends and has not calculated and reported any other ratios, other than earnings per share as set forth above, in this report; and hence no basis for such calculation is included. This section refers to disclosure required under Exhibit-7.

FINANCIAL RESULTS OF OPERATIONS

The following discussion of the Company's financial results includes those for the most recently completed fiscal quarter ended 10/31/05 and the most recently completed last three fiscal years ended 7/31/05, 2004, and 2003.  Comparisons to "the same period last year" refer to financial results for the same fiscal period ended the previous fiscal year and may be read together with audited, consolidated financial statements for the previous fiscal year ended 7/31/04.  The section for the most recent quarter ended 10/31/05 should be read together with the Company's quarterly interim unaudited financial statements which were filed under Form-6K and are hereby incorporated for reference.

FINANCIAL RESULTS FOR THE MOST RECENTLY COMPLETED FISCAL QUARTER ENDED 10/31/05

The quarter ended 10/31/05 marks the first quarter of the Company’s annual fiscal year ending 7/31/06. All balances referred to in the following discussion are in US$ currency.

Current Working Capital Situation  As at 10/31/05, the Company's interim consolidated financial statements reflect a working capital position of $3,423,059. This represents an increase in the working capital of approximately $3,462,000 compared to the July 31, 2005 deficit of $39,066. The increase was mainly due to the Company selling its Yapen subsidiary and receiving cash proceeds of $3,600,000.  The cash balance at 10/31/05 was $3,609,871 compared to $98,898 as at July 31, 2005, an increase of $3,510,973. The Company used $71,910 for operating activities during the current fiscal quarter compared with $97,828 in the three months ended October 31, 2004.  The current level of spending is consistent with the prior year spending for operations. The cash resources provided by investing activities during the current fiscal quarter was $3,588,271 compared with using $8,803 in the three months ended October 31, 2004.  The Company’s property expenditures were reduced to a minimal level until such time as financing is obtained to continue further exploration and development of its Indonesian properties.  The current year amount includes the proceeds from the Yapen sale. The Company used $5,388 for financing activities during the current fiscal quarter compared with $5,205 in the prior year quarter.  The current level of spending is consistent with the prior year spending for financing activities.

Investments during Most Recent Fiscal Quarter Ended 10/31/05  During the three months ended 10/31/05 the Company invested approximately $42,000 in its Indonesian oil & gas properties and recovered $30,000 from its farm out partner, GeoPetro.

Finance during Most Recent Fiscal Quarter Ended 10/31/05  During the three months ended 10/31/05 there were no Private Placements and no Stock Options or Warrants exercised. On 10/31/05, the Company had options outstanding granted to directors, officers and consultants to purchase an aggregate of 8,932,426 shares at prices ranging from $0.15 to $0.20 and expiring at varying dates between December 30, 2005 and April 30, 2009. On 10/31/05, the Company had warrants outstanding to purchase an aggregate of 8,895,334 shares at prices ranging from $0.15 to $0.60 and expiring at varying dates between July 19, 2006 and April 27, 2007.

Income during Most Recent Fiscal Quarter Ended 10/31/05  During the three months ended 10/31/05 the Company sold its Yapen subsidiary for cash proceeds of $3,600,000 and recorded a gain of $3,599,999 on disposition.

Expenses during Most Recent Fiscal Quarter Ended 10/31/05  Overall, the Company had income from operations during the three months ended 10/31/05 of $3,451,135 compared to a loss of $234,128 in the three months ended October 31, 2004.  The largest difference was the fact that the Company sold its Yapen subsidiary for cash proceeds of $3,600,000 and recorded a gain of $3,599,999 on disposition.  There were no disposals in the three months ended October 31, 2004  The Company wrote down its resource properties to nominal values, which resulted in an expense in the amount of $11,729.  In the prior fiscal period, the property write-down was $15,667.  The Company elected to remove certain accounts payable in the amount of $6,855 off its books during the current fiscal period due to the fact that they were over 6 years old and the Company has received no correspondence from these vendors over this period.  These payables were on the books of the Company when the current management took over the Company and have been maintained for conservative purposes, but upon legal advice they are now being written off resulting in a gain of $6,855.  General and administrative expenses decreased by $70,116 from $214,106 to $143,990 for the three months ended October 31, 2004 and 2005 respectively.  The significant changes to general and administrative expenses are as follows.  Office expenses decreased by $26,428 from $36,390 to $9,962 for the three months ended October 31, 2004 and 2005 respectively. The decrease in office expenses is mostly due to the disposal of GATB and resulting reduced operating expenses.  Foreign exchange loss and interest expense decreased by $17,373 from $23,265 to $5,892.  This reduction is also due to selling GATB and removing the need to revalue large Rupiah denominated assets and liabilities previously held in GATB.  Management fees decreased by $12,676 from $82,997 to $70,321.  The decrease is due to lower management fees paid out by the Company’s subsidiaries with the disposal of GATB in July 2005.  All other expense groups appear consistent with the comparative period and most decreased slightly.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 23

FINANCIAL RESULTS FOR THE COMPANY’S MOST RECENTLY COMPLETED FISCAL YEAR 2005, ENDED 7/31/05

All balances referred to in the following discussion are in US$ currency unless otherwise indicated.

Current Working Capital Situation  As at Fiscal Year ended 7/31/05, the Company's consolidated financial statements reflect a working capital deficit of $39,066. This represents a decrease in the working capital deficit of approximately $785,000 compared to the July 31, 2004 deficit of $824,545. The decrease was due to the Company obtaining significant funding during the year in the form of private placements and exercise of options and warrants.  The cash balance at July 31, 2005 was $98,898 compared to $126,313 as at July 31, 2004, a decrease of $27,415.  To further improve its working capital position the company is pursuing other private placements and farm-out agreements for its properties.  See subsequent events section for details on the sale of Yapen. The Company used $889,816 for operating activities during the current fiscal year compared with $1,127,045 in the prior year. The Company used $8,599 for investing activities after joint venture contributions during the current fiscal year compared with using $29,130 in the prior year.  The Company’s property expenditures were reduced to a minimal level until such time as financing is obtained to continue further exploration and development of its Indonesian properties. The cash resources provided by financing activities during the current fiscal year was $871,000 compared with $480,361 in the prior year.  The majority of the period’s cash increase relates to private placements of $545,000, option exercises of $328,735 and warrant exercises of $67,500.

Investments During Fiscal Year Ended 7/31/05  During the Fiscal Year ended 7/31/05 the Company invested approximately $191,000 in its Indonesian oil & gas properties and recovered $178,000 from its farm out partner, GeoPetro.

Financing During Fiscal Year Ended 7/31/05  On 12/13/04 a Private Placement of 133,333 Units, consisting of one common share and one share purchase warrant to purchase one additional common share for $0.50 until 6 December 2006, was completed.  Proceeds to the Company were $20,000.  No finder’s fees were paid.

On 2/7/05 a Private Placement of 100,000 Units, consisting of one common share and one warrant to purchase one common share for $0.50 until 7 February 2007, was completed. Proceeds to the Company were $15,000. No finder’s fees were paid.

On 4/18/05 the Company completed a private placement of 50,000 of the company's common shares at a price of $0.20 per share. Proceeds to the Company were $10,000. No finder’s fees were paid.

On 4/ 28/05 the Company completed a private placement of 3,333,334 units of the company’s securities at a price of $0.15 per unit. Each unit consists of one common share plus one non-transferable share purchase warrant to purchase additional share at a fixed exercise price of $0.50 for a term of two years. The private placement raised $500,000 working capital for the Company. The Company paid a finders fee to an arm’s length party who arranged the placement a total of $50,000 in cash and $25,000 in the form of 166,667 units of the placement.

During the Fiscal year ended 7/31/05 there were 2,155,490 Stock Options and 300,000 Warrants exercised, generating proceeds to the company of $396,235.

At Fiscal Year ended 7/31/05, the Company had options outstanding granted to directors, officers, consultants and employees to purchase an aggregate of 8,932,426 shares at prices ranging from $0.15 to $0.20 and expiring at varying dates between December 31, 2005 and 30 April 2007.

At Fiscal Year ended 7/31/05, the Company had warrants outstanding to purchase an aggregate of 10,481,146 shares at prices ranging from $0.15 to $0.60 and expiring at varying dates between 10 September 2005 and 27 April 2007.

Income - The Company had no revenue during the Fiscal year ended July 31, 2005.

Expenses During Fiscal Year Ended 7/31/05  Overall, the Company had income from operations during the Ffiscal year ended 7/31/05 of $2,342,520 compared to a loss of $1,110,737 in the prior year.  The major changes in the current period as compared with the prior year are outlined as follows.  The largest difference was the fact that the Company sold its GATB subsidiary and recorded a gain of $4,059,868 on disposition.  There were no disposals in the prior year, however, the Company did receive $251,869 from farm out proceeds in the prior period and recorded a gain on reduction of contingent and conditional liabilities of $328,500.  There were no such proceeds or gains in the current period.  In addition, the stock compensation expense in the current fiscal year was $803,481 compared to $469,831 in the prior year.  (During the current period, the granting of new stock options resulted in stock compensation expense of $497,775.  The modification of exercise prices and expiry dates of existing stock options resulted in additional stock compensation expense of $305,706.)  

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 24

After making accounting adjustments for equipment returned and a reclassification of prepaid expenditures misallocated in a prior period, the Company wrote down its resource properties to nominal values, which resulted in an expense in the amount of $12,961.  In the prior year, the property write-down was $252,613.  General and administrative expenses decreased by $118,739 from $964,391 to $845,652 for the current fiscal years ended July 31, 2004 and 2005 respectively.  The significant changes to general and administrative expenses were lower management fees in the current year.  Management fees decreased by $155,791 from $478,331 to $322,540 for the year ended July 31, 2004 and 2005 respectively. The decrease is due to the loss of a director in the Langley office coupled with lower management fees paid out by the Company’s subsidiaries and offset by one additional management position in the Company’s Dallas office. Staff Wage expense decreased to $nil from $25,163 due to the closure of the Langley office.  Investor relations costs decreased by $23,997 from $30,105 to $6,108 for the year ended July 31, 2004 and 2005 respectively.  Interest and bank charges decreased by $19,604 from $19,130 to a net recovery of $474 for the year ended July 31, 2004 and 2005 respectively.  Office expenses decreased by $18,060 from $157,935 to $139,875 for the year ended July 31, 2004 and 2005 respectively.  The decreases were offset by some increases.  

The financing costs, interest on loans and foreign exchange loss line item was $74,112 compared to a gain of $39,798 lasting the prior year.  The increase is mainly due to the revaluing of the Company’s Rupiah denominated payables during the year as well as a one time interest charge of $44,373 relating the shares for debt transaction in the Company’s GATB subsidiary.  Professional fees increased by $31,752 from $66,311 to $98,063 for the year ended July 31, 2004 and 2005 respectively.  The increase is due to additional legal work done during the year with respect to various agreements and the increasing costs of regulatory compliance with respect to audit and accounting requirements.  Rent and utilities increased by $10,448 from $50,596 to $61,044.  This mostly relates to the company relocating offices in Jakarta.  All other expense groups appear consistent with the comparative period.

FINANCIAL RESULTS FOR FISCAL YEAR 2004, ENDED 7/31/04   All balances referred to in the following discussion are in US$ currency unless otherwise indicated.

Working Capital Situation - As at July 31, 2004, the Company's consolidated financial statements reflect a working capital deficit of $824,545. This represents a working capital deficit increase of $334,653 compared to the July 31, 2003 deficit of $489,892.  (The July 31, 2003 working capital deficit of $4,229,659 as originally disclosed in the prior year audited financial statements has been updated to reflect the reclassification of certain accounts payables and amounts due to related parties to conform with the presentation in the current year.  The decrease is due to the Company reclassifying certain contingent and conditional liabilities recorded in its GATB subsidiary in the amount of $3,455,585 for 2004 and $3,739,767 in 2003.  See “GAT Bangkudulis Payables, Accrued & Contingent Liabilities” section below for further details.  As a result of the reclassification, the accounts payable and accrued liabilities balance disclosed in the consolidated financial statements as at 31 July 2003 was reduced by $3,362,767 from $4,608,355 to $1,245,588 and the amount due to related parties was reduced by $377,000 from $368,121 to a receivable of $8,879.)  To improve its working capital position the company is currently negotiating private placements and farm out agreements for its properties.

Investments - During the year ended July 31, 2004 the Company invested $635,862 in its Indonesian oil & gas properties and recovered $383,249 from its farm out partner, GeoPetro.  Under the terms of the China Wisdom agreement, the Company received proceeds in the amount $251,869 from China Wisdom during the year, representing its 60% share in Bengara.

Finance - During the year ended July 31, 2004, 3,330,554 warrants were exercised resulting in the issuance of 3,330,554 common shares for total proceeds of $518,333, of which $92,008 was received prior to July 31, 2003 and 388,750 options were exercised resulting in the issuance of 388,750 common shares for total proceeds of $72,750.

Income - The Company had no revenue during the year ended July 31, 2004.

Expenses - Overall, year over year expenses decreased by $935,879 from $2,046,616 to $1,110,737 for the years ended July 31, 2003 and 2004 respectively. The major changes in the current year as compared with the prior year are outlined below.  The Company expensed $252,613 as its share of current year costs on the Oil and Gas properties compared to only $76,344 in the prior year.  The Company continues to write-off all property expenditures as incurred until such time as an active work program is commenced on the properties.  $469,831 of the current year expense is due to stock option compensation expense booked in relation to 5,200,000 options granted during the year.  The stock compensation expense in the prior year was $1,061,000.  The Company did not incur any finder’s fees in the current period as compared to $300,000 in the prior year relating to the China Wisdom agreement.  The Company received $251,869 from farm out proceeds from China Wisdom compared to only $180,000 in the prior year.  The prior year finder’s fee of $300,000 less the proceeds of $180,000 have been shown as a net loss of $120,000 in the prior year column on the Consolidated Statement of Operations.  The Company recorded a gain on the reduction of some conditional payables owed to former employees of the Company’s GATB subsidiary for accrued management fees in the amount of $328,500.  These fees had been accrued in prior years as conditional liabilities and were only to be paid out if GATB established commercial oil production.  According to the agreements with the various individuals, the entitlement to any conditional fees terminated upon the individual leaving the Company.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 25

General and administrative expenses increased by $128,690 from $289,707 to $418,397 for the year ended July 31, 2003 and 2004 respectively. The significant changes to general and administrative expenses are in office expenses, professional fees, travel, rent and shareholder information. Office costs increased from $109,115 to $157,935, professional fees increased from $34,778 to $66,311, travel increased from $44,109 to $65,433, rent increased from $28,207 to $50,596 and shareholder information increased from $10,168 to approximately $18,990 for the years ended July 31, 2003 and 2004 respectively.  All other general and administrative expenses are at consistent levels compared to the previous period.  Management fees increased by $144,656 from $333,675 to $478,331 for the years ended July 31, 2003 and 2004 respectively.   Additional management salaries were paid to current GATB management during the current year and one additional management position was added in the Company’s Dallas office.  The Company had an unrealized foreign exchange gain of $39,798 in the current year compared with an unrealized foreign exchange loss of $116,820 in the prior year.  As discussed in Note 3 to the consolidated financial statements, the Company is subject to foreign currency fluctuation especially on its large accounts payable balances denominated both in Indonesian Rupiah and Canadian Dollars.  The prior year foreign exchange loss combined with interest paid on loans of $36,725 represents the $153,545 on the consolidated statement of operations.  There was no interest paid on loans in the current year.  Amortization expense increased by $18,706 from $24,996 to $43,702 for the years ended July 31, 2003 and 2004 respectively. The increase is due to the amortization related to capital and leased assets acquired by the Bengara subsidiary in the year ended July 31, 2003. All other expense groups are consistent with the comparative period.

GAT Bangkudulis Payables, Accrued & Contingent Liabilities - As at July 31, 2004, the Company's consolidated balance sheet, included in Schedule-A above, reflects total liabilities of $4,642,448. Of this total, an amount of $4,330,931 (or 93% of total liabilities) is attributable solely to the Company's majority owned GAT Bangkudulis Petroleum Co. Ltd. subsidiary ("GATB"). Most of these liabilities were acquired together with the GATB subsidiary upon the Company's acquisition of a 70% stake in GATB in 2001. Of the GATB total accrued liabilities, firm payables total $875,346 (20%) shown as part of accounts payable and accrued liabilities in the financial statements and the remaining balance of $3,455,585 (80%) shown as contingent and conditional liabilities is contingent and is payable only on the conditions described below.

Firm Payables - GATB accounts payable total $875,346 which includes trade payables of $568,396, an annual advance due Pertamina of $25,000 and accrued withholding taxes of $281,950. GATB has negotiated with creditors due these amounts and expects to pay them according to a schedule from Bangkudulis Field production. Most of these payables are denominated in Indonesian Rupiah and the total amount changes monthly depending upon the US$ to Rupiah exchange rate applied.  The firm payables have been presented as current liabilities in the consolidated financial statements.

Conditional Liabilities - GATB has accrued and made provision for contingent and conditional liabilities totaling an amount of $3,455,585. Contingent and conditional liabilities include the following:

Fees: GATB has accrued an amount of $97,500 as a contingent and conditional liability payable to a director of the Company in respect of deferred compensation for personal services as a director and manager of GATB. By agreement this entire amount is payable only in the event GATB commences commercial production from the Bangkudulis Field. If no production is achieved this liability is not payable.

Labor Dispute Provision: GATB has made provision for a Rupiah settlement of a labor dispute described below in the section entitled "Claims, Contingencies & Litigation”. At the end of the year this provision amounts to a US$ equivalent of $41,787. This amount is contingent and represents a maximum payable. Actual payment of the claim may occur at some reduced amount and is conditional upon settlement of the labor dispute claim.

Tax Penalties & Interest: GATB has made provision for payment of estimated Rupiah penalties and interest conditionally applicable to outstanding withholding taxes due to Indonesian tax authorities in the amounts indicated in the section above entitled "Firm Payables". At year-end this provision amounts to a US$ equivalent of $225,567. This amount is contingent and represents an estimated maximum payable. Actual payment of the claim may occur at some reduced amount and is conditional upon settlement terms.

Value Added Tax: GATB has accrued a US$ equivalent amount of $528,549 at the year-end for Value Added Tax ("VAT") which is a contingent payable. VAT taxes are deferred under current Indonesian tax law and GATB shall be obliged to pay accrued VAT, if and only if, Bangkudulis Field production is achieved. VAT is not due and payable until such time as commercial production from the Bangkudulis Field and is not payable at all in the event no production is achieved. VAT is denominated in Indonesian Rupiah and the total amount changes monthly depending upon the US$ to Rupiah exchange rate applied.

Shareholder Loan: GATB has accrued an amount of $2,562,182 that is repayable to its former shareholders for funds contributed to GATB by them prior to the Company's involvement. In accordance with a 9-April-2001 agreement between only the current shareholders of GATB, the current shareholders have agreed to cause GATB to repay this amount, without interest, to the former shareholders.  In such event the loan from former shareholders will be repaid, if and only if, Bangkudulis Field production is achieved and only at such time as GATB revenue is sufficient to repay it.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 26

FINANCIAL RESULTS FOR FISCAL YEAR 2003, ENDED 7/31/03   All balances referred to in the following discussion are in US$ currency unless otherwise indicated.

Current Working Capital Situation - As at Fiscal year end July 31, 2003, the Company's consolidated financial statements reflect a working capital deficit of approximately $4,229,700. This represents a working capital deficit decrease of approximately $2,416,500 compared to the July 31, 2002 deficit of approximately $6,646,200. To improve its working capital position the company is currently negotiating private placements and additional farm out agreements for its properties.

Investments - During the Fiscal year ended July 31, 2003 the Company invested approximately $452,000 and $145,600 in its Indonesian oil & gas properties and capital assets respectively. The Company recovered $786,000 from its farm out partner Geopetro and received an additional $594,000 from the Yapen – Medco/Exspan farm out. In addition, as part of the China Wisdom farm out, China Wisdom as at 31 July 2003, had advanced to the Company and Geopetro US $300,000. The Company’s 60% share of this balance amounted to $180,000.  Total proceeds from China Wisdom and Medco/Exspan amounted to $774,000.

Finance - During the Fiscal Year ended July 31, 2003

-

8,310,000 common shares of the Company were issued through private placements for total proceeds of $1,246,500.

-

5,233,625 warrants were exercised resulting in the issuance of 5,118,625 common shares for total proceeds of $785,044.

-

1,340,000 options were exercised resulting in the issuance of 1,390,000 common shares for total proceeds of $201,000.

-

1,500,000 shares were issued as finders fees in relation to the China Wisdom farm out. These shares were valued at US $300,000

-

3,000,000 and 2,000,000 share purchase options were granted during the year exercisable at $0.25 and $0.45 respectively up to 1/30.05. Each option allows the holder to acquire 1 common share of the company.

Income  - The Company had no material income in the twelve months ended July 31, 2003 other than the funds received in relation to the terminated China Wisdom farm out agreement. The Company’s 60% share of the funds received to 31 July 2003 amounted to $180,000. The Company issued 1,500,000 shares as a finders fee in relation to this agreement. These shares were valued at US $300,000 and expensed creating a loss of $120,000. The Yapen farm out generated proceeds of $594,000 with allocated costs of $535,000 creating a gain of $59,000.

Expenses - Excluding the impact of property write downs, stock option compensation and the loss on the terminated farm out, overall expenses decreased by $133,900 from approximately $982,600 to approximately $848,700 for the year ended July 31, 2002 and 2003 respectively. General and administrative expenses decreased by $119,100 from approximately $408,800 to approximately $289,700 for the year ended July 31, 2002 and 2003 respectively. The material changes to general and administrative expenses are as follows. Wage expense decreased by $168,100 from approximately $197,400 to approximately $29,300 for the years ended July 31, 2002 and 2003 respectively. The decrease is due primarily to the reduced activity in the GATB subsidiary. Rent expense increased by $11,500 from approximately $16,700 to approximately $28,200 for the years ended July 31, 2002 and 2003 respectively. The increase is due primarily to increased field accommodation costs incurred by the Bengara subsidiary. Travel expense increased by $16,500 from approximately $27,600 to approximately $44,100 for the years ended July 31, 2002 and 2003 respectively. The increase is due primarily to increased field travel costs incurred by the Bengara subsidiary.

During the Fiscal year ended July 31, 2003 the Company incurred financing, interest and foreign exchange costs of $153,500. This is comprised of a consolidating foreign exchange adjustment of $50,500, a foreign exchange loss of $66,400 in the GATB subsidiary and interest expense of $36,600 paid by the GATB subsidiary. The consolidation adjustment of $50,500 is related to the translation of the parent company’s Canadian $ denominated into US $. The GATB foreign exchange loss of $66,400 is due to the fluctuation of the exchange rate between the Indonesian Rupiah and the US $ and its impact on accounts payable denominated in Rupiah. The Rupiah rose against the US $ during the year creating a foreign exchange loss. The interest expense of $36,600 is related to interest paid to the Company president in relation to an outstanding loan.  Amortization expense increased by approximately $17,600 from approximately $7,400 to approximately $25,000 for the years ended July 31, 2002 and 2003 respectively. The increase is due to the additional amortization of capital assets acquired during the year.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 27

ITEM - # 9   MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The Company has no oil or gas production, no revenues, and no internally generated income of any kind. The Company owns two oil and gas exploration concessions in Indonesia covering 3.7 million acres.  The Company's management considers the Bengara-II Block to be a medium risk and high potential reward property and the Yapen Block to be a high risk, high potential reward property.  Minimizing the risks and exploiting the potential of the Indonesian Properties to the maximum extent possible is the Company's primary objective.

LIQUIDITY AND CAPTIAL RESOURCES

In order to realize any reward and income from either of the two Indonesian concessions the Company must first meet its contractual obligations to expend amounts set forth in the Production Sharing Contracts pursuant to which the Company was awarded the concessions.  Refer to Exhibit-10B: "PSC Terms".  These cash obligations are substantial and although the contractual obligations include expenditure for drilling exploratory wells there is no assurance that the exploratory wells actually drilled will be successful in discovering oil and gas. Additional funds may be required to continue exploration drilling after contractual obligations are met in an effort to make a commercially exploitable discovery.  The Company may, in fact, face an even greater cash requirement in the event of a successfully discovery in order to finance a field development project although a discovery would provide the Company greater flexibility and give it more options in raising capital.

The Company is not currently liquid and raising sufficient funds to conduct the Company's ambitious objectives are the highest priority and an issue the Company expects to deal with proactively in next year on a constant basis.  There is no real opportunity to realize internally generated income from oil and gas production unless a merger or acquisition opportunity is realized.  The Company has basically two options to raise operating capital.  Either the Company must issue securities or farm out its resource properties.  The Company plans to raise required funds in the near future by utilizing both methods.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 28

MATERIAL EVENTS OCCURING DURING

THE LAST FISCAL YEAR ENDED 7/31/05

Bengara-II JV Subsidiary Shares Returned  Despite written demand made upon China Wisdom International (HK) Ltd. to comply with the court’s order (see “China Wisdom Farm Out Suit Won” above) there was no response by 8/31/04. The 20,000 common shares of joint venture subsidiary were transferred back to the Company and to its partner GeoPetro Resources Company on 10/1/04. Also despite written demand the Company has not received the court ordered legal costs of US$ 7,700, which China Wisdom International (HK) Ltd. is ordered to pay.

Financial Advisory Contracts Terminated  On 10/19/04 the Company gave notice terminating a financial advisory agreements with the Oberon Group and with Mr. Bruce Dorfman. Stock options in the amount of 150,000 options granted with the advisory agreements will consequently expire on 1/30/05 in accordance with their terms.

Director Changes  The Company’s director Mr. Gary Wine resigned from the board and on 10/18/04 the board appointed Mr. James D. Eger to serve in his place. Further to a press release dated 5/2/05 the Company announced that Mr. David Tai Wai Yu has been appointed to the Board of Directors and shall serve as a non-executive director until the Company’s next annual meeting of shareholders.

Audited Annual Financial Statements & Annual Report Form-20F Filed on EDGAR  The Company's audited annual financial statements for fiscal year ending 7/31/04 and its annual report for the same period were filed on Form-20F on the US SEC's EDGAR on 1/26/05.

Annual General Meeting 2005  The Company's Annual General Meeting was held 1/24/05. All management proposals for action at the shareholder meeting were approved by the shareholders. Staley Okada was re-appointed as the Company's auditors for the next fiscal year.

Makapan Gas Field POD Study Commissioned  Further to a press release dated 5/5/05 the Company announced it has commissioned a group of independent geologists and engineers to prepare a Feasibility Study, Conceptual Design and Preliminary Plan of Development (POD) for its Makapan Gas Field, located within the Bengara-II Block, East Kalimantan. As of the date of this report the POD is in preparation and not yet completed.

Bengara-II Second 4-Years Exploration Period Entered  The Company's 60% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd. sought and received approval of Indonesian authorities under a letter dated 20 June 2005 to enter and undertake the phase 2 exploration period of the Bengara-II PSC to complete the initial ten year PSC exploration period ending 12/4/07. The total work commitment for this period includes four exploration wells to be drilled with a total anticipated cumulative commitment of $25,000,000. To date approximately $5,200,000 has been spent against this commitment by Continental-GeoPetro (Bengara-II) Ltd. The Company is obliged to fund its 60% share of these commitments.

Shares Issued for Debt  On July 28, 2005 the Company issued 813,700 shares to a an unrelated party and creditor of one of the Company's Indonesian subsidiaries in full and final satisfaction of trade accounts payable due for work done by the creditor on the Company's Bangkudulis property. The shares were issued at a value of $0.15 each in settlement of $122,055 of debt which included $44,373 of accrued interest. No finder’s fees were paid in respect of the issue.

Bangkudulis TAC Terminated  As reported in the Company's press release dated 25 August 2005 the Technical Assistance Contract ("TAC") with Pertamina, the state oil company of the Republic of Indonesia, for the Bangkudulis Field oil and gas property was terminated on 22 August 2005 by Pertamina. The Bangkudulis TAC was the only material asset of the Company's 70% owned subsidiary Company GAT Bangkudulis Petroleum Company Ltd. The Bangkudulis TAC was one of several TAC's terminated by Pertamina who has announced plans that it is discontinuing the TAC type concession agreement in Indonesia and plans to replace it with a new type concession agreement the details of which have not yet been finalized.

Bangkudulis Subsidiary Sold  As reported in the Company's press release dated 25 August 2005 the Company announced that with effect from July 31, 2005 it has sold its entire holding of 35,000 common shares, representing a 70% stake in GAT Bangkudulis Petroleum Company Ltd., the operating company for and holder of the terminated Bangkudulis TAC, to an unrelated party for a nominal fee of $1,000. The buyer purchased the shares on an as-is, where-is basis and relieved the Company from all of its obligations as a shareholder of GATB including assumption of 70% responsibility for GATB accrued debts and liabilities as of the July 31, 2005 sale date.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 29

Private Placements Completed

·

On 12/13/04 a Private Placement of 133,333 Units, consisting of one common share and one warrant to purchase one common share at an exercise price of US$ 0.50 valid until 12/6/06, was completed.  Proceeds to the Company were US$ 20,000. No finders fees were paid on the placement.

·

On 2/7/05 a Private Placement of 100,000 Units, consisting of one common share and one warrant to purchase one common share for $0.50 until 2/7/07, was completed. Proceeds to the Company were $15,000. No finder’s fees were paid.

·

On 4/18/05 the Company completed a private placement of 50,000 of the company's common shares at a price of $0.20 per share. Proceeds to the Company were $10,000. No finder’s fees were paid.

·

On 4/28/05 the Company completed a private placement of 3,333,334 units of the companies securities at a price of $0.15 per unit. Each unit consists of one common share plus one non-transferable share purchase warrant to purchase additional share at a fixed exercise price of $0.50 for a term of two years. The private placement raised $500,000 working capital for the Company. The Company paid an arms length finder who arranged the placement a total of $50,000 in cash and $25,000 in the form of 166,667 units of the placement.

Stock Options Exercises

·

On 1/31/05 a total of 166,666 options were exercised at a price of $0.15. Proceeds to the Company were $25,000.

·

On 2/16/05 a total of 70,588 options were exercised at a price of $0.17. Proceeds to the Company were $12,000.

·

On 3/15/05 a total of 200,000 options were exercised at a price of $0.17. Proceeds to the Company were $34,000.

·

On 4/14/05 a total of 28,236 options were exercised at a price of $0.15. Proceeds to the Company were $4,235.

·

On 4/18/05 a total of 1,250,000 options were exercised at a price of $0.15. Proceeds to the Company were $187,500.

·

On 5/5/05 a total of 100,000 options were exercised at a price of $0.15 and proceeds to the Company were $15,000.

·

On 7/28/05 a total of 340,000 options were exercised at a price of $0.15 and proceeds to the Company were $51,000.

Warrants Exercises

·

On 1/14/05 a total of 150,000 warrants were exercised at a price of $0.15. Proceeds to the Company were $22,500.

·

On 1/31/05 a total of 100,000 warrants were exercised at a price of $0.15. Proceeds to the Company were $30,000.

·

On 4/18/05 a total of 50,000 warrants were exercised at a price of $0.60. Proceeds to the Company were $30,000.

New Stock Option Grants

·

The Company granted 50,000 new incentive stock options to a consultant in 12/04. The options are valid until December 30, 2005 and have an exercise price of US$ 0.17 per share.

·

Further to a press release dated 4/18/05 the Company granted 300,000 new incentive stock options at an exercise price of $0.15 for two years.

·

Further to a press release dated 4/4/05 the Company granted a total of 4,800,000 new incentive stock options having an exercise price of $0.15 and a two-year term until 4/30/07.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 30

Stock Option Amendments

·

On 10/19/04 the Company amended the terms of certain outstanding stock options. For 940,000 options the Company reduced the exercise price from $0.25 to $0.17 and extended the term from 1/30/05 to 12/30/05. For 600,000 options the Company reduced the exercise price from $0.20 to $0.17 and extended the term from 1/30/06 to 12/30/05. For 1,831,250 options the Company reduced the exercise price from $0.20 to $0.17 and extended the term from 7/30/05 to 12/30/05.

·

Further to a press release dated 4/4/05 the Company amended a total of  outstanding stock options, which were extended until 7/30/06, and their exercise price amended to $0.15.

·

Further to a press release dated 4/4/05 the Company amended a total of  outstanding stock options, which were extended until 12/30/06 at no change to the exercise price of $0.15.

·

Further to a press release dated 4/4/05 the Company amended a total of  outstanding share purchase warrants were extended until 12/30/06 at no change to the exercise price of $0.15.

·

On 7/15/05 the company amended the terms of 750,000 incentive stock options having an exercise price of $0.20 per share and an expiry date of 7/30/05 were amended to have an extended expiry date of 7/30/06 and no change was made to the exercise price.

Warrant Amendments

·

On 715/05 the company amended the terms of 820,000 share purchase warrants having an exercise price of $0.15 per share and an expiry date of 7/19/05 were amended to have an extended expiry date of 7/19/06 and no change was made to the exercise price.

Warrants Expired

·

A total of 500,000 outstanding share purchase warrants expired without exercise at the end of their five-year term on 11/24/04.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 31

MATERIAL EVENTS OCCURRING SINCE THE

LAST FISCAL YEAR END 7/31/05 UNTIL THE REPORT  DATE

The following is a discussion of three material events, which have occurred which have significant impact on the Company the implications of which are discussed below and the section entitled "Material Commitments".

Finders Agreement  On 10/10/05 the Company engaged London based Alternative Energy Finance Ltd. ("AEF") to source European and Middle Eastern investors for the Company and its projects. Under the agreement the Company is not obliged to pay AEF any fees but agreed to set stock options and to pay a successful efforts finders fee of 5% on equity investment and 2.5% on debt investment in the Company or its projects by investors brought by AEF.

Yapen Disposition  Pursuant to a farm out agreement with Maraja Yapen Energy Ltd. (“Maraja”) dated 6/28/04, Medco International Ventures Ltd. (“Medco”) farmed out a 75% share of its Yapen PSC interest to Maraja and the Company's 60% owned subsidiary Continental-GeoPetro (Yapen) Ltd.s 10% interest in the Yapen PSC was unaffected. Maraja failed to perform its obligations to Medco under the said farm out agreement resulting in Maraja's breach of contract and consequently in accordance with the provisions of the farm out agreement Maraja's 75% interest in the Yapen PSC was reassigned to Yapen in a deed of assignment dated 8/15/05 subsequent to fiscal year end 7/31/05. Neither the Company nor its Continental-GeoPetro (Yapen) Ltd. subsidiary realized any proceeds from the reassignment which brought Continental-GeoPetro (Yapen) Ltd.'s participating interest in the Yapen PSC to 85%. Medco continues to own 15%. Subsequent to the end of the fiscal year 7/31/05 the Company and its partner GeoPetro Resources Company sold, pursuant to a shares sale and purchase agreement dated 10/26/05, all 100% of their respective shares of their Continental-GeoPetro (Yapen) Ltd. subsidiary to Nations Energy Company Ltd., an unrelated buyer, for US$ 6,000,000 cash. The Company received its 60% share of the sales proceeds or US$ 3,600,000 at closing on 10/27/05. With the sale the Company no longer has any interest in the Yapen PSC.

Director Resignation   Mr. Stan Lichman resigned from his post of director and his resignation was accepted on 10/31/05.

Bengara-II PSC Annual Work Program and Budget for 2005  The Company’s Continental-GeoPetro (Bengara-II) Ltd. subsidiary submitted the Bengara-II JV's annual work program and budget to BPMigas on 11/24/05 for calendar year 2006 for the Bengara-II PSC contract area onshore East Kalimantan, Indonesia. The planned work program for 2006 consists of continuing geological evaluation, seismic interpretation and prospect generation as well as the drilling of at least 4 exploration wells. The Company expects to raise funds to complete the Bengara-II PSC work program and budget through a combination of private placements and farm outs. The budget as submitted is presented in the following table:

Registered Office Address Change  On 11/28/05 the Registered and Records Offices of the Company was changed from 10th Floor – 595 Howe Street, Vancouver, B.C., V6C-2T5 to  #105, 6395-198 Street, Langley, B.C., V2Y-2E3, Canada and a Notice of Change of Offices was filed online with the Registrar of Companies in Victoria advising them of such change.

Proposed Change of Fiscal Year End  On 11/28/05 the Company’s board proposed that the Company's fiscal year end be changed from July 31 to June 30 and that appropriate approval of the shareholders be sought to ratify this change at the Company's January 2006 Annual General Meeting.

Proposed Reduction of Deficit  On 11/28/05 the Company’s board proposed that the Company petition a BC court to reduce the deficit attributable to such prior years as the court may allow  and that appropriate approval of the shareholders be sought to accomplish this action at the Company's January 2006 Annual General Meeting.

Proposed New Bylaws  On 11/28/05 the Company’s board proposed that the Company prepare a replacement bylaws and articles of incorporation more modern and conforming to the recently amended BC corporations act and present them for the approval and ratification of the shareholders as appropriate at the Company's January 2006 Annual General Meeting.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 32

New Stock Option Plan Recommended On 11/28/05 the board of directors, upon the recommendation of the executive compensation committee, approved a stock option plan to be implemented upon its ratification by the shareholders at the Company’s January 2006 annual general meeting.  The text of the new stock option plan is as follows:

At the recommendation of the Executive Compensation Committee the Board of Directors of Continental Energy Corporation have adopted the policy for issuing common share incentive stock options (the "Stock Options") described in this plan (the "Stock Option Plan").

a)

Stock Options granted by the Company shall be limited to options to purchase shares of the Company's common stock and shall not extend to or include options to purchase any of the Company's authorized preferred shares.

b)

All Stock Options granted by the Company shall be granted, issued, administered and exercised in accordance with any and all applicable laws and securities regulations in whatever jurisdiction applicable.

c)

Stock Options are granted for the purposes of providing incentives to directors, officers, employees, and consultants whose good performance in their respective duties is desirable to the Company and its shareholders.

d)

Stock Options may only be granted, amended or revoked by the Board of Directors in ordinary resolution of its members.

e)

Stock Options are granted subject to later ratification and approval by the shareholders at any appropriate annual or special general meetings of the Company.

f)

Each Stock Option granted shall be detailed in a written "Stock Option Agreement" to be concluded by the recipient and signed by an authorized officer of the Company after a resolution by the Board of Directors granting the option. A form of Stock Option Agreement" suggested as a standard format for recording Stock Options is attached to this recommendation entitled "Schedule-B: Standard Form of Stock Option Agreement".

g)

Directors, officers, and employees of the Company are eligible to be granted Stock Options by the Company.

h)

Persons who are related parties to the Company, including any family members of directors, officers, employees, and consultants to the Company; and who are not otherwise directly employed by or directly contractually engaged by the Company are expressly prohibited from being granted Stock Options by the Company.

i)

Consultants to the Company are eligible to be granted Stock Options by the Company provided they have a written contractual agreement with the Company; and further provided that any such written agreements which provide for activities concerning investor relations, public relations, publicity, promotion, financial advice, finance finders, and deal finders shall constitute the applicable Stock Option holder to be a deemed "Investor Relations Advisor".

j)

The aggregate number of common shares which may be reserved against exercise of unexercised and outstanding Stock Options shall not exceed 20% of the total number of the Company's issued and outstanding common shares at any time.

k)

The maximum number of unexercised Options which any one individual may hold at one time shall not exceed 5% of the total number of the Company's issued and outstanding common shares.

l)

The maximum number of new Options granted to any one individual who is not a deemed Investor Relations Advisor during any consecutive 12-month period shall not exceed  3% of the total number of the Company's issued and outstanding common shares.

m)

The maximum number of  new Options granted to any one individual who is a deemed Investor Relations Advisor during any consecutive 12-month period shall not exceed  2% of the total number of the Company's issued and outstanding common shares.

n)

The Company's Secretary shall maintain registers and records of all Stock Options activity in the permanent record books of the Company and shall promptly upon each new grant file an exempt distribution report with the BC Securities Commission together with any other applicable related filings with any securities regulatory agency.

o)

Upon grant the Company Secretary shall file a reservation order with the Company's registrar and transfer agent reserving the number of common shares under Stock Option against possible exercise against the total number of authorized but unissued and unreserved common shares of the Company.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 33

Warrants Expired

A total of 1,585,812 warrants expired on 9/10/05.

Options Expired

A total of 400,000 options were permitted to expire on 12/30/05 in accordance with their term.

Bonuses Authorized In recognition of exceptional service to the Company and its shareholders in their respective capacity and influence in concluding the Yapen sale to Nations Energy the Company authorized on 12/1/05 payment of cash bonuses totaling $90,000 to two executive officers.

New Stock Option Grants

On 11/18/05 a total of 50,000 new stock options having an exercise price of $0.15 and expiring 11/21/07 were granted to a consultant.

Stock Option Amendments

·

On 12/1/05 the Company extended the term of 2,000,000 outstanding stock options originally set to expire on 4/30/07 until 4/30/09. No change was made to the exercise price of the options and of  $0.15.

·

On 12/16/05 the Company extended the term of 250,000 outstanding stock options originally set to expire on 12/30/05. Of the options extended no change was made to the exercise price of the options and of the total 50,000 options have an exercise price of $0.17, 100,000 options have an exercise price of $0.15, and 100,000 options have an exercise price of $0.20.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 34

MATERIAL COMMITMENTS

A summary of the current status of all material contracts, commitments and expenditure obligations of the Company as of the date of this ANNUAL REPORT are described below.  The Company intends to meet its commitments by a combination of raising funds through placement of its securities and through farm out of promoted working interests in its Indonesian properties.  There is no guarantee the Company will be successful in raising sufficient capital and the inability to meet its obligations may have material adverse detrimental effects on the Company, its operations and its particular resource properties. See Exhibit-10B: "PSC Terms" for material commitments common to all Indonesian PSC and TAC contracts.

PSC Vendor Promissory Notes   As part of the total consideration paid the original vendors pursuant to the Company's acquisition of its interest in the Bengara-II property the Company issued three promissory notes totaling US$800,000.  As at 7/31/00, the Company had repaid the entire principal and a portion of the interest outstanding on these promissory notes.  As at the Report Date of this Annual Report US$50,000 of accrued interest remained outstanding.

Bengara-II PSC Commitments   As of the Report Date, the Bengara-II PSC is currently in its Contract Year-9 of the 10 Contract Years exploration period of the Bengara-II PSC ending 12/4/07.  Within this period the Bengara-II JV operator, the Company's 60% owned subsidiary, Continental-GeoPetro (Bengara-II) Ltd., is obliged to drill 4 exploration wells and or expend at least US$ 25,000,000 on petroleum exploratory "Work Commitments" within the Bengara-II contract area. The Company is obliged to provide its Bengara-II Joint Venture 60% share of this amount or US$ 13,800,000. A total of approximately $ 5,200,000 has been spent by Continental-GeoPetro (Bengara-II) Ltd. towards the Bengara-II PSC Work Commitment as at the Report Date of this Annual Report.

Consequences of Failure to Fund PSC Commitments  There is no guarantee the Company will be able to raise sufficient funds in a timely fashion to meet its JV share of the funds needed to meet the Work Commitment to BPMigas in its Bengara-II PSC.  Similarly, there is no guarantee that the Company's joint venture partners will be able to raise funds to meet their own JV shares of costs either or will honor their farm out obligations, if any.  The consequences of a failure or election by any JV party or farmee to not meet their respective funding requirements are discussed in the following section. In the event that the either JV is unable to raise sufficient funds to meet its respective accumulated Work Commitment then the JV will have three options.

1.

First, the JV could elect to exercise its rights under the PSC and advise BPMigas that it intends to carry forward the under-expended, accumulated Work Commitment into the next Contract Year.  In so doing the JV would incur the additional expenditure obligation for the subsequent Contract Year as specified in the PSC.  The PSC provides for such carry forward and accumulation of PSC expenditure obligations.  Over and under actual expenditures are also accumulated and apply to the cumulative Work Commitment.

2.

Second, the JV could elect to advise BPMigas of its difficulties in raising finance to meet the Firm Commitment and request from BPMigas the grant of a one-year extension of the current PSC contract year and corresponding accumulated Work Commitment.  Although there is no guarantee that BPMigas would grant such an extension, the request for such is not unusual or uncommon and such requests are commonly granted.  In some cases additional annual extensions past the fourth year have been granted. BPMigas may elect to impose certain conditions on such a grant also.

3.

Third, the JV could elect to default on its Firm Commitment contractual obligation to BPMigas, so notify BPMigas and thereby terminate the PSC and surrender the contract area back to BPMigas.  In such event the JV would lose its sunk costs to date and it is unlikely the JV participants would ever be granted a PSC again.  Although there is no precedent on record of its doing so, BPMigas would be contractually entitled to sue and seek payment of the unexpended portion of any Firm Commitment amount from the JV and its participants. There is no guarantee BPMigas would not take this course of action and the JV and the Company might be found liable.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 35

Joint Venture Contract Commitments

GeoPetro Joint Ventures - The Company is party to a joint venture contract with GeoPetro Resources Company of San Francisco, with respect to the Bengara-II Joint Venture ("JV").  The JV contract provides for the JV participants to share in all costs and benefits of the Bengara-II JV on the basis of a 60% share for the Company and a 40% share for GeoPetro subject to JV "non-consent", "sole-risk" and "default" provisions.  Each JV is obliged to meet its respective PSC work expenditure obligations. Provisions are provided that in the event either the Company or GeoPetro reduce their interest in favor of a third party the third party must become a party to the JV. Individual participants in each JV, including the Company, have certain flexibility with regard to their individual respective funding obligations to the JV as follows:

1.

Each year at the JV annual work program and budget meeting an individual JV participant may elect, but only within fourteen days of annual budget approval deadline, to exercise its JV right of "non-consent" and thereby elect not to participate in a particular operation, activity or budget item project.  If the remaining JV parties agree to proceed without the non consenting party then they may do so provided that the non consenting party will not be cash called for his JV share of the non consent activity and the cost of such shall be spread proportionally over the other JV parties.  Thereafter if the activity should prove successful and the non-consenting party wishes to rejoin the other JV parties in the non-consent activity then the JV rules of "sole risk" as described in the following paragraph shall apply.

2.

The JV agreement provides for actions of less than all the JV participants in accordance with its "sole risk" provisions.  In the event of "non consent" by a JV party or in the event that one or more but not all JV parties invoke "sole risk" and agree to bear the full cost of an activity in the JV PSC such as drilling a well, that other parties are not agreeable to, then the operator shall conduct such sole risk activity at the expense of the sole risk parties. In the event the sole risk activity is successful, such as a successful well, then those non-consenting or non sole risk parties may regain their JV participating interest share of such successful well by paying a penalty to the sole risk taking parties equivalent to 500% of the non-consenting party's cost of the sole risk activity if such party had participated in the first place.

3.

JV participants who fail to fund their share of agreed JV work programs and budgets within 30 days of a cash call shall be held in "default".  If such default is not cured within 60 days the JV agreement provides for the defaulting party to be "squeezed down" and his percentage interest share of the JV is reduced by an amount that bears the same proportion to its percentage interest as the default amount bears to the total JV costs met through that date by the defaulting party.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 36

RISK FACTORS

The nature of the Company's business, oil and gas exploration, places the entire foundation of the enterprise in a high-risk category.  Oil and gas exploration involves a very high degree of risk. There is no assurance that expenditures to be made, as intended by the Company on exploration or "wildcat" drilling of its properties will result in any discoveries of oil and gas in commercially exploitable quantities.  The marketability of any oil and gas actually discovered will be affected by numerous factors beyond the control of the Company including availability of a market for gas, oil and gas market price fluctuations, the proximity and capacity of transport and processing equipment, additional financing and government regulation.  Drilling and production operations involve risks including blowouts, oil spills and fires (each of which could result in damage to or destruction of wells, production facilities or other properties, or injury to persons).  Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs.  In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the Company's production from successful wells.  Competition among oil companies for quality properties and limited amounts of drilling capital is intense. Specific risk factors are described below and listed in the priority in which Management feels they pose the most serious risk facing the Company.

Financing Risks - The Company is not generating income or revenue, has generated losses to date and does not presently have sufficient financial resources to undertake by itself all of its planned acquisitions or to fund its contractual commitments.  The Company’s ability to continue as a going concern depends upon its ability to obtain financing.  The Company does not currently have the funds required to completely fulfill its joint venture share of the work commitments due under the Bengara-II, Bangkudulis and Yapen PSC's.  There is no assurance that the Company will be able to obtain such financing on acceptable terms, or at all. There is no assurance that the Company will be able to extend or defer its PSC work commitments in the event sufficient funds are not available.  It is possible that prolonged inability of the Company to fund its joint venture and PSC work commitments could result in a loss of some or all of its interest in the joint venture or the PSC's.  Management is pursuing all available options to raise working capital and funds for its various projects, including possible shares for debt settlements, farm-out of a portion of its interest and commitments on Bengara II and Yapen, and conducting other debt and/or equity offerings.  There can be no assurance that the Management will be successful.

Dependency on PSC Contracts - The Company's principal assets are its Indonesian oil and gas properties.  The PSC contract terms contain requirements regarding quality of service, capital expenditure, legal status of concessionaires, restrictions on transfer and encumbrance of assets and other restrictions.  Any failure to comply with these arrangements could result, under certain circumstances, in the revocation of the PSC, and therefore termination of development, production, drilling and other petroleum operations.  Furthermore, all plant, property and equipment purchased by Continental-GeoPetro (Bengara-II) Ltd. for use pursuant to PSC operations becomes the property of BPMigas.  The cost of such materials may be recovered only if commercial production is established within the PSC area in accordance with provisions of the PSC.

Political Risks - Indonesia  -  The Company's investments in Indonesia are subject to the political risks of foreign investment.  These include potential changes in laws affecting foreign ownership, contract and area tenure, government participation, taxation, royalties, duties, rates of exchange and exchange controls.  Any new Indonesian government policies adverse to the Company could include a change in crude oil pricing policy, expropriation, nationalization, renegotiation or nullification of existing concessions and contracts, taxation policies, foreign exchange and repatriation restrictions, international monetary fluctuations and currency controls.  Direct and indirect effects of the decline in value of the Rupiah have included high levels of domestic inflation, reductions in employment, high interest rates, unavailability of traditional sources of financing, and an overall contraction in production and income levels.  These conditions have affected and may continue to affect the operating environment in Indonesia, as well as the cost and availability of financing for natural resources development efforts.  Impediments to a return to more normal economic conditions in Indonesia, or shocks to the system that exacerbate current adverse economic conditions, could originate from various sources, including further social unrest, terrorism, Islamic fundamentalism, secessionist provinces, lack of government effectiveness due to political uncertainty, or policy initiatives adverse to foreign investment. Recent changes to Indonesian petroleum legislation could impact the Company's concessions or operations on those concessions as implementation guidelines related to the new legislation are released by the government. Increasing calls for economic autonomy among many Indonesian provinces may impact the Company's Indonesian concessions or operations thereon as local provinces and regencies receive more control over their natural resources from the central government.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 37

Oil and Gas Exploration Risks - Oil and gas exploration involves a high degree of risk.  There is no assurance that expenditures to be made by the Company on its oil and gas properties will result in any discoveries of oil and gas in commercial quantities.  The Company intends to participate in the drilling of both exploratory and development wells.  Exploratory wells have a much greater dry hole risk than do development wells.  The marketability of any oil and gas, which may be acquired or discovered, will be affected by numerous factors beyond the control of the Company.  These factors include market fluctuations, the proximity and capacity of oil and gas pipelines and processing equipment, rig availability and government regulation, including regulations relating to prices, taxes, royalties, land tenure, allowable production and environmental protection.

Operating Risks - Production operations involve risks normally incident to such activities, including blowouts, oil spills and fires (each of which could result in damage to or destruction of wells, production facilities or other properties, or injury to persons).  Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs.  In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect the Company's production from successful wells.  These conditions include delays in obtaining governmental approvals or consents, shut-in of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity.  While close well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to adversely affect operating revenues from time to time in varying degrees.

Risk of Future Changes in Regulatory Environment - The Indonesian Government has exercised and continues to exercise significant influence over many aspects of the Indonesian economy, including the oil and gas industry, Indonesian business generally, investments, taxes and the capital markets.  The Bengara-II property and operations there upon, are governed by Indonesian laws and regulations relating to the development, production, marketing, pricing, transportation and storage of crude oil, taxation and environmental and safety matters.  Any new government policies adverse to the Company could include a change in crude oil pricing policy, expropriation, nationalization, renegotiation or nullification of existing concessions and PSC contracts, taxation policies, foreign exchange and repatriation restrictions, international monetary fluctuations and currency controls.  Such changes and developments could have a material adverse effect on private sector entities in general and on the Company in particular.

Management - The Company depends entirely upon its management to identify, acquire, finance and operate a portfolio of oil and gas exploration properties through which the Company can grow and achieve oil production and a steady income.  The Company's management is comprised of a small number of key employees with technical skills and expertise in the business, the loss of any one of whom could harm the Company.  The Company does not currently maintain "key-man" insurance for any of its employees.

Director’s Conflicts of Interest - Certain directors of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the business of acquiring, developing and exploiting natural resource properties.  Such associations may give rise to conflicts of interest from time to time.  The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest, which they may have in any project or opportunity of the Company.  If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter.  In determining whether or not the Company will participate in any project or opportunity, the director will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time.  Persons considering the purchase of Company securities must appreciate that they will be required to rely on the judgment of these individuals in resolving such conflicts as they may arise.

Currency/Exchange Rate Risk - All of the Company’s material financial obligations and commitments are denominated in US Dollars while its primary source of financing is the issuance of equity securities in Canada for Canadian currency. A substantial amount of the Company's business transactions will be denominated in Indonesian Rupiah due to operations on its principal properties. The Company’s financial statements are kept in US Dollars. The Indonesian currency, the Rupiah, has decreased substantially in terms of the US Dollar during the past few years. See historical foreign currency exchange rates set forth in Table-1 above in the section "ITEM-#1: Currency and Exchange Rates". Fluctuations in the Rupiah may have a substantial effect on the Company’s financial statements due to related gains or losses due to the rate changes. Until such time as it achieves revenue from petroleum production the Company does not hedge and engage in other strategies to protect itself from adverse fluctuations in the respective exchange rate.  Significant variations in exchange rates could have a material adverse effect on the ability of the Company to meet its obligations.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 38

MATERIAL TRENDS AND UNCERTAINTIES

The Company's securities are highly speculative and trade in a specialized market of investors willing to take a large degree of risk for a possibly large reward.  World oil prices have risen to relatively high levels recently, largely on fears of supply disruption with possible terrorist acts and appears to have settled in the US$ 50 per barrel range. Given the uncertainty, world oil prices are likely to fluctuate and be volatile, possibly over a wide range,  with developments as to the resolution of the conflicts with Iraq and international terrorism proceed.  

The rebounding of the previously vigorous Asian economies is clearly evident and expected to regain much of its forward momentum this year and next.  This rebound offers a triple benefit for the Company as increasing Asian demand buoys world oil prices, international funds and emerging markets funds refocus interest and investment on the region and larger oil companies refocus exploration and development activities in the Asian geographic region.

Resource exploration is a speculative venture involving substantial risk.  There is no certainty that the expenditures to be made by the Company in the acquisition of interests in properties under its various agreements will result in discoveries of commercial quantities of oil/gas.  Further, the marketability of oil/gas that may be acquired or discovered by the Company will be affected by numerous factors beyond the control of the Company.  These factors include market price fluctuations, the proximity and capacity of oil/gas markets, availability of needed equipment, transportation costs and government regulations.  The exact effect of these factors cannot be accurately predicted, the combination of these factors may result in the Company not receiving an adequate return on capital.

As of the date of this Annual Report, the Company has insufficient financial resources to undertake all of its planned exploration and development programs.  The future development of the properties of the Company shall depend upon the ability of the Company to finance through the joint venturing of projects, debt financing, equity financing or other means.   The Company intends to raise required additional funds by selling equity or debt securities, and/or by selling or joint venturing its properties until it develops a cash flow from operations.   While the Company has been successful in raising the necessary funds in the past, there can be no assurance it can continue to do so.  If such funds cannot be secured, the Company will be forced to curtail its exploration/development efforts to a level for which funding can be secured or relinquish certain of its properties or allow its interest to be diluted pursuant to the terms of the respective joint venture agreements.  There is no assurance that the Company will be successful in obtaining such financing. This situation could be exacerbated by additional and continuing acts of international terrorism and a possible war in Iraq; or unforeseen political disturbances in Indonesia.

The Company does not know of any other trends or uncertainties that are reasonably likely to result in, material changes to its liquidity at present or in the foreseeable future. Material increases or decreases in the Company's liquidity are substantially determined by the success or failure of its exploration programs or the acquisition of new or disposition of existing projects.

OUTLOOK

The Company is an oil and gas exploration company engaged in the assembly of a portfolio of high potential oil and gas exploration prospects.  At present the Company does not have any producing properties and has no revenue. The Company is focusing its efforts in Indonesia where large tracts of acreage can be accumulated, there is a long and positive history of oil exploration success, geological conditions are favorable for hydrocarbon accumulation and the Company has long experience..  Oil exploration involves a high degree of technical and commercial risk and is characterized by a continuous need for fresh capital.  The Company will try to minimize and spread this risk by joint-venturing in its oil exploration projects with other companies and participating in properties exhibiting a range of risk profiles to reduce its cost exposure and enhance the possibility of wildcat success while restricting its focus to Indonesia where its limited manpower and technical resources are already deployed. For calendar year 2006, the Company's management has set two important strategic objectives, which it hopes to accomplish during the year.  These goals, in order of priority, are:

1.

Drilling four exploratory commitment wells on the Bengara-II Property.  Funds to complete this objective shall be raised by private placement as first preference or by farm-out as second preference, or some combination thereof.

2.

Pursuing acquisition of opportunities for new oil and gas properties.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 39

ITEM - # 10   DIRECTORS AND OFFICERS OF THE REGISTRANT

DIRECTORS

The table below lists, as at the Report Date of this Annual Report, the names of all the Directors of the Company.  The Directors generally serve in their respective capacities from their election on the day of the Annual General Meeting of the Company held each year normally in January and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles of the Company. Casual vacancies on the Board of Directors are filled by the remaining Directors and the persons filling those vacancies hold office until the next Annual General Meeting at which time they may be re-elected or replaced. The Company distinguishes its directors into two groups, "Executive Directors" and "Non-Executive Directors".  Executive Directors are those directors who also serve as Executive Officers employed under contract for such service by the Company.  Non-Executive Directors are those directors who do not serve also as Executive Officers of the Company and have not contractual relationship with the Company for personal services outside those of being a director.  At the Report Date of this Annual Report the Company has two Non-Executive directors, Mr. Hayes and Mr. Yu and two Executive Directors Mr. McAdoo and Mr. Eger.

Notes to table:

(1)  Resident of Indonesia and citizen of the United States.

(2)  Resident and citizen of the United States.

(3)  Resident and citizen of Hong Kong.

(4)  Members of the Audit Committee of the Board of Directors.

(5)  Members of the Executive Compensation Committee of the Board of Directors.

DIRECTORS COMMITTEES

Audit Committee - The board of directors has created an "Audit Committee" and duly appointed executive director Eger and non-executive directors Hayes and Yu to serve on the committee. The Audit Committee is charged with the responsibility of coordinating, reviewing and working with the Company’s auditors with respect to the annual fiscal year end audit. Mr. Eger serves as the committee’s chairman.

Executive Compensation Committee - The board of directors has created an "Executive Compensation Committee" and duly appointed executive director Eger and non-executive directors Hayes and Yu serve on the committee. The Compensation Committee is charged with the responsibility to review and recommend contracts and terms of compensation to be paid to Company management. Mr. McAdoo  serves as the committee’s chairman.

RESUMES OF DIRECTORS

Richard L. McAdoo holds a Bachelors degree in Geology and Masters degrees in Geophysics from Texas Tech University; and a Masters degree in Business Administration from Boston University. He is registered as a Certified Petroleum Geologist by the American Association of Petroleum Geologists. Actively involved in the international oil exploration and production business for the last 28 years, Mr. McAdoo has held a variety of technical and management positions in exploration and production for Mobil Oil Company, Phillips Petroleum Company, Jackson Exploration, Inc., Triton Energy Corporation, Tracer Petroleum Company, and others in many regions including the North Sea, Middle East, Africa, South America, FSU and Asia. Mr. McAdoo is President of the Company. Mr. McAdoo is currently also a director, President and CEO of the Company's 60% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 40

James D. Eger holds a Bachelors degree in Earth Science from Antioch College, and three Masters degrees -- in Geology, Marine Affairs, and Business Administration -- from the University of Florida, University of Rhode Island, and Boston University, respectively. His career spans more than 25 years, with more than 13 years in international oil exploration, and 12 years in the securities and investments industry. Initially, he served as an exploration geologist with Phillips Petroleum Company, from 1978 to 1982, in Bartlesville, Oklahoma, as well as Singapore and London. His overseas assignments included working in the North Sea, North Africa and Indonesia. In 1982, he joined Jackson Exploration, serving as the company's General Manager and Chief Geologist in Jakarta, and later in Dallas where he was responsible for overseeing that company's new ventures activities. In 1987, he joined Dean Witter Reynolds Inc., stationed both in New York and Dallas, where he specialized in energy futures, international equities, and options and currency trading. In 1992 he was named Vice President of Finance for Tracer Petroleum in Vancouver, where he was responsible for financing activities and management of the company's cash assets. In 1994 he joined Southwest Securities Inc. in Dallas, where he specialized in oil and gas and international equities. From 1998 to 2000 he was President of Dimensions West Energy, Inc. and in 2000 rejoined Southwest Securities in Dallas until leaving in 2004 to join the company.

Paul L. Hayes, Jr.'s experience includes over twenty years in each of the securities and energy industries.  After graduating in Petroleum Engineering from the University of Oklahoma, he was employed by Exxon in Venezuela.  After four years, he returned to the United States to get his MBA from Harvard University after which he worked for Mobil Oil and Amoco in Argentina and New York City.  When the Board of Amoco moved the International division back to Chicago, he left and became an oil analyst for William D. Witter, Inc.  He was with Witter for four years and then started his own NASD firm, Hayes Brothers Securities, Inc. in Greenwich CT.  After four years, he sold his office to Fahnestock & Co. and became head of research and later worked as an oil analyst for Oppenheimer & Co. and for Yorkton Securities in Toronto.

David W,T, Yu is a resident of Hong Kong, and is an experienced independent financial professional with thirty years experience in the securities, commodities, bullion, and foreign exchange trading business in Hong Kong. He has been employed by Rothschild & Sons, Shearson American Express, and Citibank. Recently Mr. Yu has led negotiations that led to long term intergovernmental oil supply agreements between the Chinese government and oil producing nations in Africa in exchange for Chinese government backed investment in economic development, trade and infrastructure projects. He is currently working on similar deals in South America and in Indonesia.

EXECUTIVE OFFICERS

The table below lists, as at the Report Date of this Annual Report, the names of all of the Executive Officers of the Company.  Executive Officers are appointed by the Board of Directors and hold office indefinitely at the pleasure of the Board of Directors.  The term "Executive Officers" includes and is limited to those members of management who are either President, Vice President, Secretary, Treasurer or Chairman of the Company or hold position of similar capacity in wholly owned subsidiaries.

Notes to table:

(1)

Spends substantially full time on the affairs of the Company and its subsidiaries. He resides in Jakarta, Indonesia, and is employed under contract to Continental-GeoPetro (Bengara-II) Ltd. He is also President of the Company’s Indonesian subsidiary: Continental-GeoPetro (Bengara-II) Ltd.

(2)

Spends substantially full time on the affairs of the Company and resides in Dallas, TX, USA. He is employed under full time contract to the Company. He is also a director and secretary of the Company’s Indonesian subsidiary: Continental-GeoPetro (Bengara-II) Ltd.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 41

Orders - No Director or Executive Officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony. During the past 10 years, no director, officer or promoter of the Company has been the subject of any penalties or sanctions by a court or securities regulatory authority related to the trading in securities, promotion or management of a publicly traded Company, or theft or fraud, except R.L. McAdoo, who, as an officer of Triton Indonesia, Inc. ("Triton Indonesia"), consented, without admitting or denying allegations made in a civil complaint filed against Triton Energy Corporation (the US parent of Triton Indonesia), Mr. McAdoo and other officers of that company by the US Securities and Exchange Commission, to the entry of a Final Judgment permanently enjoining him from violating the anti-bribery provision and the internal control and books and records provisions of the Foreign Corrupt Practices Act and the Securities Exchange Act of the United States.

Multiple Directorships - Paul L. Hayes, Jr. is also a director of Capco Energy Inc. (an OTC-Bulletin Board traded public company) also involved in oil and gas exploration and development. While some Executive Officers and Directors of the Company are involved in other business ventures and may not spend full time on the affairs of the Company, the Company believes that each devotes as much time to the affairs of the Company as are required to satisfactorily carry out their duty.

Arrangements & Relationships - There are no family relationships between any two or more Directors or Executive Officers. There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which anyone was selected as a Director or Executive Officer.

ITEM - # 11   COMPENSATION OF OFFICERS AND DIRECTORS

COMPANY DIRECTOR COMPENSATION

The Company does not provide cash compensation its Directors for their service in their capacity as Directors.  Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors.  The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director.  Other than indicated below no Director received any compensation for his services as a Director of the Company, including committee participation and/or special assignments. During Fiscal 2004, the Company did not pay or accrue any salary, fees or other cash compensation directly or indirectly to any director of the Company solely for their services as directors to the Company. The compensation of executives of the Company is reviewed by the Compensation Committee and set by a vote of the Board of Directors. Refer to ITEM-#13.

Non-Executive Director Compensation

Non-Executive Directors are those directors not paid for their service as a director and also not employed or paid by the Company in any capacity such as officer or consultant.

Paul L. Hayes, Jr., Non-Executive Director   During Fiscal 2005, Mr. Hayes served as a Non-Executive Director of the Company and is not entitled to cash compensation for such services.  The Company did not pay any cash compensation of any kind to Mr. Hayes during Fiscal 2005 and does not expect to pay any cash compensation to during Fiscal 2006. Mr. Hayes accepted appointment to the board of directors in an action minuted on 4/14/03 filling a vacancy. See ITEM-#12 for his stock options.

Stan Lichman, Non-Executive Director   During Fiscal 2005, Mr. Lichman served as a Non-Executive Director of the Company and is not entitled to cash compensation for such services.  The Company did not pay any cash compensation of any kind to Mr. Lichman during Fiscal 2005 and does not expect to pay him any compensation. Mr. Lichman resigned as a director on 10/31/05. See ITEM-#12 for his stock options.

David Yu, Non-Executive Director   During Fiscal 2005, Mr. Yu served as a Non-Executive Director of the Company since April 2005 and is not entitled to cash compensation for such services.  The Company did not pay any cash compensation of any kind to Mr. Yu during Fiscal 2005 and does not expect to pay any cash compensation to Mr. Yu for his services as Non-Executive Director during Fiscal 2006. See ITEM-#12 for his stock options.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 42

Contracts & Compensation of Executive Directors

Executive Directors are those directors who are directly or indirectly employed by the Company and serving as paid officers, advisors or employees of the Company in addition to their unpaid service as a director. The following directors have contracts with the Company or its affiliates and are Executive Directors. All contracts with the Company for directors, officers and senior management are reviewed by the Compensation Committee.

Richard McAdoo, Director and President   Pursuant to an employment contract dated 08/01/02 with the Company’s President, Mr. Richard L. McAdoo, the Company does not pay any direct salary to Mr. McAdoo but instead reimburses his actual personal family medical insurance premiums. Instead the Company's Continental-GeoPetro (Bengara-II) Ltd. subsidiary pays him for his services as a President of that subsidiary. The Company indirectly pays a 60% portion of his salary through its funding its 60% joint venture share of Continental-GeoPetro (Bengara-II) Ltd.  During Fiscal 2005/2004/2003, Mr. McAdoo was paid or accrued total compensation by the Continental-GeoPetro (Bengara-II) Ltd. in the amounts of  US$ 150,000, US$ 150,000, and US$ 117,500 respectively of which the Company contributed 60%.

James D. Eger, Director and VP Acting CFO   Pursuant to an employment contract dated 2/1/04 with and for the Company’s Vice President and Acting CFO, Mr. James D. Eger to provide executive management from the Company’s Dallas office at a salary of US$ 5,000 per month. On 2/1/05 his salary was increased to US$ 10,000 per month. During Fiscal 2005/2004/2003, Mr. Eger was paid or accrued total compensation by the Company in the amounts of US$90,000, US$ 30,000, and US$ 0 respectively.

CONTRACTS & COMPENSATION OF EXECUTIVE OFFICERS

The Company has only two executive officers, Mr. McAdoo and Mr. Eger, whose contracts and compensation are discussed in the preceding section pursuant to their service also as directors of the Company.

Stock Options

The Company does grant incentive stock options to Directors and to Officers and employees; refer to ITEM-#12, "Options to Purchase Securities from Registrant or Subsidiaries".  All stock options are set at levels determined from time to time by the board of directors in accordance with applicable securities regulations.

Pension Plans & Stock Ownership Programs

No funds were set aside or accrued by the Company during Fiscal 2005 to provide pension, retirement or similar benefits for Directors or Executive Officers. Except for the stock option program discussed in ITEM-#12, the Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Executive Officers.

Termination Compensation

The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2005 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $100,000 per Executive Officer. No Executive Officer/Director received other compensation in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 43

ITEM - # 12   OPTIONS TO PURCHASE SECURITIES

FROM REGISTRANT OR SUBSIDIARIES

Incentive Stock Options to purchase securities from the Company can be granted only to Directors, Officers, employees and consultants and Employees of the Company in accordance with applicable securities regulations. All optionees other than directors and officers must be employees or consultants or subcontractors engaged under written contract by the Company. The Company has no formal written stock option plan in place as of the date of this Annual Report. At the Report Date of this Annual Report, the Company had 8,382,426 stock options outstanding entitling the holders to purchase 8,382,426common shares at exercise prices between $0.15 and $0.25.  The names and titles of the Directors and Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in the table below. Options shown in the table are effective as at the Report Date of this Annual Report and include the number of options granted to directors and executive officers as a group.  Outstanding options to other employees and consultants as a group is also shown.

At the Report Date of this Annual Report, the Company had 8,695,334 share purchase warrants outstanding entitling the holders to purchase 8,695,334 common shares at prices between US$0.15 and US$0.60. All of the share purchase warrant issued by the Company have been issued in conjunction with private placements of Company securities or loans as incentive consideration to the placee or lender. The table below lists share purchase warrants outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 44

ITEM - # 13   INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

Since the end of the Company's fiscal year at 7/31/03, there are no transactions, or proposed transactions, which have materially affected or will materially affect the Company in which any director, officer, or beneficial holder of more that 10% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest.  

P A R T -  II

ITEM - # 14   DESCRIPTION OF SECURITIES TO BE REGISTERED

Debt Securities to be Registered.

This Form-20F filing is made as an annual report and matters ordinarily required to be disclosed pursuant to this sub-heading of this ITEM-#14 are not applicable. A description of the Company’s currently registered securities is made in ITEM-#4, ITEM-#5 and ITEM-#12.

American Depository Receipts.

This Form-20F filing is made as an annual report and matters ordinarily required to be disclosed pursuant to this sub-heading of this ITEM-#14 are not applicable. A description of the Company’s registered securities is made in ITEMS#4, #5 and #12.

Other Securities to be Registered.

This Form-20F filing is made as an annual report and matters ordinarily required to be disclosed pursuant to this sub-heading of this ITEM-#14 are not applicable. A description of the Company’s registered securities is made in ITEMS-#4, #5 and #12.

P A R T -  III

ITEM - # 15   CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

The Company’s principal executive officer and its principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) on 7/31/05, concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

Changes in internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting  procedures or  in other factors that have materially affected, or are reasonably likely to materially affect these internal controls over financial reporting subsequent to the date of management's last evaluation.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 45

ITEM - # 16   CHANGES IN SECURITIES AND CHANGES IN

SECURITY FOR REGISTERED SECURITIES

This Form-20F filing is made as an annual report and matters ordinarily required to be disclosed pursuant to this ITEM-#16 are not applicable. A description of the Company’s currently authorized, issued, outstanding and registered securities is made in ITEMS-#4, #5 and #12.

P A R T -  IV

ITEM - # 17   FINANCIAL STATEMENTS

For its 7/31/02 year-end reporting, and all subsequent reporting, the Company adopted the U.S. currency as its reporting currency and has prepared its financial statements on that basis.  Accordingly, all prior years' figures presented have been recast in the U.S. currency through a "translation of convenience" whereby all amounts appearing are restated from Canadian to U.S. currency using the exchange rate prevailing at 7/31/01. The accounts of the Company are now prepared in U.S. funds and the Company’s Canadian operations are translated into U.S. dollars under the temporal method. The Company's financial statements are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to the financial statements.

AUDITORS

The Company’s auditors are Staley Okada & Partners (formerly Staley, Okada, Chandler & Scott), ("SOAP") Chartered Accountants, of Vancouver, British Columbia, Canada. SOAP or its predecessor firm has been the Company’s auditors since the Company’s incorporation in 1984. SOAP has been a member of the Institute of Chartered Accountants of British Columbia since 1962. The firm is also a member of the Canadian Institute of Chartered Accountants. In addition, five SOAP partners are qualified American CPA’s in good standing in the states of Illinois, Oregon, and Washington.

AUDITS, REPORTING, FINANCIAL STATEMENTS AND THEIR APPLICABILITY

The Company prepares annual audited consolidated financial statements as at its year end date of 31 July. These consolidated financial statements include the accounts of the company and its majority owned subsidiaries. During the course of the Company’s fiscal year management prepares unaudited quarterly consolidated financial statements as at 31 October, 31 January and April 30 which are filed with British Columbia Securities Commission within 60 days of the quarter’s end.

ELECTRONIC FILING AT THE SEDAR WEBSITE

The Company makes continuous financial and corporate information disclosure as well as statutory filings with Canadian securities regulators on the internet at the "SEDAR" website www.sedar.com. SEDAR is the "System for Electronic Document Archiving and Retrieval" employed by Canadian securities regulatory commissions to enable publicly traded companies to electronically file and archive documents and filings in compliance with applicable laws and securities trading regulations. The Company began filing electronically on SEDAR in 1997.

STATEMENT ON AGE OF FINANCIAL STATEMENTS

The audited financial statements included pursuant to this ITEM-#17 are effective as at the Company’s Fiscal 2005 year end at 7/31/05. The cut-off Date of the auditors report for the same Fiscal 2005 financial statements is 11/23/05. The Date of this Form-20F Annual Report is 12/31/05. The actual electronic filing of this Form-20F report and its Exhibits, including the Fiscal 2003 financial statements, on EDGAR is scheduled for 1/17/06. Elapsed time between the fiscal year end effective date of the financial statements and the effective date of the auditors report is 115 days. Elapsed time between the fiscal year end effective date of the financial statements and the  Date of this Annual Report is 153 days.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 46

FINANCIAL STATEMENTS ATTACHMENT & INDEX

The auditors report and audited financial statements as required under ITEM-#17 are included attached hereto, are incorporated herein as Exhibit-11 attached with this Form-20F Annual Report on the pages shown in the table of contents following.

ITEM - # 18 FINANCIAL STATEMENTS

The Registrant has elected to provide its financial statements pursuant to ITEM-#17.

ITEM - # 19 EXHIBITS

INDEX TO EXHIBITS

The following Exhibits are incorporated herein this Form-20F and are attached hereto following the signatures below at the page number indicated on the following index:

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 47

COPIES & DISTRIBUTION

This Form-20F annual report and its Exhibits, including the audited financial statements at Fiscal 2005 year end 7/31/05, was submitted for filing electronically on the US-SEC's EDGAR system in January 2006.

SARBANES OXLEY CERTIFICATIONS

Certificates by the Company's CEO and CFO regarding the internal controls of the Company as required by Section 302 of the Sarbanes Oxley Act of 2002 are filed with and as a part of this Form-20F in the required form in Exhibit-31.

The certification required related to this Form-20F annual report pursuant to 18 USC Section 1350 as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 is furnished below in Exhibit-32.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Form-20F Fiscal 2004 year end 7/31/04 annual report on its behalf.

Continental  Energy  Corporation

(Registrant)

"James D. Eger"

_______________________________________

By: James D. Eger,  Director & Acting CFO

Report Date: December 31, 2005

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 48

E X H I B I T S   1   THROUGH   11  &  31  &  32

EXHIBITS AND/OR ATTACHMENTS TO THE

Form-20F For Fiscal 2005 Ended 7/31/05 Filed In January 2006 By

CONTINENTAL ENERGY CORPORATION

E X H I B I T  -  1  :  CERTIFICATE, MEMORANDUM & ARTICLES OF INCORPORATION.

Materials required to be filed under this Exhibit-2 are incorporated into this Annual Report Form-20F filing by this reference. Exhibit-1 consists of those copies of the Company’s certificate of incorporation, certificates of name changes, memorandum of incorporation, and articles of association already filed with the US-SEC under cover of previous filings made with the US-SEC by the Company including but not limited to the most recently filed Form-20F Annual Report for the Company’s last fiscal year (as amended), Form-20F Annual Report filings for previous years; and any information filed as part of a Form-6K periodic filings of material changes, news, contracts or events affecting the Company.

E X H I B I T  -  2  :  SHAREHOLDERS RIGHTS INSTRUMENTS

The disclosure required to be filed under this Exhibit-2 is incorporated into this Annual Report Form-F filing by the following reference. Exhibit-2 disclosure consists of the same materials referred to and incorporated by reference under Exhibit-1 above. All instruments defining rights of holders of Company securities instruments are therein described or presented in their entirety. A statement commenting upon shareholder rights instruments issued by the Company relative to the date of this annual report is also set forth in the body of this Form-20F within ITEM-#4 under the section entitled “Shareholders Rights Instruments”.

E X H I B I T  -  3  :  VOTING  TRUSTS

The disclosure required to be filed under this Exhibit-3 is incorporated into this Annual Report Form-F filing by the following reference. Exhibit-3 disclosure consists of the same materials referred to and incorporated by reference under Exhibit-1 above and/or under Exhibit-4 below. Any share voting trusts, pooling agreements or similar agreements regarding collaborative voting of the Company’s shares are therein described or presented in their entirety. A statement commenting upon voting trusts known to the Company relative to the date of this annual report is also set forth in the body of this Form-20F within ITEM-#4 under the section entitled “Voting Trusts”.

E X H I B I T  -  4 : MATERIAL CONTRACTS

Materials required to be filed under this Exhibit-3 is incorporated into this Annual Report Form-20F filing by this reference. Exhibit-3 consists of those copies of the Company’s material contracts already filed with the US-SEC under cover of previous filings made with the US-SEC by the Company (as amended); including, but not limited to, the most recently filed Form-20F Annual Report for the Company’s last fiscal year, Form-20F Annual Report filings for previous years; and information filed as part of Form-6K filings of material changes, news, contracts or events affecting the Company.

E X H I B I T  -  5 : FOREIGN PATENTS

The Company does not have any foreign patents. The Company has never registered any foreign patents in the past and does not contemplate registering any foreign patents in the future.

E X H I B I T  -  6 : STATEMENT HOW EARNINGS PER SHARE CALCULATED

The disclosure required to be filed under this Exhibit-6 is incorporated into this Annual Report Form-F filing by the following reference. A statement commenting upon how earnings per share are calculated is set forth in the body of this Form-20F within ITEM-#8 under the section entitled “How Earnings Per Share Are Calculated”.

E X H I B I T  -  7 : STATEMENT HOW REPORTED RATIOS ARE CALCULATED

The disclosure required to be filed under this Exhibit-7 is incorporated into this Annual Report Form-F filing by the following reference. A statement commenting upon how any ratio of earning to fixed charges, any ratio of earnings to combined fixed charges and preferred stock dividends or any other ratios in the registration statement or report is set forth in the body of this Form-20F within ITEM-#8 under the section entitled “How Reported Ratios Are Calculated”.

E X H I B I T  -  8 : SUBSIDIARIES

The disclosure required to be filed under this Exhibit-8 is incorporated into this Annual Report Form-F filing by the following reference. The identity and relationship of the registrant as parent company and its subsidiaries is set forth in the body of this Form-20F within ITEM-#1 under the section entitled “Subsidiaries”.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 49

E X H I B I T  -  9 : STATEMENT ON AGE OF FINANCIAL STATEMENTS

The disclosure required to be filed under this Exhibit-9 is incorporated into this Annual Report Form-F filing by the following reference. A statement commenting upon the age of the attached audited financial statements of the Company relative to the date of this annual report is set forth in the body of this Form-20F within ITEM-#17 under the section entitled “Statement on Age of Financial Statements”.

E X H I B I T  -  10 : GLOSSARY

Technical Terms Definitions - The meaning of certain technical words, terms and phrases commonly used in the oil and gas industry and also used in this Annual Report Form-20F are described in the glossary filed by the Company on EDGAR in January 2003 as Exhibit-10A of the Company's Annual Report Form-20F for its fiscal 2002 year end.

Production Sharing Contract Terms - Certain words, terms, phrases and concepts used to describe the Company's Indonesian oil and gas concessions, and the Production Sharing Contracts ("PSC") from whence they are derived, are unique or contractually defined. For the benefit of the reader many of these terms are defined and described in the glossary filed by the Company on EDGAR in January 2003 as Exhibit-10B Parts-A and B of the Company's Annual Report Form-20F for its fiscal 2002 year end. The same definitions apply to this Annual Report Form-20F.

E X H I B I T  -  11 : AUDITED ANNUAL FINANCIAL STATEMENTS

Annual audited financial statements are attached hereto after the exhibits as referenced in Item-17 above.

E X H I B I T  -  12 TO 30:      (INTENTIONALLY LEFT BLANK)

E X H I B I T  -  31 : SARBANES OXLEY ACT OF 2002 SECTION 302 CEO AND CFO CERTIFICATIONS

The disclosure required to be filed pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is included below in this Exhibit-31 in the form required as Certificates by the Company's CEO and its CFO.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 50

CONTINENTAL ENERGY CORPORATION

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS

JULY 31 2005 AND 2004

U.S. FUNDS

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 51

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The preparation and presentation of the Company’s financial statements is the responsibility of management.  The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and necessarily include estimates which are based on management’s best judgements.  Information contained elsewhere in the Annual Report is consistent, where applicable, with that contained in the financial statements.

Management is also responsible for installing and maintaining a system of internal controls to provide reasonable assurance that assets are safeguarded and that reliable financial information is produced for preparation of financial statements.

Staley, Okada & Partners, a firm of chartered accountants, were appointed by the shareholders as external auditors to conduct an independent examination and express their opinion on the financial statements.  The Auditors’ Report outlines the auditors’ opinion and the scope of their examination.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control.  The Board exercises these responsibilities with the assistance of the Audit Committee of the Board.

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 52

Report of Independent Registered Public Accounting Firm

To the Shareholders of Continental Energy Corporation:

We have audited the accompanying consolidated balance sheets of Continental Energy Corporation (the “Company”) as at 31 July 2005 and 2004 and the related consolidated statements of operations, shareholders' deficiency, and cash flows for each of the years ended 31 July 2005, 2004 and 2003.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Canadian generally accepted audit standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at 31 July 2005 and 2004 and the results of its operations and its cash flows for each of the years ended 31 July 2005, 2004 and 2003, in accordance with Canadian generally accepted accounting principles.

“Staley, Okada & Partners”

Comments By Auditors For U.S. Reader On Canada - U.S. Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when financial statements are affected by future events, the outcome of which is indeterminable.  As discussed in Note 1, the Company’s continued existence as a going concern is dependent upon the future economic success of its exploration and development activities, the Company’s ability to continue to secure adequate financing and the Company achieving a positive cash flow and profitable operations.  Our report to the shareholders dated 23 November 2005, is expressed in accordance with Canadian reporting standards, which do not require a reference to such going concern considerations in the auditors’ report when the situation is adequately disclosed in the financial statements.

“Staley, Okada & Partners”

Form 20F Annual Report - FYE 7/31/2005 -  Continental Energy Corp. -  SEC File # 0-17863

Page - 53

1.

Continued Operations

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

Adverse conditions and events cast substantial doubt upon the validity of this assumption.  The Company has incurred significant operating losses over the past several fiscal years and has a working capital deficiency.  In addition, as at the year-end, the Company had insufficient funds to complete the property expenditures required on its Indonesian properties.  These facts create uncertainty surrounding the timing and capacity of the Company to meet its financial obligations.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital by issuance of treasury shares or debt, receive significant disposal or farm-out proceeds for its Indonesian oil and gas properties or achieve profitable operations (Note 4 and 13).

If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.

a)

Consolidation

These consolidated financial statements include the accounts of the Company and its three subsidiaries as follows:

-

Continental-GeoPetro (Bengara-II) Ltd. (“Bengara”) (Note 4a) – 60% owned

-

Continental-GeoPetro (Yapen) Ltd. (“Yapen”) (Note 4a) – 60% owned

-

GAT Bangkudulis Petroleum Company Ltd. (“GATB”) (Note 4b) - 70% owned, sold 100% of the Company’s interest effective on 31 July 2005

b)

Amortization

The Company provides for amortization on its equipment as follows:

-

Furniture and field survey equipment - 50% declining balance basis with a 5 year useful life

-

Computer equipment - 50% declining balance basis with a 5 year useful life

-

Automobile under capital lease - straight line over 31 months

c)

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas operations, as prescribed by the Canadian Institute of Chartered Accountants, whereby all costs of exploring for and developing oil and gas reserves are capitalized and accumulated in cost centres established on a country-by-country basis.  Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells, interest costs on significant investments in unproved properties and major development projects and overhead charges directly related to acquisition, exploration and development activities, less any government incentives relating thereto.

Upon establishing production, the costs related to each cost centre from which there is production, together with the costs of production equipment, will be depleted and amortized on the unit-of-production method based on the estimated gross proved reserves of each country.  Oil and natural gas reserves and production will be converted into equivalent units based upon estimated relative energy content.  Costs of acquiring and evaluating significant unproved properties will be initially excluded from depletion calculations.  These unevaluated properties are assessed periodically to ascertain whether impairment in value has occurred.  When proved reserves are assigned or the value of the property is considered to be impaired, the cost of the property or the amount of the impairment will be added to costs subject to depletion.

The capitalized costs less accumulated amortization in each cost centre from which there is production will be limited to an amount equal to the estimated future net revenue from proved reserves (based on estimated future prices and costs at the balance sheet date) plus the cost (net of impairments) of unproved properties ("ceiling test").  The total capitalized costs less accumulated depletion and amortization and deferred taxes of all cost centres will be further limited to an amount equal to the estimated future net revenue from proved reserves plus the cost (net of impairments) of all unproved properties less estimated future general and administrative expenses, future financing costs and taxes.

The costs (including exploratory dry holes) related to cost centres from which there has been no commercial production are not subject to depletion until commercial production commences.  The capitalized costs are assessed annually to determine whether it is likely such costs will be recovered in the future.  Costs unlikely to be recovered in the future are written off.

Proceeds from the farm-out of oil and gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would significantly alter the rate of depletion and amortization.

d)

Asset Retirement Obligations

Effective 1 August 2004, the Company adopted the recommendations of CICA Handbook Section 3110, Asset Retirement Obligations. This new section requires recognition of a legal liability for obligations relating to retirement of property, plant, and equipment, and arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement costs must be recognized at fair value, when a reasonable estimate of fair value can be estimated, in the period in which it is incurred, added to the carrying value of the asset, and amortized into income on a systematic basis over its useful life.

There is no material impact on the consolidated financial statements resulting from the adoption of Section 3110 either in the current or prior periods presented.

e)

Income Taxes

Income taxes are accounted for using the asset and liability method.  Future taxes are recognized for the tax consequences of “temporary differences” by applying enacted or substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and tax basis of existing assets and liabilities.  The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.  In addition, the method requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not.

f)

Share Capital

Proceeds from the exercise of stock options, warrants and escrow shares are recorded as share capital in the amount for which the option, warrant or escrow share enabled the holder to purchase a share in the Company.

Share capital issued for non-monetary consideration is recorded at an amount based on estimated fair market value reduced by an estimate of transaction costs normally incurred when issuing shares for cash, as determined by the board of directors of the Company.

g)

Stock-Based Compensation

The Company has adopted the recommendations of CICA Handbook Section 3870, Stock-based compensation and other stock-based payments.  This Section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services.

This standard requires that all stock-based awards made to employees and non-employees be measured and recognized using a fair value based method.  In fiscal years prior to the year ended 31 July 2004, stock-based compensation expense was only recognized when stock-based compensation awards were made to non-employees, while pro forma disclosure was acceptable for awards made to employees.

h)

Income (Loss) per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period.  The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share.  The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method.  The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method.

i)

Conversion of Foreign Currencies

For its 31 July 2002 year-end reporting, and all subsequent reporting, the Company adopted the U.S. currency as its reporting currency and has prepared its financial statements on that basis.

The accounts of the Company are now prepared in U.S. funds and the Company’s Canadian operations are translated into U.S. dollars under the temporal method as follows:

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Monetary assets and liabilities at year-end rates;

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All other assets and liabilities at historical rates;

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Income and expense items and exploration and development costs translated in a manner that produces substantially the same result as would have resulted had these items been translated on the date they occurred;

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Exchange gains and losses arising from these transactions are treated as period items.

j)

Basis of Segmented Disclosure

The Company’s only business activity is the exploration and development of oil and gas prospects.  During the year, the Company had administration activity in North America and exploration and development activity in Indonesia.  The segmented information is identified by geographic location of the Company’s exploration and development activities.

k)

Management’s Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods.  Actual results could differ from those estimates.

l)

Change in Accounting Policy

The Accounting Standards Board (AcSB) issued Accounting Guideline AcG 15 “Consolidation of Variable Interest Entities”, to harmonize the Guideline with the equivalent FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities.”  The Guideline provides criteria for identifying VIEs and further criteria for determining what entity, if any, should consolidate them.  The Guideline is effective for annual and interim periods beginning on or after 1 November 2004, and upon adoption, will not materially impact the Company’s results of operations and financial position.  The Guideline is effective 1 May 2005 for the Company.

The Company's financial instruments consist of cash, amounts due from / to related parties, goods and service tax recoverable, accounts receivable, accounts payable, promissory notes payable and capital lease obligation.  The carrying value of these financial instruments approximates their fair value due to their short-term maturity or capacity of prompt liquidation.  Except as noted below, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments.

The Company is exposed to currency risk in that material accounts payable are denominated in both Canadian dollars and Indonesian Rupiah.  The US dollar value of these payables will fluctuate due to changes in foreign exchange.

a)

Bengara and Yapen

By separate share purchase and transfer agreements (“SPTA”) with effective dates of 1 August 1998 and subsequent amendments between 30 September 1998 and 19 January 2000, the Company purchased 100% of the issued and outstanding shares of Bengara and Yapen, two British Virgin Island companies with oil and gas exploration activities in Indonesia.  The Company accounted for the acquisition of the subsidiaries using the purchase method of accounting for a business combination. Included in the Company’s statement of loss are the results of operations of both subsidiaries from the date of acquisition forward.

Bengara

Bengara was incorporated in the British Virgin Islands on 9 September 1997 and on 4 December 1997 entered into a production-sharing contract (“PSC”) with Badan Pelaksanaan Minyak dan Gas Bumi (“BPMIGAS”), the Oil & Gas Governing Authority (formerly, PT Pertamina (Pesero) (“Pertamina”), the Indonesian government’s state owned oil and gas enterprise).  The Bengara-II PSC grants Bengara the exclusive authority, for a term of 30 years, to conduct petroleum exploration, development and production operations in an area of approximately 3,650 square kilometers known as the Bengara II Block area, East Kalimantan.  

Pursuant to the Bengara-II PSC as currently amended, Bengara undertook a cumulative expenditure commitment through the initial ten year PSC exploration period ending 4 December 2007 which totals $25,000,000, of which approximately $5,200,000 has been spent.  

The Company’s activities within the Bengara-II PSC contract area are currently in the exploration stage and no crude oil or natural gas revenues are being produced within the contract area. The Company considers the Bengara-II PSC contract area to be a highly promising oil, gas and condensate exploration area but does not assign any oil or gas reserves to the Bengara-II PSC. As at the end of fiscal year 31 July 2005 and as of the record date of these financial statements Bengara owns an undivided 100% controlling interest in the Bengara-II PSC.

Due to exploration risk and the overall uncertainty of drilling results on exploration properties the Company determined that the recoverability of the costs associated with Bengara to which Bengara is entitled under the PSC upon commencement of oil or gas production is uncertain, consequently the Company wrote down the book value of the Bengara-II PSC property to $1.  The Company continues to evaluate expenditures for impairment as incurred and writes off impaired costs in the period when incurred.

Yapen

Yapen was incorporated in the British Virgin Islands on 8 January 1998 for the purpose of holding the Yapen PSC with BPMIGAS (formerly Pertamina), which was signed on 27 September 1999.  Prior to its farm-out agreement with Medco (Note 4aii), Yapen owned a 100% controlling interest in the PSC. However, as a result of the Medco farm-out agreement and Medco's subsequent farm out to Maraja (Note 4aiv), Yapen retained only a 10% interest in the Yapen PSC.  On 15 August 2005, Yapen reacquired a 75% interest (Note 4aiv).  Subsequent to year-end the company sold its interest in the Yapen subsidiary (Note 4v and13).

Due to exploration risk and the overall uncertainty of drilling results on exploration properties the Company determined that the recoverability of the costs associated with Yapen to which Yapen is entitled under the PSC upon commencement of oil or gas production is uncertain, consequently the Company wrote down the book value of the Yapen PSC property to $1.  The Company continues to evaluate expenditures for impairment as incurred and writes off impaired costs in the period when incurred.

Bengara and Yapen Farm-Outs

Since entering into the Bengara and Yapen PCSs, the Company or the Bengara and Yapen subsidiaries have entered into several farm-out agreements with various joint venture partners.  As part of the agreements, the joint venture partners are required to pay their share of incurred costs such that the interests in the properties be retained.  The balance paid to the company has been shown as a reduction of the costs incurred and is called “joint venture reimbursement of costs” on the schedule of resource property costs.

i)

GeoPetro Resources Company (“GeoPetro”) - Yapen and Bengara Farm-Outs

The Company and GeoPetro of San Francisco, California entered into a Farm-Out Agreement (“FOA”) dated 1 January 2000 pursuant to which the Company farmed out 40% of its 100% interest in each of the Yapen and Bengara subsidiaries and their respective underlying properties. Joint Operating Agreements ("JOA") also dated 1 January 2000 between GeoPetro and the Company provide for joint venture operations of the Yapen and Bengara subsidiaries. Under these JOA the Company is obliged to contribute its 60% share of Yapen and Bengara PSC work commitments and expenditures and is entitled to take a 60% share of all revenues realized by the subsidiaries from the Yapen and Bengara PSCs.

As at the end of fiscal year 31 July 2005 the GeoPetro FOA and JOA were in full force and effect, but as of the record date of these financial statements only the Bengara JOA and the provisions of the GeoPetro FOA pertaining to Bengara remain in full force and effect.

In a letter agreement dated 27 October 2005 made subsequent to fiscal year ended 31 July 2005 the Company and GeoPetro agreed to terminate the provisions of the GeoPetro FOA pertaining to Yapen and to terminate in its entirety the Yapen JOA. These terminations coincided with the sale by the Company and by GeoPetro of all of their respective shares of Yapen to Nations (Note 4av and 13).  As of 27 October 2005 the Company no longer has any interest in, entitlements to or obligations in respect of the Yapen PSC.

ii)

Medco International Ventures Ltd. (“Medco”) - Yapen Farm-Out

On 5 November 2002, the Company’s subsidiary, Yapen, completed an agreement to farm out 90% of it’s PSC to Medco.  As part of the agreement Medco paid approximately $572,000 of Yapen’s current liabilities and agreed to fund 100% of the future property development costs up to commercial production.  Upon commercial production, Yapen would be required to fund 10% of the costs.  As a result of this Medco farm-out agreement, Yapen assigned 90% of the Yapen PSC to Medco and Yapen retained a 10% interest in the Yapen PSC. Medco has subsequently farmed out a 75% share of its Yapen PSC to Maraja (Note 4aiv) but Yapen's 10% interest was unaffected.

iii)

China Wisdom International (HK) Ltd. (“China Wisdom”) - Bengara Farm-Out

During the 31 July 2003 fiscal year, the Company and its farm out partner, GeoPetro, entered into an agreement with an unrelated partner, China Wisdom, to dispose of 40% of the Bengara subsidiary.  To earn its 40% interest, China Wisdom was to:

pay $720,000 and drill five exploration wells no later than 31 December 2004, at least three of which were to be drilled in 2003, with the first of the three completed by 30 September 2003.  No drilling was commenced by China Wisdom.

During the prior fiscal year, to fulfill its obligation under the farm-out agreement, 40% of the issued and outstanding shares of Bengara had been transferred to China Wisdom.

On 4 December 2003, the Company and GeoPetro gave China Wisdom notice that the agreement is to be terminated effective 1 December 2003 and requested that the Bengara shares previously transferred to China Wisdom be returned to the Company and GeoPetro.  

The Company together with GeoPetro were claimants in a civil suit brought against China Wisdom International (HK) Ltd. pertaining to China Wisdom’s default and failure to fulfill its drilling obligations under the FOA. In a 28 July 2004 ruling handed down by the Eastern Caribbean Supreme Court in the High Court of Justice British Virgin Islands (BVI) the court declared the Farm-Out Agreement dated 3 March 2003 between the Claimants and China Wisdom as terminated.

The court ordered China Wisdom to re-transfer 20,000 common shares of Bengara to the Company (12,000 shares) and GeoPetro (8,000 shares) by 31 August 2004.

China Wisdom defied the court order and in accordance with the court’s instructions the BVI Companies Registrar signed documents dated effective 1 October 2004 returning the said 12,000 fully paid Bengara shares to the Company restoring the Company's Bengara ownership to a total of 30,000 shares representing a 60% stake.

As at 31 July 2004, $ 719,782 had been received for payment towards the Farm-In with 60% ($551,869) and 40% ($287,913) of the proceeds being allocated to the Company and GeoPetro respectively.  

iv)

Maraja Yapen Energy Ltd. (“Maraja”) - Yapen Farm-Out from Medco

Pursuant to a farm-out agreement with Maraja dated 28 June 2005, Medco farmed out a 75% share of its Yapen PSC interest to Maraja and Yapen's 10% interest in the Yapen PSC was unaffected. Maraja failed to perform its obligations to Medco under the said farm out agreement resulting in Maraja's breach of contract and consequently in accordance with the provisions of the farm-out agreement Maraja's 75% interest in the Yapen PSC was reassigned to Yapen in a deed of assignment dated 15 August 2005 subsequent to fiscal year end 31 July 2005. The Company realized no proceeds from the reassignment.

v)

Nations Energy Company Ltd. (“Nations”) Yapen Sale

Subsequent to the end of the fiscal year 31 July 2005 the Company and GeoPetro sold, pursuant to a share sale and purchase agreement dated 26 October 2005, all 100% of their respective shares of Yapen to Nations, an unrelated buyer, for $6,000,000 cash. The Company was paid and received its 60% share of the Yapen sale proceeds or $3,600,000 at closing.

b)

GAT Bangkudulis Petroleum Company Ltd. (“GATB”)

On 31 August 2001, the Company completed the acquisition of 70% of the issued and outstanding shares in GATB from Dimensions West Energy Inc. (“DWE”).  

GATB is party to a Technical Assistance Contract (“TAC”) dated 7 October 1996 with Pertamina, the Indonesian government’s state owned oil and gas enterprise.  The TAC grants GATB exclusive authority to conduct petroleum development and production in an area of approximately 18.63 square kilometers on the Indonesian island of Kalimantan.    Prior to fiscal year end 31 July 2005, Pertamina gave notice to GATB in a letter dated July 2005 that it intended to terminate the Bangkudulis TAC together with several other Indonesian TAC's not yet in oil production. The TAC type contract is being discontinued in Indonesia.

The termination of the TAC eliminates the only material asset of GATB and consequently the Company sold its 70% share holding in GATB to an unrelated local investor for a nominal price of $1,000 effective 31 July 2005 with the proceeds being received by the Company subsequent to the year end (received). All of GATB's liabilities and fixed assets were sold with the shares. As of fiscal year end 31 July 2005 and also as of the date of these financial statements the Company no longer has any interest in, entitlements to or obligations in respect of GATB or the TAC.

The Company recognized its portion of the proceeds, being $1,000, as income.  The net effect of this transaction was a gain of $4,059,868, calculated as follows based on the net book values recorded in GATB as at 31 July 2005:

The purchaser acquired the Company’s interest in GATB for $1,000 and assumed all the liabilities and obligations of GATB.  Due to all of the fixed assets of the subsidiary having been written down to $1 prior to the disposal, the GATB subsidiary had a consolidated negative net book value of $4,058,868.  Consequently, the disposal resulted in a gain on disposition.

Details are as follows:

In a prior year, the Company repaid the principal and a portion of the interest outstanding on its promissory notes payable.  As at 31 July 2005, $50,000 (2004 - $50,000) of accrued interest remains outstanding.  The note holders have confirmed that no additional interest will be accrued or payable.  

A Company subsidiary is currently obligated to certain capital leases for two automobiles.  Details are as follows:

Scheduled annual lease payments of principal on the capital leases are as follows:

Authorized Share Capital

The Company’s authorized share capital consists of 600,000,000 shares divided into 500,000,000 common shares without par value and 100,000,000 preferred shares without par value.  As at 31 July 2005, there are nil preferred shares issued or outstanding.

b)

Private Placements

On 13 December 2004 a Private Placement of 133,333 Units was completed for proceeds of $20,000.  Each Unit consists of one common share and one share purchase warrant.  Each warrant can purchase one additional common share for $0.50 until 6 December 2006.

On 7 February 2005 a Private Placement of 100,000 Units was completed for proceeds of $15,000.  Each Unit consists of one common share and one share purchase warrant.  Each warrant can purchase one additional common share for $0.50 until 7 February 2007.

On 18 April, 2005 a Private Placement of 50,000 common shares was completed for proceeds of $10,000.

On 28 April 2005 a Private Placement of 3,333,334 Units was completed for proceeds of $500,000.  Each Unit consists of one common share and one share purchase warrant.  Each warrant can purchase one additional common share for $0.50 until April 2007.  The Company paid a finders fee to an arms length party who arranged the placement a total of $50,000 in cash and 166,667 Units, with a value of $25,000.  Each Unit consists of one common share and one share purchase warrant.  Each warrant can purchase one additional common share for $0.50 until April 2007.

c)

Shares for Debt

During the year, the Company issued 813,700 common shares in settlement of certain trade payables in GATB in the amount of $122,055.

d)

Stock Options

During the year, the Company granted a total of 5,150,000 new incentive stock options to directors, officers, consultants and employees.  50,000 options are valid until 30 December 2005 and have an exercise price of $0.17 per share.  The remaining 5,100,000 options are valid until 30 April 2007 and have an exercise price of $0.15 per share.  The Company estimated the fair value of these options to be $497,775 on the grant date which has been recorded in the Company accounts.

During the year, the Company amended the terms of certain outstanding stock options:

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For 940,000 options the Company reduced the exercise price from $0.25 to $0.17 and extended the term from 30 January 2005 to 30 December 2005.  The Company further amended 740,000 of these options to an exercise price of $0.15 and an expiry date of 30 July 2006.

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For 1,491,250 options the Company reduced the exercise price from $0.20 to $0.17 and extended the term from 30 January 2005 to 30 December 2005.  The Company further amended 1,391,250 of these options to an exercise price of $0.15 and an expiry date of 30 July 2006.

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For 940,000 options the Company reduced the exercise price from $0.20 to $0.17 and extended the term from 30 July 2005 to 30 December 2005.  The Company further amended 869,412 of these options to an exercise price of $0.15 and an expiry date of 30 July 2006.

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For 900,000 options the Company extended the term from 31 December 2005 to 30 July 2006 with no change to the exercise price of $0.15.

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For 250,000 options the Company reduced the exercise price from $0.20 to $0.17 and extended the term from 30 July 2005 to 30 July 2006.

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For 750,000 options the Company extended the term from 30 July 2005 to 30 July 2006 with no change to the exercise price of $0.20.

The Company estimated the combined fair value of these amended options to be $305,706 which has been recorded in the Company accounts.

During the year there were 2,155,490 Stock Options exercised, generating proceeds to the company of $328,735.

Details of outstanding share purchase options are as follows:

e)

Warrants

During the year, the Company extended the term of 2,565,000 outstanding share purchase warrants from 19 July 2005 and 10 September 2005 until 30 December 2006 with no change to the exercise price of $0.15.

During the year there were 300,000 warrants exercised, generating proceeds to the company of $67,500.

Details of outstanding share purchase warrants are as follows: